<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 0-3134
PARK-OHIO INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO
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(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
34-6520107
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(I.R.S. EMPLOYER IDENTIFICATION NO.)
600 TOWER EAST, 20600 CHAGRIN BOULEVARD
CLEVELAND, OHIO
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
44122
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(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (216) 991-9700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS)
$.75 CUMULATIVE CONVERTIBLE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 28, 1995: Approximately $81,684,000.
Number of shares outstanding of the registrant's Common Stock, par value
$1.00 per share, as of February 28, 1995: 8,941,810.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S PROXY STATEMENT DATED APRIL 17, 1995, ARE
INCORPORATED BY REFERENCE INTO PART III OF THIS FORM 10-K.
The Exhibit Index is located on page 32.
<PAGE> 2
PART I
ITEM 1. BUSINESS
Park-Ohio Industries, Inc. ("Park-Ohio"), an Ohio corporation, is a
diversified manufacturer whose operations serve a wide variety of industrial and
consumer markets with plastic containers, molded plastic and leisure products
for the home, office and garden, forged and machined products, aluminum
permanent mold castings, induction heating systems and industrial rubber
products. Headquartered in Cleveland, Ohio, Park-Ohio is publicly held and its
shares are traded on the NASDAQ National Market System.
In 1994, Park-Ohio had net sales of $191.5 million ($28.0 million to Ford
Motor Company) and as of December 31, 1994, employed 1,734 persons.
Park-Ohio's industry segments are (i) container products, (ii)
transportation, and (iii) consumer products.
CONTAINER PRODUCTS
On December 30, 1993, Bennett Industries, Inc. (Bennett), a wholly-owned
subsidiary of Park-Ohio, acquired Cleveland Steel Container's (CSC) plastic
container facility located in Cleveland, Ohio for $2.4 million in cash and
assets of the Company's steel container plant in Peotone, Illinois. See Note B
to the consolidated financial statements included herein. CSC manufactures
plastic containers for the food products, industrial coatings and building
products industry.
Bennett makes plastic pails, mostly in 3 to 7 gallon sizes for packagers of
food, paint, and building materials. Bennett has 484 employees. Plastic pail
production is conducted at its plants in Valparaiso, Indiana; Dunellen, New
Jersey; Lithonia, Georgia; San Fernando, California and Cleveland, Ohio.
The plastic pails are distributed nationally through direct sales and
manufacturers' representatives. In 1994, the largest single container customer
accounted for approximately 10% of this segment's sales. The loss of such
customer would have a material, adverse effect on this segment. Raw materials
for the production of these containers are available from a number of plastic
suppliers.
Conditions in the container industry are extremely competitive. Bennett's
competitors include Letica Corporation, Plastican Incorporated and Rheem
Manufacturing Company.
TRANSPORTATION
On October 15, 1993, Park-Ohio acquired General Aluminum Mfg. Company
(GAMCO) by issuing 250,000 shares of its Common Stock in exchange for the
outstanding shares of GAMCO. See Note B to the consolidated financial statements
included herein. GAMCO is headquartered in Conneaut, Ohio and produces and
machines aluminum permanent mold castings for the transportation industry.
Park-Ohio's transportation segment includes forged and machined products,
induction heating systems, aluminum permanent mold castings, and industrial
rubber products.
Forging is the process of hot or cold working of metal to achieve high
mechanical qualities. Park-Ohio produces closed die forgings and machines and
finishes forgings produced by it and others.
The transportation industry is Park-Ohio's major market for its forged and
machined products. Park-Ohio forges crankshafts and machines camshafts and
crankshafts for diesel engines used in trucks, locomotives, buses, farm
machinery, marine and other applications. It
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also forges components and other high-strength, high-performance, structural
parts for civilian and military aircraft, truck, military ordnance and other
machinery and equipment producers.
Park-Ohio's forging and machining business is carried out by 282 employees
in three plants, two of which are located in Cleveland and one in Wellington,
Ohio.
Forging and machining sales are made through Park-Ohio's sales force and
through independent sales representatives. The single largest customer accounted
for approximately 30% of sales of forged and machined products. The loss of such
customer would have a material, adverse effect on this business.
Competition for forging and machining work is substantial. Several of
Park-Ohio's larger customers also do their own forging or machining and there
are many independent companies in this field, some of which are substantially
larger than Park-Ohio.
Park-Ohio's forgings are made primarily from various kinds of steel alloys.
These raw materials are generally available from a number of sources.
Park-Ohio custom engineers, manufactures and sells induction heating
systems under the TOCCO brand name through Tocco, Inc. ("Tocco"), a wholly-owned
subsidiary. TOCCO induction heating systems are used primarily for heat
treating, surface hardening, heating for forging, brazing, soldering, annealing,
shrink-fitting, melting, welding and heating metal components, principally for
the purpose of up-grading the wear and fatigue resistance features of such
components.
Automotive and automotive supplier companies are Park-Ohio's major
customers for induction heating systems, with farm equipment manufacturers
second and miscellaneous metalworking companies third. TOCCO systems are sold
worldwide. While standard "off the shelf" systems are produced, it is more often
necessary to engineer unique installations to meet the particular needs of the
customer. TOCCO custom engineering may involve systems with a series of loading,
heating, quenching, conveying and unloading processes incorporated into a single
unit. The individually designed systems may involve micro-processor controls,
adaptable modular construction and solid state technology. All production is
conducted at Park-Ohio's manufacturing facility in Boaz, Alabama. In addition, a
laboratory and customer service facility is located in Madison Heights,
Michigan. Tocco employs 244 people.
Sales are made both through its own sales organization and through
independent representatives. The largest customer, comprised of many divisions,
accounted for approximately 25% of sales of TOCCO systems and service. The loss
of business from certain of this customer's divisions would have a material,
adverse effect on this business.
Conditions in the induction heating equipment industry are extremely
competitive. Several companies manufacture equipment competitive with some or
all of the TOCCO equipment.
The various electrical components, electrical wiring, metal stampings, and
other materials incorporated in the systems are generally available from a
variety of sources.
General Aluminum Mfg. Company, a wholly-owned subsidiary of Park-Ohio,
operates with 376 employees with plants located in Conneaut, Ohio and
Hartsville, Tennessee and produces and machines aluminum permanent mold castings
for the transportation industry. The castings produced by GAMCO are used in
automobiles, vans and light trucks. While competition for these types of
aluminum castings is substantial, GAMCO believes it maintains a favorable
competitive position since its primary plant has received quality awards from
its major automotive customers and believes that it is one of the few permanent
mold aluminum foundries in the United States to have received these awards. Raw
materials for production, primarily aluminum ingots of various alloys, are
generally available. Products are sold directly and through sales'
representatives. The largest customer, comprised of many divisions, accounted
for approximately 64% of sales for the year ended December 31, 1994. The loss of
this customer would have a materially adverse effect on this business.
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Castle Rubber Company, a wholly-owned subsidiary of Park-Ohio, has its
plant located at East Butler, Pennsylvania and is a custom manufacturer of
rubber products, including molded and lathe cut goods, roll coverings, tank
linings and items such as pump parts and pipe seals requiring rubber-to-metal
bonding. Rubber products produced by Castle Rubber are used in air brake
equipment, gas and oil lines, motors, compressors, automobiles, printing rolls
and steel mills. Market conditions are extremely competitive. Products are sold
principally in the Middle Atlantic and Midwestern States directly and through
sales' representatives to a variety of industries. Raw materials for production
include natural and synthetic rubber and metal inserts, all of which are
generally available.
CONSUMER PRODUCTS
Park-Ohio manufactures barbecue grills, lawn spreaders, lap trays, patio
tables, tray table sets, bird feeders, plant stands and planters through Kay
Home Products, Inc. ("KHP"), a wholly-owned subsidiary acquired on June 30,
1992. Sales are made through its own sales organization and through independent
representatives. KHP distributes the products nationwide through a network
comprised of mass merchandisers, grocery chains, drug stores, and hardware
stores. KHP has operations in Cleveland, Ohio; Antioch, Illinois and Columbus,
Ohio. Because KHP's business is very seasonal, the number of its employees
varies from approximately 177 during the off season to a peak of approximately
450.
For the period ended December 31, 1994, one customer accounted for 11% of
net sales. The loss of such customer would have a materially adverse effect on
this business. KHP is not dependent upon any particular suppliers.
ENVIRONMENTAL REGULATIONS
Park-Ohio is subject to numerous laws and regulations designed to protect
the environment, particularly in regard to waste and emissions. In general,
Park-Ohio has not experienced difficulty in complying with environmental
protection provisions in the past, and compliance with such laws and regulations
has not had a materially adverse effect on Park-Ohio's operations.
INFORMATION AS TO INDUSTRY SEGMENT REPORTING
The information contained under the heading of "Note K -- Industry
Segments" of notes to consolidated financial statements included herein,
relating to net sales, operating income (loss), identifiable assets and other
information by industry segment for the years ended December 31, 1994, 1993 and
1992 is incorporated herein by reference.
ITEM 2. PROPERTIES
Principal Facilities -- The following table provides information relative to the
principal facilities of Park-Ohio and its subsidiaries.
<TABLE>
<CAPTION>
SQUARE
FOOTAGE OF RELATED INDUSTRY
LOCATION BUILDING AREA OWNED OR LEASED USE SEGMENT
------------------------------------ ----------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
ALABAMA
Boaz 100,000 Owned Manufacturing Transportation
CALIFORNIA
San Fernando 41,000 Lease Expiring Manufacturing Container
January 15, 1996
</TABLE>
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<TABLE>
<CAPTION>
SQUARE
FOOTAGE OF RELATED INDUSTRY
LOCATION BUILDING AREA OWNED OR LEASED USE SEGMENT
------------------------------------ ----------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
GEORGIA
Lithonia 40,000 Lease Expiring Manufacturing Container
July 14, 2001
Lithonia 12,000 Lease Expiring Warehouse Container
December 31, 1996
ILLINOIS
Antioch 333,600 Owned Manufacturing Consumer
Peotone 13,900 Owned Administrative Container
INDIANA
Valparaiso 106,000 Owned Manufacturing Container
MICHIGAN
Madison Heights 26,000 Owned Development Transportation
Laboratory and
Customer Service
NEW JERSEY
Dunellen 43,000 Lease Expiring Manufacturing Container
May 31, 1996
OHIO
Cleveland 391,000 Owned Manufacturing Transportation
Cleveland 240,000 Owned Manufacturing Container
Cleveland 197,600 Leased - Monthly Manufacturing Consumer
Columbus 60,000 Owned Manufacturing Consumer
Conneaut 84,000 Owned Manufacturing Transportation
Conneaut 140,000 Lease Expiring - Manufacturing Transportation
October 1, 2003
Cuyahoga Hts. 427,000 Owned Manufacturing Transportation
Shaker Heights 5,000 Lease Expiring - Headquarters --
November 30, 1995
Wellington 50,000 Owned Manufacturing Transportation
PENNSYLVANIA
East Butler 136,000 Owned Manufacturing Transportation
TENNESSEE
Hartsville 39,000 Lease Expiring - Manufacturing Transportation
April 1, 2011
Hartsville 7,500 Owned Manufacturing Transportation
</TABLE>
Park-Ohio considers these facilities to be well maintained and suitable for
their purposes.
ITEM 3. LEGAL PROCEEDINGS
During 1994, Tocco, Inc., a wholly-owned subsidiary of the Company, settled
a civil action for personal injury entitled the William B. Fleenor matter. The
settlement had no effect on the Company's consolidated financial position or its
results of operations as substantially all settlement payments were funded by
the Company's product liability insurance carriers. The Company becomes involved
in litigation arising out of its normal business activities. In the opinion of
management, the Company's liability, if any, under any pending litigation would
not materially affect its financial position or results of operations.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to executive officers of Park-Ohio is as follows:
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER OF
REGISTRANT
NAME AGE PRESENT EXECUTIVE OFFICE SINCE
------------------------- --- --------------------------------------------- ----------
<S> <C> <C> <C>
Edward F. Crawford 55 Chairman and Chief Executive Officer 1992
John J. Murray 39 President and Chief Operating Officer 1995
James S. Walker 52 Vice President -- Treasurer 1983
and Controller
Ronald J. Cozean 31 Secretary and General Counsel 1994
</TABLE>
Mr. Walker has been an employee of Park-Ohio for more than five years.
Since 1964, Mr. Crawford owned and operated various private companies and is
currently Chairman and Chief Executive Officer, Crawford Group, Inc. From April,
1989, to his resignation in March, 1991, Mr. Crawford was a director of
Park-Ohio. On June 17, 1992, the shareholders approved the acquisition of Kay
Home Products, Inc., a company wholly-owned by Mr. Crawford. At that time, Mr.
Crawford was appointed to the Board of Directors and was elected Chairman, Chief
Executive Officer and President of Park-Ohio. Mr. Murray became the President
and Chief Operating Officer on January 1, 1995. He had been President of KMR
Industries, Inc. (business consulting firm) since 1991 and was formerly the
President and Chief Operating Officer, Rennoc Corporation (manufacturing
company) from 1989 to 1990. Mr. Murray was elected to the Board of Directors in
1992. Mr. Cozean worked for the law firm of Squire, Sanders & Dempsey prior to
joining the Company.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
Park-Ohio's common stock, $1 par value, is traded on the NASDAQ National
Market System. The table presents its high and low sales prices. No dividends
were paid during the periods.
<TABLE>
QUARTERLY COMMON STOCK PRICE RANGES
<CAPTION>
1994 1993
------------ ------------
QUARTER HIGH LOW HIGH LOW
------- ---- --- ---- ---
<S> <C> <C> <C> <C>
1st 18 1/8 12 5/8 9 4 7/8
2nd 17 1/8 12 3/8 11 3/4 8 1/2
3rd 15 3/4 12 1/2 12 3/4 8 7/8
4th 14 1/8 12 3/4 13 5/8 11 5/8
</TABLE>
The number of common shareholders of record for Park-Ohio's common stock as
of March 17, 1995 was 1,303.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Operations
Net sales..................... $ 191,527 $ 147,168 $ 119,839 $ 115,497 $ 125,152
Gross profit.................. 33,665 25,369 17,027 19,396 19,735
Income (loss) from continuing
operations................. 12,484 6,031 (7,655) (4,001) 832
Cumulative effect of change in
accounting principle....... -0- -0- (26,891) -0- -0-
Net income (loss)............. 12,484 6,031 (34,546) (10,217) (1,681)
Net income (loss) per common
share:
Continuing operations...... 1.49 .90 (1.28) (.72) .14
Net income (loss).......... 1.49 .90 (5.76) (1.83) (.31)
Financial Position
Working capital............... 30,127 20,519 15,297 17,932 22,656
Total assets.................. 134,615 97,664 71,729 62,610 66,785
Long-term debt................ 9,766 25,054 12,008 3,228 4,203
Subordinated debentures....... 22,235 -0- -0- -0- -0-
Shareholders' equity.......... 46,715 17,933 8,795 39,742 49,988
<FN>
---------------
(A) As of December 31, 1994, the Company reduced by $2,000,000 the valuation
allowance on deferred tax assets relating to anticipated future income tax
benefits from utilization of net operating loss carryforwards.
(B) On October 15, 1993, the Company acquired General Aluminum Mfg. Company in
an exchange of shares. The acquisition has been accounted for as a
purchase. On June 30, 1992, the Company completed the acquisition of
substantially all of the assets of Kay Home Products, Inc. The acquisition
has been accounted for as a purchase.
(C) Effective January 1, 1992, the Company adopted the provisions of Financial
Accounting Standards Board No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," changing to the accrual
method of accounting for these benefits, which resulted
</TABLE>
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in a noncash charge to operations of $26,891,000 as of that date. During
1993, the Company reduced costs and revised its actuarial assumptions to
reflect experience. The effect of these changes reduced annual expense from
$2,700,000 in 1992 to $1,200,000 in 1993.
(D) This summary should be read in conjunction with the related Management's
Discussion and Analysis of Financial Condition and Results of Operations
included under Item 7 elsewhere herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1994 versus 1993
On October 15, 1993, the Company acquired General Aluminum Mfg. Company
("GAMCO") by issuing 250,000 shares of common stock valued at $3.1 million in
exchange for the outstanding shares of GAMCO. Up to an additional 750,000 shares
of common stock, currently held in escrow, may be issued if GAMCO achieves
certain income levels during the four-year period ending December 31, 1997. The
acquisition has been accounted for as a purchase. During 1994, 187,500 common
shares were earned under the earn-out provisions and, accordingly, have been
included in the computation of earnings per share for 1994.
Net sales increased by 30% in 1994 compared to 1993. This increase is
primarily a result of acquisitions made in 1993. For 1994, the Transportation
Group's net sales increased by 42% over the prior year with 15% of the increase
attributable to internal sales growth and 85% to acquisitions made in 1993. For
the Consumer Products Group, net sales increased by 21% largely as a result of
acquisitions made by the Company in the fourth quarter of 1993. The Container
Group's net sales increased by 18% primarily due to the acquisition of the
Cleveland Container plastic container facility in December, 1993.
Consolidated gross profit which approximates 17% of net sales in both 1994
and 1993 rose $8.3 million to $33.7 million. Acquisitions made in 1993 accounted
for 69% of this increase, while internal growth accounted for 31% primarily in
the Transportation Group. The increase in the Transportation Group relates to
the increase in net sales.
Selling, general and administrative costs increased by approximately $3.2
million primarily as a result of the 42% increase in net sales for the period.
However, as a percentage of sales, selling, general and administrative expenses
declined to 11% from 12% of sales in the corresponding period of the prior
period.
Interest expense increased by 58% to $2.0 million in 1994. This increase is
a result of issuing $22.2 million principal amount of 7 1/4% convertible senior
subordinated debentures in the second quarter of 1994 and to increased
borrowings under the Company's revolving credit arrangements necessitated by
higher demands on the Company's working capital to support the increased sales
and by increased capital expenditures and other capital asset acquisitions.
The Federal income tax benefit of $1.8 million in 1994 primarily results
from recording a $2.0 million reduction in the valuation allowance on deferred
tax assets relating to the minimum anticipated future income tax benefits to be
recognized during 1995 from utilization of net operating loss carryforwards. In
1993, the Federal income tax provision of $242 thousand related primarily to
certain subsidiaries not consolidated for Federal income tax purposes and, to
the alternative minimum tax. At December 31, 1994, the Company had net operating
loss carryforwards for tax purposes of $21.6 million available to offset future
taxable income. Additional net operating loss carryforwards amounting to $2.5
million relating to a consolidated subsidiary are also available subject to
certain limitations. For financial reporting purposes, the Company has
additional net operating loss carryforwards relating to deductible temporary
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differences, the most significant of which relates to other postretirement
benefits. Federal income tax expense for the 1994 period has been reduced by
approximately $3.5 million ($1.8 million in 1993) due to the utilization of net
operating loss carryforwards.
1993 versus 1992
On December 30, 1993, the Company acquired Cleveland Steel Container's
(CSC) plastic container facility located in Cleveland, Ohio in exchange for $2.4
million in cash and assets of the Company's steel container plant in Peotone,
Illinois. The acquisition has been accounted for as a purchase.
Additionally, in 1993, the Company also purchased certain assets and
product lines from three companies for a total cost of $4,623,000, including the
issuance of 18,000 common shares for $193,500.
On June 30, 1992, the Company acquired substantially all of the assets of
KHP in consideration of the assumption of certain of the liabilities of KHP and
an initial issuance of 850,000 shares of common stock valued at $3.8 million. As
of June 30, 1994, Kay Home Products, Inc. had met the earn-out provisions as
specified in the Agreement of Purchase and Sale dated as of February 25, 1992.
Accordingly, the Company issued 1,150,000 of its common shares valued at $12.1
million which represents purchase price in excess of net assets acquired.
Net sales for 1993, increased by 23% primarily as a result of increased
sales in the Transportation Group and the inclusion of Kay Home Products (KHP)
net sales for the entire year. In 1993, Transportation's net sales increased
$12.1 million, a 20% increase as a result of internal growth and acquisitions.
Internal growth accounted for a $3.4 million increase while acquisitions
accounted for a $8.7 million increase. KHP recorded increased sales of $14.0
million in 1993. For 1992, KHP's net sales amounted to $7.9 million as sales
were included in the consolidated results of operations only since June 30,
1992, the date of acquisition.
Consolidated gross margins in 1993 increased to 17% from 14% in 1992. This
increase is due to dramatically improved margins in the Transportation Group and
to the inclusion of KHP for the entire year. In 1993, the Transportation Group's
gross margin increased to 19% from 14%. This improvement resulted from increased
production efficiencies through a lowering of costs and to a more selective
customer order process yielding greater returns per sales dollar. Particular
improvement occurred at Park Drop Forge where the gross margin increased to 13%
from a negative gross margin in 1992 of 5%. KHP's gross margin in 1993 was 23%
compared to 12% in 1992. This increase is a result of including the operations
of KHP in the consolidated results of operations for the entire year; whereas in
1992 only the last six months of operations were included which are
traditionally at a much lower margin than the first six months.
Although net sales increased by 23% for the year, selling, general, and
administrative costs declined by $4.5 million or 20% and represent 12% of sales
in 1993 versus 19% in 1992. The decline in costs is caused by significant cost
reduction and containment programs in 1993 and to certain nonrecurring costs
that occurred in 1992. In 1992, selling, general and administrative expenses
included costs associated with the settlement of labor issues at the Company's
Ohio Crankshaft and Castle Rubber facilities; costs to settle two civil actions
alleging violations of federal antitrust laws at the Company's Bennett
Industries' unit; loan fees; and certain costs associated with the purchase of
KHP and Fein Plastic Container Corp.
Interest expense for the year increased by $485 thousand resulting from
higher levels of borrowings under the Company's revolving credit for working
capital purposes and to the inclusion of the Company's term notes for Bennett
and KHP for the entire year. For 1992, the term notes were outstanding for only
a portion of the year.
Effective January 1, 1993, the Company adopted the provisions of Financial
Accounting Standards Board No. 109, "Accounting for Income Taxes". Because the
Company has exper-
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ienced net operating losses in recent years, the adoption of this statement had
no effect on the Company's consolidated financial position or results of
operations.
The Federal income tax provision of $242 thousand in 1993 and $137 thousand
in 1992 relates primarily to certain subsidiaries not consolidated for Federal
income tax purposes and, in 1993, to the alternative minimum tax due as a result
of utilizing available net operating loss carryforwards. At December 31, 1993,
the Company had a net operating loss carryforward for tax purposes of $30.9
million available to offset future taxable income. For financial reporting
purposes, the Company has additional net operating loss carryforwards relating
to deductible temporary differences, the most significant of which relates to
other postemployment benefits. Federal income tax expense for the year has been
reduced by approximately $1.8 million due to the utilization of net operating
loss carryforwards.
LIQUIDITY AND SOURCES OF CAPITAL
The ratio of current assets to current liabilities was 2.13 at December 31,
1994, compared to 1.79 at December 31, 1993 and 1.72 at December 31, 1992.
Working capital increased by $9.6 million to $30.1 million at December 31, 1994,
primarily as a result of increases in accounts receivables and inventories
needed to fuel the 30% growth in the Company's businesses in 1994.
On October 27, 1994, the Company entered into a Credit Agreement with three
banks that provides $50 million in unsecured credit to be used for working
capital purposes and acquisitions. At December 31, 1994, the Company had $7.0
million outstanding under the working capital portion of this facility.
Current financial resources (working capital and available bank borrowing
arrangements) and anticipated funds from operations are expected to be adequate
to meet cash requirements for 1995, including estimated capital expenditures of
$8 million. The Company's growth during the three year period ended December 31,
1994, has largely been fueled by acquisitions. In the event additional capital
resources are needed for other opportunities in 1995, the Company believes
adequate financing is either in place or would be available.
On October 26, 1994, the company announced an agreement in principle to
acquire RB&W Corporation (RB&W) of Cleveland, Ohio. In accordance with the
Amended and Restated Plan and Agreement of Merger dated February 6, 1995, each
share of RB&W common stock outstanding will be converted into a right to receive
$4.45 in cash plus 0.33394 of a share of the Company's common stock for a total
value of approximately $60.6 million. The Company's existing credit arrangement
with a group of banks is sufficient to fund this acquisition. However, the
Company is currently in negotiations with its bank group to extend its borrowing
availability to $100 million from the $50 million presently in place. The
proceeds from this new facility will be more than adequate to finance the
aforementioned transaction, in addition to paying off RB&W's current debt and
still providing the Company with adequate financing resources to fund its
operations.
Cash and cash equivalents increased by approximately $2.0 million since
December 31, 1993. During 1994, the Company generated $9.0 million from
operations, borrowed $11.4 million under revolving credit arrangements with a
bank group and sold $20.9 million, net of financing costs, of 7 1/4% convertible
senior subordinated debentures and $4.2 million of common stock. The combined
proceeds were used to fund capital expenditures of $11.8 million, acquire a new
product line for $2.1 million, acquire other capital assets of $2.9 million and
retire $26.7 million of bank indebtedness under revolving credit and term loan
arrangements.
For 1993, the Company financed its cash outflows from cash generated from
operations and bank borrowings. For the year, the Company generated $4.9 million
from operations, and borrowed $9.9 million from its revolving credit with a
bank. These funds were used primarily to finance purchases of property, plant
and equipment of $5.0 million, fund acquisitions of $6.9 million and to repay
bank borrowings of $2.1 million.
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For 1992, the Company financed its cash outflows from cash generated from
operations, bank borrowings, a sale and leaseback of certain assets and a draw
on existing cash balances. For 1992, $2.4 million was generated from operations,
$6.0 million from bank borrowings and $1.4 million from a sale and leaseback
transaction. These sources, along with $3.0 million in cash, funded $6.1 million
in plant and equipment, $2.1 million in acquisitions and $4.5 million to reduce
long-term obligations.
Long-term debt represented 41% of the Company's capital at December 31,
1994, and 58% at December 31, 1993 and 1992.
IMPACT OF INFLATION
In 1994, the Company experienced significant inflation in the cost of raw
materials used in the production of plastic containers and aluminum permanent
mold castings. To the extent permitted by competition, the Company passes on
increased costs by increasing sales prices over time. The Company generally uses
the LIFO method of accounting for its inventories. Under this method, the cost
of products sold reported in the financial statements approximates current costs
and thus reduces the distortion in reported results of operations due to
increasing costs. The charges to operations for depreciation represent the
allocation of historical costs incurred over past years and are significantly
less than if they were based on the current cost of productive capacity being
consumed.
OTHER
Governmental agencies have identified several disposal sites for clean-up
under Superfund and similar laws to which the Company has been named a Potential
Responsible Party (PRP). The Company is participating in the cost of certain
clean-up efforts. However, the Company's share of such costs has not been
material and is not expected to have a material adverse impact on the Company's
financial condition or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Report of Independent Auditors.................................................. 11
Financial Statements:
Consolidated balance sheets -- December 31, 1994 and 1993.................. 12
Consolidated statements of operations -- Years ended December 31, 1994,
1993 and 1992............................................................. 13
Consolidated statements of shareholders' equity -- Years ended December 31,
1994, 1993 and 1992....................................................... 14
Consolidated statements of cash flows -- Years ended December 31, 1994,
1993 and 1992............................................................. 15
Notes to consolidated financial statements................................. 16-25
Supplementary Financial Data:
Selected quarterly financial data (unaudited) -- Years ended December 31,
1994 and 1993............................................................. 26
</TABLE>
10
<PAGE> 12
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
Park-Ohio Industries, Inc.
We have audited the consolidated financial statements and schedule of
Park-Ohio Industries, Inc. and subsidiaries listed in the index at Item 14(a)(1)
and (2). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Park-Ohio
Industries, Inc. and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note I to the consolidated financial statements, effective
January 1, 1992 the Company adopted Financial Accounting Standards Board
Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions."
/s/ ERNST & YOUNG LLP
Cleveland, Ohio
February 22, 1995
11
<PAGE> 13
<TABLE>
CONSOLIDATED BALANCE SHEETS
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
<CAPTION>
DECEMBER 31
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.......................................... $ 2,172 $ 133
Accounts receivable, less allowances for doubtful accounts of
$394,000 in 1994 and $351,000 in 1993........................... 27,165 25,345
Inventories........................................................ 25,651 19,450
Prepaid expenses................................................... 1,845 1,570
-------- --------
Total Current Assets....................................... 56,833 46,498
Property, Plant and Equipment
Land and land improvements......................................... 2,925 2,617
Buildings.......................................................... 24,096 23,040
Machinery and equipment............................................ 84,860 75,105
-------- --------
111,881 100,762
Less accumulated depreciation...................................... 61,246 58,102
-------- --------
50,635 42,660
Excess Purchase Price Over Net Assets Acquired, net.................. 16,727 3,989
Other Assets......................................................... 10,420 4,517
-------- --------
$134,615 $ 97,664
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable............................................. $ 15,353 $ 13,233
Accrued expenses................................................... 8,884 8,431
Current portion of long-term liabilities........................... 2,469 4,315
-------- --------
Total Current Liabilities.................................. 26,706 25,979
Long-Term Liabilities, less current portion
Long-term debt..................................................... 9,513 22,770
Other postretirement benefits...................................... 27,800 29,124
Other.............................................................. 1,646 1,858
-------- --------
38,959 53,752
Convertible Senior Subordinated Debentures........................... 22,235 -0-
Shareholders' Equity
Capital stock, par value $1 a share
Serial preferred stock:
Authorized -- 632,470 shares; Issued -- none.................. -0- -0-
Common stock:
Authorized -- 20,000,000 shares
Issued and outstanding -- 8,191,810 shares in 1994 and
6,771,491 in 1993............................................ 8,192 6,771
Additional paid-in capital......................................... 26,189 11,312
Retained earnings (deficit)........................................ 12,334 (150)
-------- --------
46,715 17,933
-------- --------
$134,615 $ 97,664
========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
12
<PAGE> 14
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1994 1993 1992
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales............................................. $ 191,527 $ 147,168 $ 119,839
Costs and expenses:
Cost of products sold............................... 157,862 121,799 102,812
Selling, general and administrative expenses........ 21,049 17,854 22,337
Business restructuring costs........................ -0- -0- 1,451
Interest expense.................................... 1,958 1,242 757
--------- --------- ---------
180,869 140,895 127,357
--------- --------- ---------
Income (Loss) before Federal Income Taxes
and before Cumulative Effect of Change in
Accounting Principle...................... 10,658 6,273 (7,518)
Federal income tax (benefit).......................... (1,826) 242 137
--------- --------- ---------
Income (Loss) before Cumulative Effect of
Change in Accounting Principle............ 12,484 6,031 (7,655)
Cumulative effect of change in accounting principle... -0- -0- (26,891)
--------- --------- ---------
Net Income (Loss)........................... $ 12,484 $ 6,031 $ (34,546)
========= ========= =========
Net income (loss) per common share:
Before cumulative effect of change in accounting
principle........................................ $ 1.49 $ .90 $ (1.28)
Cumulative effect of change in accounting
principle........................................ -0- -0- (4.48)
--------- --------- ---------
$ 1.49 $ .90 $ (5.76)
========= ========= =========
Common shares used in the computation................. 8,092 6,642 6,007
Preferred dividends per share......................... $ -0- $ .75 $ .75
<FN>
See notes to consolidated financial statements.
</TABLE>
13
<PAGE> 15
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CUMULATIVE
CONVERTIBLE ADDITIONAL RETAINED
PREFERRED COMMON PAID-IN EARNINGS
STOCK STOCK CAPITAL (DEFICIT) TOTAL
----------- ------ ---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1992......... $ 38 $5,605 $ 5,679 $ 28,420 $ 39,742
Net loss........................... (34,546) (34,546)
Conversion of 1,170 preferred
shares into 2,340 common
shares........................... (1) 2 (1) -0-
Acquisition of Kay Home Products,
Inc.............................. 850 2,777 3,627
Preferred stock cash dividends..... (28) (28)
----------- ------ ---------- -------- --------
Balance at December 31, 1992....... 37 6,457 8,455 (6,154) 8,795
Net income......................... 6,031 6,031
Conversion of 24,667 preferred
shares into 49,334 common
shares........................... (24) 48 (24) -0-
Redemption of preferred shares..... (13) (178) (191)
Acquisitions of General Aluminum
Mfg. Company and Gilchrist Kustom
Molders, Inc..................... 264 3,052 3,316
Preferred stock cash dividends..... (27) (27)
Issuance of common shares upon
exercise of stock options........ 2 7 9
----------- ------ ---------- -------- --------
Balance at December 31, 1993....... -0- 6,771 11,312 (150) 17,933
Net income......................... 12,484 12,484
Issuance of Kay Home Products
earn-out shares.................. 1,150 10,925 12,075
Sale of common stock............... 271 3,952 4,223
----------- ------ ---------- -------- --------
Balance at December 31, 1994....... $ -0- $8,192 $ 26,189 $ 12,334 $ 46,715
=========== ========= ========== ========= =========
</TABLE>
See notes to consolidated financial statements.
14
<PAGE> 16
CONSOLIDATED STATEMENTS OF CASH FLOWS
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income (loss) before cumulative effect of change in
accounting principle.................................. $12,484 $ 6,031 $(7,655)
Adjustments to reconcile income (loss) to net cash
provided:
Depreciation........................................ 5,888 4,936 4,423
Tax benefit resulting from reduction of valuation
allowance on deferred tax assets................. (2,000) -0- -0-
Business restructuring costs........................ -0- -0- 1,451
Changes in other operating assets and liabilities........ (1,622) (1,575) (1,200)
Changes in current assets and liabilities:
Accounts receivable................................. (1,820) (2,485) 985
Inventories and prepaid expenses.................... (6,476) (653) 2,655
Accounts payable and accrued expenses............... 2,573 (1,343) 1,705
------- ------- -------
Net Cash Provided by Operating Activities...... 9,027 4,911 2,364
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net.......... (11,749) (4,992) (6,091)
Costs of acquisitions.................................... (2,114) (6,886) (2,137)
Other.................................................... (2,909) (548) -0-
------- ------- -------
Net Cash Used by Investing Activities.......... (16,772) (12,426) (8,228)
FINANCING ACTIVITIES
Proceeds from bank arrangements.......................... 11,350 9,900 6,000
Payments on bank borrowings.............................. (26,661) (2,148) (4,469)
Proceeds from convertible senior subordinated debentures,
net................................................... 20,872 -0- -0-
Issuance of common stock................................. 4,223 -0- -0-
Other.................................................... -0- (218) 1,334
------- ------- -------
Net Cash Provided by Financing Activities........ 9,784 7,534 2,865
------- ------- -------
Increase (Decrease) in Cash and Cash
Equivalents.................................... 2,039 19 (2,999)
Cash and Cash Equivalents at Beginning of
Year........................................ 133 114 3,113
------- ------- -------
Cash and Cash Equivalents at End of Year.... $ 2,172 $ 133 $ 114
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
15
<PAGE> 17
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The consolidated financial statements include the accounts
of the Company and all of its subsidiaries. All intercompany accounts and
transactions have been eliminated upon consolidation.
Cash Equivalents: The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents.
Inventories: Inventories are stated at the lower of cost (principally the
last-in, first-out method) or market value. If the first-in, firstout method of
inventory accounting had been used exclusively by the Company, inventories would
have been approximately $7,144,000 and $6,132,000 higher than reported at
December 31, 1994 and 1993, respectively.
Major Classes of Inventories
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
In-process and finished goods.................... $14,496 $10,189
Raw materials and supplies....................... 11,155 9,261
------- -------
$25,651 $19,450
======== ========
</TABLE>
Property, Plant and Equipment: Property, plant and equipment are carried at
cost. Major additions are capitalized and betterments are charged to accumulated
depreciation; expenditures for repairs and maintenance are charged to
operations. Depreciation of fixed assets is computed principally by the
straight-line method based on the estimated useful lives of the assets.
Excess Purchase Price Over Net Assets Acquired: The Company records
amortization of excess purchase price over the fair value of net assets acquired
(see Note B) over twenty-five years using the straight-line method. Management
periodically evaluates for possible impairment the current value of these
intangibles through cash flow and income analyses of the acquired businesses.
Pensions: The Company and its subsidiaries have pension plans, principally
noncontributory defined benefit or noncontributory defined contribution plans,
covering substantially all employees. For the defined benefit plans, benefits
are based on the employee's years of service and the Company's policy is to fund
that amount recommended by its independent actuaries. For the defined
contribution plans, the costs charged to operations and the amount funded are
based upon a percentage of the covered employees' compensation.
Income Taxes: Effective January 1, 1993, the Company began accounting for
income taxes under the liability method by adopting Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under Statement No.
109, the liability method is used in accounting for income taxes whereby
deferred tax assets and liabilities are determined based on temporary
differences between financial reporting and tax bases of assets and liabilities
and are measured using the current enacted tax rates. The adoption of FASB No.
109 had no effect on the Company's financial position or results of operations
as net deferred tax assets as of January 1, 1993 were not recognized due to the
Company's net operating loss carryforwards.
16
<PAGE> 18
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Net Income (Loss) Per Common Share: Net income (loss) per common share is
based on the average number of common shares outstanding and assumes the
exercise of outstanding dilutive stock options and the issuance of certain
additional shares subject to earn-out provisions.
Reclassifications: Certain prior year amounts have been reclassified to
conform to the 1994 presentation.
NOTE B -- ACQUISITIONS
On June 30, 1992, the Company acquired substantially all of the assets of
Kay Home Products, Inc. ("KHP") in consideration of the assumption of certain of
the liabilities of KHP and an initial issuance of 850,000 shares of common stock
valued at $3,825,000. An additional 1,150,000 shares of common stock valued at
$12,075,000, which represents purchase price in excess of net assets acquired,
were issued in September, 1994 as a result of KHP achieving certain income
levels for the two-year period ended June 30, 1994 as specified in the purchase
agreement. The acquisition has been accounted for as a purchase.
On October 15, 1993, the Company acquired General Aluminum Mfg. Company
(GAMCO) from Mr. Crawford, the owner of GAMCO and the Chairman of the Company,
by issuing 250,000 shares of its common stock valued at $3,127,000, in exchange
for the outstanding shares of GAMCO. Up to an additional 750,000 shares of
common stock may be issued if GAMCO achieves certain income levels during the
four-year period ending December 31, 1997. Throughout 1994, 187,500 of the
750,000 shares were included in the earnings per share calculation as it
appeared likely such shares would be issued pursuant to this agreement. The
acquisition has been accounted for as a purchase. GAMCO is headquartered in
Conneaut, Ohio and produces and machines aluminum permanent mold castings for
the transportation industry.
On December 30, 1993, the Company acquired Cleveland Steel Container's
(CSC) plastic container facility for $2.4 million in cash and assets of the
Company's steel container plant. The acquisition has been accounted for as a
purchase. Cleveland Container manufactures plastic containers for the food
products, industrial coatings and building products industry.
The following is the current value of the net assets acquired of GAMCO and
CSC as of their respective dates of acquisition:
<TABLE>
<CAPTION>
GAMCO CSC
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash.................................................. $ 55
Accounts receivable................................... 3,271
Inventories........................................... 1,599 $ 792
Property, plant and equipment......................... 6,438 3,468
Other assets and intangibles.......................... 1,021 1,239
Trade accounts payable................................ (3,481)
Accrued expenses...................................... (1,186)
Current portion of long-term liabilities.............. (3,445)
Long-term liabilities................................. (1,145)
------- -------
Total cost of acquisition................... $ 3,127 $ 5,499
======== ========
</TABLE>
The following unaudited pro forma results of operations for 1993 assume the
acquisitions of GAMCO and CSC occurred on January 1, 1993. These pro forma
results have been prepared for comparative purposes only and do not purport to
be indicative of the results of operations
17
<PAGE> 19
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
which actually would have resulted had the acquisitions occurred on the date
indicated, or which may result in the future.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Net sales............................................................ $163,121
Gross profit......................................................... 28,116
Net income........................................................... 7,927
Net income per common share.......................................... $1.15
</TABLE>
In 1994, the Company purchased certain assets and a product line from a
company for a total cost of $2,114,000. In 1993, the Company also purchased
certain assets and product lines from three companies for a total cost of
$4,623,000, which includes the issuance of 18,000 common shares valued at
$193,500. In 1992, the Company also purchased certain assets from a company for
$1,575,000 in cash. The operations of these businesses prior to the dates of
acquisition were not material to the Company.
NOTE C -- ACCRUED EXPENSES
Accrued expenses include the following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1994 1993
------ ------
(IN THOUSANDS)
<S> <C> <C>
Self-insured liabilities............................................. $1,023 $1,325
Warranty and installation accruals................................... 2,000 1,320
Accrued payroll and payroll-related items............................ 1,663 1,195
State and local taxes................................................ 705 652
Advance billings..................................................... 755 211
Sundry............................................................... 2,738 3,728
------ ------
Totals..................................................... $8,884 $8,431
======= =======
</TABLE>
NOTE D -- FINANCING ARRANGEMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revolving credit at prime (8 1/2% at December 31, 1994) maturing on
September 30, 1997................................................. $ 7,000 $13,550
Industrial Revenue Bond, Boaz, Alabama, 9.25%, due through 2000...... 1,400 1,500
GAMCO, payable in monthly installments through November 1, 2003,
interest at 3%..................................................... 781 858
GAMCO, payable in monthly installments through June 1, 1996.......... 107 134
Miscellaneous loans refinanced in 1994............................... -0- 8,530
Other................................................................ 478 482
------- -------
9,766 25,054
Less current maturities.............................................. 253 2,284
------- -------
Totals..................................................... $ 9,513 $22,770
======== ========
</TABLE>
18
<PAGE> 20
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Maturities of long-term debt during each of the five years following
December 31, 1994 are approximately $253,000 in 1995, $280,000 in 1996,
$7,307,000 in 1997, $302,000 in 1998 and $501,000 in 1999.
During 1994, the Company entered into a new revolving credit agreement with
a group of banks under which it may borrow up to $50,000,000 on an unsecured
basis. Interest is payable quarterly at the prime lending rate or at the
Company's election, a percentage over LIBOR which fluctuates based on specific
financial ratios. All of the Company's borrowings under this agreement at
December 31, 1994 were at the prime rate (8 1/2%). The credit agreement expires
on September 30, 1997 and includes provisions for two one-year renewal periods.
This agreement replaced previous revolving credit agreements of the Company and
GAMCO of $22,000,000 and $3,900,000, respectively.
Within the revolver, $2,500,000 in standby letters of credit and $500,000
of commercial letters of credit may be issued. In addition to the bank's
customary letter of credit fees, a 1% fee is assessed on standby letters of
credit on an annual basis. As of December 31, 1994, in addition to amounts
borrowed under the revolver, there is $1,800,000 outstanding primarily for
standby letters of credit. A fee of 1/4% is imposed by the bank on the unused
portion of available borrowings.
The credit agreement contains limitations on borrowings, investments, lease
rentals, capital expenditures and acquisitions or mergers, and requires
maintenance of specific financial ratios and a minimum net worth.
During 1994, the Company sold $22,235,000 of its 7 1/4% convertible senior
subordinated debentures and $4,200,000 of its common stock at $15.75 a share.
The debentures are convertible into shares of the Company's common stock at a
price of $19.32 per share or a rate of 51.76 shares per $1,000 principal amount
of debentures and are subordinated to all senior indebtedness of the Company.
Interest is payable semiannually.
NOTE E -- FEDERAL INCOME TAXES
Significant components of the Company's net deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Postretirement benefit obligation.................................. $ 10,047 $ 10,500
Net operating loss carryforwards................................... 7,258 10,530
Other -- net....................................................... 1,410 1,680
-------- --------
Total deferred tax assets....................................... 18,715 22,710
Deferred tax liabilities:
Tax over book depreciation......................................... 4,572 5,200
Pension............................................................ 1,071 770
-------- --------
Total deferred tax liabilities.................................. 5,643 5,970
-------- --------
Net deferred tax assets.............................................. 13,072 16,740
Valuation allowance for deferred tax assets.......................... (11,072) (16,740)
-------- --------
Net deferred tax assets......................................... $ 2,000 $ -0-
======== ========
</TABLE>
19
<PAGE> 21
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
As of December 31, 1994, the Company reduced by $2,000,000 the valuation
allowance on deferred tax assets relating to anticipated future income tax
benefits from utilization of net operating loss carryforwards.
The reasons for the difference between Federal income tax (benefit) and the
amount computed by applying the statutory Federal income tax rate to income
(loss) before Federal income taxes and before cumulative effect of change in
accounting principle are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed statutory amount.................................. $ 3,643 $ 2,051 $(2,556)
Tax effect of losses for which no tax benefits are
available................................................ -0- -0- 2,693
Utilization of net operating loss carryforwards............ (3,469) (1,809) -0-
Reduction in valuation allowance for deferred tax assets... (2,000) -0- -0-
------- ------- -------
Federal income tax (benefit)..................... $(1,826) $ 242 $ 137
======== ======== ========
</TABLE>
At December 31, 1994, the Company had net operating loss carryforwards for
tax purposes of approximately $21,600,000 available to offset future taxable
income which expire in 2001 to 2007. Additionally, a subsidiary of the Company
has net operating loss carryforwards totalling $2,546,000, subject to certain
limitations, which expire in 2001 to 2007.
NOTE F -- SHAREHOLDERS' EQUITY
On December 3, 1993, the Company redeemed all the outstanding $.75
Cumulative Convertible Preferred Stock at $15.00 a share plus accrued dividends.
Effective February 16, 1992, no new grants will be issued under the
Company's 1982 Incentive Stock Option Plan. At December 31, 1994 and 1993, no
options were outstanding and exercisable under the Plan. During 1993, 1,500
options under this Plan were exercised at $6.06 a share. No options were
exercised during 1992.
Under the provisions of the Company's 1992 Stock Option Plan, incentive
stock options or non-statutory options to purchase 350,000 shares of the
Company's stock may be granted to officers and other key employees at the market
price on the respective date of grant. The option rights are exercisable only if
and after the employee shall have remained in the employ of the Company for one
year from the date the option is granted. At December 31, 1994, there were a
total of 321,000 options outstanding under the Plan. 200,000 of such options
become 100% exercisable after two years from the date of grant at an option
price of $5.125 a share and terminate five years from the option date; 121,000
of such options become 100% exercisable after three years from the date of grant
at option prices ranging from $9.125 -- $13.50 a share and terminate ten years
from the option date. During 1994, 1,000 options under this Plan were exercised
at $9.125 a share. At December 31, 1994, there were 228,667 options exercisable
at $5.125 -- $13.50 a share.
NOTE G -- LEGAL PROCEEDINGS
During 1994, Tocco, Inc., a wholly-owned subsidiary of the Company, settled
a civil action for personal injury entitled the William B. Fleenor matter. The
settlement had no effect on the Company's consolidated financial position or its
results of operations as substantially all settlement payments were funded by
the Company's product liability insurance carriers.
20
<PAGE> 22
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The Company becomes involved in litigation arising out of its normal
business activities. In the opinion of management, the Company's liability, if
any, under any pending litigation would not have a material effect on its
financial position or results of operations.
NOTE H -- PENSIONS
A summary of the components of net periodic pension credit for the defined
benefit plans and the total contributions charged to pension expense for the
defined contribution plans is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Defined benefit plans:
Service cost.......................................... $ 128 $ 175 $ 247
Interest cost......................................... 1,558 1,718 1,610
Actual return on assets............................... 90 (2,197) (2,017)
Net amortization and deferral......................... (2,242) (61) (337)
------- ------- -------
Net periodic pension credit of defined benefit
plans............................................... (466) (365) (497)
Defined contribution plans................................. 773 882 1,581
------- ------- -------
Total pension expense............................ $ 307 $ 517 $ 1,084
======== ======== ========
</TABLE>
Assumptions used in the accounting for the defined benefit pension plans
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1994 1993
----------- -----------
<S> <C> <C>
Weighted average discount rate............................. 8.5% 7.5%
Expected long-term rate of return on assets................ 9.5 8.5
</TABLE>
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheets at December 31, 1994 and 1993 for the Company's
defined benefit pension plans.
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................. $18,211 $21,431
======== ========
Plan assets at fair value.................................. $21,772 $25,789
Accumulated and projected benefit obligation............... 19,108 22,701
------- -------
Plan assets in excess of projected benefit obligation...... 2,664 3,088
Unrecognized net gain...................................... (274) (905)
Unrecognized prior service cost............................ 1,383 1,496
Unrecognized net asset at January 1, 1987
net of amortization...................................... (345) (778)
------- -------
Net pension asset included in other assets................. $ 3,428 $ 2,901
======== ========
</TABLE>
21
<PAGE> 23
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The plans' assets at December 31, 1994 and 1993 are invested in listed
stocks, bonds and unallocated insurance contracts.
NOTE I -- OTHER POSTRETIREMENT BENEFITS
The Company and certain of its subsidiaries provide health care and life
insurance benefits for retired employees. Employees may become eligible for
benefits if they qualify for retirement while working for the Company.
Effective January 1, 1992, the Company adopted Financial Accounting
Standards Board (FASB) Statement No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." This statement requires that the
cost of these benefits be recognized in the financial statements on the accrual
basis. Accordingly, the Company recorded a charge of $26,891,000 or $4.59 a
share as the cumulative effect of the accounting change.
During 1993, the Company reduced costs and revised its actuarial
assumptions to reflect actual estimates of experience. The effect of these
changes reduced the actuarial present value of accumulated plan benefits from
$31,729,000 at January 1, 1993 to $20,737,000 at December 31, 1993.
Cost reduction efforts included adjusting subsidies for certain personnel,
restructuring the distribution of benefits for salaried retirees and
implementation of a new prescription drug plan. Changes in actuarial assumptions
included revisions in estimates to reflect actual plan experience and mortality.
The following table presents the plan's funded status and amounts
recognized in the consolidated balance sheets at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees.............................................. $16,495 $19,812
Fully eligible active plan participants............... 218 150
Other active plan participants........................ 818 775
------- -------
Accumulated Postretirement Benefit Obligations... 17,531 20,737
Unrecognized net gain................................. 12,146 10,137
------- -------
Recorded Postretirement Benefit Obligations...... $29,677 $30,874
======== ========
</TABLE>
Net periodic benefit cost includes the following components for the years
ended December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1994 1993 1992
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost............................................... $ 58 $ 56 $ 162
Interest cost.............................................. 1,476 1,744 2,565
Net amortization and deferral.............................. (620) (611) -0-
------ ------ ------
Net Periodic Postretirement Benefit Cost................... $ 914 $1,189 $2,727
======= ======= =======
</TABLE>
The accumulated postretirement benefit obligation was determined using an
assumed discount rate of 8.5%, 7.5% and 8.5% for 1994, 1993 and 1992,
respectively. The assumed annual health care trend rate for retirees younger
than 65 was 10% in 1994 (11% in 1993 and
22
<PAGE> 24
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
14.5% in 1992) decreasing to 6.0% in 2004. The assumed annual health care trend
rate for retirees aged 65 and over will decrease to 5.5% in 2004. A 1% change in
the trend rate would increase the APBO by 6.6% and annual expense by 12%.
NOTE J -- LEASES
Rental expense for 1994, 1993 and 1992 was $2,348,000, $2,008,000 and
$1,531,000, respectively. Future minimum lease commitments during each of the
five years following December 31, 1994 are as follows: $1,647,000 in 1995,
$1,278,000 in 1996, $967,000 in 1997, $440,000 in 1998 and $266,000 in 1999.
NOTE K -- INDUSTRY SEGMENTS
The Company operates in three principal industry groups: Container
Products, Transportation and Consumer Products. The Container Products Group
includes the manufacture of plastic containers for the food, industrial coatings
and building products industries. The Transportation Group manufactures
industrial products for the airline, automotive, locomotive and trucking
industries and includes forged and machined products, induction heating systems,
permanent mold castings and industrial rubber products. Forged and machined
products include the production, machining and finishing of closed die forgings
produced by the Company and others. Induction heating systems include the
engineering and manufacturing of induction heating machinery used for a variety
of purposes such as surface hardening, brazing, soldering, melting, and welding.
Permanent mold castings include the production and machining of permanent mold
aluminum parts. Industrial rubber products include custom made molded and lathe
cut goods and items requiring rubber-to-metal bonding. The Consumer Products
Group manufactures and distributes molded plastic and metal indoor and outdoor
products for the housewares industry.
The Company's sales are made through its own sales organization,
distributors and representatives. There are generally no sales of products
between the various industry segments. Operating income (loss) is total revenue
less operating expenses, excluding interest and unallocated income and expense
(net). Identifiable assets by industry segment include assets directly
identified with those operations.
23
<PAGE> 25
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Corporate assets generally consist of cash and cash equivalents, and other
investments.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net Sales
Container products group......................... $ 62,311 $ 52,696 $ 52,649
Transportation group............................. 101,427 71,332 59,250
Consumer products group.......................... 27,789 23,140 7,940
-------- -------- --------
Net Sales................................... $191,527 $147,168 $119,839
========= ========= =========
Operating Income (Loss)
Container products group......................... $ 4,463 $ 2,903 $ 2,214
Transportation group (includes restructuring
costs of $1,451 in 1992)....................... 7,537 3,533 (4,531)
Consumer products group.......................... 3,251 3,209 (287)
-------- -------- --------
Operating Income (Loss)..................... 15,251 9,645 (2,604)
Corporate costs....................................... (2,635) (2,130) (4,157)
Interest expense...................................... (1,958) (1,242) (757)
-------- -------- --------
Income (Loss) before Federal Income Tax............... $ 10,658 $ 6,273 $ (7,518)
========= ========= =========
Identifiable Assets
Container products group......................... $ 33,570 $ 23,420 $ 22,158
Transportation group............................. 58,433 54,145 35,713
Consumer products group.......................... 32,418 19,195 13,554
General corporate................................ 10,194 904 304
-------- -------- --------
Total Assets................................ $134,615 $ 97,664 $ 71,729
========= ========= =========
Depreciation Expense
Container products group......................... $ 2,675 $ 2,309 $ 2,245
Transportation group............................. 2,563 1,990 1,856
Consumer products group.......................... 650 637 322
-------- -------- --------
Total Depreciation Expense.................. $ 5,888 $ 4,936 $ 4,423
========= ========= =========
Capital Expenditures
Container products group......................... $ 8,022 $ 1,820 $ 6,224
Transportation group............................. 3,966 652 1,134
Consumer products group.......................... 208 2,666 139
-------- -------- --------
Total Capital Expenditures.................. $ 12,196 $ 5,138 $ 7,497
========= ========= =========
</TABLE>
In 1994, the Company's Transportation Group had sales of $28,000,000 (14.6%
of consolidated net sales) to Ford Motor Company.
NOTE L -- SUBSEQUENT EVENTS-UNAUDITED
On March 7, 1995, the shareholders of the Company and RB&W Corporation
(RB&W) approved the issuance of up to 2,250,000 ($13.125 per share market value
as of March 7, 1995) of the Company's common shares for the purpose of acquiring
all of the shares of RB&W in exchange for cash of $29,969,000 ($4.45 per share)
and the newly issued shares. The transaction, which is expected to be
consummated on or about March 31, 1995, will be accounted for as a purchase.
RB&W is headquartered in Cleveland, Ohio and operates in two business segments:
manufacturing and distribution. Manufacturing operations comprise the
manufacture of cold formed products, a significant portion of which are sold to
the transportation industry. The principal business of RB&W's distribution
segment is the distribution of various products
24
<PAGE> 26
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
associated with the fastener industry, primarily components to original
equipment manufacturers.
The following is the estimated value of the net assets of RB&W as of
December 31, 1994:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash................................................................. $ 4,430
Accounts receivable.................................................. 25,353
Inventories.......................................................... 34,392
Property, plant and equipment........................................ 5,848
Excess purchase price over net assets acquired....................... 35,423
Other assets......................................................... 16,377
Notes payable........................................................ (26,102)
Trade accounts payable............................................... (16,750)
Accrued expenses..................................................... (7,580)
Long-term liabilities................................................ (10,807)
--------------
Total estimated cost of acquisition........................ $ 60,584
===============
</TABLE>
The following unaudited pro forma results of operations assume the
acquisition occurred on January 1, 1993. These pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
the results of operations which actually would have resulted had the acquisition
occurred on the date indicated, or which may result in the future.
<TABLE>
<CAPTION>
1994 1993
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Net sales............................................. $ 359,819 $ 323,771
Gross profit.......................................... 56,119 47,864
Net income............................................ 12,894 3,308
Net income per common share........................... $ 1.21 $ .37
</TABLE>
25
<PAGE> 27
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
SUPPLEMENTARY FINANCIAL DATA
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
1994 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------------------------------------------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales................................... $ 52,288 $ 49,394 $ 44,183 $ 45,662
Gross profit................................ 9,538 8,576 6,811 8,740
Net income.................................. $ 3,138 $ 3,273 $ 1,640 $ 4,433
========= ========= ========= =========
Net income per common share................. $ 0.40 $ 0.39 $ 0.17 $ 0.52
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
1993 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------------------------------------------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales................................... $ 36,841 $ 37,846 $ 30,974 $ 41,507
Gross profit................................ 7,157 6,403 5,017 6,993
Net income.................................. $ 1,826 $ 1,768 $ 528 $ 1,908
========= ========= ========= =========
Net income per common share................. $ 0.28 $ 0.27 $ 0.08 $ 0.27
========= ========= ========= =========
</TABLE>
Note A - On October 15, 1993, the Company acquired General Aluminum Mfg. Company
(GAMCO) in an exchange of shares which was accounted for as a purchase.
Accordingly, operations of GAMCO are included in the results of
operations since that date.
Note B - In the fourth quarter of 1994, the Company reduced by $2,000,000 the
valuation allowance on deferred tax assets relating to anticipated
future income tax benefits from utilization of net operating loss
carryforwards.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in nor disagreements with Park-Ohio's independent
auditors on accounting and financial disclosure matters within the two-year
period ended December 31, 1994.
26
<PAGE> 28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in "Election of Directors" on page 2 of
Park-Ohio's Proxy Statement, dated April 17, 1995, is incorporated herein by
reference. Information relating to executive officers of Park-Ohio is contained
under Part I of this Annual Report on Form 10-K.
Information required by Item 405 of Regulation S-K contained under the
heading "Beneficial Ownership of Shares" on pages 4 and 5 of Park-Ohio's Proxy
Statement, dated April 17, 1995, is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information relating to executive compensation contained under the
headings "Certain Matters Pertaining to the Board of Directors" on pages 5 and
6, "Executive Compensation" on pages 6 and 7, and "Information Concerning
Executive Officers - Executive Agreements" on page 10, of Park-Ohio's Proxy
Statement, dated April 17, 1995, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the heading "Beneficial Ownership of
Shares" on pages 4 and 5 of Park-Ohio's Proxy Statement, dated April 17, 1995,
relating to the beneficial ownership of Park-Ohio's Common Stock is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information concerning related transactions contained under the heading
"Information Concerning Executive Officers - Related Transactions" on page 10 of
Park-Ohio's Proxy Statement, dated April 17, 1995, is incorporated herein by
reference.
27
<PAGE> 29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following financial statements are included in Part II, Item 8:
<TABLE>
<CAPTION>
PAGE
----------
<S> <C> <C>
11
Report of Independent Auditors.........................................
Financial Statements
12
Consolidated balance sheets -- December 31, 1994 and 1993..........
13
Consolidated statements of operations -- years ended December 31,
1994, 1993 and 1992................................................
14
Consolidated statements of shareholders' equity -- years ended
December 31, 1994, 1993 and 1992...................................
15
Consolidated statements of cash flows -- years ended December 31,
1994, 1993 and 1992................................................
16-25
Notes to consolidated financial statements.........................
26
Selected quarterly financial data (unaudited) -- years ended December 31, 1994
and 1993.......................................................................
(2) Index to Financial Statement Schedules
</TABLE>
The following financial statement schedule required by Regulation S-X for
the three years ended December 31, 1994 is submitted herewith:
<TABLE>
<C> <S> <C> <C> <C>
II -- Valuation and qualifying accounts........................................ 31
(3) Exhibits included herein:
*****
(2) Amended and Restated Plan and Agreement of Merger dated February 6,
1995 among Park-Ohio Industries, Inc., P.O. Acquisition Company,
Inc. and RB&W Corporation..........................................
****
(3)(A) Amended Articles of Incorporation of Park-Ohio.....................
****
(3)(B) Code of Regulations of Park-Ohio...................................
Instruments defining the rights of security holders:
(4)(A) See Exhibits (3)(A) and (B)
*****
(4)(B) Revolving Loan and Credit Agreement among Park-Ohio Industries,
Inc., Society National Bank, The Huntington National Bank, and NBD,
N.A., dated October 27, 1994.......................................
***
(4)(C) Indenture dated May 3, 1994 between Park-Ohio Industries, Inc. and
Society Bank, Michigan, as Trustee.................................
*
(10)(A) Form of Indemnification Agreement entered into between Park-Ohio
Industries, Inc. and each of its directors and certain officers....
*****
(10)(B) Standstill Agreement between Park-Ohio Industries, Inc., Edward F.
Crawford and Kay Home Products, Inc. dated June 17, 1992...........
*****
(10)(C) Employment Agreement between Park-Ohio Industries, Inc. and Edward
F. Crawford dated June 17, 1992....................................
</TABLE>
28
<PAGE> 30
<TABLE>
<S> <C> <C>
(10)(D) Plan and Agreement of Merger dated October 1, 1993 among Park- Ohio **
Industries, Inc., PO Acquisition Company, Inc., General Aluminum
Mfg. Company and Edward F. Crawford................................
*****
(10)(E) Park-Ohio Industries, Inc. 1992 Stock Option Plan..................
**
(10)(F) Escrow Agreement dated October 15, 1993 among Park-Ohio Industries,
Inc., Edward F. Crawford and The Huntington Trust Company, N.A.....
(11) Computation of Net Income (Loss) Per Common Share..................
(21) List of Subsidiaries of Park-Ohio Industries, Inc..................
(23) Consent of Independent Auditors....................................
(27) Financial Data Schedule (Electronic Filing Only)...................
</TABLE>
* These documents were filed as part of the registrant's Annual Report on
Form 10-K for
the year ended December 31, 1992.
** These documents were filed as part of the registrant's Report on Form
8-K filed with the Commission on November 1, 1993.
*** These documents were filed as part of the registrant's Report on Form 8-K
filed with the Commission on May 6, 1994.
**** These documents were filed as part of the registrant's Report on Form S-3
(No. 33-86054) filed with the Commission on November 7, 1994.
***** These documents were part of the registrant's Form S-4 (No. 33-87230)
filed with the Commission on December 9, 1994.
(b) Reports on Form 8-K filed in the fourth quarter of 1994:
None
29
<PAGE> 31
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
PARK-OHIO INDUSTRIES, INC.
(Registrant)
ByRONALD J. COZEAN
Ronald J. Cozean, Secretary
Date: March 29, 1995
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C> <C>
EDWARD F. CRAWFORD Chairman and Chief Executive
Edward F. Crawford Officer (Principal Executive
Officer and Director
JOHN J. President and Chief Operating
MURRAY Officer and Director
John J. Murray
JAMES S. Vice President -- Treasurer and
WALKER Controller (Principal Financial and
James S. Walker Accounting Officer)
</TABLE>
March 29, 1995
<TABLE>
<S> <C> <C>
LEWIS E. HATCH, Director
JR.
Lewis E. Hatch, Jr.
RICHARD S. Director
SHEETZ
Richard S. Sheetz
THOMAS E. Director
MCGINTY
Thomas E. McGinty
JAMES W. Director
WERT
James W. Wert
</TABLE>
30
<PAGE> 32
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
----------------------------
<S> <C> <C> <C> <C> <C>
----------------------------
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
----------------------------
ADDITIONS
---------------------------
(1) (2)
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
----------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1994:
Reserves deducted from
respective assets
accounts
Allowance for doubtful
accounts............. $ 351,372 $ 291,041 $ -0- $ 248,099A $ 394,314
============ ============ ============ ============ ============
Plant closedown and
business
restructuring
costs................ $ 1,858,015 $ -0- $ -0- $ 211,738 $ 1,646,277
============ ============ ============ ============ ============
YEAR ENDED DECEMBER 31,
1993:
Reserves deducted from
respective assets
accounts
Allowance for doubtful
accounts............. $ 472,711 $ 335,121 $ -0- $ $456,461A $ 351,372
============ ============ ============ ============ ============
Plant closedown and
business
restructuring
costs................ $ 2,288,877 $ 70,000 $ -0- $ 430,862B $ 1,858,015
============ ============ ============ ============ ============
YEAR ENDED DECEMBER 31,
1992:
Reserves deducted from
respective assets
accounts
Allowance for doubtful
accounts............. $ 470,269 $ 474,268 $ -0- $ 456,461A $ 472,711
============ ============ ============ ============ ============
Plant closedown and
business $ 1,086,600B
restructuring
costs............. $ 7,097,808 $ 392,495 $ -0- $ 4,114,826C $ 2,288,877
============ ============ ============ ============ ============
</TABLE>
Note A -- Uncollectible accounts charged off, less recoveries.
Note B -- Payments on amounts reserved.
Note C -- Reclassified to other postemployment benefits.
31
<PAGE> 33
ANNUAL REPORT ON FORM 10-K
PARK-OHIO INDUSTRIES, INC.
FOR THE YEAR ENDED DECEMBER 31, 1994
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
---------
<C> <S> <C>
(11) Computation of Net Income (Loss) Per Common Share
(21) List of Subsidiaries of Park-Ohio Industries, Inc.
(23) Consent of Independent Auditors
(27) Financial Data Schedule (Electronic Filing Only)
</TABLE>
32
<PAGE> 1
<TABLE>
EXHIBIT 11
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATIONS OF NET INCOME (LOSS) PER COMMON SHARE
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Income (loss) $12,484,347 $ 6,031,419 $(7,655,007)
Less Preferred Stock dividend requirements -0- 27,362 28,028
----------- ----------- -----------
12,484,347 6,004,057 (7,683,035)
Amortization of imputed goodwill
associated with the earnout shares (397,800) -0- -0-
Cumulative effect of change in
accounting principle -0- -0- (26,891,174)
Net income (loss) related to
shareholders of Common Stock
----------- ----------- -----------
(Primary) 12,086,547 6,004,057 (34,574,209)
Interest associated with convertible
senior subordinated debentures 1,009,000 -0- -0-
Net income (loss) related to
shareholders of Common Stock
----------- ----------- -----------
(Fully Diluted) $13,095,547 $ 6,004,057 $(34,574,209)
=========== =========== ============
Primary Computation:
Average shares outstanding 7,237,195 6,529,226 6,006,789
Effect of Kay Home Products, Inc.
earnout shares deemed to be issued 509,473 -0- -0-
Effect of General Aluminum Mfg. Company
earnout shares deemed to be issued 187,500 -0- -0-
Effect of dilutive stock options
based on the treasury stock
method using the average market
price for the period 157,854 112,814 -0-
----------- ----------- -----------
Total Shares Used in Primary
Computation 8,092,022 6,642,040 6,006,789
=========== =========== ===========
Per share of Common Stock:
Income (loss) $ 1.49 $ .90 $ (1.28)
Cumulative effect of change in
accounting principle -0- -0- (4.48)
----------- ----------- ------------
Net Income (loss) $ 1.49 $ .90 $ (5.76)
=========== =========== ============
Fully Diluted Computation:
Average shares outstanding per
primary computation above 8,092,022 6,642,040 6,006,789
Additional effect of dilutive
stock options based on the
treasury stock method using
the year-end market price, if
higher than the average market
price -0- 24,177 -0-
Effect of assuming conversion of
the convertible subordinated
debentures 723,258 -0- -0-
Effect of assuming conversion of
the $.75 Cumulative Convertible
Preferred Stock (weighted
average) -0- 39,274 74,742
----------- ----------- -----------
Total Shares Used in Fully
Diluted Computation 8,815,280 6,705,491 6,081,531
=========== =========== ===========
Per share of Common Stock:**
Income (loss) $ 1.49 $ .90 $ (1.26)
Cumulative effect of change in
accounting principle -0- -0- (4.42)
----------- ----------- ------------
Net income (loss) $ 1.49 $ .90 $ (5.68)
=========== =========== ============
<FN>
**Disclosure not presented in consolidated statement of operations because the effect is either anti-dilutive or not material.
</TABLE>
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF PARK-OHIO INDUSTRIES, INC.
Park-Ohio has no parent. As of December 31, 1994, Park-Ohio had the following
subsidiaries, all of which are included in the consolidated financial
statements:
<TABLE>
<CAPTION>
PERCENTAGE OF
-------------
VOTING
------
SECURITIES
----------
STATE OF OWNED BY
-------- --------
SUBSIDIARY ORGANIZATION PARK-OHIO
---------- ------------ ---------
<S> <C> <C>
Bennett Industries, Inc. Illinois 100%
Blue Falcon Forge, Inc. Pennsylvania 100%
Castle Rubber Company Pennsylvania 100%
General Aluminum Mfg. Company Ohio 100%
Gilchrist Kustom Molders, Inc. Ohio 100%
Globe Steel Abrasive Company Ohio 100%
Kay Home Products, Inc. Ohio 100%
National Automatic Pipeline Operators, Inc. Michigan 50%
Park-Ohio Bio-Medical Group, Inc. Ohio 100%
The National Pipe Line Company Michigan 60%
Steel Abrasives, Inc. Ohio 100%
Tocco, Inc. Alabama 100%
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements on
Forms S-4, S-3 and S-8 (relating to the 1992 Stock Option Plan) of Park-Ohio
Industries, Inc. for the registration of 2,248,942 shares, 363,094 shares, and
350,000 shares, respectively, of its common stock of our report dated February
22, 1995, with respect to the consolidated financial statements and schedule of
Park-Ohio Industries, Inc. included in this Annual Report on Form 10-K for the
year ended December 31, 1994.
/s/ Ernst & Young LLP
-----------------------------
Ernst & Young LLP
Cleveland, Ohio
March 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000076282
<NAME> PARK OHIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,172
<SECURITIES> 0
<RECEIVABLES> 27,165
<ALLOWANCES> 394
<INVENTORY> 25,651
<CURRENT-ASSETS> 56,833
<PP&E> 111,881
<DEPRECIATION> 61,246
<TOTAL-ASSETS> 134,615
<CURRENT-LIABILITIES> 26,706
<BONDS> 31,748
<COMMON> 8,192
0
0
<OTHER-SE> 38,523
<TOTAL-LIABILITY-AND-EQUITY> 134,615
<SALES> 191,527
<TOTAL-REVENUES> 191,527
<CGS> 157,862
<TOTAL-COSTS> 157,862
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,958
<INCOME-PRETAX> 10,658
<INCOME-TAX> (1,826)
<INCOME-CONTINUING> 12,484
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,484
<EPS-PRIMARY> 1.49
<EPS-DILUTED> 1.49
</TABLE>
