<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, 1998
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 HOLDINGS CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
OHIO 34-1867219
- ----------------------------------------------------- -----------------------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
23000 EUCLID AVENUE
CLEVELAND, OHIO 44117
- ----------------------------------------------------- -----------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
Registrant's telephone number, including area code: (216) 692-7200
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)
Park-Ohio Holdings Corp. is a successor issuer to Park-Ohio Industries, Inc.
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 March 25, 1999: Approximately $105,232,000.
Number of shares outstanding of the registrant's Common Stock, par value
$1.00 per share, as of March 5, 1999: 11,147,462 including 355,206 shares in
treasury.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 29, 1999 ARE INCORPORATED BY
REFERENCE INTO PART III OF THIS FORM 10-K.
<PAGE> 2
PARK-OHIO HOLDINGS CORP.
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
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<CAPTION>
ITEM NO. PAGE NO.
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PART I
1. Business 1
2. Properties 6
3. Legal Proceedings 6
4. Submission of Matters to a Vote of Security Holders 6
PART II
5. Market for the Registrant's Common Stock and Related
Security Holder Matters 8
6. Selected Consolidated Financial Data 8
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
7A. Quantitative and Qualitative Disclosure about Market Risk 15
8. Financial Statements and Supplementary Data 16
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 35
PART III
Part III information will appear in the Registrant's Proxy
Statement in connection with its 1999 Annual Meeting of
Shareholders. Such Proxy Statement will be filed with the
Securities and Exchange Commission pursuant to Regulation
14A and such information will be incorporated herein by
reference as of the date of such filing. 35
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K 36
SIGNATURES 37
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<PAGE> 3
PART I
ITEM 1. BUSINESS
THE COMPANY
Park-Ohio Holdings Corp. ("Holdings") was incorporated as an Ohio
corporation in 1998. Holdings, primarily through the subsidiaries owned by its
direct subsidiary, Park-Ohio Industries, Inc. ("Park-Ohio") is a leading
provider of logistics services and a manufacturer of highly engineered products.
Reference herein to the "Company" includes, where applicable, Holdings,
Park-Ohio and its direct and indirect subsidiaries and its predecessor
companies, which have operated for more than 150 years.
The Company operates through two segments, Integrated Logistics Solutions
("ILS") and Manufactured Products, which serve a wide variety of industrial
markets. ILS is a leading national supplier of fasteners (e.g., nuts, bolts and
screws) and other industrial products to original equipment manufacturers
("OEMs"), other manufacturers and distributors. In connection with the supply of
such industrial products, ILS provides a variety of value-added, cost-effective
procurement solutions. The principal customers of ILS are OEMs in the
transportation, industrial, electrical and lawn and garden equipment industries.
Manufactured Products designs and manufactures a broad range of high quality
products engineered for specific customer applications. The principal customers
of Manufactured Products are end-users in the automotive, railroad, truck and
aerospace industries. Between 1994 and 1998, the Company grew significantly,
through both internal growth and acquisitions. Over this period, the Company's
net sales increased from $129.2 million to $551.8 million, income from
continuing operations before income taxes increased from $6.7 million to $22.7
million, and EBITDA increased from $11.4 million to $52.9 million. As of
December 31, 1998, the Company employed approximately 3,000 persons.
OPERATIONS
The following chart highlights the Company's two business segments, the
primary industries they serve and the key products they sell.
<TABLE>
<CAPTION>
NET SALES FOR THE
YEAR ENDED
SEGMENT PRIMARY INDUSTRIES SERVED SELECTED PRODUCTS/SERVICES DEC. 31, 1998
------- ------------------------- -------------------------- -----------------
(MILLIONS)
<S> <C> <C> <C>
INTEGRATED LOGISTICS Automotive parts and Inventory management, $364.5
SOLUTIONS accessories, electrical engineering and
equipment, lawn and garden procurement of standard
equipment, HVAC, and specialty fasteners,
industrial equipment, fittings, rubber and other
railroad and heavy truck industrial products.
MANUFACTURED PRODUCTS Automotive, aerospace, Engineering and 187.3
power generation, manufacturing the
railroad, shipbuilding, following: Aluminum
steel, telecommunications permanent mold castings
and truck such as clutch retainers,
pinion carriers and
transmission pump
housings; forged and
machined products such as
aircraft landing gears,
locomotive crankshafts and
camshafts; induction
heating systems; and,
industrial rubber products
</TABLE>
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INTEGRATED LOGISTICS SOLUTIONS
ILS is a leading national supplier of over 150,000 standard and specialty
fasteners and other industrial products pursuant to either supply chain
management agreements or traditional wholesale supply arrangements. ILS operates
out of branches located throughout the United States, Canada, Puerto Rico,
Mexico and England, and has a central distribution center located in Dayton,
Ohio. ILS generated net sales of $364.5 million, or 66% of the Company's net
sales for the year ended December 31, 1998. The four largest customers,
comprised of many divisions, accounted for approximately 21% of sales of ILS.
The loss of any one of these customers would have an adverse effect on this
segment.
Products and Services. Supply chain management, which is ILS' primary
focus for future growth, involves offering customers procurement solutions and
comprehensive, on-site management for most of their fastener and related
hardware needs. Supply chain management customers receive value-added services,
such as part usage and cost analysis, product redesign recommendations, supplier
selection, quality assurance, bar coding, product packaging and tracking,
just-in-time delivery, electronic billing services and ongoing technical
support. Supply chain management services are typically provided to customers
pursuant to total fastening services ("TFS") contracts. TFS contracts enable
ILS' customers to both reduce procurement costs and better focus on their
companies' core manufacturing competencies by: (i) significantly reducing the
administrative and labor costs associated with fastener procurement by
outsourcing certain internal purchasing, quality control and inventory
fulfillment responsibilities; (ii) reducing the amount of working capital
invested in inventory; (iii) achieving purchasing efficiencies as a result of
vendor consolidation; and (iv) receiving technical expertise in the selection of
fastener and other components for certain manufacturing processes. Management
believes that TFS contracts foster longer-lasting supply relationships with
customers, who increasingly rely on the Company for their fastener needs, as
compared to traditional buy/sell distribution relationships. Sales pursuant to
TFS contracts have increased significantly in recent years and represented over
59% of ILS' net sales for the year ended December 31, 1998. ILS' remaining sales
are generated through the wholesale supply of fasteners and other industrial
products to OEMs, other manufacturers and distributors pursuant to master or
authorized distributor relationships.
ILS supplies standard and specialty engineered fasteners such as nuts,
bolts, screws and washers on a fully integrated basis. ILS engineers and
manufactures precision cold formed and cold extruded products including
locknuts, spac nuts and wheel hardware, which are principally used in
applications where controlled tightening is required due to high vibration.
These are manufactured by shaping cold raw materials. Standard and specialty
nuts are produced to customer specifications, which are used in large volumes by
customers in the automotive, truck and railroad industries.
In addition to fasteners, ILS supplies, among other things, valves,
fittings, clamps and rubber products, which currently represent approximately 9%
of ILS' net sales. ILS also provides engineering and design services to its
customers. Applications-engineering specialists and the direct sales force work
closely with the engineering staff of OEM customers to recommend the appropriate
fasteners for a new product or to suggest alternative fasteners that reduce
overall production costs, streamline assembly or enhance the appearance or
performance of the end product.
Markets and Customers. In 1998, approximately 89% of ILS' net sales were
to domestic customers. Remaining sales were primarily to Canada and Mexico. The
domestic industrial fastener market is estimated by industry sources to have
generated between $7 and $9 billion in annual sales in 1998 at the wholesale
level. Fasteners are used extensively by OEMs in a variety of industries, and
demand is generally related to the state of the economy and to the overall level
of manufacturing activity.
ILS markets and sells fasteners and other industrial products to over
12,000 customers domestically and internationally. The principal markets served
by ILS are transportation equipment, including manufacturers of heavy trucks and
recreational vehicles, automotive parts and accessories, industrial equip-
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ment, electrical equipment, including manufacturers of electrical controls,
appliances and motors, lawn and garden equipment and HVAC.
In recent years, OEMs have made it a priority to reduce their total cost of
purchasing and handling fasteners. Due to the low unit cost and the large number
of different fasteners used to manufacture or assemble a single product,
administrative and overhead costs comprise a substantial portion of an OEM's
fastener-related costs. As a result, management believes industrial fastener
suppliers are consolidating as OEMs rely on fewer suppliers to achieve
purchasing efficiencies. ILS provides a wide array of value-added services and
is a reliable source for just-in-time delivery and is well positioned to
capitalize on these trends. In addition, OEMs are increasingly relying on
fastener suppliers to provide design and applications engineering support,
enabling more efficient use of internal engineering resources thereby allowing
ILS to increase the amount of low unit cost fastener and non-fastener items
supplied to OEMs.
Competition. The industrial fastener supply industry is highly competitive
and fragmented. Management believes that substantially all of ILS' competitors
operate on a regional basis and do not provide customers with the wide array of
value-added services offered by ILS. ILS competes primarily on the basis of its
value-added services, extensive product selection and price with primarily
domestic competitors who are capable of providing inventory management programs.
MANUFACTURED PRODUCTS
The Manufactured Products segment includes aluminum casting, forged and
machined products, capital equipment, industrial rubber products and other
manufactured products. Manufactured Products generated net sales of $187.3
million, or 34% of the Company's net sales for the year ended December 31, 1998.
The three largest customers, of which the Company sells to multiple operating
divisions, accounted for approximately 31% of Manufactured Products sales in
1998. The loss of business from any one of these customers would have an adverse
effect on this segment.
ALUMINUM CASTINGS
Aluminum permanent mold castings are produced at General Aluminum Mfg.
Company ("GAMCO") and its wholly owned subsidiary. GAMCO's cast aluminum parts
are critical components manufactured primarily for automotive OEMs. GAMCO's
principal automotive products include: transmission pump housings, planetary
pinion carriers, clutch retainers, rotor castings and bearing cups. In addition,
GAMCO manufactures products for non-automotive end users such as surgical table
components, light housings and electrical meter housings. GAMCO also provides
value-added services such as secondary casting, machining, drilling, tapping and
part assembly. Although these parts are lightweight, they possess high
durability and integrity characteristics even under extreme pressure and
temperature conditions. Demand by automotive OEMs for aluminum permanent mold
products has increased in recent years as OEMs have sought lighter alternatives
to heavier steel and iron components. Lighter aluminum cast components increase
an automobile's fuel efficiency without decreasing its structural integrity.
Management believes this replacement trend will continue as government standards
regarding fuel efficiency become increasingly stringent. GAMCO sells its
products primarily to customers located in North America. The market for
aluminum permanent mold castings is comprised of two segments: automotive and
non-automotive. The domestic aluminum permanent mold industry is highly
competitive. GAMCO competes principally on the basis of its ability to: (i)
engineer and manufacture high quality, semi-machined castings in large volumes;
(ii) provide timely delivery; and (iii) retain the manufacturing flexibility
necessary to quickly adjust to the needs of its customers. Although there are a
number of smaller domestic companies with aluminum permanent mold casting
capabilities, the automotive industry's stringent quality and service standards
enable only large suppliers with the requisite quality certifications to compete
effectively. As one of these suppliers, GAMCO has benefited in recent years as
automotive OEMs have consolidated their supplier base. GAMCO, a well-established
name in the aluminum permanent mold industry, has achieved QS 9000 and ISO 9002
certifications and has been awarded numerous supplier quality awards.
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In January 1999, GAMCO acquired all of the shares of The Metalloy
Corporation ("Metalloy"). Metalloy is a full service aluminum casting and
machining company with operations located in Indiana, Michigan and Mississippi.
The acquisition of Metalloy provides sand and die casting capabilities to
complement GAMCO's permanent mold process. Management believes that GAMCO is one
of the few automotive parts suppliers which has the capabilities of providing
permanent mold, sand-casted and die-casted products.
FORGED AND MACHINED PRODUCTS
The Company's forged and machined products business is carried out at four
operating units consisting of Park Drop Forge, Ohio Crankshaft, Cleveland City
Forge, and Blue Falcon Forge. The forging process enables metal to be shaped
while generally retaining higher structural integrity than metal shaped through
other processes. Park Drop Forge manufactures closed-die metal forgings of up to
6,000 pounds, including crankshafts and aircraft landing gears, primarily for
customers in the railroad and aerospace industries. Park Drop Forge's products
are sold primarily to machining companies and subassemblers who finish the
products for sale to OEMs in the railroad and aerospace industries. Ohio
Crankshaft machines, induction hardens and surface finishes crankshafts and
camshafts used primarily in locomotives, power generators and ships. Cleveland
City Forge manufactures and machines specialized hardware such as turnbuckles
and clevises for construction companies. Its products are manufactured according
to customers' specific dimensional and/or strength requirements. Blue Falcon
Forge produces large forged products such as center plates and couplings, both
of which are used in the undercarriage of rail cars. Forged and machined
products are sold to a wide variety of domestic and international OEMs and other
manufacturers in the transportation, power generation and construction
industries. The Company's forged and machined products business competes
domestically and internationally with other small to medium-sized businesses on
the basis of product quality and precision.
CAPITAL EQUIPMENT
The Company manufactures large industrial equipment through its operating
units consisting of Tocco, Ajax, and Feco. Tocco specializes in the engineering
and construction of induction heating systems primarily for the automotive and
truck industries. Tocco's induction heating systems are engineered and built to
customer specifications and are used primarily by OEMs for surface hardening.
Ajax engineers, manufactures and services mechanical forging presses ranging in
size from 500 to 8,000 tons that are used worldwide in the automotive and truck
manufacturing industries. Feco produces complete oven systems that combine heat
processing and curing technologies with material handling and conveying methods.
Feco's principal products include industrial drying and curing ovens for
automotive components, metal can curing ovens, specialized conveyor and
automation systems for lightweight containers, and plastic and glass bottle
coating and finishing systems. The Company's capital equipment units compete
with large equipment manufacturers on the basis of service capability, ability
to meet customer specifications, delivery performance and engineering expertise
and exists at both domestic and international levels.
INDUSTRIAL RUBBER PRODUCTS
The Company manufactures injection and transfer molded products, lathe-cut
goods, roll coverings and various items requiring rubber to metal bonding for
use in industrial applications through three operating units consisting of
Castle Rubber, Cicero Flexible Products and Geneva Rubber. Castle manufactures
valve seals, power and conveyor rolls and slitter rings. Cicero is a developer
and manufacturer of injection molded silicone rubber products for customers in
the automotive, food processing and consumer appliance industries, such as wire
harnesses, spark plug boots and nipples and general sealing gaskets. Geneva is a
manufacturer of injection molded rubber products for customers in the
automotive, telecommunications, funeral and heavy truck industries. Its products
include primary wire harnesses, transoceanic cable boots, casket gaskets and
shock and vibration mounts. The industrial
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rubber products operating units compete primarily on the basis of price and
product quality with other domestic small to medium-sized manufacturers of
rubber products.
SALES AND MARKETING
ILS markets its products and services in the United States, Mexico, Canada
and Europe, primarily through its direct sales force, which is assisted by
applications engineers who provide the technical expertise necessary to assist
the engineering staff of OEM customers in designing new products and improving
existing products. ILS often obtains new customers as a result of referrals from
existing customers. Manufactured Products markets and sells its products through
both internal sales personnel and independent sales representatives. In some
instances, the internal engineering staff assists in the sales and marketing
effort through joint design and applications-engineering efforts with major
customers. In addition, Manufactured Products markets certain of its products
through various regional and national trade shows.
RAW MATERIALS AND SUPPLIERS
ILS purchases substantially all of its fasteners and Manufactured Products
purchases substantially all of its raw materials, principally metals and certain
component parts incorporated into its products, from third-party suppliers and
manufacturers. Management believes that raw materials and component parts other
than certain specialty fasteners are available from alternative sources. ILS has
multiple sources of supply for standard products, but has limited supply sources
for certain specialty products. Approximately 10% of ILS' fasteners are
purchased from suppliers in foreign countries, primarily Taiwan, Japan and
Korea. The Company is dependent upon the ability of such suppliers to meet
stringent quality and performance standards and to conform to delivery
schedules. Most raw materials required by Manufactured Products are commodity
products available from several domestic suppliers.
BACKLOG
Management believes that backlog is not a meaningful measure for the
Company's ILS operating units, as a majority of ILS' customers require
just-in-time delivery of fasteners and other industrial products. Management
believes that Manufactured Products' backlog as of any particular date is not a
meaningful measure of sales for any future period as a significant portion of
sales are on a release or firm order basis.
ENVIRONMENTAL REGULATIONS
The Company is subject to numerous federal, state and local laws and
regulations designed to protect public health and the environment
("Environmental Laws"), particularly with regard to discharges and emissions, as
well as handling, storage, treatment and disposal, of various substances and
wastes. Pursuant to certain Environmental Laws, owners or operators of
facilities may be liable for the costs of response or other corrective actions
for contamination identified at or emanating from current or former locations,
without regard to whether the owner or operator knew of, or was responsible for,
the presence of any such contamination, and for related damages to natural
resources. Additionally, persons who arrange for the disposal or treatment of
hazardous substances or materials may be liable for costs of response at sites
where they are located, whether or not the site is owned or operated by such
person.
The Company believes that it is currently in material compliance with
applicable Environmental Laws. In general, the Company has not experienced
difficulty in complying with Environmental Laws in the past, and compliance with
Environmental Laws has not had a material adverse effect on the Company's
financial condition, liquidity and results of operations. The Company's capital
expenditures on environmental control facilities were not material during the
past five years and such expenditures are not expected to be material to the
Company in the foreseeable future.
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The Company has been identified as a potentially responsible party at
certain third-party sites under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or comparable state laws
which provide for strict and, under certain circumstances, joint and several
liability. The Company is participating in the cost of certain clean-up efforts
at several of these sites. The availability of third-party payments or insurance
for environmental remediation activities is subject to risks associated with the
willingness and ability of the third party to make payments. However, the
Company's share of such costs has not been material and based on available
information, the Company does not expect its exposure at any of these locations
to have a material adverse effect on its results of operations, liquidity or
financial condition.
At its facility in Kent, Ohio, the Company's indirect subsidiary, RB&W
Manufacturing LLC, is conducting remediation of groundwater impacted by
operations and disposal activities. Contaminants known to be present in the
groundwater at the facility and/or to have migrated off-site include oil and
certain volatile organic compounds. In addition, soil and groundwater
investigations are being conducted in connection with a closure under the
Resource Conservation and Recovery Act of 1976, as amended, of hazardous waste
storage areas associated with former metal plating operations. RB&W has filed
suit against the former owner seeking reimbursement of costs spent and
contribution for future costs for remediation efforts at the Kent facility. The
Company does not believe that future costs to address the currently identified
environmental issues at its facilities will be material.
INFORMATION AS TO INDUSTRY SEGMENT REPORTING
The information contained under the heading of "Note L -- Industry
Segments" of notes to consolidated financial statements included herein,
relating to net sales, operating income, identifiable assets and other
information by industry segment for the years ended December 31, 1998, 1997, and
1996 is incorporated herein by reference.
RECENT DEVELOPMENTS
The information contained under the headings of "Note B -- Corporate
Reorganization", "Note C -- Acquisitions" and "Note D -- Dispositions" of notes
to consolidated financial statements included herein, is incorporated by
reference.
ITEM 2. PROPERTIES
The Company's operations include numerous manufacturing and warehousing
facilities located in 23 states in the United States and in 4 other countries.
Approximately 54% of the available square footage is owned. In 1998,
approximately 61% of the available domestic square footage was used by the
Manufactured Products segment and 39% by the ILS segment. Approximately 19% of
the foreign facilities was used by the Manufactured Products segment and 81% was
used by the ILS segment. In the opinion of management, Park-Ohio's facilities
are generally well maintained and are suitable and adequate for their intended
uses.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various pending and threatened lawsuits in which
claims for monetary damages are asserted in the ordinary course of business.
While any litigation involves an element of uncertainty, in the opinion of
management, liabilities, if any, arising from currently pending or threatened
litigation will not have a material adverse effect on the Company's financial
condition, liquidity and results of operations.
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 1998.
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MANAGEMENT
EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the executive officers of the Company is as
follows:
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NAME AGE POSITION
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EXECUTIVE OFFICERS
Edward F. Crawford................. 59 Chairman of the Board, Chief Executive Officer and
President
James S. Walker.................... 56 Vice President and Chief Financial Officer
Felix J. Tarorick.................. 56 Vice Chairman of the Board and Vice President of
Operations
Ronald J. Cozean................... 35 Secretary and General Counsel
Matthew V. Crawford................ 29 Assistant Secretary, Corporate Counsel and Director
Patrick W. Fogarty................. 38 Director of Corporate Development
</TABLE>
Edward F. Crawford has been Chairman of the Board and Chief Executive
Officer of the Company since 1992.
James S. Walker has served as Vice President and Chief Financial Officer of
the Company since 1991. Mr. Walker has been with the Company for over 20 years
and has served in several capacities, including Corporate Controller and
Assistant Treasurer.
Felix J. Tarorick became Vice Chairman of the Board in 1998 and has been
Vice President of Operations since 1996. From 1992 to 1995, Mr. Tarorick served
as President of the former consumer products group. Mr. Tarorick joined the
Company in 1992. Mr. Tarorick became a director of the Company in February,
1998.
Ronald J. Cozean has served as Secretary and General Counsel since joining
the Company in 1994. Mr. Cozean was an associate at the law firm of Squire,
Sanders & Dempsey L.L.P. from 1991 to 1994.
Matthew V. Crawford has served as Assistant Secretary and Corporate Counsel
since joining the Company in February 1995 and has served as President of
Crawford Container Company since 1991. Mr. M. Crawford became a director of the
Company in August 1997. Prior to joining the Company, Mr. M. Crawford worked as
a Corporate Finance Analyst at McDonald & Co. Securities, Inc. Mr. E. Crawford
is the father of Mr. M. Crawford.
Patrick W. Fogarty has been Director of Corporate Development since 1997
and joined the Company in 1995 as Director of Finance. Prior thereto, Mr.
Fogarty held various positions, including Senior Manager, at Ernst & Young LLP
from 1983 to 1995.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company'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.
QUARTERLY COMMON STOCK PRICE RANGES
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1998 1997
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QUARTER HIGH LOW HIGH LOW
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1st 20 1/8 16 1/2 16 7/8 12 1/2
2nd 19 5/8 18 1/8 15 1/4 11 1/4
3rd 19 3/8 12 16 3/8 14 1/4
4th 16 15/16 11 1/2 18 3/8 15
</TABLE>
The number of shareholders of record for the Company's common stock as of
March 5, 1999 was 1,260.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
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Selected Income Statement Data:
Net sales............................... $551,793 $441,110 $347,679 $289,501 $129,216
Cost of products sold................... 455,167 368,734 289,400 240,871 104,225
-------- -------- -------- -------- --------
Gross profit.......................... 96,626 72,376 58,279 48,630 24,991
Selling, general and administrative
expenses.............................. 56,478 44,396 38,131 30,020 16,838
Restructuring charge.................... -- -- 2,652 -- --
-------- -------- -------- -------- --------
Operating income(a)................... 40,148 27,980 17,496 18,610 8,153
Other (income) expense.................. -- (320) (4,204)(b) (214) --
Interest expense........................ 17,488 9,101 6,947 5,911 1,501
-------- -------- -------- -------- --------
Income from continuing operations
before income taxes................ 22,660 19,199 14,753 12,913 6,652
Income taxes (benefit).................. 9,726 7,903 5,060 (6,900) (1,826)
-------- -------- -------- -------- --------
Income from continuing operations
before extraordinary charge........ $ 12,934 $ 11,296 $ 9,693 $ 19,813 $ 8,478
======== ======== ======== ======== ========
Income per common share from continuing
operations before extraordinary
charge -- diluted..................... $ 1.16 $ 1.01 $ .88 $ 1.87 $ 1.03
======== ======== ======== ======== ========
Supplemental per common share data:
Pro forma income per common share from
continuing operations before
extraordinary charge on a fully
taxable basis -- diluted.............. $ 1.16 $ 1.01 $ .88 $ .75 $ .47
======== ======== ======== ======== ========
Other Financial Data:
EBITDA(c)............................... $ 52,901 $ 38,345 $ 28,146 $ 24,888 $ 11,366
Capital expenditures.................... 22,681 15,947 15,590 13,632 11,749
</TABLE>
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<TABLE>
<CAPTION>
YEAR ENDED AS OF DECEMBER 31
----------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selected Balance Sheet Data:
Cash and cash equivalents............. $ 4,320 $ 1,814 $ 4,659 $ 2,662 $ 2,172
Working capital....................... 176,932 146,444 99,094 96,307 29,411
Total assets.......................... 489,554 413,109 282,910 301,747 128,396
Total debt............................ 238,105 172,755 82,989 118,738 32,001
Shareholders' equity.................. 141,187.. 129,010 115,069 95,542 46,530
</TABLE>
(a) Operating income is defined as net sales less cost of products sold,
selling, general and administrative expenses and a restructuring charge. In
1996, the Company incurred a restructuring charge of $2.7 million related to
the consolidation of three of the Company's manufacturing facilities into
one and the discontinuation of certain product lines.
(b) In 1996, other income was comprised of (i) a gain of $2.7 million in
connection with the full settlement of subordinated notes receivable
resulting from the sale of two manufacturing facilities and (ii) a gain of
$1.5 million on the sale of certain securities by the Company in the third
quarter of 1996.
(c) EBITDA is defined as earnings from continuing operations before interest,
income taxes, depreciation, amortization, other income and non-recurring
items. Non-recurring items include a restructuring charge of $2.7 million in
the fourth quarter of 1996 related to the consolidation of three of the
Company's consumer products manufacturing facilities into one and the
discontinuation of certain product lines. EBITDA is not a measure of
performance under generally accepted accounting principles ("GAAP"). While
EBITDA should not be considered in isolation or as a substitute for net
income, cash flows from operating activities and other income or cash flow
statement data prepared in accordance with GAAP or as a measure of
profitability or liquidity, management understands that EBITDA is
customarily used as an indication of a company's ability to incur and
service debt. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion of other measures of
liquidity and operations that are covered by the audited financial
statements. EBITDA as defined herein may not be comparable to other
similarly titled measures of other companies.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The consolidated financial statements of the Company include the accounts
of Park-Ohio Holdings Corp. and its subsidiaries. All significant intercompany
transactions have been eliminated in consolidation. The historical financial
information is not directly comparable on a year-to-year basis due to
acquisitions in 1998 and 1997. During 1998, the Company acquired two businesses
for $40.2 million. During October, 1998, the Company acquired all of the shares
of GIS Industries, Inc. ("Gateway"). Gateway is a distributor of fasteners and
other industrial products and a manufacturer of metal products and fasteners.
During April, 1998, the Company acquired all of the shares of Direct Fasteners
Limited ("Direct"), a distributor of fasteners located in Ontario, Canada.
During 1997, the Company acquired five businesses for $60.4 million ("the 1997
Acquisitions"). The largest of the 1997 Acquisitions was Arden Industrial
Products, Inc. ("Arden") which was acquired for $44 million as of August 1,
1997. Arden is a national supplier of specialty and standard fasteners to the
industrial market. All acquisitions are accounted for as purchases and
consequently their results are included in the consolidated financial statements
from their respective dates of acquisition. In 1996, the Company sold
substantially all of the assets of Bennett Industries, Inc., a manufacturer of
plastic containers, in order to focus on its remaining logistics and
manufacturing businesses.
9
<PAGE> 12
OVERVIEW
The Company operates logistics ("Integrated Logistics Solutions" or "ILS")
and diversified manufacturing ("Manufactured Products") businesses that serve a
wide variety of industrial markets. ILS is a leading national supplier of
fasteners (e.g., nuts, bolts and screws) and other industrial products to
original equipment manufacturers ("OEMs"), other manufacturers and distributors.
In connection with the supply of such industrial products, ILS provides a
variety of value-added, cost-effective procurement solutions. The principal
customers of ILS are in the transportation, industrial, electrical and lawn and
garden equipment industries. Manufactured Products designs and manufactures a
broad range of high quality products engineered for specific customer
applications. The principal customers of Manufactured Products are OEMs and
end-users in the automotive, railroad, truck and aerospace industries.
The Company previously announced that it was planning to cause ILS to issue
shares of common stock to the public. It was anticipated that a registration
statement would be filed in the third quarter of 1998 and that the offering
would be completed during 1998. However, the market conditions were not
conducive for initial public offerings during that time period and no prediction
can be made that favorable market conditions will exist in the near term. As a
result, the Company has indefinitely postponed the filing of a registration
statement.
A registration statement relating to these securities has not been filed
with the Securities and Exchange Commission. These securities may not be sold
absent registration or an applicable exemption from registration. The offering
will be made only by means of a prospectus. This disclosure shall not constitute
an offer to sell or the solicitation of an offer to buy, nor shall there be any
sale of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any State.
The statements herein regarding the filing of a registration statement, the
timing of the offering and any other future aspects relating to the offering and
other statements which are not historical facts are forward-looking statements.
Such statements involve risks and uncertainties, including, but not limited to,
market conditions (including the price and market for the common stock) and
other factors detailed herein under the heading "Forward-Looking Statements."
Between 1994 and 1998, the Company has grown significantly, both internally
and through acquisitions. Over this period, the Company's net sales increased at
a 43.8% compounded annual growth rate ("CAGR"), from $129.2 million to $551.8
million, and income from continuing operations on a fully taxed basis increased
at a 33.2% CAGR from $4.1 million to $12.9 million.
This growth has been primarily attributable to the Company's strategy of
making selective acquisitions in order to complement internal growth.
Historically, the Company has acquired underperforming businesses with potential
for: (i) significant cost reductions through improved labor, supplier and
customer relations and increased purchasing power and (ii) revenue enhancement
due to better asset utilization and management practices, as well as increased
access to capital. The Company's internal growth has been driven primarily by
the addition of ILS customers under TFS contracts and by the leveraging of
existing customer relationships at Manufactured Products.
Between January 1, 1994 and December 31, 1998, the Company's continuing
operations incurred $64.2 million of capital expenditures, the majority of which
was used to expand and upgrade existing manufacturing facilities and enhance
ILS' management information systems.
RESULTS OF OPERATIONS
1998 versus 1997
Net sales increased by $110.7 million, or 25%, from $441.1 million in 1997
to $551.8 million in 1998. Approximately 27% of this increase was attributable
to internal growth and 73% was a result of acquisitions completed in 1997 or
1998. Of the internal sales growth, approximately 66% was primarily attributable
to ILS and the addition of TFS customers, and the remainder was due to increased
orders
10
<PAGE> 13
from Manufactured Products' customers. The growth in net sales from acquisitions
applies to ILS and primarily pertains to Arden and Gateway.
Gross profit increased by $24.2 million, or 34%, from $72.4 million in 1997
to $96.6 million in 1998. Of the increase, 67% relates to acquisitions and 33%
to internal growth. The Company's consolidated gross margin increased to 17.5%
for 1998 from 16.4% for 1997. This increase in consolidated gross margin was due
to increased margins in both the ILS and Manufactured Products segments. The
increase in Manufactured Products was due to a change in revenue mix and to
increased production thereby allocating fixed manufacturing overhead over a
greater production base. The increase in margins in the ILS segment is a result
of reduced material costs.
Selling, general and administrative costs increased by 27% to $56.5 million
in 1998 from $44.4 million in 1997. Approximately 78% of such increase was
related to acquisitions while the remainder related to the increase in
internally generated net sales. Consolidated selling, general and administrative
expenses as a percentage of net sales was approximately 10% for both periods.
Interest expense increased by $8.4 million from $9.1 million for 1997 to
$17.5 million for 1998 due to higher average debt outstanding during 1998 and to
higher average interest rates in 1998 versus 1997. For the year ended December
31, 1998, the Company averaged outstanding borrowings of $205.3 million as
compared to $123.1 million outstanding for 1997. The $82.2 million increase
related primarily to acquisitions completed during the latter part of 1997 and
1998, working capital increases to support the realized and anticipated growth
in business and capital expenditures to support the operations. The average
borrowing rate of 8.5% for the year ended December 31, 1998 is 1.1% higher than
the average rate of 7.4% for the year ended December 31, 1997 primarily because
of the $150 million bond offering in November, 1997 which carries a coupon of
9.25% versus a 7.3% rate on the bank debt it replaced.
The effective income tax rate for 1998 was 43% as compared to 41% for 1997.
The increase is directly attributable to an increase in expenses recorded for
financial reporting purposes, but not deductible for income tax purposes,
primarily certain goodwill amortization. At December 31, 1998, subsidiaries of
the Company had $1.1 million of net operating loss carryforwards for tax
purposes.
1997 versus 1996
Net sales from continuing operations increased by $93.4 million, or 27%,
from $347.7 million in 1996 to $441.1 million in 1997. Approximately 42% of this
increase was attributable to internal growth and 58% was a result of the 1997
Acquisitions. Of the internal sales growth, approximately 70% was primarily
attributable to the addition of TFS customers in the ILS segment and the
remainder was due to increased orders from Manufactured Products' customers. Of
the growth in net sales attributable to the 1997 acquisitions, the majority
applies to the ILS segment and primarily pertains to Arden which was acquired as
of August 1, 1997.
Gross profit from continuing operations increased by $14.1 million, or 24%,
from $58.3 million in 1996 to $72.4 million in 1997. Of the increase, 79%
relates to the 1997 Acquisitions and 21% was due to internal growth. A majority
of the increase attributable to the 1997 Acquisitions was related to Arden. The
Company's consolidated gross margin from continuing operations decreased to
16.4% in 1997 from 16.8% in 1996. This decrease in consolidated gross margin was
primarily due to a change in the Company's revenue mix.
Selling, general and administrative costs from continuing operations
increased by 16% to $44.4 million in 1997 from $38.1 million in 1996.
Approximately 93% of such increase was related to the 1997 Acquisitions.
Consolidated selling, general and administrative expenses decreased as a
percentage of net sales to 10.1% in 1997 from 11.0% in 1996 due to economies of
scale resulting from higher sales volume.
Interest expense from continuing operations increased by $2.2 million from
$6.9 million in 1996 to $9.1 million in 1997 due to average debt outstanding in
1997 increasing by $19.9 million and to the reclassification in 1996 of
approximately $.8 million of interest expense to discontinued operations
11
<PAGE> 14
resulting from the sale of Bennett Industries. Average interest rates for the
period were approximately the same in 1997 and 1996.
As a result of the early extinguishment of the Company's 7 1/4% Convertible
Senior Subordinated Debentures due June 15, 2004, and its then existing bank
credit facility, the Company recorded an extraordinary charge of $1.5 million,
net of income taxes, in 1997.
At December 31, 1997, subsidiaries of the Company had net operating loss
carryforwards for tax purposes of approximately $9.4 million, subject to certain
limitations that expire between 2001 and 2007.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's liquidity needs are primarily for working capital and capital
expenditures. The Company's primary sources of liquidity have been funds
provided by operations and funds available from existing bank credit
arrangements. On November 2, 1998, Park-Ohio amended and restated its credit
agreement with a group of banks under which it may borrow up to $150 million on
an unsecured basis. This agreement, the proceeds of which will be used for
general corporate purposes, expires on April 30, 2001. Amounts borrowed under
the agreement may be at Park-Ohio's election at either (i) the bank's prime
lending rate less 100-30 basis points or (ii) LIBOR plus 90-170 basis points
depending on the aggregate amount borrowed under the agreement. As of December
31, 1998, $86.0 million was outstanding under the facility.
On November 25, 1997, the Company sold $150 million of its 9.25% Senior
Subordinated Notes due 2007. The Company used the net proceeds of the Senior
Subordinated Notes along with borrowings under its new credit facility to (i)
redeem its 7 1/4% Convertible Senior Subordinated Debentures due June 15, 2004
and (ii) to repay substantially all amounts of its then existing credit
facility.
Current financial resources (working capital and available bank borrowing
arrangements) and anticipated funds from operations are expected to be adequate
to meet current cash requirements. Capital expenditures for 1999 are projected
to be approximately $15 million which will be used to invest in the Company's
current facilities for projected new business, for scheduled improvements and
new equipment to expand existing products.
The ratio of current assets to current liabilities was 3.19 at December 31,
1998, compared to 2.83 at December 31, 1997. Working capital increased by $30.5
million to $176.9 million at December 31, 1998 from $146.4 million at December
31, 1997 as a result of the inclusion of acquisitions completed in 1998 and to
support the internal growth of the Company.
During 1998, the Company generated $32.3 million of cash from operations
before changes in operating assets and liabilities. After giving effect to the
use of $28.6 million in the operating accounts, the Company provided $3.7
million from operating activities. During the year, the Company invested $22.7
million in facilities, machinery and equipment, and information systems, used
$40.2 for acquisitions and used $2.8 million to purchase common shares for the
treasury. These activities were funded by a net increase in bank borrowings of
$64.3 million offset by a $2.5 million increase in cash during the period.
During 1997, the Company generated $27.0 million from continuing operations
before changes in operating assets and liabilities. After giving effect to the
use of $37.0 million in the operating accounts, the Company used $10.0 million
for operating activities. During the period, the Company invested $15.9 million
in capital expenditures and $60.4 million for acquisitions and investments
including the acquisition of Arden for $44.0 million. During the year, the
Company bought 221,494 shares of its common stock in the open market for $3.0
million. As of December 31, 1997, after issuing 199,000 common shares from the
treasury for the exercise of stock options, the Company had 148,719 shares of
its common stock in the treasury. During the year, 351,000 shares of common
stock were issued under stock option agreements for which the Company received
$3.2 million from the option holders. In addition, the Company purchased in the
open market $1.2 million of its convertible senior subordinated debentures.
12
<PAGE> 15
These activities were funded by a net increase in long-term borrowings of $85.4
million and a decrease in cash balances of $2.8 million.
During 1996, the Company generated $20.4 million from continuing operations
before changes in operating assets and liabilities. After giving effect to the
use of $14.7 million in the operating accounts and $2.0 million provided from
discontinued operations, the Company provided $7.7 million from operating
activities. During 1996, the Company invested $15.6 million in capital
expenditures and purchased 126,225 shares of its common stock for $1.8 million,
all of which were funded by internally generated cash flow and bank borrowings.
IMPACT OF INFLATION
Although inflation was not a significant factor in 1998, the Company
continues to seek ways to cope with its impact. To the extent permitted by
competition, the Company's operations generally attempt to pass on increased
costs by increasing sales prices over time. The Company primarily uses the FIFO
method of accounting for its inventories. Under this method, current costs are
generally reflected in cost of products. 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.
YEAR 2000 CONVERSION
The Year 2000 ("Y2K") issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
the Company's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruption of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
During 1996, the Company developed a Y2K Task Force, which was established
to monitor and track the Y2K compliance at its operating units. The Task Force
developed a Y2K plan in order to minimize the risk to the Company's operating
units and its customers. The plan to resolve the Y2K issues involves four
phases: assessment, remediation, testing and implementation.
To date, the Task Force has completed its assessment of the Company's
computer hardware and software applications, process control equipment, and
other non-information technology equipment. After taking into consideration
investments in new equipment and systems that have already been made, this
assessment has determined that with only a few exceptions, the systems are Y2K
compliant. The exceptions require upgrades of software programs or changes to
existing programs. The remediation and testing phases are currently underway,
and upgrades and software corrections are being completed. The target for
completion of all phases is by the second quarter of 1999. The Company also
expects critical contingency plans to be developed by the end of the second
quarter of 1999. Based upon the assessments and remediations completed to date,
the Company does not expect that the Y2K issue will have a material effect on
its business operations, consolidated financial condition, cash flows, or
results of operations.
In addition, the Task Force is reviewing the Y2K compliance of the
Company's key suppliers, customers and service providers ("significant third
parties") in an effort to reduce the potential adverse effect on its operations
from non-compliance by such parties. This significant third party review has
begun and is expected to be completed by June 30, 1999. Interfaces to external
suppliers and customers are part of this assessment and validation process. As
these significant third parties are reviewed, the Task Force intends to develop
contingency plans, if necessary, for significant third parties that exhibit
possible Y2K problems. The Company has identified the most likely risks of Y2K
non-compliance as the risk that significant third parties will not be Y2K
compliant. Due to the general uncertainty inherent in the Y2K problem, the
Company is unable to determine at this time whether the consequences of Y2K
compliance failures will have a material effect on the Company's results of
operations or financial
13
<PAGE> 16
condition. If Y2K compliance is not achieved by these significant third parties,
over which the Company has no control, it could, depending on duration, have a
material adverse effect on the Company's operations.
The Company is utilizing both internal and external resources to remedy,
test, and implement the software and operating equipment for Y2K modifications.
The total cost to achieve Y2K compliance is estimated at $9 million.
Approximately 75% of this cost represents new systems, which the Company may
have initiated during the period, notwithstanding the Y2K issue. To date, the
Company has incurred approximately $8.0 million for new systems and equipment,
with the majority of these costs for the conversion/development of systems. The
remaining $1.0 million will be funded through operating cash flows. The Company
generally does not separately identify the direct costs of internal employees
working on Y2K projects.
ENVIRONMENTAL
The Company has been identified as a potentially responsible party at
certain third-party sites under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or comparable state laws
which provide for strict and, under certain circumstances, joint and several
liability. The Company is participating in the cost of certain clean-up efforts
at several of these sites. However, the Company's share of such costs has not
been material and based on available information, the Company does not expect
its exposure at any of these locations to have a material adverse effect on its
results of operations, liquidity or financial condition.
SEASONALITY; VARIABILITY OF OPERATING RESULTS
As a result of the significant growth in the Company's net sales and
operating income in recent years, seasonal fluctuations have been substantially
mitigated. The Company, however, performs scheduled plant maintenance in the
third quarter to coincide with customer plant shut downs.
The timing of orders placed by the Company's customers has varied with,
among other factors, orders for customers' finished goods, customer production
schedules, competitive conditions and general economic conditions. The
variability of the level and timing of orders has, from time to time, resulted
in significant periodic and quarterly fluctuations in the operations of the
Company's business units. Such variability is particularly evident at the
Capital Equipment businesses, included in the Manufactured Products segment,
which typically ship a few large systems per year.
FORWARD-LOOKING STATEMENTS
This Form 10-K contains certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Certain statements in this Management's Discussion and
Analysis of Financial Condition and Results of Operations contain
forward-looking statements, including without limitation, discussion regarding
the Company's anticipated levels and funding of capital expenditures and the Y2K
conversion. Forward-looking statements are necessarily subject to risks,
uncertainties and other factors, many of which are outside the control of the
Company, that could cause actual results to differ materially from such
statements. These uncertainties and other factors include such things as:
general business conditions, competitive factors, including pricing pressures
and product innovation and quality; raw material availability and pricing;
changes in the Company's relationships with customers and suppliers; the ability
of the Company to successfully integrate recent and future acquisitions into its
existing operations; changes in general domestic economic conditions such as
inflation rates, interest rates and tax rates; increasingly stringent domestic
and foreign governmental regulations including those affecting the environment;
inherent uncertainties involved in assessing the Company's potential liability
for environmental remediation-related activities; the outcome of pending and
future litigation and other claims; dependence on the automotive industry;
dependence on key management; dependence on information systems; and the ability
of the Company, its vendors and customers to achieve Y2K compliance. Any
forward-looking statement speaks only as of the date on which such statement is
made, and the Company undertakes no
14
<PAGE> 17
obligation to update any forward-looking statement, whether as a result of new
information, future events or otherwise. In light of these and other
uncertainties, the inclusion of a forward-looking statement herein should not be
regarded as a representation by the Company that the Company's plans and
objectives will be achieved.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to market risk including changes in interest rates.
The Company is subject to interest rate risk on its fixed rate debt consisting
of $150 million, 9.25% Senior Subordinated Notes. The estimated fair value of
these notes at year end 1998 would be $2 million higher than the recorded value
based on current borrowing rates available for financings with similar terms and
maturities.
15
<PAGE> 18
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.............................. 17
Consolidated Balance Sheets -- December 31, 1998 and
December 31, 1997......................................... 18
Consolidated Statements of Income -- Years Ended December
31, 1998, 1997 and 1996................................... 19
Consolidated Statements of Shareholders' Equity -- Years
Ended December 31, 1998, 1997 and 1996.................... 20
Consolidated Statements of Cash Flows -- Years Ended
December 31, 1998, 1997 and 1996.......................... 21
Notes to Consolidated Financial Statements.................. 22
Supplementary Financial Data:
Selected Quarterly Financial Data (Unaudited) -- Years
Ended December 31, 1998 and 1997....................... 35
</TABLE>
16
<PAGE> 19
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
Park-Ohio Holdings Corp.
We have audited the accompanying consolidated financial statements of
Park-Ohio Holdings Corp. and subsidiaries listed in the Index at Item 14(a)(1).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements 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
Holdings Corp. and subsidiaries at December 31, 1998 and 1997 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Cleveland, Ohio
February 15, 1999
17
<PAGE> 20
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1998 1997
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $ 4,320 $ 1,814
Accounts receivable, less allowances for doubtful accounts
of $2,803 in 1998 and $2,060 in 1997.................... 95,718 86,787
Inventories............................................... 150,052 129,512
Deferred tax assets....................................... 2,232 3,240
Other current assets...................................... 5,468 5,075
-------- --------
Total Current Assets............................... 257,790 226,428
Property, Plant and Equipment
Land and land improvements................................ 4,460 4,126
Buildings................................................. 25,912 24,782
Machinery and equipment................................... 130,253 103,956
-------- --------
160,625 132,864
Less accumulated depreciation............................. 70,468 59,795
-------- --------
90,157 73,069
Other Assets
Excess purchase price over net assets acquired, net of
accumulated amortization of $8,105 in 1998 and $5,749 in
1997.................................................... 99,351 68,996
Deferred taxes............................................ 8,900 12,960
Other..................................................... 33,356 31,656
-------- --------
$489,554 $413,109
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable.................................... $ 46,410 $ 49,470
Accrued expenses.......................................... 32,076 28,291
Current portion of long-term liabilities.................. 2,372 2,223
-------- --------
Total Current Liabilities.......................... 80,858 79,984
Long-Term Liabilities, less current portion
Long-term debt............................................ 237,483 172,283
Other postretirement benefits............................. 26,286 27,537
Other..................................................... 3,740 4,295
-------- --------
267,509 204,115
Shareholders' Equity
Capital stock, par value $1 a share
Serial preferred stock:
Authorized -- 632,470 shares; Issued -- none......... -0- -0-
Common stock:
Authorized -- 40,000,000 shares Issued and
outstanding -- 11,147,462 shares in 1998 and
10,959,962 in 1997.................................... 11,148 10,960
Additional paid-in capital................................ 55,755 53,476
Retained earnings......................................... 80,420 67,486
Treasury stock, at cost, 336,206 shares in 1998 and
148,719 in 1997......................................... (4,554) (2,087)
Accumulated other comprehensive earnings (loss)........... (1,582) (825)
-------- --------
141,187 129,010
-------- --------
$489,554 $413,109
======== ========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 21
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1998 1997 1996
-------- -------- --------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales.................................................. $551,793 $441,110 $347,679
Cost of products sold...................................... 455,167 368,734 289,400
-------- -------- --------
Gross profit............................................. 96,626 72,376 58,279
Selling, general and administrative expenses............... 56,478 44,396 38,131
Restructuring charge....................................... -0- -0- 2,652
-------- -------- --------
Operating income......................................... 40,148 27,980 17,496
Other income............................................... -0- (320) (4,204)
Interest expense........................................... 17,488 9,101 6,947
-------- -------- --------
Income from continuing operations before income
taxes............................................... 22,660 19,199 14,753
Income taxes............................................... 9,726 7,903 5,060
-------- -------- --------
Income from continuing operations before extraordinary
charge.............................................. 12,934 11,296 9,693
Extraordinary charge for early retirement of debt, net of
tax benefit of $928...................................... -0- (1,513) -0-
Income from discontinued operations, net of tax............ -0- -0- 11,642
-------- -------- --------
Net income....................................... $ 12,934 $ 9,783 $ 21,335
======== ======== ========
Per common share:
Basic earnings per share:
Continuing operations.................................... $ 1.18 $ 1.06 $ .93
Extraordinary charge..................................... -0- (.14) -0-
Discontinued operations.................................. -0- -0- 1.12
-------- -------- --------
Net Income....................................... $ 1.18 $ .92 $ 2.05
======== ======== ========
Diluted earnings per share:
Continuing operations.................................... $ 1.16 $ 1.01 $ .88
Extraordinary charge..................................... -0- (.13) -0-
Discontinued operations.................................. -0- -0- .96
-------- -------- --------
Net income....................................... $ 1.16 $ .88 $ 1.84
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 22
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE
COMMON PAID-IN RETAINED TREASURY EARNINGS
STOCK CAPITAL EARNINGS STOCK (LOSS) TOTAL
------- ---------- -------- -------- ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996.......... $10,402 $49,184 $36,368 $ -0- $ (412) $ 95,542
Comprehensive income:
Net income........................ 21,335 21,335
Foreign currency translation
adjustment..................... (217) (217)
--------
Comprehensive income.............. 21,118
Exercise of stock options........... 31 153 184
Purchase of treasury stock.......... (1,775) (1,775)
------- ------- ------- ------- ------- --------
Balance at December 31, 1996........ 10,433 49,337 57,703 (1,775) (629) 115,069
Comprehensive income:
Net income........................ 9,783 9,783
Foreign currency translation
adjustment..................... (196) (196)
--------
Comprehensive income.............. 9,587
Issuance of General Aluminum Mfg.
Company earn-out shares........... 375 3,600 3,975
Exercise of stock options........... 152 539 2,673 3,364
Purchase of treasury stock.......... (2,985) (2,985)
------- ------- ------- ------- ------- --------
Balance at December 31, 1997........ 10,960 53,476 67,486 (2,087) (825) 129,010
Comprehensive income:
Net income........................ 12,934 12,934
Foreign currency translation
adjustment..................... (757) (757)
--------
Comprehensive income.............. 12,177
Issuance of General Aluminum Mfg.
Company earn-out shares........... 188 2,306 2,494
Exercise of stock options........... (27) 294 267
Purchase of treasury stock.......... (2,761) (2,761)
------- ------- ------- ------- ------- --------
Balance at December 31, 1998........ $11,148 $55,755 $80,420 $(4,554) $(1,582) $141,187
======= ======= ======= ======= ======= ========
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 23
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1998 1997 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income................................................ $ 12,934 $ 9,783 $ 21,335
Adjustments to reconcile net income to net cash provided
(used) by continuing operations:
Extraordinary charge................................. -0- 1,513 -0-
Discontinued operations.............................. -0- -0- (11,642)
Gain on sale of investments.......................... -0- (320) (1,552)
Depreciation and amortization........................ 12,753 10,365 7,998
Deferred income taxes................................ 6,659 5,686 4,310
-------- -------- --------
32,346 27,027 20,449
Changes in operating assets and liabilities excluding
acquisitions of businesses:
Accounts receivable.................................. (2,312) (14,008) (3,643)
Inventories.......................................... (10,404) (21,021) (3,056)
Accounts payable and accrued expenses................ (7,810) 5,623 (1,214)
Other................................................ (8,193) (7,660) (6,850)
-------- -------- --------
Net Cash Provided (Used) by Continuing Operations.... 3,627 (10,039) 5,686
Net Cash Provided by Discontinued Operations......... -0- -0- 2,040
-------- -------- --------
Net Cash Provided (Used) by Operating Activities..... 3,627 (10,039) 7,726
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net........... (22,681) (15,947) (15,590)
Costs of acquisitions, net of cash acquired............... (40,175) (60,389) -0-
Purchase of investments................................... (101) (1,432) (5,427)
Proceeds from sales of investments........................ -0- 551 6,315
Proceeds from sale of discontinued operations, net of
$4,500 of income taxes................................. -0- -0- 46,313
-------- -------- --------
Net Cash Provided (Used) by Investing Activities..... (62,957) (77,217) 31,611
FINANCING ACTIVITIES
Proceeds from bank arrangements........................... 66,000 106,500 9,500
Payments on long-term debt................................ (1,670) (166,657) (45,249)
Issuance of 9.25% senior notes, net of deferred financing
costs.................................................. -0- 145,604 -0-
Cash paid to retire subordinated debentures............... -0- (1,245) -0-
Issuance of common stock under stock option plan.......... 267 3,194 184
Purchase of treasury stock................................ (2,761) (2,985) (1,775)
-------- -------- --------
Net Cash Provided (Used) by Financing Activities..... 61,836 84,411 (37,340)
Increase (decrease) in Cash and Cash Equivalents..... 2,506 (2,845) 1,997
Cash and Cash Equivalents at Beginning of Year....... 1,814 4,659 2,662
-------- -------- --------
Cash and Cash Equivalents at End of Year............. $ 4,320 $ 1,814 $ 4,659
======== ======== ========
Taxes paid................................................ $ 2,326 $ 1,215 $ 6,925
Interest paid............................................. 16,272 7,713 8,321
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 24
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The consolidated financial statements include the accounts
of the Company and all of its subsidiaries. All significant intercompany
accounts and transactions have been eliminated upon consolidation.
Accounting Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
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
first-in, first-out method) or market value. If the first-in, first-out method
of inventory accounting had been used exclusively by the Company, inventories
would have been approximately $4,869 and $4,895 higher than reported at December
31, 1998 and 1997, respectively.
Major Classes of Inventories
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1997
-------- --------
<S> <C> <C>
In-process and finished goods....................... $124,783 $100,283
Raw materials and supplies.......................... 25,269 29,229
-------- --------
$150,052 $129,512
======== ========
</TABLE>
Property, Plant and Equipment: Property, plant and equipment are carried at
cost. Major additions and associated interest costs 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. The Company capitalized interest of $1.0 million in 1998.
Interest capitalized in 1997 and 1996 was immaterial.
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 C) over periods from twenty-five to forty 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 as required by Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
which established accounting standards for determining the impairment of
long-lived assets to be held and used, certain identifiable intangibles, and
goodwill related to those assets and for long-lived assets and certain
identifiable intangibles to be disposed of.
Pensions and Other Postretirement Benefits: The Company and its
subsidiaries have pension plans, principally noncontributory defined benefit or
noncontributory defined contribution plans, covering substantially all
employees. The Company has two non-pension and postretirement benefit plans. 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
22
<PAGE> 25
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
plans, the costs charged to operations and the amount funded are based upon a
percentage of the covered employees' compensation.
Stock-Based Compensation: The Company has elected to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" ("APB 25"), and related interpretations. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.
Income Taxes: The Company accounts for income taxes under the liability
method whereby deferred tax assets and liabilities are determined based on
temporary differences between the financial reporting and the tax bases of
assets and liabilities and are measured using the current enacted tax rates.
Revenue Recognition: For the majority of its operations, the Company
recognizes revenues upon shipment of its product. Revenues on long-term
contracts are recognized using the percentage of completion method of
accounting, under which the sales value of performance is recognized on the
basis of the percentage each contract's cost to date bears to the total
estimated cost. The recognition of profit, based upon anticipated final costs,
is made only after evaluation of the contract status at critical milestones. The
Company's contracts generally provide for billing to customers at various points
prior to contract completion. Revenues earned on contracts in process in excess
of billings are classified in other current assets in the accompanying balance
sheet.
Environmental: The Company accrues environmental costs related to existing
conditions resulting from past or current operations and from which no current
or future benefit is discernible. Costs which extend the life of the related
property or mitigate or prevent future environmental contamination are
capitalized. The Company records a liability when environmental assessments
and/or remedial efforts are probable and can be reasonably estimated. The
estimated liability of the Company is not discounted or reduced for possible
recoveries from insurance carriers.
Concentration of Credit Risk: The Company sells its products to customers
in diversified industries. The Company performs ongoing credit evaluations of
its customers' financial condition but does not require collateral to support
customer receivables. The Company establishes an allowance for doubtful accounts
based upon factors surrounding the credit risk of specific customers, historical
trends and other information. As of December 31, 1998 the Company had
uncollateralized receivables with six customers in the automotive and truck
industry each with several locations approximating $25,995 which represents 27%
of the Company's trade accounts receivable. During 1998, sales to these
customers amounted to approximately $135,241 which represents 25% of the
Company's net sales.
Impact of Recently Issued Accounting Standards: The Company adopted FASB
Statement No. 130 "Reporting Comprehensive Income", at the beginning of 1998.
Statement 130 establishes standards for the reporting and display of
comprehensive earnings and its components in financial statements; however, the
adoption of this statement had no impact on the Company's net earnings.
Statement 130 requires foreign currency translation adjustments, which prior to
adoption were immaterial and included in accrued expenses, to be included in
other comprehensive earnings. Prior year financial statements have been
reclassified to conform to the requirements of Statement 130.
The FASB has issued two accounting pronouncements which the Company adopted
in the fourth quarter of 1998. FASB Statement No. 131 "Disclosures about
Segments of an Enterprise and Related Information" and FASB Statement No. 132
"Employers' Disclosures about Pensions and Other Post Retirement Benefits -- an
amendment of FASB Statements No. 87, 88 and 106" both expand or modify
disclosures and accordingly, have no impact on the Company's financial position,
results of operations or cash flows.
23
<PAGE> 26
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use". The SOP requires
companies to capitalize qualifying computer software costs incurred during the
application development stage. The statement will be applied prospectively and
is effective for financial statements for fiscal years beginning after December
15, 1998. This new standard is not expected to have a significant effect on the
Company's financial position or results of operations.
In April 1998, the AICPA issued SOP 98-5, "Accounting for the Costs of
Start-up Activities". The SOP requires that costs of start-up activities be
expensed as incurred. The SOP is effective for fiscal years beginning after
December 15, 1998. The Company expects to adopt the SOP in the first quarter of
1999. The impact of adoption of the SOP on the Company's financial position,
results of operations or cash flows is expected to be immaterial.
FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued in June 1998. Statement 133 requires derivatives to be
recorded on the balance sheet at fair value and establishes accounting for three
different types of hedges: hedges of changes in fair value of assets,
liabilities, or firm commitments; hedges of the variable cash flows of
forecasted transactions; and hedges of foreign currency exposures of net
investments in foreign operations. Statement 133 is effective for years
beginning after June 15, 1999 and is not expected to have a significant impact
on the Company's financial position or results of operations.
Reclassification: Certain amounts in the prior period's financial
statements have been reclassified to be consistent with the current
presentation.
NOTE B -- CORPORATE REORGANIZATION
At the 1998 Annual Meeting of Shareholders of Park-Ohio Industries, Inc.
("Park-Ohio") held on May 28, 1998, the shareholders of Park-Ohio approved an
agreement of Merger ("Merger Agreement") dated February 20, 1998 by and among
Park-Ohio, PKOH Holdings Corp. ("Holdings") and PKOH Merger Corp. ("Merger
Corp.") providing for a reorganization of Park-Ohio into a holding company form
of ownership with Holdings as its sole parent. On June 10, 1998, Holdings
amended and restated its articles of incorporation to increase its authorized
shares from 100 shares of common stock, $1.00 par value per share, to 40,000,000
shares of common stock and 632,470 shares of preferred stock, all $1.00 par
value per share, and changed its name from PKOH Holding Corp. to Park-Ohio
Holdings Corp. Effective as of the close of business on June 15, 1998, Merger
Corp. was merged with and into Park-Ohio upon the terms and conditions of the
Merger Agreement. At the effective time of the Merger, (i) all of the shares of
Park-Ohio's common stock issued and outstanding immediately prior to the Merger
were converted into an equal number of shares of Holding's common stock(on a
share-for-share basis), (ii) all of the shares of Merger Corp.'s common stock
issued and outstanding immediately prior to the Merger were converted into 100
shares of Park-Ohio's common stock and (iii) all of the shares of Holdings'
common stock issued and outstanding immediately prior to the Merger were
canceled.
Prior to the Merger, there was no public market for Holdings' common stock,
and Park-Ohio's common stock was listed for trading on the NASDAQ National
Market under the symbol "PKOH". Upon the opening of the market after the
effective time of the Merger: (i) Holdings' common stock was registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and was listed for trading on the NASDAQ National Market under the symbol
"PKOH"; (ii) Park-Ohio common stock was simultaneously delisted from the NASDAQ
National Market and ceased to be registered under Section 12(g) of the Exchange
Act; and (iii) Holdings assumed Park-Ohio's reporting obligations under the
Exchange Act.
24
<PAGE> 27
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE C -- ACQUISITIONS
The Company completed two acquisitions for cash of approximately $40.2
million in 1998. In April 1998, the Company acquired all of the shares of Direct
Fasteners Limited ("Direct") a distributor of fasteners located in Ontario,
Canada. In October 1998, the Company acquired all of the shares of GIS
Industries, Inc. ("Gateway"), a distributor of fasteners and other industrial
products and a manufacturer of metal products and fasteners. Both Direct and
Gateway are included in the Company's Integrated Logistics Solutions ("ILS")
segment. Each of the transactions were accounted for as a purchase. The
aggregate purchase price and the results of operations of both Direct and
Gateway prior to the date of acquisition were not material to the Company.
In January 1999, the Company acquired all of the shares of The Metalloy
Corporation ("Metalloy") for cash. Metalloy is a full service aluminum casting
and machining company and will be included in the Company's Manufactured
Products segment. The transaction will be accounted for as a purchase. The
purchase price and the results of operations of Metalloy prior to the date of
acquisition were not material to the Company.
On August 1, 1997, the Company acquired substantially all of the shares of
Arden Industrial Products, Inc. ("Arden") for cash of approximately $44 million.
The transaction has been accounted for as a purchase. Arden is a national
distributor of specialty and standard fasteners to the industrial market. Arden
is included in the Company's ILS segment.
The following is the estimated value of the net assets of Arden as of
August 1, 1997:
<TABLE>
<S> <C>
Cash........................................................ $ 2,711
Accounts receivable......................................... 11,503
Inventories................................................. 17,764
Property, plant and equipment............................... 4,468
Excess purchase price over net assets acquired.............. 19,599
Other assets................................................ 6,680
Trade accounts payable...................................... (6,437)
Accrued expenses............................................ (5,930)
Long-term liabilities....................................... (6,358)
-------
Total estimated cost of acquisition......................... $44,000
=======
</TABLE>
During the year ended December 31, 1997, the Company acquired four other
businesses for an aggregate purchase price of approximately $18.6 million. Each
of these transactions was accounted for as a purchase, resulting in excess
purchase price over net assets acquired of $8.6 million. The following unaudited
pro forma results of operations assume the acquisitions of Arden and the other
businesses discussed above occurred on January 1, 1996. 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>
YEAR ENDED
-------------------
1997 1996
-------- --------
<S> <C> <C>
Net sales....................................... $508,724 $476,693
Gross profit.................................... 93,547 98,190
Income from continuing operations............... 12,454 8,777
Income from continuing operations per common
share assuming dilution....................... $ 1.10 $ .80
======== ========
</TABLE>
25
<PAGE> 28
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
On October 15, 1993, the Company acquired General Aluminum Mfg. Company
(GAMCO), by issuing 250,000 shares of its common stock valued at $3,127 in
exchange for the outstanding shares of GAMCO. An additional 187,500 shares of
common stock valued at $1,931, were issued in March, 1995; an additional 375,000
shares of common stock valued at $3,975 were issued in January, 1997; an
additional 187,500 shares of common stock valued at $2,494, representing the
final earn-out shares to be issued under the GAMCO purchase agreement, were
issued in 1998. The additional $8,400 represents purchase price in excess of net
assets acquired.
NOTE D -- DISPOSITIONS
On July 31, 1996, the Company completed the sale of substantially all of
the assets of Bennett Industries, Inc. ("Bennett"), a wholly-owned subsidiary
which manufactures plastic containers, to North America Packaging Corporation, a
wholly-owned subsidiary of Southcorp Holdings Limited, an Australian company,
for $50.8 million in cash, resulting in a pre-tax gain of $13.8 million. The
results of operations and changes in cash flows for Bennett have been classified
as discontinued operations for all periods presented in the related consolidated
statements of income and consolidated statements of cash flows, respectively.
Interest expense has been allocated to discontinued operations based on the
ratio of net assets discontinued to the total net assets of the consolidated
entity plus consolidated debt.
Summary operating results of the discontinued operations, excluding the
above gain on sale, for the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Sales....................................................... $49,448
Costs and expenses.......................................... 44,502
-------
Income from discontinued operations before income taxes..... 4,946
Income taxes................................................ 1,820
-------
Net income from discontinued operations..................... $ 3,126
=======
</TABLE>
During September, 1998 the Company completed the sale of the assets of
Friendly and Safe Packaging Systems, Inc. to Kerr Group. The transaction had an
immaterial effect on the consolidated results of operations and financial
position of the Company.
NOTE E -- ACCRUED EXPENSES
Accrued expenses include the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1998 1997
------- -------
<S> <C> <C>
Self-insured liabilities.................................... $ 2,911 $ 2,827
Warranty and installation accruals.......................... 3,156 3,401
Accrued payroll and payroll-related items................... 2,586 4,820
State and local taxes....................................... 2,101 2,324
Advance billings............................................ 2,229 2,215
Acquisition liabilities..................................... 5,930 1,906
Interest payable............................................ 1,695 1,498
Sundry...................................................... 11,468 9,300
------- -------
Totals............................................ $32,076 $28,291
======= =======
</TABLE>
26
<PAGE> 29
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE F -- FINANCING ARRANGEMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
9.25% Senior Subordinated Notes due 2007.................... $150,000 $150,000
Revolving credit maturing on April 30, 2001................. 86,000 20,000
Other....................................................... 2,105 2,755
-------- --------
238,105 172,755
Less current maturities..................................... 622 472
-------- --------
Total............................................. $237,483 $172,283
======== ========
</TABLE>
During 1998 Park-Ohio entered a new credit agreement with a group of banks
under which it may borrow up to $150 million on an unsecured basis. Interest is
payable quarterly at the prime lending rate less 1% to .3% (6.75% at December
31, 1998) or at Park-Ohio's election at LIBOR plus .9% to 1.7% (which aggregated
6.5% at December 31, 1998). The interest rate is dependent on the aggregate
amounts borrowed under the agreement. The weighted average rate on borrowings
was 8.2% at December 31, 1998. The credit agreement expires on April 30, 2001.
Provisions of the Senior Subordinated Notes and the revolving credit
agreement contain restrictions on the Company's ability to incur additional
indebtedness, to create liens or other encumbrances, to make certain payments,
investments, loans and guarantees and to sell or otherwise dispose of a
substantial portion of assets to or merge or consolidate with, an unaffiliated
entity. The revolving credit agreement also requires maintenance of specific
financial ratios.
On November 25, 1997, the Company sold $150 million of its 9.25% Senior
Subordinated Notes due 2007 at a price of 97.375% of face value. Interest on the
Senior Subordinated Notes is payable semi-annually on June 1 and December 1 of
each year beginning on June 1, 1998. The fair market value of fixed rate debt
securities at December 31, 1998 was approximately $152,625. The Company used the
net proceeds of the Senior Subordinated Notes along with borrowings under its
new credit facility to (i) redeem its 7 1/4% Convertible Senior Subordinated
Debentures due June 15, 2004 and (ii) to repay substantially all amounts of its
then existing credit facility. The early extinguishment of the 7 1/4%
Convertible Senior Subordinated Debentures and the then existing credit facility
resulted in an extraordinary charge of $1.5 million consisting of the following:
<TABLE>
<S> <C>
Discount on prepayment of 7 1/4% Convertible Senior
Subordinated Debentures................................... $1,245
Write-off related unamortized financing costs............... 1,196
------
Extraordinary charge before income tax benefit.............. 2,441
Income tax benefit.......................................... 928
------
Net extraordinary charge.................................... $1,513
======
</TABLE>
The Company has agreements on which up to $5 million in standby letters of
credit and commercial letters of credit may be issued. In addition to the bank's
customary letter of credit fees, a 3/4% fee is assessed on standby letters of
credit on an annual basis. As of December 31, 1998, in addition to amounts
borrowed under the revolving credit agreement, there is $2.8 million outstanding
primarily for standby letters of credit. A fee of 1/4% to 3/8% is imposed by
the bank on the unused portion of available borrowings.
27
<PAGE> 30
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Maturities of long-term debt during each of the five years following
December 31, 1998 are approximately $622 in 1999, $537 in 2000, $86,278 in 2001,
$427 in 2002 and $123 in 2003.
NOTE G -- INCOME TAXES
Significant components of the Company's net deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1997
------- -------
<S> <C> <C>
Deferred tax assets:
Postretirement benefit obligation......................... $ 9,900 $10,200
Inventory................................................. 6,800 6,500
Tax net operating loss carryforwards and credits.......... 1,500 4,100
Other -- net.............................................. 4,832 4,100
------- -------
Total deferred tax assets......................... 23,032 24,900
Deferred tax liabilities:
Tax over book depreciation................................ 6,900 5,200
Pension................................................... 5,000 3,500
------- -------
Total deferred tax liabilities.................... 11,900 8,700
------- -------
Net deferred tax assets..................................... $11,132 $16,200
======= =======
</TABLE>
Income taxes consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------
1998 1997 1996
------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................ $1,023 $ 775 $ (150)
State.................................................. 1,037 733 500
Foreign................................................ 1,007 709 400
------ ------ ------
3,067.. 2,217 750
Deferred:
Federal................................................ 6,195 5,175 4,010
State.................................................. 464 511 300
------ ------ ------
6,659 5,686 4,310
------ ------ ------
Income taxes................................................ $9,726 $7,903 $5,060
====== ====== ======
</TABLE>
The reasons for the difference between income taxes and the amount computed
by applying the statutory Federal income tax rate to income from continuing
operations before income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Computed statutory amount................................... $7,700 $6,500 $5,000
Effect of state income taxes payable........................ 1,000 800 600
Other....................................................... 1,026 603 (540)
------ ------ ------
Income taxes................................................ $9,726 $7,903 $5,060
====== ====== ======
</TABLE>
28
<PAGE> 31
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
At December 31, 1998, subsidiaries of the Company have net operating loss
carryforwards for income tax purposes of approximately $1.1 million subject to
certain limitations, which expire in 2001 to 2007.
NOTE H -- STOCK PLANS
Under the provisions of the Company's Amended and Restated 1992 Stock
Option Plan, incentive stock options or non-statutory options to purchase
850,000 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.
The 1996 Non-Employee Director Stock Option Plan authorized the granting of
options on 250,000 shares of common stock to directors who are not employees of
the Company. Annually, each non-employee director will automatically receive
options to acquire 6,000 shares at the market price on the date of grant.
Options under this plan are exercisable six months from the date of grant. Also
during 1996 the Chairman and Chief Executive Officer of the Company was granted
a non-statutory stock option to purchase 500,000 shares of common stock at
$13.625 per share which was the market price at the date of grant. The options
become 100% exercisable after five years and terminate fifteen years from the
option date.
Under the provisions of the 1998 Long-Term Incentive Plan ("1998 Plan"),
which is administered by the Compensation Committee, incentive stock options,
non-statutory stock options, stock appreciation rights ("SARs") restricted
shares, performance shares or stock awards may be awarded to all employees of
the Company and its subsidiaries. Stock options will be exercisable in whole or
in installments as may be determined provided that no options will be
exercisable more than ten years from date of grant. The exercise price will be
the market price at the date of grant. The aggregate number of shares of the
Company's stock which may be awarded under the 1998 Plan is 550,000, all of
which may be incentive stock options. No more than 250,000 shares shall be the
subject of awards to any individual participant in any one calendar year. During
1998, there were no awards under the 1998 Plan.
Had the compensation cost for the stock options granted in 1998, 1997 and
1996 been determined based on the fair value method of FASB Statement No. 123,
the Company's net income and diluted earnings per share would have been reduced
by $1,235 ($.11 per share) in 1998, $1,304 ($.11 per share) in 1997, and $1,290
($.11 per share) in 1996. The effects on 1998, 1997 and 1996 net earnings may
not be representative of the effect on future years net earnings amounts as the
compensation cost on each year's grant is recognized over the vesting period.
Fair value was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions for 1998, 1997 and
1996, respectively: risk-free interest rates of 4.75%, 5.25% and 5.25%; zero
dividend yield; expected volatility of 39% in 1998, 40% in 1997 and 43% in 1996
and expected option lives of 6 years for 1998 and 1997 and 6 to 10 years for
1996.
29
<PAGE> 32
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table reflects activity under all stock plans from January 1,
1996 through December 31, 1998, and the weighted average exercise prices:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE PRICE
OF SHARES PER SHARE
--------- -------------
<S> <C> <C>
Outstanding,
January 1, 1996.......................................... 540,500 $ 8.79
Granted.................................................. 698,000 13.62
Exercised................................................ (31,167) 5.92
Forfeited................................................ (1,333) 10.62
Outstanding,
December 31, 1996........................................ 1,206,000 11.63
Granted.................................................. 60,000 13.02
Exercised................................................ (351,000) 7.97
Forfeited................................................ -0- -0-
Outstanding,
December 31, 1997........................................ 915,000 13.13
Granted.................................................. 145,000 18.45
Exercised................................................ (20,817) 12.82
Forfeited................................................ (3,333) 13.62
---------
Outstanding at December 31, 1998........................... 1,035,850 $13.88
=========
</TABLE>
The following table summarizes information about options outstanding as of
December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- ------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE WEIGHTED
AS OF REMAINING AVERAGE AS OF AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 1998 LIFE PRICE 1998 PRICE
--------------- ------------------ ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$ 9.125-$13.000 159,000 6.02 $10.78 148,983 $10.65
13.125- 14.250 716,850 10.55 13.62 363,928 13.62
14.500- 19.375 160,000 9.31 18.08 34,950 18.07
--------- -------
1,035,850 547,861
========= =======
</TABLE>
NOTE I -- LEGAL PROCEEDINGS
The Company is subject to various pending and threatened lawsuits in which
claims for monetary damages are asserted in the ordinary course of business.
While any litigation involves an element of uncertainty, in the opinion of
management, liabilities, if any, arising from currently pending or threatened
litigation will not have a material adverse effect on the Company's financial
condition, liquidity and results of operations.
30
<PAGE> 33
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE J -- PENSIONS AND OTHER POSTRETIREMENT BENEFITS
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year......... $ 45,473 $ 45,049 $ 21,673 $ 19,888
Service cost.................................... 403 304 133 118
Amendments and other............................ 116 158 -0- -0-
Interest cost................................... 3,136 3,251 1,496 1,541
Plan participants' contributions................ -0- -0- 118 118
Actuarial losses................................ 731 995 497 2,207
Benefits paid................................... (4,158) (4,284) (2,199) (2,199)
-------- -------- -------- --------
Benefit obligation at end of year............... $ 45,701 $ 45,473 $ 21,718 $ 21,673
======== ======== ======== ========
CHANGE IN PLAN ASSETS
Fair Value of plan assets at beginning of
year.......................................... $ 80,274 $ 63,139 $ -0- $ -0-
Actual return on plan assets.................... 7,832 21,204 -0- -0-
Company contributions........................... 12 215 2,081 2,081
Plan participants' contributions................ -0- -0- 118 118
Benefits paid................................... (4,158) (4,284) (2,199) (2,199)
-------- -------- -------- --------
Fair value of plan assets at end of year........ $ 83,960 $ 80,274 $ -0- $ -0-
======== ======== ======== ========
Funded status of the plan (underfunded)......... $ 38,259 $ 34,801 $(21,718) $(21,673)
Unrecognized net transition obligation.......... (329) (279) -0- -0-
Unrecognized net actuarial gain................. (21,027) (21,654) (5,595) (6,812)
Unrecognized prior service cost................. 1,395 1,429 (723) (802)
-------- -------- -------- --------
Prepaid benefit cost............................ $ 18,298 $ 14,297 $(28,036) $(29,287)
======== ======== ======== ========
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31
Discount rate................................... 7.00% 7.25% 7.00% 7.25%
Expected return on plan assets.................. 8.50% 8.50% N/A N/A
Rate of compensation increase (decrease)........ 2.50% 2.50% N/A N/A
</TABLE>
For measurement purposes, an 8.0% percent annual rate of increase in the
per capita cost of covered health care benefits was assumed for 1999. The rate
was assumed to decrease gradually to 5.5% for 2004 and remain at that level
thereafter.
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
--------------------------- ---------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET
PERIODIC BENEFIT COST
Service costs...................... $ 403 $ 302 $ 296 $ 133 $ 118 $ 106
Interest costs..................... 3,136 3,252 3,294 1,496 1,541 1,457
Expected return on plan assets..... (6,642) (5,181) (4,879) -0- -0- -0-
Transition obligation.............. 77 77 -0- -0- -0- -0-
Amortization of prior service
cost............................. 181 170 156 (79) (79) (79)
Recognized net actuarial gain...... (1,225) (332) (26) (343) (407) (464)
------- ------- ------- ------- ------- -------
Benefit costs...................... $(4,070) $(1,712) $(1,159) $ 1,207 $ 1,173 $ 1,020
======= ======= ======= ======= ======= =======
</TABLE>
31
<PAGE> 34
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The Company has two non-pension postretirement benefit plans. Health care
benefits are provided on both a contributory and noncontributory basis. The life
insurance plan is primarily noncontributory.
The assumed health care cost trend rate has a significant effect on the
amounts reported. A one-percentage-point change in the assumed health care cost
trend rate would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE- 1-PERCENTAGE
POINT POINT
INCREASE DECREASE
------------- ------------
<S> <C> <C>
Effect on total of service and interest cost components
in 1998................................................ $ 124,000 $ 124,000
Effect on post retirement benefit obligation as of
December 31, 1998...................................... $1,373,000 $1,373,000
</TABLE>
The total contribution charged to pension expense for the Company's defined
contribution plans was $876 in 1998, $687 in 1997 and $796 in 1996.
NOTE K -- LEASES
Rental expense for 1998, 1997 and 1996 was $7,056, $6,696 and $4,751,
respectively. Future minimum lease commitments during each of the five years
following December 31, 1998 are as follows: $6,858 in 1999, $5,687 in 2000,
$4,824 in 2001, $3,594 in 2002 $2,322 in 2003 and $4,977 thereafter.
NOTE L -- INDUSTRY SEGMENTS
The Company conducts its business through two segments: Integrated
Logistics Solutions ("ILS") and Manufactured Products. ILS is a leading national
supplier of fasteners (e.g., nuts, bolts and screws) and other industrial
products to OEMs, other manufacturers and distributors. In connection with the
supply of such industrial products, ILS provides a variety of value-added,
cost-effective procurement solutions. The principal customers of ILS are in the
transportation, industrial, electrical, lawn and garden equipment industries.
Manufactured Products designs and manufactures a broad range of high quality
products engineered for specific customer applications. The principal customers
of Manufactured Products are OEMs and end-users in the automotive, railroad,
truck and aerospace industries.
The Company's sales are made through its own sales organization,
distributors and representatives. Intersegment sales from the manufactured
products segment to the ILS segment are immaterial and eliminated in
consolidation and are not included in the figures presented. Intersegment sales
are accounted for at values based on market prices. Income allocated to segments
excludes certain corporate expenses, interest expense and amortization of excess
purchase price over net assets acquired. Identifiable assets by industry segment
include assets directly identified with those operations.
Corporate assets generally consist of cash and cash equivalents, deferred
tax assets, and other assets.
32
<PAGE> 35
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales
ILS................................................... $364,546 $266,292 $188,306
Manufactured products................................. 187,247 174,818 159,373
-------- -------- --------
$551,793 $441,110 $347,679
======== ======== ========
Income from continuing operations before income taxes
ILS................................................... $ 34,595 $ 23,310 $ 15,282
Manufactured products................................. 12,004 10,763 10,257
-------- -------- --------
46,599 34,073 25,539
Amortization of excess purchase price over net assets
acquired............................................ (2,277) (2,211) (1,902)
Corporate costs....................................... (4,174) (3,562) (1,937)
Interest expense...................................... (17,488) (9,101) (6,947)
-------- -------- --------
$ 22,660 $ 19,199 $ 14,753
======== ======== ========
Identifiable assets
ILS................................................... $288,713 $252,763 $134,107
Manufactured products................................. 187,095 140,278 136,701
General corporate..................................... 13,746 20,068 12,102
-------- -------- --------
$489,554 $413,109 $282,910
======== ======== ========
Depreciation and amortization expense
ILS................................................... $ 6,124 $ 4,352 $ 2,623
Manufactured products................................. 6,629 6,013 5,375
-------- -------- --------
$ 12,753 $ 10,365 $ 7,998
======== ======== ========
Capital expenditures
ILS................................................... $ 4,274 $ 3,938 $ 5,261
Manufactured products................................. 18,316 11,870 9,163
General corporate..................................... 91 139 1,166
-------- -------- --------
$ 22,681 $ 15,947 $ 15,590
======== ======== ========
</TABLE>
The Company had sales of $33,728 in 1996 to Ford Motor Company which
represented 10% of consolidated net sales.
Approximately 89% of the Company's net sales are within the United States.
None of the net sales to any foreign country represented more than 6% of the
Company's total sales. Approximately 96% of the Company's assets are maintained
in the United States.
NOTE M -- RESTRUCTURING CHARGES AND OTHER INCOME
During the fourth quarter of 1996, the Company reorganized certain
manufacturing operations which resulted in the realignment of two manufacturing
facilities and the discontinuance of certain products lines. As a result of
these actions, the Company recorded a charge of $2,700 primarily for the
writedown of property and equipment and inventory to estimated net realizable
value.
In December 1996, the Company negotiated full settlement of subordinated
notes receivable, resulting from the sale of two manufacturing facilities, which
were fully reserved at the date of sale. The
33
<PAGE> 36
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
net proceeds received of $2,700 were recorded in income in the fourth quarter.
In the third quarter of 1996, the Company sold certain securities purchased
during 1996 for $6,315 which resulted in a gain of $1,500.
NOTE N -- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
NUMERATOR
Numerator for basic earnings per share -- income from
continuing operations before extraordinary charge......... $12,934 $11,296 $ 9,693
Effect of dilutive securities:
Amortization of imputed goodwill associated with the earnout
shares.................................................... -0- (63) (84)
Interest (net of income taxes) associated with convertible
senior subordinated debentures............................ -0- 886 999
------- ------- -------
Numerator for diluted earnings per share-income from
continuing operations after assumed conversions........... $12,934 $12,119 $10,608
======= ======= =======
Discontinued operations..................................... $ -0- $ -0- $11,642
======= ======= =======
Extraordinary item, net of tax.............................. $ -0- $(1,513) $ -0-
======= ======= =======
Numerator for basic earnings per share-net income........... $12,934 $ 9,783 $21,335
======= ======= =======
Numerator for diluted earnings per share-net income after
assumed conversions....................................... $12,934 $10,606 $22,250
======= ======= =======
DENOMINATOR
Denominator for basic earnings per share-weighted average
shares.................................................... 10,958 10,691 10,401
Effect of dilutive securities:
Effect of General Aluminum Mfg. Company earnout shares
deemed to be issued.................................... -0- 140 188
Employee stock options.................................... 203 204 340
Convertible subordinated debentures....................... -0- 1,019 1,151
------- ------- -------
Denominator for diluted earnings per share-adjusted
weighted-average shares and assumed conversions........ 11,161 12,054 12,080
Basic earnings (loss) per share:
Continuing operations..................................... $ 1.18 $ 1.06 $ .93
======= ======= =======
Extraordinary item, net of tax............................ $ -0- $ (.14) $ -0-
======= ======= =======
Discontinued operations................................... $ -0- $ -0- $ 1.12
======= ======= =======
Net income................................................ $ 1.18 $ .92 $ 2.05
======= ======= =======
Diluted earnings (loss) per share:
Continuing operations..................................... $ 1.16 $ 1.01 $ .88
======= ======= =======
Extraordinary item, net of tax............................ $ -0- $ (.13) $ -0-
======= ======= =======
Discontinued operations................................... $ -0- $ -0- $ .96
======= ======= =======
Net income................................................ $ 1.16 $ .88 $ 1.84
======= ======= =======
</TABLE>
34
<PAGE> 37
SUPPLEMENTARY FINANCIAL DATA
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------
1998 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
---- -------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales............................... $136,503 $140,765 $133,370 $141,155
Gross profit............................ 23,332 23,586 23,896 25,812
Net Income.............................. $ 2,874 $ 3,336 $ 2,916 $ 3,808
======== ======== ======== ========
Diluted Earnings Per Share.............. $ .26 $ .30 $ .26 $ .35
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------
1997 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
---- -------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales............................... $93,806 $103,785 $114,325 $129,194
Gross profit............................ 15,043 16,820 17,993 22,520
Income from continuing operations....... 2,242 3,035 2,526 3,493
Extraordinary charge, net of tax........ -0- -0- -0- (1,513)
Net Income.............................. $ 2,242 $ 3,035 $ 2,526 $ 1,980
======= ======== ======== ========
Diluted Earnings Per Share:
Continuing Operations................. $ .20 $ .27 $ .22 $ .31
Extraordinary charge.................. -0- -0- -0- (.13)
------- -------- -------- --------
Net Income............................ $ .20 $ .27 $ .22 $ .18
======= ======== ======== ========
</TABLE>
NOTE 1 -- On August 1, 1997, the Company acquired substantially all of the
shares of Arden Industrial Products, Inc. ("Arden") for cash of
approximately $44.0 million. The transaction has been accounted for as
a purchase. Arden is a national distributor of speciality and standard
fasteners to the industrial market. Arden is included in the Company's
ILS segment.
NOTE 2 -- The extraordinary charge relates to the Company's decision to enter
into a new bank agreement, issue 9 1/4% Senior Subordinated Notes due
2007 and redeem the Convertible Senior Subordinated Debentures.
NOTE 3 -- During September 1998, the Company completed the sale of Friendly &
Safe Packaging Systems, Inc. to Kerr Group. The transaction had an
immaterial effect on the consolidated financial position and
operations of the Company.
NOTE 4 -- On October 8, 1998, the Company acquired all of the shares of GIS
Industries, Inc. dba Gateway Industrial Supply ("Gateway"). The
transaction has been accounted for as a purchase. Gateway is a
distributor of fasteners and a manufacturer of fabricated metal
products and fasteners.
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, 1998.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning directors required under this item is
incorporated herein by reference from the material contained under the caption
"Election of Directors" in the registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A,
not
35
<PAGE> 38
later than 120 days after the close of the fiscal year. Information relating to
executive officers is contained under Part I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information relating to executive compensation contained under the
headings "Certain Matters Pertaining to the Board of Directors" and "Executive
Compensation" in the registrant's definitive proxy statement to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A, not later
than 120 days after the close of the fiscal year, is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required under this item is incorporated herein by
reference from the material contained under the caption "Principal Shareholders"
in the registrant's definitive proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A, not later than 120 days
after the close of the fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under this item is incorporated herein by
reference from the material contained under the caption "Certain Transactions"
in the registrant's definitive proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A, not later than 120 days
after the close of the fiscal year.
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>
Report of Independent Auditors............................ 17
Financial Statements
Consolidated balance sheets -- December 31, 1998 and
1997.................................................. 18
Consolidated statements of income -- years ended
December 31, 1998, 1997 and 1996...................... 19
Consolidated statements of shareholders'
equity -- years ended December 31, 1998, 1997 and
1996.................................................. 20
Consolidated statements of cash flows -- years ended
December 31, 1998, 1997 and 1996...................... 21
Notes to consolidated financial statements............. 22
Selected quarterly financial data (unaudited) -- years
ended December 31, 1998 and 1997....................... 35
</TABLE>
(3) Exhibits:
The Exhibits filed as part of this Form 10-K are listed on the Exhibit
Index immediately preceding such exhibits, incorporated herein by reference.
(b) Reports on Form 8-K filed in the fourth quarter of 1998:
None
36
<PAGE> 39
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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 HOLDINGS CORP
(Registrant)
By: /s/ RONALD J. COZEAN
--------------------
Ronald J. Cozean, Secretary
Date: March 26, 1999
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>
<C> <S> <C>
/s/ EDWARD F. CRAWFORD Chairman, Chief Executive Officer and
- ------------------------------------------------ President (Principal Executive Officer)
Edward F. Crawford and Director
/s/ JAMES S. WALKER Vice President -- and Chief Financial
- ------------------------------------------------ Officer (Principal Financial and
James S. Walker Accounting Officer)
/s/ MATTHEW V. CRAWFORD Director
- ------------------------------------------------
Matthew V. Crawford
/s/ KEVIN R. GREENE Director
- ------------------------------------------------ March 26, 1999
Kevin R. Greene
/s/ LEWIS E. HATCH, JR. Director
- ------------------------------------------------
Lewis E. Hatch, Jr.
/s/ THOMAS E. MCGINTY Director
- ------------------------------------------------
Thomas E. McGinty
/s/ LAWRENCE O. SELHORST Director
- ------------------------------------------------
Lawrence O. Selhorst
/s/ FELIX J. TARORICK Director
- ------------------------------------------------
Felix J. Tarorick
/s/ JAMES W. WERT Director
- ------------------------------------------------
James W. Wert
</TABLE>
37
<PAGE> 40
ANNUAL REPORT ON FORM 10-K
PARK-OHIO HOLDINGS CORP.
FOR THE YEAR ENDED DECEMBER 31, 1998
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
- -------
<S> <C> <C> <C>
2.0 Agreement of Merger dated February 20, 1998 by and among
Park-Ohio Industries, Inc., PKOH Merger Corp. and PKOH
Holding Corp. (filed as appendix A to the Registration
Statement on Form S-4 of Park-Ohio Industries, Inc., filed
on February 26, 1998, SEC File No. 333-46931 and
incorporated by reference and made a part hereof)
3.1 Amended and Restated Articles of Incorporation of Park-Ohio
Holdings Corp.
3.2 Code of Regulations of Park-Ohio Holdings Corp.
4.1 Indenture, dated November 25, 1997 by and among Park-Ohio
Industries, Inc. and Norwest Bank Minnesota, N.A. as trustee
(filed as Exhibit 4.1 of the Company's Registration
Statement on Form S-4, filed on December 23, 1997, SEC File
No. 333-43005 and incorporated by reference and made a part
hereof)
4.2 Amended and Restated Credit Agreement among Park-Ohio
Industries, Inc., and various financial institutions dated
November 2, 1998 (filed as Exhibit 4 to the Form 10-Q of
Park-Ohio Holdings Corp., filed on November 13, 1998, SEC
File No. 000-03134 and incorporated by reference and made a
part hereof)
10.1 Form of Indemnification Agreement entered into between
Park-Ohio Holdings Corp. and each of its directors and
certain officers
10.2 Park-Ohio Industries, Inc. Amended and Restated 1992 Stock
Option Plan (filed as Exhibit A to Schedule 14A of Park-Ohio
Industries, Inc. filed on May 12, 1995, SEC File No.
000-03134 and incorporated by reference and made a part
hereof)
10.3 Non-Statutory Stock Option Agreement dated February 22, 1996
by and between Park-Ohio Industries, Inc., and Edward F.
Crawford (filed as Appendix A to the Definitive Proxy
Statement of Park-Ohio Industries, Inc., filed on April 16,
1996, SEC File No. 000-03134 and incorporated by reference
and made a part hereof)
10.4 1996 Non-employee Director Stock Option Plan (filed as
Appendix B to the Definitive Proxy Statement of Park-Ohio
Industries, Inc., filed on April 16, 1996, Sec File No.
000-03134 and incorporated by reference and made a part
hereof)
10.5 1998 Long-Term Incentive Plan (filed as appendix E to the
Definitive Proxy Statement of Park-Ohio Industries, Inc.,
filed on April 24, 1998, SEC File No. 000-03134 and
incorporated by reference and made a part hereof)
12.1 Computation of Ratios
21.1 List of Subsidiaries of Park-Ohio Holdings Corp.
23.1 Consent of Ernst & Young, LLP
27.1 Financial Data Schedule for period ended December 31, 1998
(Electronic Filing Only)
</TABLE>
38
<PAGE> 1
Exhibit 3.1
CERTIFICATE
OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
PKOH HOLDING CORP.
Edward F. Crawford, who is Chairman of the Board of Directors,
President and Chief Executive Officer, and Ronald J. Cozean, who is Secretary,
of the above-named Ohio corporation for profit with its principal location at
Cleveland, Ohio (the "Corporation") do hereby certify that the following Amended
and Restated Articles of Incorporation were adopted by the Board of Directors of
the Corporation to supersede and take the place of the existing Articles of
Incorporation at a meeting duly called on May 28, 1998, and further that such
Amended and Restated Articles of Incorporation were approved by the sole
shareholder of the Corporation in a writing signed by such shareholder and dated
May 28, 1998, all in accordance with the applicable provisions of the Ohio
Revised Code, including Section 1701.69 thereof.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
PARK-OHIO HOLDINGS CORP.
FIRST: The name of the Corporation shall be "Park-Ohio
Holdings Corp".
SECOND: The place in the State of Ohio where the principal
office of the Corporation will be located is Cleveland, Ohio, in Cuyahoga
County, or such other location as the Board of Directors may from time to time
determine.
THIRD: The purposes for which the Corporation is formed are
(i) to engage in any lawful act or activity for which corporations may be formed
under Sections 1701.01 to 1701.98, inclusive, of the Ohio Revised Code, as now
in effect or hereinafter amended, in furtherance of such long-term plans and
strategies as the Board of Directors may from time to time establish for the
Corporation and (ii) to preserve for the Corporation, its shareholders and such
other constituencies as the Board of Directors may from time to time identify,
the benefits expected to be derived from such long term-plans and strategies.
FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty million six hundred
thirty-two thousand four hundred seventy (40,632,470), all of a par value of $1
per share, divided into two classes as follows: 632,470 shares of Serial
Preferred Stock (hereinafter called the "Serial Stock"); and 40,000,000 shares
of Common Stock (hereinafter called the "Common Stock").
1
<PAGE> 2
The voting powers and such designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions of each class of stock which are
fixed by these Amended and Restated Articles of Incorporation, and the express
grant of authority to the Board of Directors to fix by resolutions the voting
powers, designations, preferences and relative, participating, optional or other
rights, if any, or the qualifications, limitations or restrictions, if any, of
the Serial Stock which are not fixed by these Amended and Restated Articles of
Incorporation, are as follows:
SECTION 1. PROVISIONS APPLICABLE ONLY TO THE SERIAL STOCK
A. The Serial Stock may be issued from time to time in any
amount, not exceeding in the aggregate (including all shares of any and all
series thereof theretofore issued and not theretofore retired) the total number
of shares of the Serial Stock hereinabove authorized, as Serial Stock of one or
more series, as hereinafter provided. All shares of any one series of the Serial
Stock shall be identical in all respects, each series thereof shall be
distinctively designated by letter or descriptive words, and, except as
permitted by the provisions of this Article FOURTH, all series of the Serial
Stock shall rank equally and be identical in all respects.
B. Authority is hereby expressly granted to the Board of
Directors from time to time to issue the Serial Stock as Serial Stock of any
series and in connection with the creation of such series to fix by the
resolution or resolutions providing for the issue of shares thereof the voting
powers and designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions of such
series, to the fullest extent now or hereafter permitted by the laws of the
State of Ohio, in respect of the matters set forth in the following subdivisions
(1) to (7), inclusive:
(1) The designation of such series;
(2) The voting powers, if any, of the holders of Serial
Stock of such series;
(3) The rate and the times and conditions upon which the
holders of Serial Stock of such series shall be entitled to receive dividends,
and whether such dividends shall be cumulative or non-cumulative;
(4) The price or prices and the time or times and the
manner in which the Serial Stock of such series shall be redeemable, if such
Serial Stock is made redeemable;
(5) Whether or not the shares of such series shall be
entitled to the benefit of a sinking fund or purchase fund to be applied to the
redemption or purchase of such series and, if so entitled, the amount of such
fund and the manner of its application;
(6) Whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of any other class or classes or
of any other series of the same or any other class of the Corporation or any
other security, and, if so convertible or exchangeable,
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the conversion price or prices or rate or rates, or the rate or rates of
exchange, and the adjustments, if any, in the price or prices or rate or rates
at which such conversion or exchange may be made; and
(7) Any other designations, preferences and relative
participating, or other special rights, and qualifications, limitations or
restrictions thereof, so far as they are not inconsistent with the provisions of
these Amended and Restated Articles of Incorporation, as from time to time
amended.
C. Shares of any series of Serial Stock which have been issued
and reacquired in any manner by the Corporation (excluding, until the
Corporation elects to retire them, shares which are held as treasury shares but
including shares redeemed, shares purchased and retired, whether through the
operation of a retirement or purchase fund or otherwise, and shares which, if
convertible or exchangeable, have been converted into or exchanged for shares of
stock of any other class or classes) shall have the status of authorized and
unissued shares of Serial Stock and may be reissued as a part of the series of
which they were originally a part or may be reissued as part of a new series of
Serial Stock to be created by resolution or resolutions of the Board of
Directors or as part of any other series of Serial Stock, all subject to the
conditions or restrictions on issuance set forth herein or in any resolution or
resolutions adopted by the Board of Directors providing for the issue of any
series of Serial Stock.
SECTION 2. PROVISIONS APPLICABLE TO ALL CLASSES OF STOCK
A. Except to the extent that the resolution or resolutions
providing for the issuance of a series of Serial Stock may otherwise provide
with respect to such series, the preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions of the Serial Stock of all series are as follows:
(1) Out of the unreserved and unrestricted surplus of the
Corporation legally available for dividends, the holders of Serial Stock shall
be entitled to receive, when and as declared by the Board of Directors,
dividends at the rate per annum determined as in this Article FOURTH, provided
therefor, and no more, payable quarterly in each year on such dates as may be
fixed as in this Article FOURTH provided therefor to holders of record on the
respective dates not exceeding forty days preceding such dividend payment dates
as may be determined by the Board of Directors in advance of the payment of each
such dividend (each such payment day being hereinafter called a dividend date
and each quarterly period ending with a dividend date being hereinafter called a
dividend period), before any dividends (other than dividends payable in stock
ranking junior to Serial Stock) on any class or classes of stock of the
Corporation ranking junior to Serial Stock as to dividends or on liquidation
shall be declared or paid or set apart for payment. With respect to each issue
of Serial Stock on which dividends are cumulative, such dividends shall accrue
and be cumulative from the "Date of Cumulation." The term "Date of Cumulation"
as used in this Section 2A.(1) with reference to the Serial Stock shall be
deemed to mean the date on which shares of the Serial Stock of such series are
first issued. In the event of the issue of additional shares of Serial Stock of
any then existing series, all dividends paid on the Serial Stock of such series
prior to the issue of such additional shares,
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and all dividends declared and payable to holders of record of the Serial Stock
of such series on any date prior to the issue of such additional shares, shall
be deemed to have been paid on such additional shares. No dividends shall be
declared on any issue of Serial Stock in respect of any dividend period unless
there shall likewise be or have been declared on all shares of Serial Stock of
each other issue at the time outstanding like dividends for all dividend periods
coinciding with or ending before such dividend period, ratably in proportion to
the respective annual dividend rates per annum fixed therefor as hereinbefore
provided. Accruals of dividends shall not bear interest.
(2) The Serial Stock of all issues shall be preferred over
the Common Stock as to assets in the event of any liquidation or dissolution or
winding up of the Corporation, and in that event the holders of the Serial Stock
of each issue shall be entitled to receive, out of the assets of the Corporation
available for distribution to its shareholders the amount payable upon such
liquidation or dissolution or winding up as fixed by the Board of Directors,
plus an amount equal to all dividends accrued and unpaid thereon to the date of
final distribution to such holders, before any distribution of the assets shall
be made to the holders of the Common Stock; and, if in the event of any such
liquidation or dissolution or winding up of the Corporation, the holders of all
issues of the Serial Stock shall have received all the amounts to which they
shall be entitled as aforesaid, the holders of the Common Stock shall be
entitled, to the exclusion of the holders of the Serial Stock, to share ratably
in all the assets of the Corporation available for distribution to the
shareholders then remaining according to the number of shares of the Common
Stock held by them respectively. If, upon any liquidation or dissolution or
winding up of the Corporation, the amounts payable on or with respect to the
Serial Stock are not paid in full, the holders of shares of the Serial Stock of
all issues shall share ratably in any distribution of assets according to the
respective amounts which would be payable in respect of the shares held by them
upon such distribution if all amounts payable on or with respect to the Serial
Stock of all series were paid in full. For the purposes of this Section 2A.(2),
the voluntary sale, lease, exchange or transfer (for cash, shares of stock,
securities, or other consideration) of all or substantially all of its property
or assets to, or a consolidation or merger of the Corporation with, one or more
corporations shall not be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary.
(3) The shares of Serial Stock, or any series or issue
thereof, or any part of any series or issue thereof, which are outstanding and
which are by resolution or resolutions of the Board of Directors creating any
series of Serial Stock, then redeemable, may be redeemed by the Corporation at
its election expressed by resolution of the Board of Directors, upon not less
than thirty (30) nor more than sixty (60) days' previous notice to the holders
of record of the Serial Stock to be redeemed, given by mail or by publication in
such manner as may be prescribed by resolution of the Board of Directors, at the
applicable redemption price, determined as provided in this Article FOURTH, of
the Serial Stock to be redeemed. If less than all the outstanding Serial Stock
of any issue or series is to be redeemed, the redemption may be made either by
lot or pro rata as may be prescribed by resolution of the Board of Directors.
From and after the date fixed in any such notice as the date of redemption
(unless default shall be made by the Corporation in providing moneys for the
payment of the redemption price pursuant to such notice), or, if the Corporation
shall so elect, from and after a date, prior to the date fixed as the date of
redemption, on which the Corporation shall provide moneys for
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the payment of the redemption price by depositing the amount thereof for the
account of the holders of the Serial Stock entitled thereto with a bank or trust
company doing business in the City of Chicago, Illinois, or in the City of New
York, New York, or in the City of Cleveland, Ohio, and having a capital and
surplus of at least fifty million dollars ($50,000,000), pursuant to notice of
such election included in the notice of redemption specifying the date on which
such deposit will be made, all dividends on the Serial Stock called for
redemption shall cease to accrue and all rights of the holders thereof as
shareholders of the Corporation, except the right to receive the redemption
price as hereinafter provided and, in the case of such deposit, any conversion
rights not theretofore expired, shall cease and terminate. After the deposit of
such amount with such bank or trust company, the respective holders of record of
the Serial Stock to be redeemed shall be entitled to receive the redemption
price at any time upon actual delivery to such bank or trust company of
certificates for the number of shares to be redeemed, duly endorsed in blank or
accompanied by proper instruments of assignment and transfer thereof duly
endorsed in blank. Any moneys so deposited which shall remain unclaimed by the
holders of such Serial Stock at the end of six (6) years after the redemption
date, together with any interest thereon which shall be allowed by the bank or
trust company with which the deposit shall have been made, shall be repaid by
such bank or trust company to the Corporation upon its request expressed in a
resolution of its Board of Directors, free of any trust theretofore impressed
upon them by the Corporation.
(4) If at the time of any annual meeting of shareholders
of the Corporation for the election of directors a default in preference
dividends, as the term "default in preference dividends" is hereinafter defined,
shall exist, the holders of the Serial Stock voting separately as a class and
without regard to series, shall have the right to elect two members of the Board
of Directors; and the holders of the Common Stock shall not be entitled to vote
in the election of the directors of the Corporation to be elected by the holders
of Serial Stock, as provided above. Whenever a default in preference dividends
shall commence to exist, the Corporation, upon the written request of the
holders of five percent (5%) or more of the outstanding shares of Serial Stock,
shall call a special meeting of the holders of the Serial Stock, such special
meeting or meetings to be held within one hundred twenty (120) days after the
date on which such request is received by the Corporation, for the purpose of
enabling such holders to elect members of the Board of Directors as provided
above; provided, however, that such special meeting or meetings need not be
called if an annual meeting of shareholders of the Corporation for the election
of directors shall be scheduled to be held within such 120 days. Prior to any
such special or annual meeting or meetings, the number of directors of the
Corporation shall be increased to the extent necessary to provide as additional
places on the Board of Directors the directorships to be filled by the directors
to be elected thereat. Any director elected as aforesaid by the holders of
shares of the Serial Stock shall cease to serve as such director whenever a
default in preference dividends shall cease to exist. If, prior to the end of
the term of any director elected as aforesaid by the holders of shares of Serial
Stock, or elected by the holders of the Serial Stock and Common Stock, a vacancy
in the office of such director shall occur by reason of death, resignation,
removal or disability, or for any other cause, such vacancy shall be filled for
the unexpired term in the manner provided in these Amended and Restated Articles
of Incorporation and the Regulations of the Corporation; provided, however, that
if such vacancy shall be filled by election by the shareholders at a meeting
thereof, the right to fill such vacancy shall be vested in the holders of that
class of stock
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or series thereof which elected the director the vacancy in the office of whom
is so to be filled, unless, in any such case, no default in preference dividends
shall exist at the time of such meeting. For the purposes of this Section
2A.(4), a "default in preference dividends" shall be deemed to have occurred
whenever the amount of cumulative dividends accrued and unpaid upon any series
of the Serial Stock and the amount of non-cumulative dividends unpaid upon any
series of the Serial Stock shall be equivalent to six (6) full quarter-yearly
dividends or more, and, having so occurred, such default in preference dividends
shall be deemed to exist thereafter until, but only until, all cumulative
dividends accrued and unpaid on all shares of the Serial Stock then outstanding,
of each and every class and series, shall have been paid in full, or declared
and funds set aside for their payment, and until non-cumulative dividends on all
shares of the Serial Stock then outstanding, of each and every series, shall
have been paid regularly for at least one year. Nothing herein contained shall
be deemed to prevent an increase in the number of directors of the Corporation
pursuant to its Regulations so as to provide as additional places on the Board
of Directors the directorships to be filled by the directors so to be elected by
the holders of the Serial Stock or of any class or series thereof, or to prevent
any other change in the number of directors of the Corporation. At any meeting
held for the purpose of electing directors at which the holders of the Serial
Stock shall have the special right, voting separately as a group, to elect
directors as provided in this Section 2A.(4), the presence, in person or by
proxy, of the holders of one-third of the aggregate number of shares of the
Serial Stock of all series at the time outstanding shall be required to
constitute a quorum of such group for the election of any director by the
holders of the Serial Stock as a group. At any such meeting or adjournment
thereof, (a) the absence of a quorum of the holders of the Serial Stock shall
not prevent the election of directors other than those to be elected by the
holders of the Serial Stock voting as a group and the absence of a quorum for
the election of such other directors shall not prevent the election of the
directors to be elected by the holders of the Serial Stock voting as a group,
and (b) in the absence of either or both such quorums, a majority of the holders
present in person or by proxy of the stock or stocks which lack a quorum shall
have power to adjourn the meeting for the election of directors which they are
entitled to elect from time to time without notice other than announcement at
the meeting until a quorum shall be present.
(5) So long as any shares of the Serial Stock of any
series shall be outstanding, (a) the Corporation shall not, without the
affirmative vote or written consent of the holders of at least two-thirds of the
aggregate number of shares of the Serial Stock of all series at the time
outstanding, considered as a single class without regard to series,
(i) alter or change the voting powers, designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions of the Serial Stock as provided in
these Amended and Restated Articles of Incorporation or by the resolution or
resolutions so fixing the same, so as to affect the Serial Stock adversely, or
(ii) authorize or create any class of stock ranking,
either as to dividends or upon liquidation, prior to the Serial Stock; or
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(b) the Corporation shall not, without the
affirmative vote or written consent of the holders of a majority of the
aggregate number of shares of the Serial Stock of all series at the time
outstanding, considered as a single class, increase the authorized amount of
Serial Stock or authorize or create any class ranking, either as to dividends or
upon liquidation, on a parity with Serial Stock; or (c) the Corporation shall
not, without the affirmative vote or written consent of the holders of at least
two-thirds of the aggregate number of shares of the Serial Stock of any series
at the time outstanding, the holders of such series consenting or voting
separately as a series, alter or change the voting powers, designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions specifically applicable to such
series, as provided in these Amended and Restated Articles of Incorporation or
in the resolution or resolutions adopted by the Board of Directors providing for
the issue of such series, so as to affect such series adversely; or (d) the
Corporation shall not (i) declare, or pay, or set apart for payment, any
dividends (other than dividends payable in stock ranking junior to the Serial
Stock) or make any distribution, on any class or classes of stock of the
Corporation ranking junior to the Serial Stock in any respect, or (ii) redeem,
purchase or otherwise acquire, or permit any subsidiary to purchase or otherwise
acquire, any shares of any such junior class, if at the time of making such
declaration, payment, distribution, redemption, purchase or acquisition, the
Corporation shall be in default with respect to any dividend payable on, or any
obligation to retire, shares of Serial Stock, provided that, notwithstanding the
foregoing, the Corporation may at any time redeem, purchase or otherwise acquire
shares of stock of any such junior class in exchange for, or out of the net cash
proceeds from the sale of, other shares of stock of any junior class; provided,
however, that any vote or consent required by Section 2A.(5)(a)(i) above may be
given and made effective by the filing of an appropriate amendment of these
Amended and Restated Articles of Incorporation without obtaining the vote or
consent of the holders of the Common Stock, the right to give such vote or
consent being expressly waived by all holders of such Common Stock unless the
action to be taken would substantially adversely affect the rights or powers of
the Common Stock; and provided, further, that any vote or consent required by
Section 2A.(5)(c) above may be given and made effective by the filing of an
appropriate amendment of these Amended and Restated Articles of Incorporation
without obtaining the vote or consent of the holders of any other series of the
Serial Stock or of the holders of the Common Stock, the right to give such vote
or consent being expressly waived by all holders of such other series of Serial
Stock and Common Stock, unless the action to be taken would substantially
adversely affect the rights or powers of such other series of Serial Stock or
Common Stock, as the case may be.
(6) If at any time the Corporation shall have failed to
pay dividends in full on the Serial Stock, thereafter and until dividends in
full, including all accrued and unpaid dividends on the Serial Stock
outstanding, shall have been declared and set apart for payment or paid (a) the
Corporation shall not, without the affirmative vote or written consent of the
holders of at least two-thirds of the aggregate number of shares of the Serial
Stock of all series at the time outstanding, redeem less than all of the Serial
Stock at such time outstanding other than in accordance with Section 2A.(7), and
(b) neither the Corporation nor any subsidiary shall purchase any Serial Stock
except in accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of Serial Stock of all
series upon such terms as the Board of Directors, in its sole discretion after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series,
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shall determine (which determination shall be final and conclusive) will result
in fair and equitable treatment among the respective series; provided, that (i)
unless prohibited by the provisions applicable to any series, the Corporation,
to meet the requirements of any retirement or sinking fund provisions with
respect to any series, may use shares of such series acquired by it prior to
such failure and then held by it as treasury stock and (ii) nothing shall
prevent the Corporation from completing the purchase or redemption of shares of
Serial Stock for which a purchase contract was entered into for any retirement
or sinking fund purposes, or the notice of redemption of which was initially
published, prior to such failure.
(7) If in any case the amounts payable with respect to any
obligations to retire shares of the Serial Stock are not paid in full in the
case of all series as to which such obligations exist, the number of shares of
the various series to be retired shall be in proportion to the respective
amounts which would be payable on account of such obligations if all amounts
which would be payable on account of such obligations were discharged in full.
B. For the purposes of this Article FOURTH and of any
resolution or resolutions of the Board of Directors adopted pursuant to this
Article FOURTH or of any certificate filed with the Secretary of State of Ohio
(unless otherwise provided in any such resolution or certificate):
(1) The term "outstanding," when used in reference to
shares of stock, shall mean issued shares, excluding shares held by the
Corporation or a subsidiary and shares called for redemption, funds for the
redemption of which shall have been deposited in trust;
(2) The amount of dividends "accrued and unpaid" on any
shares of Serial Stock of any series as at any quarterly dividend date shall be
deemed (whether or not in any dividend period in respect of which such term is
used there shall have been unreserved and unrestricted surplus legally available
for the payment of dividends) to be the amount of any unpaid dividends
accumulated thereon to and including such quarterly dividend date, whether or
not earned or declared, and the amount of dividends "accrued and unpaid" on any
shares of Serial Stock of any series as at any date other than a quarterly
dividend date shall be calculated as the amount of any unpaid dividends
accumulated thereon to and including the last preceding quarterly dividend date,
whether or not earned or declared, plus an amount calculated on the basis of the
annual dividend rate fixed for the shares of such series for the period after
such last preceding quarterly dividend date to, and including, the date as of
which the calculation is made, based on a 360-day year of twelve 30-day months;
(3) Any class or classes of stock of the Corporation shall
be deemed to rank:
(a) prior to the Serial Stock either as to dividends
or upon liquidation, if the holders of such class or classes shall be entitled
to the receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to the
holders of any Serial Stock;
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(b) on a parity with the Serial Stock either as to
dividends or upon liquidation, whether or not the dividend rates, dividend
payment dates, or redemption or liquidation prices per share thereof be
different from those of any Serial Stock, if the holders of such class or
classes of stock shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority one over the other as between the holders of such class
or classes of stock and the holders of any Serial Stock; and
(c) junior to the Serial Stock if the rights of the
holders of such class or classes shall be subject or subordinate to the rights
of the holders of the Serial Stock in respect of either the receipt of dividends
or the amounts distributable upon liquidation, dissolution or winding up.
C. Except as otherwise provided by law or by these Amended and
Restated Articles of Incorporation and except to the extent that the resolution
or resolutions of the Board of Directors providing for the issuance of a series
of Serial Stock may otherwise provide with respect to such series, the holder
(or holders) of each outstanding share of stock of the Corporation, regardless
of class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders or submitted to shareholders for their consent without a
meeting.
D. No shareholder of the Corporation shall by reason of his
holding shares of any class have any preemptive or preferential right to
purchase or subscribe to any shares of any class of the Corporation now or
hereafter to be authorized, or any notes, debentures, bonds, or other securities
convertible into or carrying options or warrants to purchase shares of any
class, now or hereafter to be authorized, whether or not the issuance of any
such shares, or such notes, debentures, bonds or other securities, would
adversely affect the dividend or voting rights of such shareholder, other than
such rights, if any, as the Board of Directors, in its discretion from time to
time may grant and at such price as the Board of Directors in its discretion may
fix; and the Board of Directors may issue shares of any class of the
Corporation, or any notes, debentures, bonds, or other securities convertible
into or carrying options or warrants to purchase shares of any class, without
offering any such shares of any class, either in whole or in part, to the
existing shareholders of any class.
FIFTH:
SECTION 1. SPECIAL VOTE FOR CERTAIN BUSINESS COMBINATIONS.
Except as set forth in Section 3 of this Article FIFTH, the affirmative vote of
the holders of eighty percent (80%) of all outstanding shares of the Corporation
entitled to vote in elections of directors, considered for the purposes of this
Article FIFTH and Article SIXTH hereof as one class (such shares hereinafter in
this Article FIFTH, in Article SIXTH and Article EIGHTH hereof referred to as
"Voting Shares"), shall be required:
A. to adopt an agreement for the merger or consolidation of
the Corporation with or into any other entity; or
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B. to authorize the sale, lease, exchange, transfer or other
disposition of all or substantially all of the assets of the Corporation, to
another corporation, person or entity; or
C. to authorize any purchase by the Corporation of any assets
or securities of any other corporation, person or entity in exchange, in whole
or in part, for Voting Shares of the Corporation;
if, in any such case referred to in A, B, or C above, as of the record date for
the determination of shareholders entitled to notice thereof and to vote
thereon, such other corporation, person or entity is the beneficial owner,
directly or indirectly, of more than five percent (5%) of the Voting Shares of
the Corporation. Such affirmative vote shall be in addition to any vote of the
shareholders of the Corporation otherwise required.
SECTION 2. BENEFICIAL OWNERSHIP. For the purpose of
determining the number of Voting Shares of the Corporation beneficially owned by
any corporation, person or other entity (but not for the purpose of determining
the number of outstanding Voting Shares) there shall be included, in addition to
the outstanding shares beneficially owned, directly or indirectly, by such
corporation, person or entity, the Voting Shares of the Corporation which such
corporation, person or other entity, or any affiliate or associate thereof, owns
or has the right to acquire presently or in the future pursuant to any agreement
or upon exercise of conversion rights, warrants, options, or otherwise, or which
are the subject of any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of Voting Shares of the Corporation.
The terms "affiliate" and "associate" as herein used shall have the same meaning
as is given to those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
SECTION 3. EXCLUDED TRANSACTIONS. The provisions of the
foregoing Sections 1 and 2 of this Article FIFTH shall not be applicable to:
A. any transaction which but for said Sections would not
require the vote or consent of shareholders of the Corporation; or
B. any transaction with another person or entity if prior to
such transaction and prior to the time that such other person or entity shall
have become the beneficial owner, as defined in Section 2 above, of more than
five percent (5%) of the Voting Shares of the Corporation, the Board of
Directors of the Corporation, including the positive vote of all directors of
the Corporation who are neither "associates" nor "affiliates" (as such terms are
defined under the federal securities laws) of such other person or entity, shall
have approved: (i) the transaction or the entry by the Corporation into a
written understanding with such other person or entity substantially consistent
with such transaction; or (ii) the acquisition by such other person or entity of
beneficial ownership of more than five percent (5%) of the Voting Shares of the
Corporation; or
C. any transaction with a corporation or other entity a
majority of the voting shares of which are owned of record or beneficially by
the Corporation.
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SECTION 4. DETERMINATION OF BENEFICIAL OWNERSHIP AND OTHER
MATTERS. The determination of the Board of Directors of the Corporation, based
on information known to them and made in good faith, shall be conclusive as to
whether any corporation, person or entity beneficially owns more than five
percent (5%) of the Voting Shares of the Corporation, whether a corporation,
person or entity is an affiliate or associate of another, or whether a written
understanding entered into by the Corporation is substantially consistent with a
transaction.
SECTION 5. AMENDMENTS TO ARTICLE FIFTH. Any amendment to the
Amended and Restated Articles of Incorporation of the Corporation whereby this
Article FIFTH is to be amended, altered or repealed or any provisions
inconsistent with this Article FIFTH are to be adopted shall require the
affirmative vote or consent of the holders of at least eighty percent (80%) of
the Voting Shares of the Corporation.
SIXTH: No Person shall make a Control Share Acquisition
without the prior authorization of the Corporation's shareholders.
SECTION 1. PROCEDURE. In order to obtain authorization of a
Control Share Acquisition by the Corporation's shareholders, a Person shall
deliver a notice (the "Notice") to the Corporation at its principal place of
business that sets forth all of the following information:
A. The identity of the Person who is giving the Notice;
B. A statement that the Notice is given pursuant to this
Article SIXTH;
C. The number and class of shares of the Corporation owned,
directly or indirectly, by the Person who gives the Notice;
D. The range of voting power under which the proposed Control
Share Acquisition would, if consummated, fall;
E. A description in reasonable detail of the terms of the
proposed Control Share Acquisition; and
F. Reasonable evidence that the proposed Control Share
Acquisition, if consummated, would not be contrary to law and that the Person
who is giving the Notice has the financial capacity to make the proposed Control
Share Acquisition.
SECTION 2. CALL OF SPECIAL MEETING OF SHAREHOLDERS. The Board
of Directors of the Corporation shall, within ten days after receipt of such
Notice by the Corporation, call a special meeting of shareholders to be held not
later than fifty (50) days after receipt of the Notice by the Corporation,
unless the Person who delivered the Notice agrees to a later date, to consider
the proposed Control Share Acquisition; provided that the Board of Directors
shall have no obligation to call such meeting if they make a determination
within ten days after receipt of the Notice (I) that the Notice was not given in
good faith, (ii) that the proposed Control Share Acquisition would not be in the
best interests of the Corporation or (iii)
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that the proposed Control Share Acquisition could not be consummated for
financial or legal reasons. The Board of Directors may adjourn such meeting if,
prior to such meeting, the Corporation has received a Notice from any other
Person and the Board of Directors has determined that the Control Share
Acquisition proposed by such other Person or a merger, consolidation or sale of
assets of the Corporation should be presented to shareholders at an adjourned
meeting or at a special meeting held at a later date.
For purposes of this Section 2, a director, in determining
whether the proposed Control Share Acquisition would be in the best interests of
the Corporation, shall consider the interests of the Corporation's shareholders
and, in his discretion, may consider any of the following: the interests of the
Corporation's employees, suppliers, creditors and customers; the economy of the
state and nation; community and societal considerations; and the long term as
well as short term interests of the Corporation and its shareholders, including
the possibility that these interests may be best served by the continued
independence of the Corporation.
For purposes of making a determination that a special meeting
of shareholders should not be called pursuant to this Section 2, no such
determination shall be deemed void or voidable with respect to the Corporation
merely because one or more of its directors or officers who participated in
making such determination may be deemed to be other than disinterested, if in
any such case the material facts of the relationship giving rise to a basis for
self-interest are known to the directors and the directors, in good faith
reasonably justified by the facts, make such determination by the affirmative
vote of a majority of the disinterested directors, even though the disinterested
directors constitute less than a quorum. For purposes of this paragraph,
"disinterested directors" shall mean directors whose material contacts with the
Corporation are limited principally to activities as a director or shareholder.
Persons who have substantial, recurring business or professional contacts with
the Corporation shall not be deemed to be "disinterested directors" for purposes
of this provision. A director shall not be deemed to be other than a
"disinterested director" merely because he would no longer be a director if the
proposed Control Share Acquisition were approved and consummated.
SECTION 3. NOTICE OF SPECIAL MEETING. The Corporation shall
give notice of such special meeting to all shareholders of record as of the
record date set for such meeting as promptly as practicable. Such notice shall
include or be accompanied by a copy of the Notice and by a statement of the
Corporation, authorized by the Board of Directors, of its position or
recommendation, or that it is taking no position or making no recommendation,
with respect to the proposed Control Share Acquisition.
SECTION 4. REQUIREMENTS FOR APPROVAL. The Person who delivered
the Notice may make the proposed Control Share Acquisition if both of the
following occur: (i) the shareholders of the Corporation authorize such
acquisition at the special meeting called by the Board of Directors at which a
quorum is present and held for that purpose by an affirmative vote of a majority
of the Voting Shares represented at such meeting in person or by proxy and by a
majority of the portion of such Voting Shares represented at such meeting in
person or by proxy excluding the votes of Interested Shares; and (ii) such
acquisition is consummated, in accordance with the terms so authorized, not
later than 360 days following shareholder authorization of the Control Share
Acquisition.
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SECTION 5. VIOLATIONS OF RESTRICTION. Shares issued or
transferred to any Person in violation of this Article SIXTH shall be valid only
with respect to such amount of shares as does not result in a violation of this
Article SIXTH, and such issuance or transfer shall be null and void with respect
to the remainder of such shares, any such remainder of shares being hereinafter
called "Excess Shares." If the last clause of the foregoing sentence is
determined to be invalid by virtue of any legal decision, statute, rule or
regulation, the Person who holds Excess Shares shall be conclusively deemed to
have acted as an agent on behalf of the Corporation in acquiring the Excess
Shares and to hold such Excess Shares on behalf of the Corporation. As the
equivalent of treasury securities for such purposes, the Excess Shares shall not
be entitled to any voting rights, shall not be considered to be outstanding for
quorum or voting purposes, and shall not be entitled to receive dividends,
interest or any other distribution with respect to the Excess Shares. Any person
who receives dividends, interest or any other distribution in respect to Excess
Shares shall hold the same as agent for the Corporation and, following a
permitted transfer, for the transferee thereof. Notwithstanding the foregoing,
any holder of Excess Shares may transfer the same (together with any
distributions thereon) to any person who, following such transfer, would not own
shares in violation of this Article SIXTH. Upon such permitted transfer, the
Corporation shall pay or distribute to the transferee any distributions on the
Excess Shares not previously paid or distributed.
SECTION 6. DEFINITIONS. As used in this Article SIXTH:
A. "Person" includes, without limitation, an individual, a
corporation (whether nonprofit or for profit), a partnership, an unincorporated
society or association, and two or more persons having a joint or common
interest.
B. (1) "Control Share Acquisition" means the acquisition,
directly or indirectly, by any Person, of shares of the Corporation that, when
added to all other shares of the Corporation in respect of which such Person may
exercise or direct the exercise of voting power as provided in this Section
6B.(1), would entitle such Person, immediately after such acquisition, directly
or indirectly, to exercise or direct the exercise of the voting power of the
Corporation in the election of directors within any of the following ranges of
such voting power:
(a) One-fifth or more but less than one-third of such
voting power;
(b) One-third or more but less than a majority of such
voting power;
(c) A majority or more of such voting power.
A bank, broker, nominee, trustee, or other person who acquires
shares in the ordinary course of business for the benefit of others in good
faith and not for the purpose of circumventing this Article SIXTH shall,
however, be deemed to have voting power only of shares in respect of which such
person would be able to exercise or direct the exercise of votes without further
instruction from others at a meeting of shareholders called under this Article
SIXTH. For purposes of this Article SIXTH, the acquisition of securities
immediately
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convertible into shares of the Corporation with voting power in the election of
directors shall be treated as an acquisition of such shares.
(2) The acquisition by any Person of any shares of the
Corporation does not constitute a Control Share Acquisition for the purpose of
this Article SIXTH if the acquisition is consummated in any of the following
circumstances:
(a) Pursuant to the Merger Agreement dated February
20, 1998 by and among the Corporation, Park-Ohio Industries, Inc. and PKOH
Merger Corp.;
(b) By underwriters in good faith and not for the
purpose of circumventing this Article SIXTH in connection with an offering of
the securities of the Corporation to the public;
(c) By bequest or inheritance, by operation of law
upon the death of any individual, or by any other transfer without valuable
consideration, including a gift, that is made in good faith and not for the
purpose of circumventing this Article SIXTH;
(d) Pursuant to the satisfaction of a pledge or other
security interest created in good faith and not for the purpose of circumventing
this Article SIXTH;
(e) Pursuant to a merger or consolidation adopted, or
a combination or majority share acquisition authorized by shareholder vote in
compliance with the provisions of Article FIFTH of these Amended and Restated
Articles of Incorporation and Section 1701.78, or Section 1701.83, of the Ohio
Revised Code if the Corporation is the surviving or new corporation in the
merger or consolidation or is the acquiring corporation in the combination or
majority share acquisition and if the vote of shareholders of the surviving,
new, or acquiring corporation is required by the provisions of Section 1701.78
or 1701.83 of the Ohio Revised Code; or
(f) The Person's being entitled, immediately
thereafter, to exercise or direct the exercise of voting power of the
Corporation in the election of directors within the same range theretofore
attained by that person either in compliance with the provisions of this Article
SIXTH or as a result solely of the Corporation's purchase of shares issued by
it.
The acquisition by any Person of shares of the Corporation in
a manner described under this Section 6B.(2) shall be deemed to be a Control
Share Acquisition authorized pursuant to this Article SIXTH within the range of
voting power under Section 6B.(1)(a), (b) or (c) of this Article SIXTH that such
Person is entitled to exercise after such acquisition, provided that, in the
case of an acquisition in a manner described under Section 6B.(2)(c) or (d), the
transferor of shares to such Person had previously obtained any authorization of
shareholders required under this Article SIXTH in connection with such
transferor's acquisition of shares of the Corporation.
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(3) The acquisition of shares of the Corporation in good
faith and not for the purpose of circumventing this Article SIXTH the
acquisition of which (a) had previously been authorized by shareholders in
compliance with this Article SIXTH or (b) would have constituted a Control Share
Acquisition but for Section 6B.(2), does not constitute a Control Share
Acquisition for the purpose of this Article SIXTH unless such acquisition
entitles any Person, directly or indirectly, to exercise or direct the exercise
of voting power of the Corporation in the election of directors in excess of the
range of such voting power authorized pursuant to this Article SIXTH, or deemed
to be so authorized under Section 6B.(2).
C. "Interested Shares" means Voting Shares with respect to
which any of the following persons may exercise or direct the exercise of the
voting power:
(1) any Person whose Notice prompted the calling of the
meeting of shareholders;
(2) any officer of the Corporation elected or appointed by
the directors of the Corporation; provided, however, that Voting Shares which,
as of the record date of any special meeting held pursuant to this Article
SIXTH, have been beneficially owned by such person for three or more years shall
not be deemed to be "Interested Shares" for purposes of any vote at such
meeting; and
(3) any employee of the Corporation who is also a director
of the Corporation; provided, however, that Voting Shares which, as of the
record date of any special meeting held pursuant to this Article SIXTH, have
been beneficially owned by such person for three or more years shall not be
deemed to be "Interested Shares" for purposes of any vote at such meeting;
(4) any Person that acquires such Voting Shares for a
valuable consideration during the period beginning with the date of the first
public disclosure of a proposed Control Share Acquisition or any proposed
merger, consolidation or other transaction which would result in a change of
control of the Corporation or all or substantially all of its assets, and ending
on the record date of any special meeting held thereafter pursuant to this
Article SIXTH for the purpose of voting on a Control Share Acquisition proposed
by any Person who has delivered a Notice pursuant to Section 1 of this Article
SIXTH if either of the following applies:
(a) the aggregate consideration paid or given by the
Person who acquired the Voting Shares, and other persons acting in concert with
such Person, for all such Voting Shares exceeds Two Hundred Fifty Thousand
Dollars ($250,000.00); or
(b) the number of Voting Shares acquired by the Person
who acquired the Voting Shares, and other persons acting in concert with such
Person, for all such Voting Shares exceeds one half of one percent of all Voting
Shares; and
(5) any Person that transfers such Voting Shares for
valuable consideration after the record date of any special meeting described in
Section 6(C)(4) of this
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Article SIXTH as to shares so transferred, if accompanied by the voting power
in the form of a blank proxy, an agreement to vote as instructed by the
transferee, or otherwise.
SECTION 7. PROXIES. No proxy appointed for or in connection
with the shareholder authorization of a Control Share Acquisition pursuant to
this Article SIXTH is valid if it provides that it is irrevocable. No such proxy
is valid unless it is sought, appointed, and received both:
A. In accordance with all applicable requirements of law; and
B. Separate and apart from the sale or purchase, contract or
tender for sale or purchase, or request or invitation for tender for sale or
purchase, of shares of the Corporation.
SECTION 8. REVOCABILITY OF PROXIES. Proxies appointed for or
in connection with the shareholder authorization of a Control Share Acquisition
pursuant to this Article SIXTH shall be revocable at all times prior to the
obtaining of such shareholder authorization, whether or not coupled with an
interest.
SECTION 9. AMENDMENTS. Notwithstanding any other provisions of
these Amended and Restated Articles of Incorporation or the Regulations of the
Corporation, as the same may be in effect from time to time, or any provision of
law that might otherwise permit a lesser vote of the directors or shareholders,
but in addition to any affirmative vote of the directors or the holders of any
particular class or series of shares required by law, the Amended and Restated
Articles of Incorporation or the Regulations of the Corporation, as the same may
be in effect from time to time, the affirmative vote of at least eighty percent
(80%) of the Voting Shares, shall be required to alter, amend or repeal this
Article SIXTH or adopt any provisions in the Amended and Restated Articles of
Incorporation or Regulations of the Corporation, as the same may be in effect
from time to time, which are inconsistent with the provisions of this Article
SIXTH.
SECTION 10. LEGEND ON SHARE CERTIFICATES. Each certificate
representing shares of the Corporation's capital stock shall contain the
following legend: "Transfer of the shares represented by this Certificate is
subject to the provisions of Article SIXTH of the Corporation's Amended and
Restated Articles of Incorporation as the same may be in effect from time to
time. Upon written request delivered to the Secretary of the Corporation at its
principal place of business, the Corporation will mail to the holder of this
Certificate a copy of such provisions without charge within five (5) days after
receipt of written request therefor. By accepting this Certificate the holder
hereof acknowledges that it is accepting same subject to the provisions of said
Article SIXTH as the same may be in effect from time to time and covenants with
the Corporation and each shareholder thereof from time to time to comply with
the provisions of said Article SIXTH as the same may be in effect from time to
time."
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SEVENTH: The provisions of Section 1701.831 of the Ohio
Revised Code shall not apply to this Corporation.
EIGHTH: Except as otherwise provided in these Amended and
Restated Articles of Incorporation or in the Regulations of the Corporation, the
holders of a majority of the outstanding Voting Shares of the Corporation
present in person or by proxy at any meeting of the shareholders of the
Corporation are authorized to act on any matter which may properly come before
such meeting.
NINTH: Except to the extent that Articles FOURTH, FIFTH and
SIXTH otherwise provide with respect to certain matters therein set forth, the
Corporation reserves the right to amend, alter, change or repeal any provision
contained in these Amended and Restated Articles of Incorporation and to add new
provisions, in the manner now or hereafter prescribed by statute, upon the
affirmative vote of a majority of the outstanding shares of the Corporation,
voting as a Class; and all rights, privileges and preferences of whatsoever
nature conferred upon shareholders, directors and officers pursuant to these
Amended and Restated Articles of Incorporation in their present form or as
hereafter amended are granted subject to this reservation. Notwithstanding the
foregoing, the adoption of any amendment, alteration, change or repeal to these
Amended and Restated Articles of Incorporation as the same may be in effect from
time to time which is inconsistent with or would have the effect of amending,
altering, changing or repealing the provisions of Sections 7, 9 or 10 of the
Regulations of the Corporation as the same may be in effect from time to time
shall require the same affirmative vote of shareholders as would be required
under such Regulations to adopt any amendment, alteration, change or repeal of
said Sections 7, 9 or 10 or to adopt any provisions inconsistent therewith.
TENTH: Without derogation from any other power to purchase
shares of the Corporation, the Corporation may, by action of its Board of
Directors and to the extent not prohibited by law, purchase outstanding shares
of any class of this Corporation's stock.
ELEVENTH: No holder of shares of any class of stock of the
Corporation shall have the right to cumulate his voting power in the election of
the Board of Directors, and the right to cumulative voting described in Ohio
Revised Code Section 1701.55 is hereby specifically denied to the holders of any
class of stock of the Corporation.
TWELFTH: Except where the law or the Amended and Restated
Articles of Incorporation or Regulations of the Corporation require action to be
authorized or taken by shareholders, all of the authority of the Corporation
shall be exercised by or under the direction of the Board of Directors.
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IN WITNESS WHEREOF, the above-named officers, acting for and
on behalf of the Corporation, have subscribed their names this 9th day of June,
1998.
/s/ Edward F. Crawford
----------------------------------
Chairman of the Board, President and
Chief Executive Officer
/s/ Ronald J. Cozean
----------------------------------
Secretary and General Counsel
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Exhibit 3.2
REGULATIONS
OF
PARK-OHIO HOLDINGS CORP.
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING.
The annual meeting of shareholders of the Corporation shall be
held at such time and on such business day as the directors may determine each
year. The annual meeting shall be held at the principal office of the
Corporation or at such other place within or without the State of Ohio as the
directors may determine.
SECTION 2. SPECIAL MEETINGS.
Special meetings of the shareholders may be called at any time
by (i) the Chairman of the Board, (ii) the Vice Chairman, (iii) the President,
(iv) the directors, by action at a meeting or a majority of the directors acting
without a meeting, or (v) the holders of 50% or more of the outstanding shares
entitled to vote thereat. Such meetings may be held within or without the State
of Ohio at such time and place as may be specified in the notice thereof.
SECTION 3. NOTICE OF MEETINGS.
Written notice of every annual or special meeting of the
shareholders stating the time, place and purposes thereof shall be given to each
shareholder entitled to notice as provided by law, not less than seven nor more
than ninety days before the date of the meeting. Such notice may be given by or
at the direction of the Chairman of the Board, the Vice Chairman, the President
or the Secretary by personal delivery or by mail addressed to the shareholder at
his last address as it appears on the records of the Corporation. Any
shareholder may waive in writing notice of any meeting, either before or after
the holding of such meeting, and, by attending any meeting without protesting
the lack of proper notice, shall be deemed to have waived notice thereof.
SECTION 4. PERSONS BECOMING ENTITLED BY OPERATION OF LAW OR TRANSFER.
Every person who, by operation of law, transfer or any other
means whatsoever, shall become entitled to any shares, shall be bound by every
notice in respect of such share or shares which previously to the entering of
his name and address on the records of the Corporation shall have been duly
given to the person from whom he derives his title to such shares.
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SECTION 5. QUORUM AND ADJOURNMENTS.
Except as may be otherwise required by law or by the Articles
of Incorporation or these Regulations, the holders of a majority of the
then-outstanding shares entitled to vote in an election of directors, taken
together as a single class ("Voting Shares"), present in person or by proxy,
shall constitute a quorum; provided that any meeting duly called, whether a
quorum is present or otherwise may, by order of the Chairman of the Board or
vote of the holders of the majority of the Voting Shares represented
thereat, adjourn from time to time, in which case no further notice of any
such adjourned meeting need be given.
SECTION 6. BUSINESS TO BE CONDUCTED AT MEETINGS.
No business shall be conducted at a meeting of shareholders
except in accordance with the procedures set forth in this Section 6. To be
properly brought before a meeting of shareholders, business must be specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the directors, otherwise properly brought before the meeting by or at the
direction of the directors or otherwise properly brought before the meeting by a
shareholder. For business to be properly brought before a meeting of
shareholders by a shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the meeting; provided, however, that in the
event that less than seventy-five (75) days' notice or prior public disclosure
of the date of the meeting is given or made to the shareholders, notice by the
shareholder to be timely must be so received not later than the close of
business on the fifteenth (15th) day following the earlier of the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. A shareholder's notice to the Secretary shall set forth as to each matter
the shareholder proposes to bring before the meeting: (i) a brief description of
the proposal desired to be brought before the meeting and a statement of the
reasons for making such proposal at the meeting; (ii) the name and record
address of, and the class and number of shares of the Corporation beneficially
owned by (A) the shareholder offering such proposal, (B) any other beneficial
owner of the shares registered in such shareholder's name and (C) any other
shareholder (or beneficial owner of shares) known by such shareholder to be
supporting such proposal on the date of such shareholder's notice; and (iii) any
financial or other material interest of the shareholder (or any such beneficial
owner) or other supporting shareholder in such proposal.
If the Board of Directors, or a designated committee thereof,
determines that any shareholder proposal was not timely made in accordance with
the provisions of this Section 6, or that any proposal conflicts with or
violates a provision of the Articles of Incorporation or Regulations of the
Corporation, then such proposal shall not be presented for action at the meeting
in question. If the Board of Directors, or a designated committee thereof,
determines that the information provided in the shareholder's notice does not
satisfy the informational
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requirements of this Section 6 in any material respect, the Secretary of the
Corporation shall promptly notify such shareholder of the deficiency in the
notice. Such shareholder shall have the opportunity to cure such deficiency by
providing additional information to the Secretary within the period of time, not
to exceed five (5) days from the date such deficiency notice is given such
shareholder, determined by the Board of Directors or such committee. If the
deficiency is not cured within such period, or if the Board of Directors or such
committee determines that the additional information provided by the
shareholder, together with the information previously provided, does not satisfy
the requirements of this Section 6 in any material respect, then such proposal
shall not be presented for action at the meeting in question.
If neither the Board of Directors nor such committee makes a
determination as to the compliance of any shareholder proposal with the
provisions of this Section 6, as set forth above, the chairman of the meeting of
shareholders shall determine and declare to the meeting, if the facts warrant,
that such proposal was not made in accordance with the provisions of this
Section 6, and if he should so determine, the defective proposal shall be
disregarded.
DIRECTORS
SECTION 7. NUMBER.
The number of directors of the Corporation shall be not less
than nine (9) nor more than fifteen (15), as may be determined from time to time
upon the recommendation of a majority of the Continuing Directors (as
hereinafter defined) by the holders of a majority of the outstanding Voting
Shares at any annual meeting or special meeting called for the purpose of
electing directors, and when so fixed such number shall continue to be the
authorized number of directors until changed by the shareholders by vote as
aforesaid or by the directors as hereinafter provided. In addition to the
authority of the shareholders to fix or change the number of directors as
described above, the directors, by majority vote of the Continuing Directors,
may change the number of directors and may fill any vacancy that is created by
an increase in the number of directors. In exercising the foregoing authority,
the directors may not change the number of directors by more than two (2) from
the number authorized by the shareholders at the last annual or special meeting
of the shareholders at which the number of directors was fixed and in no event
may the directors fix the number of directors at less than nine (9) nor more
than fifteen (15). As used herein, the term "Continuing Director" shall mean, as
of any date of determination, any member of the Board of Directors of the
Corporation who (i) was a member of such Board of Directors on the date of the
initial adoption of these Regulations by the shareholder(s) of the Corporation
or (ii) was nominated for election or elected to such Board of Directors with
the approval of a majority of the Continuing Directors who were members of such
Board of Directors at the time of such nomination or election.
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SECTION 8. NOMINATIONS.
Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors. Nominations of
persons for election as directors of the Corporation may be made at a meeting of
shareholders by or at the direction of the directors by any nominating committee
or person appointed by the directors or by any shareholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 8. Such nominations, other than
those made by or at the direction of the directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the meeting; provided, however, that in the
event that less than seventy-five (75) days' notice or prior public disclosure
of the date of the meeting is given or made to shareholders, notice by the
shareholder to be timely must be so received not later than the close of
business on the fifteenth (15th) day following the earlier of the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. Such shareholder's notice shall set forth as to each nomination: (i) the
name, age and business address or residence address of any proposed nominee, the
nominee's principal employment or occupation and the other information which is
required to be disclosed in solicitations for proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended; (ii) the name and record address of, and the class and number of shares
of the Corporation beneficially owned by (A) the shareholder offering such
nomination, (B) any other beneficial owner of the shares registered in such
shareholder's name and (C) any other shareholder (or beneficial owner of shares)
known by such shareholder to be supporting such nomination on the date of such
shareholder's notice; and (iii) any financial or other material interest of the
shareholder (or any such beneficial owner) or other supporting shareholder in
such nomination. Such notice shall be accompanied by the written consent of
each proposed nominee to serve as a director of the Corporation, if elected.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Section 8.
If the Board of Directors, or a designated committee thereof,
determines that any shareholder nomination was not timely made in accordance
with the provisions of this Section 8, or that any nomination conflicts with or
violates a provision of the Articles of Incorporation or Regulations of the
Corporation, then such nomination shall not be presented for action at the
meeting in question. If the Board of Directors, or a designated committee
thereof, determines that the information provided in the shareholder's notice
does not satisfy the informational requirements of this Section 8 in any
material respect, the Secretary of the Corporation shall
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promptly notify such shareholder of the deficiency in the notice. Such
shareholder shall have the opportunity to cure such deficiency by providing
additional information to the Secretary within the period of time, not to exceed
five (5) days from the date such deficiency notice is given such shareholder,
determined by the Board of Directors or such committee. If the deficiency is not
cured within such period, or if the Board of Directors or such committee
determines that the additional information provided by the shareholder, together
with the information previously provided, does not satisfy the requirements of
this Section 8 in any material respect, then such nomination shall not be
presented for action at the meeting in question.
If neither the Board of Directors nor such committee makes a
determination as to the compliance of any shareholder nomination with the
provisions of this Section 8, as set forth above, the chairman of the meeting of
shareholders shall determine and declare to the meeting, if the facts warrant,
that such nomination was not properly brought before the meeting in accordance
with the provisions of this Section 8, and if he should so determine, the
defective nomination shall be disregarded.
SECTION 9. CLASSIFICATION, ELECTION AND TERM OF OFFICE OF DIRECTORS.
Subject to the remaining provisions of this Section 9, the
directors shall be divided into three (3) classes as follows: (i) the first
class shall be composed of three directors, and the directors elected to such
class shall hold office until the 1999 annual meeting of shareholders and until
their respective successors are elected and qualified; (ii) the second class
shall be composed of three directors, and the directors elected to such class
shall hold office until the 2000 annual meeting of shareholders and until their
respective successors are elected and qualified; and (iii) the third class
shall be composed of three directors, and the directors elected to such class
shall hold office until the 2001 annual meeting of shareholders and until their
respective successors are elected and qualified; in all cases, subject to prior
death, resignation or removal from office. Thereafter, at each annual meeting
of shareholders, directors to succeed those whose terms are expiring at such
annual meeting shall be elected to hold office until the third succeeding
annual meeting of shareholders and until their respective successors are
elected and qualified, subject to prior death, resignation or removal from
office. If the number of directors is changed, any increase or decrease shall
be apportioned between the classes so as to maintain the number of directors in
each class as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining term of such
class, but in no case will a decrease in the number of directors shorten the
term of any incumbent director. Election of directors shall be by ballot
whenever requested by any person entitled to vote at the meeting; but unless so
requested such election may be conducted in any way approved at such meeting.
SECTION 10. REMOVAL.
Except as otherwise provided by law, all the directors or all
the directors of a particular class, or any individual director, may be removed
from office without assigning any cause, by the affirmative vote of at least
eighty percent (80%) of the Voting Shares at an annual meeting or at any special
meeting duly called.
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SECTION 11. VACANCIES.
Whenever any vacancy shall occur among the directors, the
remaining directors shall constitute the directors of the Corporation until such
vacancy is filled or until the number of directors is changed pursuant to
Section 7 hereof. Except in cases where a director is removed as provided by law
and these Regulations and his successor is elected by the shareholders, the
remaining directors may, by a vote of a majority of their number, fill any
vacancy for the unexpired term. A majority of the directors then in office may
also fill any vacancy that results from an increase in the number of directors.
SECTION 12. QUORUM AND ADJOURNMENTS.
A majority of the directors in office at the time shall
constitute a quorum, provided that any meeting duly called, whether a quorum is
present or otherwise, may, by vote of a majority of the directors present,
adjourn from time to time and place to place within or without the State of
Ohio, in which case no further notice of the adjourned meeting need be given. At
any meeting at which a quorum is present, all questions and business shall be
determined by the affirmative vote of not less than a majority of the directors
present, except as is otherwise provided in the Articles of Incorporation or
these Regulations or is otherwise authorized by Section 1701.60(A)(1) of the
Ohio Revised Code.
SECTION 13. ORGANIZATION MEETING.
Immediately after each annual meeting of the shareholders at
which directors are elected, or each special meeting held in lieu thereof, the
directors, including those newly elected, if a quorum of all such directors is
present, shall hold an organization meeting at the same place or at such other
time and place as may be fixed by the shareholders at such meeting, for the
purpose of electing officers and transacting any other business. Notice of such
meeting need not be given. If for any reason such organization meeting is not
held at such time, a special meeting for such purpose shall be held as soon
thereafter as practicable.
SECTION 14. REGULAR MEETINGS.
Regular meetings of the directors may be held at such times
and places within or without the State of Ohio as may be provided for in by-laws
or resolutions adopted by the directors and upon such notice, if any, as shall
be so provided for.
SECTION 15. SPECIAL MEETINGS.
Special meetings of the directors may be held at any time
within or without the State of Ohio upon call by the Chairman of the Board, the
Vice Chairman, or a majority of the
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directors. Written notice of each such meeting shall be given to each director
by personal delivery or by mail, cablegram or telegram not less than two days
prior to such meeting or such shorter notice as the directors shall deem
necessary and warranted under the circumstances. Any directors may waive in
writing notice of any meeting, and, by attending any meeting without protesting
the lack of proper notice, shall be deemed to have waived notice thereof. Unless
otherwise limited in the notice thereof, any business may be transacted at any
organization, regular or special meeting.
SECTION 16. COMPENSATION.
The directors are authorized to fix reasonable compensation,
which may include pension, disability, and death benefits for services to the
Corporation by directors or a reasonable fee for attendance at any meeting of
the directors, the Executive Committee, or other committees elected under
Section 20 hereof, or any combination of salary and attendance fee. In addition
to such compensation provided for directors, they shall be reimbursed for any
expenses incurred by them in traveling to and from such meetings.
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
SECTION 17. MEMBERSHIP AND ORGANIZATION.
(a) The directors, at any time, may elect from their number an
Executive Committee which shall consist of three or more directors of the
Corporation, each of whom shall hold office during the pleasure of the directors
and may be removed at any time, with or without cause, by vote thereof.
(b) Vacancies occurring in the Committee may be filled by the
directors.
(c) In the event the directors have not designated a Chairman,
the Committee shall appoint one of its own number as Chairman who shall preside
at all meetings and may also appoint a Secretary (who need not be a member of
the Committee) who shall keep its records and who shall hold office during the
pleasure of the Committee.
SECTION 18. MEETINGS.
(a) Regular meetings of the Committee may be held without
notice of the time, place or purposes thereof and shall be held at such times
and places within or without the State of Ohio as the Committee may from time to
time determine.
(b) Special meetings may be held upon notice of the time,
place and purposes thereof at any place within or without the State of Ohio and
until otherwise ordered by the
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Committee shall be held at any time and place at
the call of the Chairman or any two members of the Committee.
(c) At any regular or special meeting the Committee may
exercise any or all of its powers, and any business which shall come before any
regular or special meeting may be transacted thereat, provided a majority of the
Committee is present, but in every case the affirmative vote of a majority of
all of the members of the Committee shall be necessary to take any action.
(d) Any authorized action by the Committee may be taken
without a meeting by a writing signed by all the members of the Committee.
SECTION 19. POWERS.
Except as its powers, duties and functions may be limited or
prescribed by the directors, during the intervals between the meetings of the
directors, the Committee shall possess and may exercise all the powers of the
directors provided that the Committee shall not be empowered to declare
dividends, elect or remove officers, fill vacancies among the directors or
Executive Committee, adopt an agreement of merger or consolidation, recommend to
the shareholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, nor recommend to the shareholders a
dissolution of the Corporation or revocation of a dissolution. All actions of
the Committee shall be reported to the directors at their meeting next
succeeding such action and shall be subject to revision or alteration by the
directors, provided that no rights of any third person shall be affected
thereby.
SECTION 20. OTHER COMMITTEES.
The directors may elect other committees from among the
directors in addition to or in lieu of an Executive Committee and give to them
any of the powers which under the foregoing provisions could be vested in an
Executive Committee. Sections 17 and 18 shall be applicable to such other
committees.
OFFICERS
SECTION 21. OFFICES DESIGNATED.
The offices of the Corporation shall be a Chairman of the
Board, a Vice Chairman, a President, a Secretary, a Treasurer and, in their
discretion, one or more Vice Presidents, an Assistant Secretary or Secretaries,
an Assistant Treasurer or Treasurers, and such other officers as the Board of
Directors may from time to time deem appropriate. The Chairman of the Board and
the Vice Chairman shall be, and the other officers may, but need not be,
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chosen from among the directors. Any two or more of such offices other than that
of Chairman and Vice Chairman, President and Vice President, Secretary and
Assistant Secretary or Treasurer and Assistant Treasurer, may be held by the
same person, but no officer shall execute, acknowledge or verify any instrument
in more than one capacity if such instrument is required by law, the Articles of
Incorporation, these Regulations or any by-laws to be executed, acknowledged, or
verified by two or more officers.
SECTION 22. ELECTION OF OFFICERS; TENURE OF OFFICE.
All officers shall be elected by the Board of Directors. The
Board of Directors may remove any officer at any time with or without cause by a
majority vote of the directors in office at the time. A vacancy, however
created, in any office may be filled by election by the directors.
Notwithstanding anything to the contrary in the preceding
paragraph or elsewhere herein, in the event of the death or permanent incapacity
of the Chairman of the Board, (i) the person then holding the office of Vice
Chairman shall automatically succeed to the office of Chairman for a continuous
term (subject to his continued qualification) of not less than one year from the
date of such succession and (ii) in the event such person's term as a director
of the Corporation is due to expire during the one year period described above,
such person shall be nominated by the Corporation for reelection to the Board of
Directors at the next annual meeting.
SECTION 23. CHAIRMAN OF THE BOARD.
The Chairman of the Board shall be the chief executive officer
of the Corporation, shall preside at meetings of the shareholders and directors,
shall initiate and develop broad corporate policies and shall have such other
powers and duties as may be prescribed by the directors. Except where the
signature of the President is required by law, the Chairman of the Board shall
possess the same power as the President to execute all authorized deeds,
mortgages, bonds, contracts and other instruments and obligations in the name of
the Corporation.
SECTION 24. VICE CHAIRMAN.
The Vice Chairman shall, in the absence of the Chairman of the
Board, preside at meetings of the shareholders and the directors. He shall have
such other powers and duties as may be prescribed by the directors.
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SECTION 25. PRESIDENT.
The President shall be the chief operating officer of the
Corporation and shall have general supervision over its property, business and
affairs, subject to the directions of the Chairman of the Board and/or the
directors. Unless otherwise determined by the directors, he shall have authority
to execute all authorized deeds, mortgages, bonds, contracts and other
instruments and obligations in the name of the Corporation, and, in the absence
of the Chairman of the Board and the Vice Chairman, shall preside at meetings of
the shareholders and the directors. He shall have such other powers and duties
as may be prescribed by the directors.
SECTION 26. VICE PRESIDENTS.
The Vice Presidents shall have such powers and duties as may
be prescribed by the directors or as may be delegated by the Chairman of the
Board or the President.
SECTION 27. SECRETARY.
The Secretary shall attend and keep the minutes of all
meetings of the shareholders and of the directors. He shall keep such books as
may be required by the directors, shall have charge of the seal of the
Corporation and shall give all notices of meetings of shareholders and
directors; provided, however, that any persons calling such meetings may, at
their option, themselves give such notice. He shall have such other powers and
duties as may be prescribed by the directors.
SECTION 28. TREASURER.
The Treasurer shall receive and have in charge all money,
bills, notes, bonds, stocks in other corporations and similar property belonging
to the Corporation and shall do with the same as shall be ordered by the
directors. He shall keep accurate financial accounts and hold the same open for
inspection and examination of the directors. On the expiration of his term of
office, he shall turn over to his successor, or the directors, all property,
books, papers and money of the Corporation in his hands. He shall have such
other powers and duties as may be prescribed by the directors.
SECTION 29. OTHER OFFICERS.
The Assistant Secretaries, Assistant Treasurers, if any, and
the other officers, if any, shall have such powers and duties as the directors
may prescribe.
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SECTION 30. DELEGATION OF DUTIES.
The directors are authorized to delegate the duties of any
officers to any other officer and generally to control the action of the
officers and to require the performance of duties in addition to those mentioned
herein.
SECTION 31. COMPENSATION.
The directors are authorized to determine or to provide the
method of determining the compensation of all officers.
SECTION 32. BOND.
Any officer or employee, if required by the directors, shall
give bond in such sum and with such security as the directors may require for
the faithful performance of his duties.
SECTION 33. SIGNING CHECKS AND OTHER INSTRUMENTS.
The directors are authorized to determine or provide the
method of determining how checks, notes, bills of exchange and similar
instruments shall be signed, countersigned or endorsed.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 34. INDEMNIFICATION.
The Corporation shall indemnify any director or officer or any
former director or officer of the Corporation or any person who is or has served
at the request of the Corporation as a director, officer or trustee of another
corporation, joint venture, trust or other enterprise (and his heirs, executors
and administrators) against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement, actually and reasonably incurred by him by
reason of the fact that he is or was such director, officer or trustee in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative to the full extent and
according to the procedures and requirements set forth in the Ohio General
Corporation Law as the same may be in effect from time to time. The
indemnification provided for herein shall not be deemed to restrict the right of
the Corporation to indemnify employees, agents and others as permitted by such
Law.
The indemnification authorized by the foregoing paragraph
shall not be exclusive of, and shall be in addition to any other rights granted
to those seeking indemnification under the Articles of Incorporation or these
Regulations or any Indemnification Agreement (as
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hereinafter defined), vote of shareholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
Without derogation to the power of the Corporation from time
to time to enter into, or assume the obligations of any affiliate of the
Corporation under, any agreement granting rights of indemnification to any
person or entity ("Indemnification Agreement"), the Corporation is hereby
expressly authorized to assume the obligations of Park-Ohio Industries, Inc.
under any Indemnification Agreement existing on the effective date of the merger
of PKOH Merger Corp. with and into Park-Ohio Industries, Inc. (the "Merger"),
and any obligations so assumed shall be binding upon the Corporation with the
same force and effect as if the Corporation had been an original party to such
Indemnification Agreement. The Corporation is further authorized to enter into
Indemnification Agreements in substantially the same form as the Indemnification
Agreements of Park-Ohio Industries, Inc. existing on the effective date of the
Merger.
The Corporation may purchase and maintain insurance or furnish
similar protection, including but not limited to trust funds, letters of credit
or self-insurance, on behalf of or for any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, trustee, officer, employee or agent of
another corporation, joint venture, trust or other enterprise (and his heirs,
executors and administrators), against any liability asserted against him and
incurred by him in such capacity, or arising out of his status as such,
regardless of whether the Corporation would have indemnified him against such
liability under the foregoing provisions of this Section 34. Insurance may be
purchased from or maintained with a person in which the Corporation has a
financial interest.
CORPORATE SEAL
SECTION 35. CORPORATE SEAL.
The corporate seal of the Corporation shall be circular in
form and shall contain the name of the Corporation.
PROVISIONS IN ARTICLES OF INCORPORATION
SECTION 36. PROVISIONS IN ARTICLES OF INCORPORATION.
These Regulations are at all times subject to the provisions
of the Articles of Incorporation of the Corporation as the same may be in effect
from time to time, including without limitation, the provisions of Article
FOURTH thereof authorizing the Board of Directors to fix by resolution or
resolutions providing for the issuance of Serial Stock, the voting powers and
designation, preferences and relative rights, qualifications, limitations or
restrictions of such Serial Stock to the fullest extent permitted by the laws of
the State of Ohio.
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LOST CERTIFICATES
SECTION 37. LOST CERTIFICATES.
The directors may direct a new certificate to be issued in
place of any certificate theretofore issued by the Corporation alleged to have
been lost, stolen or destroyed, upon such terms and conditions as they may deem
advisable upon satisfactory proof of loss or destruction thereof. When
authorizing such issue of a new certificate, the directors may, as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to advertise the same in
such manner as the directors shall require and/or to give the Corporation a
suitable bond or indemnity against loss by reason of the issuance of a new
certificate.
RECORD DATES
SECTION 38. RECORD DATES.
For any lawful purpose, including, without limitation, the
determination of the shareholders who are entitled to: (i) receive notice of or
to vote at a meeting of shareholders; (ii) receive payment of any dividend or
distribution; (iii) receive or exercise rights of purchase of or subscription
for, or exchange or conversion of, shares or other securities, subject to
contract rights with respect thereto; or (iv) participate in the execution of
written consents, waivers, or releases, the directors may fix a record date
which shall not be a date earlier than the date on which the record date is
fixed and, in the cases provided for in clauses (i), (ii) and (iii) above, shall
not be more than sixty (60) nor fewer than ten (10) days, unless the Articles of
Incorporation specify a shorter or a longer period for such purpose, preceding
the date of the meeting of the shareholders, or the date fixed for the payment
of any dividend or distribution, or the date fixed for the receipt or the
exercise of rights, as the case may be.
AMENDMENTS
SECTION 39. AMENDMENTS.
(a) These Regulations may be altered, changed or amended in
any respect or superseded by new Regulations in whole or in part, by the
affirmative vote of the holders of two-thirds of the outstanding Voting Shares,
unless such alteration, change, amendment or adoption has been recommended by at
least two-thirds of the Board of Directors of the Corporation then in office, in
which event such alteration, change, amendment or adoption may be approved by
the affirmative vote of the holders of a majority of the outstanding Voting
Shares. No alteration, change or amendment of these Regulations or adoption of
new
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<PAGE> 14
Regulations in whole or part may be adopted by the shareholders other than
pursuant to a vote of shareholders at an annual or special meeting or pursuant
to a writing or writings signed by the holders of all of the Voting Shares
entitled to notice of a meeting of the shareholders held for such purpose.
(b) Notwithstanding the provisions of Section 39(a) hereof and
notwithstanding the fact that a lesser percentage may be specified by law or in
any agreement with any national securities exchange or any other provision of
these Regulations, the amendment, alteration, change or repeal of, or adoption
of any provisions inconsistent with, Sections 7, 9 or 10 of these Regulations
shall require the affirmative vote of at least eighty percent (80%) of the
outstanding Voting Shares, unless such amendment, alteration, change, repeal or
adoption has been recommended by at least two-thirds of the Continuing Directors
(as defined in Section 7 of these Regulations), in which event the provisions of
Section 39(a) hereof shall apply.
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Exhibit 10.1
AGREEMENT
This Agreement, made as of this _____ day of ______, ________, between
Park-Ohio Holdings Corp., an Ohio corporation (the "Company") and
__________________, a director, officer or representative (as hereinafter
defined) of the Company (the "Indemnitee");
WHEREAS, the Company and the Indemnitee are each aware of the exposure
to litigation of officers, directors and representatives of the Company as such
persons exercise their duties to the Company;
WHEREAS, the Company and the Indemnitee are also aware of conditions in
the insurance industry that have affected and may continue to affect the
Company's ability to obtain appropriate directors' and officers' liability
insurance on an economically acceptable basis;
WHEREAS, the Company desires to continue to benefit from the services
of highly qualified, experienced and otherwise competent persons such as the
Indemnitee;
WHEREAS, the Indemnitee desires to serve or to continue to serve the
Company as a director, officer, trustee or as a director, officer or trustee of
another corporation, joint venture, trust or other enterprise in which the
Company has a direct or indirect ownership interest, for so long as the Company
continues to provide on an acceptable basis adequate and reliable
indemnification against certain liabilities and expenses which may be incurred
by the Indemnitee.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties hereto agree as follows:
1. INDEMNIFICATION
---------------
Subject to the terms of this Agreement, the Company shall indemnify the
Indemnitee with respect to his activities as a director or officer of the
Company and/or as a person who is serving or has served on behalf of the Company
("representative") as a director, officer, or trustee of another corporation,
joint venture, trust or other enterprise, domestic or foreign, in which the
Company has a direct or indirect ownership interest (an "affiliated entity")
against expenses (including, without limitation, attorneys' fees, judgments,
fines, and amounts paid in settlement) actually and reasonably incurred by him
("Expenses") in connection with any claim against Indemnitee which is the
subject of any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, investigative or otherwise and whether
formal or informal (a "Proceeding"), to which Indemnitee was, is, or is
threatened to be made a party by reason of facts which include Indemnitee's
being or having been such a director, officer or representative, to the extent
of the highest and most advantageous to the Indemnitee, as determined by the
Indemnitee, of one or any combination of the following:
a) The benefits provided by the Company's Regulations in effect on the
date hereof, a copy of
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the relevant portions of which are attached hereto as Exhibit I;
b) The benefits provided by the Articles of Incorporation, Regulations,
or By-laws or their equivalent of the Company in effect at the
time Expenses are incurred by Indemnitee;
c) The benefits allowable under Ohio law in effect at the date hereof;
d) The benefits allowable under the law of the jurisdiction under which
the Company exists at the time Expenses are incurred by the
Indemnitee;
e) The benefits available under liability insurance obtained by the
Company;
f) The benefits which would have been available to the Indemnitee under
the Chubb Executive Liability Insurance Policy issued by Federal
Insurance Company on September 7, 1983 which is designated as
policy number 81026391, a copy of which is attached as Exhibit
II hereto; had such policy continued in effect and unamended at
the time Expenses are incurred by the Indemnitee; and
g) Such other benefits as are or may be otherwise available to Indemnitee.
Combination of two or more of the benefits provided by (a) through (g) shall be
available to the extent that the Applicable Document, as hereafter defined, does
not require that the benefits provided therein be exclusive of other benefits.
The document or law providing for the benefits listed in items (a) through (g)
above is called the "Applicable Document" in this Agreement. Company hereby
undertakes to use its best efforts to assist Indemnitee, in all proper and legal
ways, to obtain the benefits selected by Indemnitee under items (a) through (g)
above.
For purposes of this Agreement, references to "other enterprises" shall
include employee benefit plans for employees of the Company or of any affiliated
entity without regard to ownership of such plans; references to "fines" shall
include any excise taxes assessed on the Indemnitee with respect to any employee
benefit plan; references to "serving on behalf of the Company" shall include any
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, the Indemnitee with respect to an employee
benefit plan, its participants or beneficiaries; references to the masculine
shall include the feminine; references to the singular shall include the plural
and VICE VERSA; and if the Indemnitee acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan he shall be deemed to have acted in a manner
consistent with the standards required for indemnification by the Company under
the Applicable Documents.
2. INSURANCE
---------
The Company shall maintain directors' and officers' liability insurance
for so long as Indemnitee's services are covered hereunder, provided and only to
the extent that such insurance is available in amounts and on terms and
conditions determined by the Company to be acceptable.
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<PAGE> 3
However, the Company agrees that the provisions hereof shall remain in effect
regardless of whether liability or other insurance coverage is at any time
obtained or retained by the Company; except that any payments in fact made to
Indemnitee under an insurance policy obtained or retained by the Company shall
reduce the obligation of the Company to make payments hereunder by the amount of
the payments made under any such insurance policy.
3. PAYMENT OF EXPENSES
-------------------
At Indemnitee's request, after receipt of written notice pursuant to
Section 5 hereof and an undertaking in the form of Exhibit III attached hereto
by or on behalf of Indemnitee to repay such amounts so paid on Indemnitee's
behalf if it shall ultimately be determined under the Applicable Document that
Indemnitee is not entitled to be indemnified by the Company for such Expenses,
the Company shall pay the Expenses as and when incurred by Indemnitee. That
portion of Expenses which represents attorneys' fees and other costs incurred in
defending any Proceeding shall be paid by the Company within thirty (30) days of
its receipt of such request, together with reasonable documentation (consistent,
in the case of attorneys' fees, with Company practice in payment of legal fees
for outside counsel generally) evidencing the amount and nature of such
Expenses, subject to its also having received such a notice and undertaking.
4. ADDITIONAL RIGHTS
-----------------
The indemnification provided in this Agreement shall not be exclusive
of any other indemnification or right to which Indemnitee may be entitled and
shall continue after Indemnitee has ceased to occupy a position as an officer,
director or representative as described in Paragraph 1 above with respect to
Proceedings relating to or arising out of Indemnitee's acts or omissions during
his service in such position.
5. NOTICE TO COMPANY
-----------------
Indemnitee shall provide to the Company prompt written notice of any
Proceeding brought, threatened, asserted or commenced against Indemnitee with
respect to which Indemnitee may assert a right to indemnification hereunder;
provided that failure to provide such notice shall not in any way limit
Indemnitee's rights under this Agreement.
6. COOPERATION IN DEFENSE AND SETTLEMENT
-------------------------------------
Indemnitee shall not make any admission or effect any settlement of any
Proceeding without the Company's written consent unless Indemnitee shall have
determined to undertake his own defense in such matter and has waived the
benefits of this Agreement. The Company shall not settle any Proceeding to which
Indemnitee is a party in any manner which would impose any Expense on Indemnitee
without his written consent. Neither Indemnitee nor the Company will
unreasonably withhold consent to any proposed settlement. Indemnitee and the
Company shall cooperate to the extent reasonably possible with each other and
with the Company's insurers, in attempts to defend and/or settle such
Proceeding.
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<PAGE> 4
7. ASSUMPTION OF DEFENSE
---------------------
Except as otherwise provided below, to the extent that it may wish, the
Company jointly with any other indemnifying party similarly notified will be
entitled to assume Indemnitee's defense in any Proceeding, with counsel mutually
satisfactory to Indemnitee and the Company. After notice from the Company to
Indemnitee of the Company's election so to assume such defense, the Company will
not be liable to Indemnitee under this Agreement for Expenses subsequently
incurred by Indemnitee in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Indemnitee
shall have the right to employ counsel in such Proceeding, but the fees and
expenses of such counsel incurred after notice from the Company of its
assumption of the defense thereof shall be at Indemnitee's expense unless:
a) The employment of counsel by Indemnitee has been authorized by the
Company;
b) Counsel employed by the Company initially is unacceptable or later
becomes unacceptable to Indemnitee and such unacceptability is
reasonable under then existing circumstances;
c) Indemnitee shall have reasonably concluded that there may be a conflict
of interest between Indemnitee and the Company in the conduct of
the defense of such Proceeding; or
d) The Company shall not have employed counsel promptly to assume the
defense of such Proceeding,
in each of which cases the fees and expenses of counsel shall be at the expense
of the Company and subject to payment pursuant to this Agreement. The Company
shall not be entitled to assume the defense of Indemnitee in any Proceeding
brought by or on behalf of the Company or as to which Indemnitee shall have made
either of the conclusions provided for in clauses (b) or (C) above.
8. ENFORCEMENT
-----------
In the event that any dispute or controversy shall arise under this
Agreement between Indemnitee and the Company with respect to whether the
Indemnitee is entitled to indemnification in connection with any Proceeding or
with respect to the amount of Expenses incurred, then with respect to each such
dispute or controversy Indemnitee may seek to enforce the Agreement through
legal action or, at Indemnitee's sole option and written request, through
arbitration. If arbitration is requested, such dispute or controversy shall be
submitted by the parties to binding arbitration in the City of Cleveland, State
of Ohio, before a single arbitrator agreeable to both parties. If the parties
cannot agree on a designated arbitrator within 15 days after arbitration is
requested in writing by Indemnitee, the arbitration shall proceed in the City of
Cleveland, State of Ohio, before an arbitrator appointed by the American
Arbitration Association. In either case, the arbitration proceeding shall
commence promptly under the rules then in effect of that Association and the
arbitrator agreed to by the parties or appointed by that Association shall be an
attorney other than an attorney who has, or is associated with a firm having
associated with it an attorney which has, been retained by or
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<PAGE> 5
performed services for the Company or Indemnitee at any time during the five
years preceding the commencement of arbitration. The award shall be rendered in
such form that judgment may be entered thereon in any court having jurisdiction
thereof. The prevailing party shall be entitled to prompt reimbursement of any
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred in connection with such legal action or arbitration; provided that
Indemnitee shall not be obligated to reimburse the Company unless the arbitrator
or court which resolves the dispute determines that Indemnitee acted in bad
faith in bringing such action or arbitration.
9. EXCLUSIONS
----------
Notwithstanding the scope of indemnification which may be available to
Indemnitee from time to time under any Applicable Document, no indemnification,
reimbursement or payment shall be required of the Company hereunder with respect
to:
a) Any claim or any part thereof as to which Indemnitee shall have been
adjudged by a court of competent jurisdiction from which no
appeal is or can be taken to have acted in willful misfeasance,
or willful disregard of his duties, except to the extent that
such court shall determine upon application that, despite the
adjudication of liability, but in view of all the circumstances
of the case, Indemnitee is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper;
b) Any claim or any part thereof arising under Section 16(b) of the
Securities Exchange Act of 1934 pursuant to which Indemnitee
shall be obligated to pay any penalty, fine, settlement or
judgment;
c) Any obligation of Indemnitee based upon or attributable to the
Indemnitee gaining in fact any personal gain, profit or
advantage to which he was not entitled; or
d) Any Proceeding initiated by Indemnitee without the consent or
authorization of the Board of Directors of the Company, provided
that this exclusion shall not apply with respect to any claims
brought by Indemnitee to enforce his rights under this Agreement
or in any Proceeding initiated by another person or entity
whether or not such claims were brought by Indemnitee against a
person or entity who was otherwise a party to such Proceeding.
Nothing in this Section 9 shall eliminate or diminish Company's obligations to
advance that portion of Indemnitee's Expenses which represent attorneys' fees
and other costs incurred in defending any Proceeding pursuant to Section 3 of
this Agreement.
10. EXTRAORDINARY TRANSACTIONS
--------------------------
The Company covenants and agrees that, in the event of any merger,
consolidation or reorganization in which the Company is not the surviving
entity, any sale of all or substantially all of the assets of the Company or any
liquidation of the Company (each such event is hereinafter
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<PAGE> 6
referred to as an "extraordinary transaction"), the Company shall:
Have the obligations of the Company under this Agreement expressly
assumed by the survivor, purchaser or successor, as the case
may be, in such extraordinary transaction; or
Otherwise adequately provide for the satisfaction of the Company's
obligations under this Agreement, in a manner acceptable to
Indemnitee.
11. NO PERSONAL LIABILITY
---------------------
Indemnitee agrees that neither the directors nor any officer, employee,
representative or agent of the Company shall be personally liable for the
satisfaction of the Company's obligations under this Agreement, and Indemnitee
shall look solely to the assets of the Company for satisfaction of any claims
hereunder.
12. SEVERABILITY
------------
If any provision, phrase, or other portion of this Agreement should be
determined by any court of competent jurisdiction to be invalid, illegal or
unenforceable, in whole or in part, and such determination should become final,
such provision, phrase or other portion shall be deemed to be severed or
limited, but only to the extent required to render the remaining provisions and
portions of the Agreement enforceable, and the Agreement as thus amended shall
be enforced to give effect to the intention of the parties insofar as that is
possible.
13. SUBROGATION
-----------
In the event of any payment under this Agreement, the Company shall be
subrogated to the extent thereof to all rights to indemnification or
reimbursement against any insurer or other entity or person vested in the
Indemnitee, who shall execute all instruments and take all other actions as
shall be reasonably necessary for the Company to enforce such rights.
14. GOVERNING LAW
-------------
The parties hereto agree that this Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Ohio.
15. NOTICES
-------
All notices, requests, demands and other communications hereunder shall
be in writing and shall be considered to have been duly given if delivered by
hand and receipted for by the party to whom the notice, request, demand or other
communication shall have been directed, or mailed by certified mail, return
receipt requested, with postage prepaid:
6
<PAGE> 7
If to the Company, to: PARK-OHIO HOLDINGS CORP.
23000 Euclid Avenue
Cleveland, Ohio 44117
Attention: Secretary
If to Indemnitee, to:
-------------------------
-------------------------
-------------------------
or to such other or further address as shall be designated from time to time by
the Indemnitee or the Company to the other.
16. TERMINATION
-----------
This Agreement may be terminated by either party upon not less than
sixty (60) days prior written notice delivered to the other party, but such
termination shall not in any way diminish the obligations of Company hereunder
with respect to Indemnitee's activities prior to the effective date of
termination.
17. AMENDMENTS AND BINDING EFFECT
-----------------------------
This Agreement and the rights and duties of Indemnitee and the Company
hereunder may not be amended, modified or terminated except by written
instrument signed and delivered by the parties hereto. This Agreement is and
shall be binding upon and shall inure to the benefits of the parties thereto and
their respective heirs, executors, administrators, successors and assigns.
IN WITNESS WHEREOF, the undersigned have executed this Agreement in
triplicate as of the date first above written.
INDEMNITEE PARK-OHIO HOLDINGS CORP.
By: By:
--------------------------------- ----------------------------------
Edward F. Crawford
Title: Title: Chairman and Chief Executive
------------------------------ Officer
7
<PAGE> 1
Exhibit 12.1
Park-Ohio Holdings Corp.
Computation of Ratio of Earnings to Fixed Charges
(In thousands except ratio data)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings from continuing
operations before income taxes $22,660 $19,199 $14,753 $12,913 $ 6,652
Fixed Charges 20,370 11,495 8,787 7,192 2,370
------- ------- ------- ------- -------
Earnings Available for Fixed Charges $43,030 $30,694 $23,540 $20,105 $ 9,022
======= ======= ======= ======= =======
Fixed Charges:
Interest Component of Rent Expense $ 2,352 $ 2,232 $ 1,584 $ 1,176 $ 783
Interest Expense 17,488 9,101 6,947 5,911 1,501
Amortization of Deferred Financing Costs 530 162 256 105 86
------- ------- ------- ------- -------
Total Fixed Charges $20,370 $11,495 $ 8,787 $ 7,192 $ 2,370
======= ======= ======= ======= =======
Ratio of Earnings to Fixed Charges 2.1x 2.7x 2.7x 2.8x 3.8x
</TABLE>
<PAGE> 1
Exhibit 21.1
<TABLE>
<CAPTION>
Name State of Incorporation
- ---- ----------------------
<S> <C>
Blue Falcon Forge, Inc. Pennsylvania
Castle Rubber Company Pennsylvania
Cicero Flexible Products, Inc. Ohio
General Aluminum Manufacturing Company II Ohio
General Aluminum Mfg. Company Ohio
Geneva Rubber Company Ohio
GIS Industries, Inc.(1) Pennsylvania
IEW, Inc. Illinois
Integrated Holding Company Ohio
Integrated Logistics Company of Canada Nova Scotia
Integrated Logistics Holding Company Ohio
Integrated Logistics Solutions, Inc. Ohio
Integrated Logistics Solutions LLC(2) Ohio
Kay Home Products, Inc. Ohio
Park-Ohio Industries, Inc.(3) Ohio
Pharmaceutical Logistics, Inc. Ohio
Precision Machining Connection LLC(4) Ohio
RB&W Corporation of Canada Ontario
RB&W Manufacturing LLC(5) Ohio
The Ajax Manufacturing Company(6) Ohio
The Metalloy Corporation Michigan
Tocco, Inc.(7) Alabama
Park-Ohio Structural Hardware LLC(8) Ohio
Pharmacy Wholesale Logistics, Inc. Ohio
</TABLE>
(1) Doing business as Gateway Industrial Supply, Sabina Mfg., Free Gate, and
American Fasteners
(2) Doing business as RB&W Logistics and Arden Fasteners
(3) Doing business as Cleveland City Forge, Park Drop Forge, and Ohio Crankshaft
(4) Doing business as PMC Industries
(5) Doing business as Delo Screw Products, Green Bearing, and RB&W
Manufacturing
(6) Doing business as Ajax Technologies and Forging Development
(7) Doing business as FECO
(8) Doing business as St. Louis Screw and Bolt
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of Park-Ohio Holdings Corp., for the registration of its common stock
of our report dated February 15, 1999 relating to the consolidated financial
statements of Park-Ohio Holdings Corp., included in this Annual Report on Form
10-K for the year ended December 31, 1998.
<TABLE>
<CAPTION>
Shares/Dollars
Registration Statement Description Registered
- ---------------------- --------------------------------------------------- ----------------
<S> <C> <C>
Form S-8 (33-64420) 1992 Stock Option Plan 350,000
Form S-8 (33-01047) Individual Account Retirement Plan 1,500,000
Form S-8 (333-28407) Amended and Restated 1992 Stock Option Plan and 750,000
1996 Non-Employee Director Stock Option Plan
Form S-8 (333-58161) 1998 Long-Term Incentive Plan 550,000
Form S-4 (333-46931) Formation of PKOH Holding Corporation 11,000,000
</TABLE>
/s/ Ernst & Young LLP
Cleveland, Ohio
March 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000076282
<NAME> PARK-OHIO HOLDINGS CORP.
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 4,320
<SECURITIES> 0
<RECEIVABLES> 95,718
<ALLOWANCES> 2,803
<INVENTORY> 150,052
<CURRENT-ASSETS> 257,790
<PP&E> 160,625
<DEPRECIATION> 70,468
<TOTAL-ASSETS> 489,554
<CURRENT-LIABILITIES> 80,858
<BONDS> 237,483
0
0
<COMMON> 11,148
<OTHER-SE> 130,039
<TOTAL-LIABILITY-AND-EQUITY> 489,554
<SALES> 551,793
<TOTAL-REVENUES> 551,793
<CGS> 455,167
<TOTAL-COSTS> 455,167
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,488
<INCOME-PRETAX> 22,660
<INCOME-TAX> 9,726
<INCOME-CONTINUING> 12,934
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,934
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.16
</TABLE>
