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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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _________________ to _________________
Commission file number 0-3134
PARK-OHIO INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-6520107
- - ------------------------------------------------------ ------------------------------------------------------
(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)
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)
$.75 CUMULATIVE CONVERTIBLE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 19, 1997: Approximately $113,293,000.
Number of shares outstanding of the registrant's Common Stock, par value
$1.00 per share, as of March 15, 1997: 10,869,237.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S PROXY STATEMENT DATED APRIL 16, 1997 ARE
INCORPORATED BY REFERENCE INTO PART III OF THIS FORM 10-K.
The Exhibit Index is located on page 33.
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PART I
ITEM 1. BUSINESS
Park-Ohio Industries, Inc. ("Park-Ohio", "the Company"), an Ohio
corporation since January, 1985, is a diversified manufacturer whose operations
serve a wide variety of industrial and consumer markets. Headquartered in
Cleveland, Ohio, Park-Ohio is publicly held, and its shares are traded on the
NASDAQ National Market System. Park-Ohio operates in two industry segments:
manufactured products and logistics. In 1996, Park-Ohio had net sales of $347.7
million and as of December 31, 1996, employed approximately 2,500 persons.
On July 31, 1996, Park-Ohio completed the sale of substantially all the
assets of Bennett Industries, Inc. ("Bennett"), a wholly-owned subsidiary which
manufactures plastic containers, to North America Packaging Corporation, an
indirect 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. The assets and liabilities of Bennett have been classified
in the consolidated balance sheets as net assets of discontinued operations at
December 31, 1995.
Effective March 31, 1995, Park-Ohio acquired all of the shares of RB&W
Corporation ("RB&W") in exchange for $31.0 million in cash and 2.0 million
shares of its common stock in a transaction valued at $54.2 million. The
combination has been accounted for as a purchase and accordingly, the operations
of RB&W are included in the consolidated financial statements as of that date.
The metal forming business of RB&W is included within the manufactured products
segment and the supply chain management business comprises the logistics
segment.
MANUFACTURED PRODUCTS
Park-Ohio's manufactured products segment includes forged and machined
products, metal forming, capital equipment, aluminum permanent mold castings,
industrial rubber products, consumer products and pharmaceutical caps and vials
and is carried out in 19 plants by approximately 2,000 employees. The three
largest customers, comprised of many divisions, accounted for approximately 34%
of manufactured products sales in 1996. The loss of business from any one of
these customers would have an adverse effect on this segment.
During 1995, in addition to the acquisition of the metal forming business
of RB&W, Park-Ohio also purchased certain assets of four companies for a total
cost of $6.4 million. The operations of these businesses prior to the dates of
acquisition were not material to Park-Ohio.
On October 15, 1993, Park-Ohio acquired General Aluminum Mfg. Company
("GAMCO") by issuing 250,000 shares of its common stock in exchange for the
outstanding shares of GAMCO. See Note B to the consolidated financial statements
included herein.
FORGED AND MACHINED PRODUCTS
Forged and machined products include the production, machining and
finishing of closed die forgings produced by Park-Ohio and others. The
transportation industry is Park-Ohio's major market for its forged and machined
products. Park-Ohio forges crankshafts and machines camshafts and crankshafts
for diesel engines used in trucks, locomotives, buses, farm machinery, marine
and other applications. It also forges components and other high-strength, high-
performance, structural parts for civilian and military aircraft, truck,
military ordnance and other machinery and equipment producers. Park-Ohio's
forging and machining business is carried out by approximately 450 employees in
four plants, two of which are located in Cleveland, Ohio, one in Wellington,
Ohio and one in Berwick, Pennsylvania. Forging and
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machining sales are generated by an internal sales force and through independent
sales representatives. Competition for forging and machining work is
substantial. Several of Park-Ohio's larger customers also do their own forging
or machining and there are many independent companies in this field, some of
which are substantially larger than Park-Ohio. Park-Ohio's forgings are made
primarily from various kinds of steel alloys. These raw materials are generally
available from a number of sources.
METAL FORMING
RB&W metal forming includes the engineering and manufacturing of cold
formed products and related hardware, principally, internally threaded parts and
miscellaneous formed metal components and assemblies which are manufactured in
high volume by cold forming, cold extrusion and specialized secondary
operations. The predominant material used is steel of various carbons and alloys
which is purchased directly from steel mills as hot rolled coils or rods or bars
of various diameters. Non-ferrous materials such as silicon bronze are purchased
in coils ready for use. These raw materials are generally available from a
number of sources. RB&W manufactures certain trademark items which are used in
volume in the automobile and truck industry and segments of the farm and
machinery businesses. These include lock nuts which find principal use in
applications where vibration is a problem and controlled tightening is desired.
RB&W's metal forming business is carried out by approximately 300 employees in
three plants located in Kent, Ohio; Coraopolis, Pennsylvania and Toronto,
Ontario. Metal forming products are sold through an internal sales force and
through independent representatives. The domestic industrial fastener industry,
which accounts for all of the products of RB&W's metal forming business, is
highly competitive. RB&W is one of the largest of several domestic producers of
industrial fasteners.
CAPITAL EQUIPMENT
Park-Ohio custom engineers, manufactures and sells capital equipment
consisting of forging presses, specialty lift trucks and induction heating
systems. Induction heating systems, the principal product, are sold under the
TOCCO brand name through Tocco, Inc. ("Tocco"), a wholly-owned subsidiary. TOCCO
induction heating systems are used primarily for heat treating, surface
hardening, heating for forging, brazing, soldering, annealing, shrink-fitting,
melting, welding, and heating metal components, principally for the purpose of
up-grading the wear and fatigue resistance features of such components.
Automotive and automotive supplier companies are Tocco's major customers with
farm equipment manufacturers second and miscellaneous metalworking companies
third. TOCCO systems are sold worldwide. Several companies manufacture equipment
competitive with some or all of the TOCCO equipment. While standard "off the
shelf" systems are produced, it is more often necessary to engineer unique
installations to meet the particular needs of the customer. TOCCO custom
engineering may involve systems with a series of loading, heating, quenching,
conveying and unloading processes incorporated into a single unit. The
individually designed systems may involve micro-processor controls, adaptable
modular construction and solid state technology. Production of capital equipment
and the related replacement parts along with the customer service technology is
carried out by approximately 500 employees in two plants, one located in
Cleveland, Ohio and one in Boaz, Alabama. In addition, a laboratory and customer
service facility is located in Madison Heights, Michigan. Sales are made both
through an internal sales organization and through independent representatives.
The various electrical components, electrical wiring, metal stampings, castings,
and other materials incorporated in the capital equipment are generally
available from a variety of sources.
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ALUMINUM PERMANENT MOLD CASTINGS
Park-Ohio produces and machines aluminum permanent mold castings
principally for the automotive industry through GAMCO, a wholly-owned
subsidiary. GAMCO operates with approximately 350 employees with plants located
in Conneaut, Ohio and Hartsville, Tennessee. The castings produced by GAMCO are
used in automobiles, vans and light trucks. GAMCO has received quality awards
from its major automotive customers and is one of the few permanent mold
aluminum foundries in the United States to have received these awards. Raw
materials for production, primarily aluminum ingots of various alloys, are
generally available. Products are sold directly and through sales
representatives.
INDUSTRIAL RUBBER PRODUCTS
Park-Ohio's industrial rubber and silicone products consist of injection
and transfer molded products, lathe cut goods, roll coverings, linings and items
requiring rubber-to-metal bonding. Rubber products produced by Park-Ohio are
used in automobiles, air brake equipment, gas and oil lines, motors,
compressors, caskets, communication equipment, printing rolls and steel mills.
Market conditions are competitive. Products are sold directly and through sales
representatives to a variety of industries. Raw materials for production include
natural and synthetic rubber and metal inserts, all of which are generally
available. Park-Ohio's industrial rubber products business is carried out by
approximately 300 employees in three plants in East Butler, Pennsylvania;
Geneva, Ohio; and Cicero, Illinois.
CONSUMER PRODUCTS
Park-Ohio manufactures barbecue grills, lawn spreaders, lap trays, patio
tables, tray table sets, plant stands and screen enclosures through Kay Home
Products, Inc. ("KHP"), a wholly-owned subsidiary. Sales are made through its
own sales organization and through independent representatives. KHP distributes
the products nationwide through a network comprised of mass merchandisers,
grocery chains, drug stores, and hardware stores. Market conditions are price
competitive. KHP has operations in Cleveland, Ohio; Antioch, Illinois and
Columbus, Ohio. Because KHP's business is very seasonal, the number of its
employees varies from approximately 100 during the off season to a peak of
approximately 300. KHP is not dependent upon any particular suppliers. During
the fourth quarter of 1996, Park-Ohio commenced the reorganization of its
consumer products manufacturing operations which will result in the realignment
of two manufacturing facilities and the discontinuance of certain product lines.
As a result of these actions, Park-Ohio recorded a charge of $2.7 million
primarily for the writedown of certain property and equipment and inventory to
net realizable value.
PHARMACEUTICAL CAPS AND VIALS
Friendly and Safe Packaging Systems, Inc., an eighty percent owned
subsidiary of Park-Ohio, acquired the worldwide exclusive license to manufacture
and market a combination container and one piece safety cap in September of
1995. Park-Ohio has spent a year and a half on the reengineering and design of
the Friendly and Safe(TM) cap systems. Initial shipments of the product will
begin in April of 1997, but revenues from this source are not expected to be
material to Park-Ohio in fiscal 1997. Park-Ohio believes its Clear Picture(TM)
safety cap and vial is superior to the current products on the market, but the
market is extremely competitive.
LOGISTICS
The principal activity of Park-Ohio's logistics business is the supply
chain management of various commodity products primarily fasteners, principally
to original equipment manufacturers. Logistics locations inventory several
thousand items which are readily available including common standard fasteners
such as bolts, nuts and cap screws; machine tapping and wood
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screws; stainless steel and non-ferrous bolts, nuts and screws; patented and
proprietary locking fasteners; plus non-standard engineered special items
inventoried for specific customer's orders. The logistics business is carried
out by approximately 500 employees, has 31 branches located throughout the
United States, Canada, Puerto Rico, Mexico and England, and has a central
distribution center located in Dayton, Ohio. The central distribution center
receives, processes and packages certain materials for the 31 branches. The
logistics business sales are generated through national agreements, Total
Fastening Service ("TFS") contracts, along with field and telemarketing efforts
on the part of each branch. These TFS contracts with large original equipment
manufacturers have increased significantly over the last few years. The products
sold by logistics are manufactured by a broad base of domestic fastener
manufacturers, as well as qualified sources around the world. The single largest
customer accounted for approximately 11% of sales of logistics. The loss of such
customer would have an adverse effect on this business. The logistics business
is competitive in both price and service and competes with a large number of
companies, including those with domestic manufacturing operations, and other
importers, many of whom have access to the same or similar sources of supply.
ENVIRONMENTAL REGULATIONS
Park-Ohio is subject to numerous laws and regulations designed to protect
the environment, particularly in regard to waste and emissions. In general,
Park-Ohio has not experienced difficulty in complying with environmental
protection provisions in the past, and compliance with such laws and regulations
has not had a materially adverse effect on Park-Ohio's operations.
INFORMATION AS TO INDUSTRY SEGMENT REPORTING
The information contained under the heading of "Note 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, 1996, 1995 and
1994 is incorporated herein by reference.
ITEM 2. PROPERTIES
Park-Ohio's operations include numerous manufacturing and warehousing
facilities located in 21 states in the United States and in 3 other countries.
Approximately 52% of the available square footage is owned. In 1996,
approximately 83% of the available domestic square footage was used by the
manufactured products segment and 17% by the logistics segment. Approximately
77% of the foreign facilities were used by the manufactured products segment and
23% were used by the logistics segment.
In the opinion of management, Park-Ohio's facilities are generally well
maintained and are suitable and adequate for their intended use.
ITEM 3. LEGAL PROCEEDINGS
Park-Ohio becomes involved in litigation arising out of its normal business
activities. In the opinion of management, Park-Ohio's liability, if any, under
any pending litigation would not materially affect its financial position or
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 1996.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to executive officers of Park-Ohio is as follows:
EXECUTIVE
OFFICER OF
REGISTRANT
NAME AGE PRESENT EXECUTIVE OFFICE SINCE
- - ------------------------ --- -------------------------------------------- ----------
Edward F. Crawford 57 Chairman and Chief Executive Officer 1992
John J. Murray 41 President and Chief Operating Officer 1995
James S. Walker 54 Vice President and Chief Financial Officer 1983
Ronald J. Cozean 33 Secretary and General Counsel 1994
Matthew V. Crawford 27 Assistant Secretary and Corporate Counsel 1996
Patrick W. Fogarty 36 Chief Financial Officer of RB&W Corporation 1996
Felix J. Tarorick 54 President of RB&W Manufacturing 1996
Mr. Walker has been an employee of Park-Ohio for more than five years.
Since 1964, Mr. Crawford owned and operated various private companies and is
currently Chairman and Chief Executive Officer, Crawford Group, Inc. From April,
1989, to his resignation in March, 1991, Mr. Crawford was a director of
Park-Ohio. On June 17, 1992, the shareholders approved the acquisition of Kay
Home Products, Inc., a company wholly-owned by Mr. Crawford. At that time, Mr.
Crawford was appointed to the Board of Directors and was elected Chairman, Chief
Executive Officer and President of Park-Ohio. Mr. Murray became the President
and Chief Operating Officer on January 1, 1995. He had been President of KMR
Industries, Inc. (business consulting firm) since 1991 and was formerly the
President and Chief Operating Officer, Rennoc Corporation (manufacturing
company) from 1989 to 1990. Mr. Murray was elected to the Board of Directors in
1992. Mr. Cozean was an attorney with the law firm of Squire, Sanders & Dempsey
prior to joining the Company in 1994. Matthew Crawford worked in the corporate
finance department of McDonald & Company prior to joining the Company in 1995.
Matthew Crawford is the son of Mr. Crawford. Mr. Fogarty worked for Ernst &
Young LLP prior to joining the Company in 1995. Mr. Tarorick was the President
of Kay Home Products prior to his position as President of RB&W Manufacturing.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
Park-Ohio's common stock, $1 par value, is traded on the NASDAQ National
Market System. The table presents its high and low sales prices. No dividends
were paid during the periods.
QUARTERLY COMMON STOCK PRICE RANGES
1996 1995
------------ ------------
QUARTER HIGH LOW HIGH LOW
- - ------- ---- --- ---- ---
1st 17 1/8 13 1/8 14 10 5/8
2nd 23 16 3/8 12 1/4 11
3rd 19 3/8 14 1/8 15 3/8 12
4th 16 5/8 12 7/8 16 1/4 12 1/2
The number of common shareholders of record for Park-Ohio's common stock as
of March 20, 1997 was 2,063.
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ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31
-------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Operations
Net sales........................... $ 347,679 $ 289,501 $ 129,216 $ 94,472 $ 67,190
Gross profit........................ 58,279 48,630 24,991 18,580 9,456
Income (loss) from continuing
operations before income taxes... 14,753 12,913 6,652 3,929 (8,681)
Income taxes (benefit).............. 5,060 (6,900) (1,826) 242 137
Income (loss) from continuing
operations....................... 9,693 19,813 8,478 3,687 (8,818)
Income from discontinued
operations....................... 11,642 4,221 4,006 2,344 1,163
Cumulative effect of change in
accounting principle............. -0- -0- -0- -0- (26,891)
Net income (loss)................... 21,335 24,034 12,484 6,031 (34,546)
Net income (loss) per common share:
Continuing operations............ .88 1.93 1.00 .55 (1.47)
Discontinued operations.......... 1.06 .41 .49 .35 .19
Net income (loss)................ 1.94 2.34 1.49 .90 (5.76)
Supplemental per common share data
Pro forma income (loss) per common
share from continuing operations
on a fully taxable basis......... .88 .75 .47 .34 (.91)
Financial Position
Working capital..................... 99,723 96,719 29,596 18,409 11,503
Total assets........................ 282,910 301,747 128,396 93,451 67,681
Long-term debt...................... 60,754 96,503 9,766 25,054 12,008
Subordinated debentures............. 22,235 22,235 22,235 -0- -0-
Shareholders' equity................ 115,698 95,954 46,715 17,933 8,795
- - ---------------
(A) On July 31, 1996, the Company completed the sale of substantially all of the
assets of Bennett Industries, Inc., a wholly-owned subsidiary which
manufactures plastic containers for $50.8 million in cash, resulting in a
pretax gain of $13.8 million recognized in the third quarter of 1996. The
results of operations for Bennett have been classified as discontinued
operations for all periods presented. The assets and liabilities of Bennett
have been classified in the consolidated balance sheets as net assets of
discontinued operations.
(B) On March 31, 1995, the Company acquired all of the shares of RB&W
Corporation in exchange for 2,023,000 shares of the Company's common stock
and cash. The transaction was accounted for as a purchase and, accordingly,
the operations of RB&W have been included since that date.
(C) On October 15, 1993, the Company acquired General Aluminum Mfg. Company in
an exchange of shares and on June 30, 1992, the Company completed the
acquisition of substantially all of the assets of Kay Home Products, Inc.
These acquisitions have been accounted for as purchases.
(D) Effective January 1, 1992, the Company adopted the provisions of Financial
Accounting Standards Board No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," changing to the accrual method
of accounting for these benefits, which resulted in a noncash charge to
operations of $26,891 as of that date. During 1993, the Company reduced
costs and revised its actuarial assumptions to reflect experience.
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(E) During 1995 and 1994, the Company's utilization of net operating loss
carryforwards and reduction in valuation allowance for deferred tax assets
(See Note F to the consolidated financial statements included herein) had
the effect of increasing income per common share from continuing operations
$1.18 in 1995 and $.53 in 1994.
(F) This summary should be read in conjunction with the related Management's
Discussion and Analysis of Financial Condition and Results of Operations
included under Item 7 elsewhere herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
1996 versus 1995
On July 31, 1996, the Company completed the sale of substantially all of
the assets of Bennett Industries, Inc., a wholly-owned subsidiary which
manufactures plastic containers, to North America Packaging Corporation, an
indirect 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 of Bennett have
been classified as discontinued operations for all periods presented in the
consolidated statements of income and cash flows. The assets and liabilities of
Bennett have been classified in the consolidated balance sheets as net assets of
discontinued operations at December 31, 1995.
Net sales from continuing operations increased by $58.2 million or 20%
during the period. Of the sales increase, approximately $47.8 million pertains
to incorporating RB&W in the consolidated results for the entire year with the
remainder primarily pertaining to acquisitions made subsequent to the second
quarter of 1995.
Gross profit from continuing operations rose to $58.3 million in the
current period from $48.6 million for 1995. Of the $9.7 million increase, $8.6
million pertains to acquisitions made in 1995 (approximately $6.7 million
relates to including RB&W for a full year) and $1.1 million pertains to margin
improvements primarily related to the logistics business. Consolidated gross
margins were approximately 17% of sales for both 1996 and 1995.
Selling, general and administrative costs from continuing operations
increased by 27% in 1996 primarily as a result of incorporating RB&W into the
consolidated results for the entire year. Of the total increase of $8.1 million,
55% pertains to RB&W. Other factors contributing to the increase were
administrative costs of other companies acquired at various times in 1995 which
are included in consolidated selling, general and administrative expense for the
entire year and costs associated with prospective business opportunities. As a
percentage of sales, consolidated selling, general and administrative costs
accounted for 11% of the sales dollar for 1996 and 10% for 1995.
During the fourth quarter of 1996, the Company commenced the reorganization
of its consumer products manufacturing operations which will result in the
realignment of two manufacturing facilities and the discontinuance of certain
product lines. As a result of these actions, the Company recorded a charge of
$2.7 million primarily for the writedown of certain 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 for a
gain of $2.7 million. In addition, in the third quarter, the Company realized a
$1.5 million gain on the sale of securities.
Interest expense from continuing operations increased by $1.0 million in
1996 due to higher levels of bank debt outstanding during the period. Average
debt outstanding for the period
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increased from $92.4 million in 1995 to $103.2 million in 1996. The increase in
borrowings was caused by the acquisition of RB&W as of March 31, 1995, and
higher levels of revolving credit debt to support increased sales and production
as well as capital expenditures in excess of depreciation. Interest rates for
the period are approximately the same for both 1996 and 1995.
During the fourth quarter of 1995, the Company recorded deferred tax assets
of $8.1 million relating to anticipated future income tax benefits from
utilization of net operating loss carryforwards. As a result, as of January 1,
1996, the Company began to fully provide for Federal income taxes. Additionally,
Federal income tax expense from continuing operations for the 1995 period was
reduced by $3.7 million due to the utilization of net operating loss
carryforwards. During 1996, as a result of the gain on the sale of Bennett
Industries, all net operating loss carryforwards for tax purposes relating to
the Company have been fully utilized. At December 31, 1996, subsidiaries of the
Company have net operating loss carryforwards for tax purposes of approximately
$15.0 million, subject to certain limitations which expire in 2001 to 2007.
1995 versus 1994
Effective March 31, 1995, the Company acquired all of the shares of RB&W
Corporation ("RB&W") in exchange for $31.0 million in cash and 2.0 million of
its common shares in a transaction valued at $54.2 million. The combination has
been accounted for as a purchase and, accordingly, the operations of RB&W are
included in the consolidated financial statements as of that date. The metal
forming business of RB&W is included within the manufactured products segment,
and the supply chain management business comprises the Company's logistics
segment.
Net sales from continuing operations increased by $160.3 million during the
period, of which $139.2 million pertained to RB&W whose results are included for
the period April through December 1995. Of the sales increase applicable to
RB&W, $108.5 million pertains to the logistics segment and $30.7 million relates
to the metal forming business included within the manufactured products segment.
The remainder of the sales increase pertains to the manufactured products
segment and is caused primarily by acquisitions made during the year.
Gross profit from continuing operations rose to $48.6 million in the
current period from $25.0 million for 1994. Of the $23.6 million increase in
gross profits, RB&W accounted for practically the entire increase. Consolidated
gross margins were 17% of sales in 1995 compared with approximately 19% of sales
in 1994. The decline in gross margins was due, in part, to RB&W which has lower
gross margins than the Company as a whole. In addition, margins in the consumer
products business included in the manufactured products segment declined as a
result of increased raw material costs that could not be adequately reflected in
pricing and to product mix changes.
Selling, general and administrative costs increased by 78% in the period
largely as a result of including RB&W in the consolidated results. As a
percentage of sales, consolidated selling, general and administrative costs
accounted for 10% of the sales dollar in the current period compared to 13% in
1994.
Interest expense increased by $4.4 million in 1995 due to higher levels of
debt outstanding during the period. Average debt outstanding for the period
increased from $27.8 million in 1994 to $92.0 million in 1995. The increase in
borrowings was caused by the acquisition of RB&W, other acquisitions, higher
levels of revolving credit debt to support increased sales and to the
convertible subordinated debentures issued in May 1994, being outstanding for
the entire current period. Interest rates remained approximately the same for
both 1995 and 1994.
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The income tax benefit of $6.9 million in 1995 primarily results from
recording an $8.1 million reduction in the valuation allowance on deferred tax
assets.
LIQUIDITY AND SOURCES OF CAPITAL
The ratio of current assets to current liabilities was 2.78 at December 31,
1996, compared to 2.80 at December 31, 1995 and 2.43 at December 31, 1994.
Working capital increased by $3.0 million in 1996 primarily as a result of
increased receivables and inventories offset by an increase in current
liabilities.
Current financial resources (working capital and available bank borrowing
arrangements) and anticipated funds from continuing operations are expected to
be adequate to meet current cash requirements. Capital expenditures for 1997 are
anticipated to be approximately $15.0 million which will be used to invest in
the Company's current facilities for projected new business, for scheduled
improvements and for other necessary expenditures. The Company's growth during
the three-year period ended December 31, 1996, has largely been fueled by
acquisitions. In the event additional capital resources are needed for other
opportunities in the near future, the Company believes adequate financing is
either in place or would be available. In addition, on July 31, 1996, the
Company applied the proceeds, net of income taxes, of $46.3 million from the
sale of Bennett to reduce outstanding bank borrowings. The Company currently has
in place a $125 million credit agreement of which $58.5 million is borrowed as
of December 31, 1996.
During 1996, the Company generated $20.6 million from continuing operations
before changes in operating assets and liabilities. After giving effect to the
use of $15.0 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 for $1.8 million, 126,225 of its own shares, all of
which were funded by internally generated cash flows and additional bank
borrowings.
During 1995, the Company generated $18.0 million from continuing operations
before changes in operating assets and liabilities. After giving effect to
changes in the operating accounts of $27.7 million and $5.7 million provided by
discontinued operations, the Company used $4.0 million in operating activities.
This amount and capital expenditures of $13.6 million were funded by an increase
in bank borrowings. In addition, the Company borrowed $68.6 million under its
revolving credit agreement to fund acquisitions of $35.8 million, primarily
RB&W, and to pay off $32.8 million of acquired debt related to the acquisitions.
During 1994, the Company generated $9.7 million from operations before
changes in operating assets and liabilities. After giving effect to changes in
the operating accounts of $6.4 million and the $5.7 million provided by
discontinued operations, the Company generated $9.0 million from operating
activities. During 1994, the Company borrowed $11.4 million under revolving
credit arrangements with a bank group and sold $20.9 million, net of financing
costs, of 7 1/4% Convertible Senior Subordinated Debentures and $4.2 million of
common stock. The combined proceeds were used to fund capital expenditures of
$11.8 million, acquisitions of $2.1 million, acquire other capital assets of
$2.9 million and retire $26.7 million of bank indebtedness under revolving
credit and term loan arrangements.
Long-term debt and the convertible senior subordinated debentures
represented 42% of the Company's capital at December 31, 1996, 55% at December
31, 1995 and 41% at December 31, 1994.
IMPACT OF INFLATION
Although inflation was not a significant factor in 1996, 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
9
11
represent the allocation of historical costs incurred over past years and are
significantly less than if they were based on the current cost of productive
capacity being consumed.
OTHER
Governmental agencies have identified eight disposal sites for clean-up
under Superfund and similar laws to which the Company has been named a Potential
Responsible Party. The Company is participating in the cost of certain clean-up
efforts. However, the Company's share of such costs has not been material and is
not expected to have a material adverse impact on the Company's financial
condition or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
PAGE
-----
Report of Independent Auditors.................................................... 11
Financial Statements:
Consolidated balance sheets -- December 31, 1996 and 1995....................... 12
Consolidated statements of income -- Years ended December 31, 1996, 1995 and
1994......................................................................... 13
Consolidated statements of shareholders' equity -- Years ended December 31,
1996, 1995 and 1994.......................................................... 14
Consolidated statements of cash flows -- Years ended December 31, 1996, 1995 and
1994......................................................................... 15
Notes to consolidated financial statements...................................... 16
Supplementary Financial Data:
Selected quarterly financial data (unaudited) -- Years ended December 31, 1996
and 1995..................................................................... 28
10
12
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
Park-Ohio Industries, Inc.
We have audited the consolidated financial statements of Park-Ohio
Industries, Inc. 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
Industries, Inc. and subsidiaries at December 31, 1996 and 1995 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Cleveland, Ohio
February 17, 1997
11
13
CONSOLIDATED BALANCE SHEETS
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
ASSETS
Current Assets
Cash and cash equivalents.......................................... $ 4,659 $ 2,662
Accounts receivable, less allowances for doubtful accounts of
$1,048 in 1996 and $787 in 1995................................. 58,764 55,121
Inventories........................................................ 83,758 80,702
Deferred tax assets................................................ 3,000 8,000
Other current assets............................................... 5,718 3,935
-------- --------
Total Current Assets....................................... 155,899 150,420
Property, Plant and Equipment
Land and land improvements......................................... 2,599 2,401
Buildings.......................................................... 21,520 20,800
Machinery and equipment............................................ 82,743 70,916
-------- --------
106,862 94,117
Less accumulated depreciation...................................... 53,054 49,691
-------- --------
53,808 44,426
Other Assets
Excess purchase price over net assets acquired, net................ 40,305 41,991
Net assets of discontinued operations.............................. -0- 33,694
Deferred taxes..................................................... 14,100 15,400
Other.............................................................. 18,798 15,816
-------- --------
$282,910 $301,747
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable............................................. $ 28,545 $ 30,859
Accrued expenses................................................... 20,695 17,013
Current portion of long-term liabilities........................... 6,936 5,829
-------- --------
Total Current Liabilities.................................. 56,176 53,701
Long-Term Liabilities, less current portion
Long-term debt..................................................... 55,571 92,450
Other postretirement benefits...................................... 28,442 30,562
Other.............................................................. 4,788 6,845
-------- --------
88,801 129,857
Convertible Senior Subordinated Debentures........................... 22,235 22,235
Shareholders' Equity
Capital stock, par value $1 a share
Serial preferred stock:
Authorized -- 632,470 shares; Issued -- none.................. -0- -0-
Common stock:
Authorized -- 20,000,000 shares
Issued and outstanding -- 10,432,998 shares in 1996 and
10,401,881 in 1995........................................... 10,433 10,402
Additional paid-in capital......................................... 49,337 49,184
Retained earnings.................................................. 57,703 36,368
Treasury stock, at cost, 126,225 shares in 1996.................... (1,775) -0-
-------- --------
115,698 95,954
-------- --------
$282,910 $301,747
======== ========
See notes to consolidated financial statements.
12
14
CONSOLIDATED STATEMENTS OF INCOME
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
1996 1995 1994
-------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
Net sales................................................ $347,679 $289,501 $129,216
Costs and expenses:
Cost of products sold.................................. 289,400 240,871 104,225
Selling, general and administrative expenses........... 38,131 30,020 16,838
Restructuring charge................................... 2,652 -0- -0-
Other income........................................... (4,204) (214) -0-
Interest expense....................................... 6,947 5,911 1,501
-------- -------- --------
Income from continuing operations before income
taxes............................................. 14,753 12,913 6,652
Income taxes (benefit)................................... 5,060 (6,900) (1,826)
-------- -------- --------
Income from continuing operations................... 9,693 19,813 8,478
Discontinued operations:
Income from operation of Bennett Industries............ 3,126 4,221 4,006
Gain on disposal of Bennett Industries, net of income
taxes............................................... 8,516 -0- -0-
-------- -------- --------
Income from discontinued operations................. 11,642 4,221 4,006
-------- -------- --------
Net income................. $ 21,335 $ 24,034 $ 12,484
======== ======== ========
Net income per common share:
Continuing operations.................................. $ .88 $ 1.93 $ 1.00
Discontinued operations................................ 1.06 .41 .49
-------- -------- --------
Net income............................................. $ 1.94 $ 2.34 $ 1.49
======== ======== ========
Common shares used in the computation.................... 10,960 10,257 8,092
See notes to consolidated financial statements.
13
15
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
------- ---------- -------- -------- --------
(DOLLARS IN THOUSANDS)
Balance at January 1, 1994........... $ 6,771 $ 11,312 $ (150) $ -0- $ 17,933
Net income........................... 12,484 12,484
Issuance of Kay Home Products
earn-out shares.................... 1,150 10,925 12,075
Sale of common stock................. 271 3,952 4,223
------- ------- ------- ------- --------
Balance at December 31,1994.......... 8,192 26,189 12,334 -0- 46,715
Net income........................... 24,034 24,034
Acquisition of RB&W Corporation...... 2,023 21,251 23,274
Issuance of General Aluminum Mfg.
Company earn-out shares............ 187 1,744 1,931
------- ------- ------- ------- --------
Balance at December 31, 1995......... 10,402 49,184 36,368 -0- 95,954
Exercise of stock options............ 31 153 184
Purchase of treasury stock........... (1,775) (1,775)
Net Income........................... 21,335 21,335
------- ------- ------- ------- --------
Balance at December 31, 1996......... $10,433 $ 49,337 $ 57,703 $ (1,775) $115,698
======= ======= ======= ======= ========
See notes to consolidated financial statements.
14
16
CONSOLIDATED STATEMENTS OF CASH FLOWS
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
YEAR ENDED DECEMBER 31
--------------------------------
1996 1995 1994
-------- -------- --------
(DOLLARS IN THOUSANDS)
OPERATING ACTIVITIES
Net Income............................................. $ 21,335 $ 24,034 $ 12,484
Adjustments to reconcile net income to net cash
provided (used) by continuing operations:
Discontinued operations........................... (11,642) (4,221) (4,006)
Gain on sale of investments....................... (1,552) -0- -0-
Depreciation and amortization..................... 7,998 6,278 3,213
Tax benefit resulting from reduction of valuation
allowance on deferred tax assets............... -0- (8,100) (2,000)
Deferred income taxes............................. 4,500 -0- -0-
--------- --------- ---------
20,639 17,991 9,691
Changes in operating assets and liabilities excluding
acquisitions of businesses:
Accounts receivable................................. (3,643) (2,479) (192)
Inventories......................................... (3,056) (14,914) (5,766)
Accounts payable and accrued expenses............... (1,214) (5,473) 424
Other............................................... (7,040) (4,855) (819)
--------- --------- ---------
Net Cash Provided (Used) by Continuing
Operations..................................... 5,686 (9,730) 3,338
Net Cash Provided by Discontinued Operations...... 2,040 5,738 5,689
--------- --------- ---------
Net Cash Provided (Used) by Operating Activities.. 7,726 (3,992) 9,027
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net........ (15,590) (13,632) (11,749)
Costs of acquisitions.................................. -0- (35,793) (2,114)
Investments............................................ (5,427) -0- -0-
Proceeds from sales of investments..................... 6,315 -0- -0-
Proceeds from sale of discontinued operations, net of
$4,500 of income taxes.............................. 46,313 -0- -0-
Other.................................................. -0- -0- (2,909)
--------- --------- ---------
Net Cash Provided (Used) by Investing Activities.. 31,611 (49,425) (16,772)
FINANCING ACTIVITIES
Proceeds from bank arrangements........................ 9,500 86,969 11,350
Payments on long-term debt............................. (45,249) (33,062) (26,661)
Proceeds from convertible senior subordinated
debentures, net..................................... -0- -0- 20,872
Issuance of common stock............................... 184 -0- 4,223
Purchase of treasury stock............................. (1,775) -0- -0-
--------- --------- ---------
Net Cash (Used)Provided by Financing Activities... (37,340) 53,907 9,784
--------- --------- ---------
Increase in Cash and Cash Equivalents............. 1,997 490 2,039
Cash and Cash Equivalents at Beginning of Year.... 2,662 2,172 133
--------- --------- ---------
Cash and Cash Equivalents at End of Year.......... $ 4,659 $ 2,662 $ 2,172
========= ========= =========
See notes to consolidated financial statements.
15
17
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(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 $4,921 and $4,928 higher than reported at December
31, 1996 and 1995, respectively.
Major Classes of Inventories
DECEMBER 31
------------------
1996 1995
------- -------
In-process and finished goods....................... $60,587 $58,215
Raw materials and supplies.......................... 23,171 22,487
------- -------
$83,758 $80,702
======= =======
Property, Plant and Equipment: Property, plant and equipment are carried at
cost. Major additions are capitalized and betterments are charged to accumulated
depreciation; expenditures for repairs and maintenance are charged to
operations. Depreciation of fixed assets is computed principally by the
straight-line method based on the estimated useful lives of the assets.
Excess Purchase Price Over Net Assets Acquired: The Company records
amortization of excess purchase price over the fair value of net assets acquired
(see Note B) over twenty-five years using the straight-line method. Management
periodically evaluates for possible impairment the current value of these
intangibles through cash flow and income analyses of the acquired businesses.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." Statement No. 121
establishes 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. The company adopted Statement No. 121 during the
first quarter of 1996. The financial statement effect of adoption was not
material.
Pensions: The Company and its subsidiaries have pension plans, principally
noncontributory defined benefit or noncontributory defined contribution plans,
covering substantially all employees. For the defined benefit plans, benefits
are based on the employee's years of service
16
18
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
and the Company's policy is to fund that amount recommended by its independent
actuaries. For the defined contribution plans, the costs charged to operations
and the amount funded are based upon a percentage of the covered employees'
compensation.
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.
Net Income Per Common Share: Net income per common share is based on the
weighted average number of common shares outstanding and assumes the exercise of
outstanding dilutive stock options and the issuance of certain additional shares
subject to earn-out provisions. On a fully-diluted basis, both net income and
common shares outstanding are adjusted to assume the conversion of the
convertible senior subordinated debentures issued in 1994. Fully diluted
earnings per share were as follows:
YEARS ENDED DECEMBER 31
-----------------------------
1996 1995 1994
------- ------- -------
Continuing operations.......................... $ .88 $ 1.86 $ 1.04
Discontinued operations........................ .96 .37 .45
------ ------ ------
Net income..................................... $ 1.84 $ 2.23 $ 1.49
====== ====== ======
Common shares used in the computation.......... 12,111 11,467 8,815
====== ====== ======
During 1995 and 1994, the Company's utilization of net operating loss
carryforwards and reduction in valuation allowances for deferred tax assets (See
Note F) had the effect of increasing income per common share from continuing
operations by $1.18 in 1995 and $.53 in 1994. Accordingly, income per common
share from continuing operations on a fully taxable basis is as follows:
YEARS ENDED DECEMBER 31
-----------------------------
1996 1995 1994
------- ------- -------
Pro forma income per common share from
continuing operations on a fully taxable
basis........................................ $ .88 $ .75 $ .47
====== ====== ======
Interest Rate Swap Agreements: The Company enters into interest rate swap
agreements to modify the interest characteristics of its outstanding debt. Each
interest rate swap agreement is designated with a portion of the principal
balance and term of a specific debt obligation. These agreements involve the
exchange of amounts based on a fixed interest rate for amounts based on variable
interest rates of the life of the agreement without an exchange of the notional
amount upon which the payments are based. The differential to be paid or
received as interest rates change is accrued and recognized as an adjustment of
interest expense related to the debt.
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
17
19
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
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 of
customers. 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, 1996 the Company had
uncollateralized receivables with six customers in the automotive and truck
industry each with several locations approximating $19,988 which represents 34%
of the Company's trade accounts receivable. During 1996, sales to these
customers amounted to approximately $103,028 which represents 30% of the
Company's revenue.
Reclassifications: Certain prior year amounts have been reclassified to
conform to the 1996 presentation.
NOTE B -- ACQUISITIONS
On March 31, 1995, the Company acquired all of the shares of RB&W
Corporation (RB&W) in exchange for 2,023,000 shares of the Company's common
stock ($11.50 market value as of March 31, 1995) and cash of $30,968. The
transaction has been accounted for as a purchase.
The table below reflects the current value of the net assets acquired of
RB&W:
Cash................................................ $ 510
Accounts receivable................................. 29,551
Inventories......................................... 36,131
Property, plant and equipment....................... 5,591
Excess purchase price over net assets acquired...... 25,596
Deferred tax assets................................. 13,300
Other assets........................................ 12,620
Notes payable....................................... (28,739)
Trade accounts payable.............................. (21,524)
Accrued expenses.................................... (9,172)
Long-term liabilities............................... (9,622)
--------
$ 54,242
========
The following unaudited pro forma results of operations assume the
acquisition occurred on January 1, 1995. These pro forma results have been
prepared for comparative purposes only
18
20
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
and do not purport to be indicative of the results of continuing operations
which actually would have resulted had the acquisition occurred on the date
indicated.
YEAR ENDED
DECEMBER 31, 1995
-----------------
Net sales.................................................... $ 336,533
Gross profit................................................. 47,255
Income from continuing operations............................ 18,797
Income from continuing operations per common share........... $ 1.74
During 1995, the Company also purchased certain assets of four companies
for a total cost of $6,400 which includes $1,500 for Ajax Manufacturing Company,
purchased from a related party. The operations of these businesses prior to the
dates of acquisition were not material to the Company.
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 which represents purchase price in excess of net
assets acquired, were issued in March, 1995 and an additional 375,000 shares of
common stock will be issued at a value to be determined at the date of issuance
during 1997 as a result of GAMCO achieving certain income levels during 1996 as
specified in the purchase agreement. Up to an additional 187,500 shares of
common stock may be issued in 1998 if GAMCO achieves certain income levels
during the year ending December 31, 1997. Throughout 1996, the 375,000 shares to
be issued in 1997 were included in the earnings per share calculation on a
weighted average basis when it appeared likely such shares would be issued
pursuant to this agreement.
NOTE C -- SALE OF BENNETT INDUSTRIES
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,
an indirect 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. The assets and liabilities of
Bennett have been classified in the consolidated balance sheets as net assets of
discontinued operations at December 31, 1995.
Summary operating results of the discontinued operations, excluding the
above gain, for the years ended December 31, 1996, 1995 and 1994 were as
follows:
DECEMBER 31
---------------------------------
1996 1995 1994
------- ------- -------
Sales.................................................... $49,448 $81,929 $62,311
Costs and Expenses....................................... 44,502 77,708 58,305
------- ------- -------
Income from discontinued operations before income taxes.. 4,946 4,221 4,006
Income taxes............................................. 1,820 -0- -0-
------- ------- -------
Net income from discontinued operations.................. $ 3,126 $ 4,221 $ 4,006
======= ======= =======
19
21
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE D -- ACCRUED EXPENSES
Accrued expenses include the following:
DECEMBER 31
--------------------
1996 1995
------- -------
Self-insured liabilities.............................................. $ 2,521 $ 1,959
Warranty and installation accruals.................................... 2,752 2,060
Accrued payroll and payroll-related items............................. 3,112 2,977
State and local taxes................................................. 2,422 1,136
Advance billings...................................................... 1,646 1,301
Restructuring reserve (see Note M).................................... 2,653 -0-
Acquisition liabilities............................................... -0- 2,196
Interest payable...................................................... 248 780
Sundry................................................................ 5,341 4,604
------- -------
Totals...................................................... $20,695 $17,013
======= =======
NOTE E -- FINANCING ARRANGEMENTS
Long-term debt consists of the following:
DECEMBER 31
--------------------
1996 1995
------- -------
Term loan, payable in quarterly installments of $1,250 through
December 31, 2001, final payment due March 31, 2002................. $32,500 $35,000
Revolving credit maturing on March 31, 1999........................... 26,000 59,000
Other................................................................. 2,254 2,503
------- -------
60,754 96,503
Less current maturities............................................... 5,183 4,053
------- -------
Totals...................................................... $55,571 $92,450
======= =======
Maturities of long-term debt during each of the five years following
December 31, 1996 are approximately $5,183 in 1997, $5,325 in 1998, $31,523 in
1999, $5,526 in 2000 and $5,132 in 2001.
The Company has a credit agreement with a group of banks under which it may
borrow up to $125 million ($35 million term loan and $90 million revolving
credit commitments, respectively)on an unsecured basis. Interest is payable
quarterly at the prime lending rate (8.25% at December 31, 1996)or at the
Company's election, at LIBOR plus a percentage which fluctuates based on
specific financial ratios (which aggregated 6.6% at December 31, 1996). The
weighted average rate on borrowings was 6.6% at December 31, 1996. The credit
agreement expires on March 31, 1999.
The Company has agreements on which up to $3 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 1% fee is assessed on standby letters of
credit on an annual basis. As of December 31, 1996, in addition to amounts
borrowed under the revolving credit agreement, there is $2.2 million outstanding
primarily for standby letters of credit. A fee of 1/4% is imposed by the bank
on the unused portion of available borrowings.
20
22
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The credit agreement contains limitations on borrowings, investments, lease
rentals, capital expenditures and acquisitions or mergers, and requires
maintenance of specific financial ratios and a minimum net worth.
As of December 31, 1996 the Company has interest rate swap agreements for
notional borrowings of $50 million in which the Company pays a fixed rate and
receives a floating rate equal to the three month LIBOR rate. The weighted
average pay rate and receive rate under these agreements is 5.83% and 5.55%,
respectively. These agreements mature during 2000.
During 1994, the Company sold $22,235 of its 7 1/4% convertible senior
subordinated debentures and $4,200 of its common stock at $15.75 a share. The
debentures are convertible into shares of the Company's common stock at a price
of $19.32 per share or a rate of 51.76 shares per $1 thousand principal amount
of debentures and are subordinated to all senior indebtedness of the Company.
Subsequent to December 15, 1996, the debentures may be redeemed at the option of
the Company, in whole or in part, initially at 107% and thereafter at prices
declining to 100% on and after December 15, 2003 together with accrued interest.
Sinking fund payments begin in 2000 in an amount sufficient to retire annually
20% of the aggregate principal amount of debentures issued, calculated to retire
80% of the debentures prior to maturity. Interest is payable semi-annually.
NOTE F -- INCOME TAXES
Significant components of the Company's net deferred tax assets and
liabilities are as follows:
DECEMBER 31
--------------------
1996 1995
------- -------
Deferred tax assets:
Postretirement benefit obligation................................... $10,600 $11,200
Tax net operating loss carryforwards................................ 5,100 9,000
Inventory........................................................... 4,500 4,300
Tax credits......................................................... 600 1,200
Other -- net........................................................ 3,400 5,600
------- -------
Total deferred tax assets................................... 24,200 31,300
Deferred tax liabilities:
Tax over book depreciation.......................................... 4,400 5,700
Pension............................................................. 2,700 2,200
------- -------
Total deferred tax liabilities.............................. 7,100 7,900
------- -------
Net deferred tax assets............................................... $17,100 $23,400
======= =======
As of December 31, 1995, the Company reduced by $8,100 the remaining
valuation allowance on deferred tax assets relating to anticipated future income
tax benefits from utilization of net operating loss carryforwards as full
realization of these assets is expected.
21
23
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The reasons for the difference between income taxes (benefit) and the
amount computed by applying the statutory Federal income tax rate to income from
continuing operations before income taxes are as follows:
YEARS ENDED DECEMBER 31
---------------------------------
1996 1995 1994
------- ------- -------
Computed statutory amount................................ $ 5,000 $ 4,400 $ 2,262
Effect of state income taxes payable..................... 600 500 -0-
Other.................................................... (540) -0- -0-
Utilization of net operating loss carryforwards.......... -0- (3,700) (2,088)
Reduction in valuation allowance for deferred tax
assets................................................. -0- (8,100) (2,000)
------- ------- -------
Income taxes (benefit)......................... $ 5,060 $(6,900) $(1,826)
======= ======= =======
At December 31, 1996, subsidiaries of the Company have net operating loss
carryforwards for income tax purposes of approximately $15 million subject to
certain limitations, which expire in 2001 to 2007.
NOTE G -- STOCK OPTIONS
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. At December 31,
1996, there were a total of 676,000 options outstanding under the Plan; 175,000
of such options became 100% exercisable after two years from the date of grant
at option prices ranging from $3.813 -- $5.125 a share and terminate five years
from the option date; 501,000 of such options become 100% exercisable after
three years from the date of grant at option prices ranging from
$9.125 -- $14.25 a share and terminate ten years from the option date. During
1996, 31,167 options under this Plan were exercised at prices ranging from
$5.125 -- $10.625 a share. At December 31, 1996, there were 348,992 options
exercisable at option prices ranging from $3.813 -- $14.25 a share.
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. At
December 31, 1996 there were 30,000 options outstanding and exercisable under
this plan at an exercise price of $13.625. 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 shall terminate fifteen years from the option date.
Had the compensation cost for the stock options granted in 1996 and 1995
been determined based on the fair value method of FASB Statement No. 123, the
Company's net income and earnings per share would have been reduced by $1,290
($.12 per share) in 1996 and $223 ($.02 per share) in 1995. The effects on 1996
and 1995 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.
22
24
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Fair value was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions for 1996 and 1995,
respectively: risk-free interest rates of 5.25% and 6.34%; zero dividend yield;
expected volatility of 43% and expected option lives of 6 to 10 years for 1996
and 6 years for 1995.
NOTE H -- LEGAL PROCEEDINGS
The Company becomes involved in litigation arising out of its normal
business activities. In the opinion of management, the Company's liability, if
any, under any pending litigation would not have a material effect on its
financial position or results of operations.
NOTE I -- PENSIONS
A summary of the components of net periodic pension credit for the defined
benefit plans and the total contributions charged to pension expense for the
defined contribution plans is as follows:
YEARS ENDED DECEMBER 31
----------------------------------
1996 1995 1994
------- -------- -------
Defined benefit plans:
Service cost.......................................... $ 296 $ 287 $ 128
Interest cost......................................... 3,249 3,362 1,469
Actual return on assets............................... (7,499) (10,719) 66
Net amortization and deferral......................... 2,795 6,315 (1,961)
------- -------- -------
Net periodic pension credit of defined benefit
plans.............................................. (1,159) (755) (298)
Defined contribution plans.............................. 796 680 508
------- -------- -------
Total pension (credit) expense................ $ (363) $ (75) $ 210
======= ======== =======
Assumptions used in the accounting for the defined benefit pension plans
were as follows:
DECEMBER 31
------------------------
1996 1995 1994
---- ---- ----
Weighted average discount rate...................................... 7.5 % 7.5% 8.5%
Expected long-term rate of return on assets......................... 8.5 % 8.5% 9.5%
23
25
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheets at December 31, 1996 and 1995 for the Company's
defined benefit pension plans.
DECEMBER 31
--------------------
1996 1995
------- -------
Actuarial present value of benefit obligations:
Vested benefit obligation........................................... $42,863 $44,223
======= =======
Accumulated benefit obligation...................................... $44,671 $45,872
======= =======
Plan assets at fair value............................................. $63,139 $58,563
Projected benefit obligation.......................................... 45,049 46,308
------- -------
Plan assets in excess of projected benefit obligation................. 18,090 12,255
Unrecognized net gain................................................. (6,959) (2,956)
Unrecognized prior service cost....................................... 1,442 1,436
Unrecognized net asset at January 1, 1987 net of amortization......... (203) (231)
------- -------
Net pension asset included in other assets............................ $12,370 $10,504
======= =======
The plans' assets at December 31, 1996 and 1995 are invested in listed
stocks, bonds and unallocated insurance contracts.
NOTE J -- OTHER POSTRETIREMENT BENEFITS
The Company and certain of its subsidiaries provide health care and life
insurance benefits for retired employees. Employees may become eligible for
benefits if they qualify for retirement while working for the Company.
The following table presents the plan's funded status and amounts
recognized in the consolidated balance sheets at December 31, 1996 and 1995:
DECEMBER 31
--------------------
1996 1995
------- -------
Accumulated postretirement benefit obligation:
Retirees............................................................ $17,555 $18,460
Fully eligible active plan participants............................. 479 445
Other active plan participants...................................... 1,854 1,626
------- -------
Accumulated Postretirement Benefit Obligations.............. 19,888 20,531
Unrecognized net gain............................................... 10,307 10,851
------- -------
Accrued Postretirement Benefit Obligations.................. $30,195 $31,382
======= =======
Net periodic benefit cost includes the following components for the years
ended December 31, 1996, 1995 and 1994:
DECEMBER 31
------------------------------
1996 1995 1994
------ ------ ------
Service cost................................................. $ 106 $ 92 $ 58
Interest cost................................................ 1,458 1,559 1,476
Net amortization and deferral................................ (544) (819) (620)
------ ------ ------
Net Periodic Postretirement Benefit Cost........... $1,020 $ 832 $ 914
====== ====== ======
24
26
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The accumulated postretirement benefit obligation ("APBO") was determined
using an assumed discount rate of 7.5%, 7.5% and 8.5% for 1996, 1995 and 1994,
respectively. The assumed annual health care trend rate for retirees younger
than 65 was 9.0% in 1996 (9.5% in 1995 and 10% in 1994) decreasing to 6.0% in
2004. The assumed annual health care trend rate for retirees aged 65 and over
will decrease to 5.5% in 2004. A 1% change in the trend rate would increase the
APBO by 4.2% and annual expense by 11%.
NOTE K -- LEASES
Rental expense for 1996, 1995 and 1994 was $4,751, $3,527 and $931,
respectively. Future minimum lease commitments during each of the five years
following December 31, 1996 are as follows: $3,295 in 1997, $2,630 in 1998,
$2,184 in 1999, $2,044 in 2000 and $1,735 in 2001.
NOTE L -- INDUSTRY SEGMENTS
The Company operates in two industry segments: Manufactured Products and
Logistics. The Manufactured Products Segment manufactures industrial products
for the airline, automotive, locomotive, trucking and housewares industries and
includes forged and machined products, metal forming, capital equipment,
permanent mold castings, industrial rubber products and consumer products.
Forged and machined products include the production, machining and finishing of
closed die forgings produced by the Company and others. Metal forming includes
the engineering and manufacturing of fasteners, cold formed parts and related
hardware. Capital equipment includes the engineering and manufacturing of
capital equipment consisting of forging presses, specialty lift trucks and
induction heating systems. Permanent mold castings include the production and
machining of permanent mold aluminum parts. Industrial rubber products include
custom made molded and lathe cut goods and items requiring rubber-to-metal
bonding. Consumer products include molded plastic and metal indoor and outdoor
products. The Logistics Segment provides supply chain management of various
commodity products including fasteners, primarily to original equipment
manufacturers.
The Company's sales are made through its own sales organization,
distributors and representatives. Intersegment metal forming sales to the
Logistics Segment are 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 interest expense and
amortization of excess purchase price over net assets acquired. Identifiable
assets by industry segment include assets directly identified with those
operations.
25
27
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Corporate assets generally consist of cash and cash equivalents, deferred
tax assets, and other assets.
YEARS ENDED DECEMBER 31
------------------------------------
1996 1995 1994
-------- -------- --------
Net Sales
Manufactured products............................ $196,327 $181,000 $129,216
Logistics........................................ 151,352 108,501 -0-
-------- -------- --------
$347,679 $289,501 $129,216
======== ======== ========
Income from continuing operations before income taxes
Manufactured products............................ $ 16,263 $ 14,525 $ 11,011
Logistics........................................ 9,276 8,217 -0-
-------- -------- --------
25,539 22,742 11,011
Amortization of excess purchase price over net
assets acquired................................ (1,902) (1,504) (223)
Corporate costs.................................. (1,937) (2,414) (2,635)
Interest expense................................. (6,947) (5,911) (1,501)
-------- -------- --------
$ 14,753 $ 12,913 $ 6,652
======== ======== ========
Identifiable Assets
Manufactured products............................ $177,946 $162,114 $ 90,851
Logistics........................................ 92,862 93,876 -0-
General corporate................................ 12,102 12,063 10,520
Discontinued operations.......................... -0- 33,694 27,025
-------- -------- --------
$282,910 $301,747 $128,396
======== ======== ========
Depreciation and Amortization Expense
Manufactured products............................ $ 6,644 $ 5,544 $ 3,213
Logistics........................................ 1,354 734 -0-
-------- -------- --------
$ 7,998 $ 6,278 $ 3,213
======== ======== ========
Capital Expenditures
Manufactured products............................ $ 10,272 $ 4,974 $ 3,557
Logistics........................................ 4,152 1,099 -0-
General corporate................................ 1,054 237 260
Discontinued operations.......................... 112 7,322 7,932
-------- -------- --------
$ 15,590 $ 13,632 $ 11,749
======== ======== ========
The Company's manufactured products segment had sales of $33,728 in 1996,
$32,200 in 1995, and $28,000 in 1994 to Ford Motor Company (9.7%, 11.1% and
21.7% of consolidated net sales, respectively).
NOTE M -- RESTRUCTURING CHARGES AND OTHER INCOME
During the fourth quarter of 1996, the Company commenced the reorganization
of its consumer products manufacturing operations which will result in the
realignment of two manufacturing facilities and the discontinuance of certain
products lines. As a result of these
26
28
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
actions, the Company recorded a charge of $2,700 primarily for the writedown of
certain 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 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.
27
29
SUPPLEMENTARY FINANCIAL DATA
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
QUARTER ENDED
-------------------------------------------------------
1996 MARCH 31 JUNE 30 SEPT.30 DEC. 31
- - --------------------------------------------- ---------- ---------- ---------- ----------
Net sales.................................... $ 90,854 $ 90,693 $ 79,750 $ 86,382
Gross profit................................. 15,530 15,431 13,044 14,274
Income from continuing operations............ 2,582 2,550 2,113 2,448
Income from discontinued operations.......... 1,499 1,326 8,817 -0-
Net Income................................... $ 4,081 $ 3,876 $ 10,930 $ 2,448
======= ======= ======= =======
Primary Earnings Per Share:
Continuing Operations...................... $ .24 $ .23 $ .19 $ .22
Discontinued Operations.................... .14 .12 .81 -0-
------- ------- ------- -------
Net Income................................. $ .38 $ .35 $ 1.00 $ .22
======= ======= ======= =======
QUARTER ENDED
-------------------------------------------------------
1995 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- - --------------------------------------------- ---------- ---------- ---------- ----------
Net sales.................................... $ 42,331 $ 88,311 $ 77,164 $ 81,695
Gross profit................................. 8,208 14,947 11,548 13,927
Income from continuing operations............ 2,696 4,221 2,059 10,837
Income from discontinued operations.......... 1,044 600 956 1,621
Net Income................................... $ 3,740 $ 4,821 $ 3,015 $ 12,458
======= ======= ======= =======
Primary Earnings Per Share:
Continuing Operations...................... $ .31 $ .39 $ .19 $ 1.00
Discontinued Operations.................... .12 .06 .09 .15
------- ------- ------- -------
Net Income................................. $ .43 $ .45 $ .28 $ 1.15
======= ======= ======= =======
NOTE 1 -- On July 31, 1996, the Company completed the sale of substantially all
of the assets of Bennett Industries, Inc., a wholly-owned subsidiary
which manufactures plastic containers, for $50.8 million in cash,
resulting in a pretax gain of $13.8 million recognized in the third
quarter of 1996. The results of operations for Bennett have been
classified as discontinued operations for all periods presented. The
assets and liabilities of Bennett have been classified in the
consolidated balance sheets as net assets of discontinued operations
at December 31, 1995.
NOTE 2 -- On March 31, 1995, the Company acquired all of the shares of RB&W
Corporation in exchange for 2,023,000 shares of the Company's common
stock and cash. The transaction has been accounted for as a purchase
and, accordingly, the operations of RB&W have been included since that
date.
NOTE 3 -- Effective December 31, 1995, the Company recorded the deferred tax
assets relating to anticipated future income tax benefits from
utilization of net operating loss carryforwards, resulting in a credit
of $8.1 million for the year ended December 31, 1995. Therefore, as of
January 1, 1996, the Company began to fully provide Federal income
taxes.
NOTE 4 -- Included in income from continuing operations for the quarter ended
September 30, 1996, is a gain on the sale of securities of $1.0
million, net of income taxes.
28
30
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, 1996.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in "Election of Directors" on pages 2 and 3 of
Park-Ohio's Proxy Statement, dated April 16, 1997, is incorporated herein by
reference. Information relating to executive officers of Park-Ohio is contained
under Part I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information relating to executive compensation contained under the
headings "Certain Matters Pertaining to the Board of Directors" on page 6,
"Executive Compensation" on pages 7 and 8, and "Information Concerning Executive
Officers -- Executive Agreements" on page 12, of Park-Ohio's Proxy Statement,
dated April 16, 1997, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the heading "Beneficial Ownership of
Shares" on pages 4 and 5 of Park-Ohio's Proxy Statement, dated April 16, 1997,
relating to the beneficial ownership of Park-Ohio's Common Stock is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information concerning related transactions contained under the heading
"Information Concerning Executive Officers -- Related Transactions" on page 12
of Park-Ohio's Proxy Statement, dated April 16, 1997, is incorporated herein by
reference.
29
31
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:
PAGE
-----
Report of Independent Auditors.................................................... 11
Financial Statements
Consolidated balance sheets -- December 31, 1996 and 1995...................... 12
Consolidated statements of income -- years ended December 31, 1996, 1995 and
1994.......................................................................... 13
Consolidated statements of shareholders' equity -- years ended December 31,
1996, 1995 and 1994........................................................... 14
Consolidated statements of cash flows -- years ended December 31, 1996, 1995
and 1994...................................................................... 15
Notes to consolidated financial statements..................................... 16-27
Selected quarterly financial data (unaudited) -- years ended December 31, 1996 and
1995........................................................................... 28
(3) Exhibits included herein:
(3)(A) Amended Articles of Incorporation of Park-Ohio.............. ****
(3)(B) Code of Regulations of Park-Ohio............................ ****
Instruments defining the rights of security holders:
(4)(A) See Exhibits (3)(A) and (B)
(4)(B) Credit Agreement among Park-Ohio Industries, Inc., and
various financial institutions, dated April 11, 1995........ *****
(4)(C) Indenture dated May 3, 1994 between Park-Ohio Industries,
Inc. and Society Bank, Michigan, as Trustee................. ***
(10)(A) Form of Indemnification Agreement entered into between
Park-Ohio Industries, Inc. and each of its directors and
certain officers............................................ *
(10)(B) Amended and Restated Plan and Agreement of Merger dated
February 6, 1995 among Park-Ohio Industries, Inc., P.O.
Acquisition Company, Inc. and RB&W Corporation.............. *****
(10)(C) Plan and Agreement of Merger dated October 1, 1993 among
Park-Ohio Industries, Inc., PO Acquisition Company, Inc.,
General Aluminum Mfg. Company and Edward F. Crawford........ **
(10)(D) Park-Ohio Industries, Inc. Amended and Restated 1992 Stock
Option Plan................................................. ******
(10)(E) Escrow Agreement dated October 15, 1993 among Park-Ohio
Industries, Inc., Edward F. Crawford and The Huntington
Trust Company, N.A.......................................... **
(10)(F) Employment Agreement between Park-Ohio Industries, Inc. And
John J. Murray dated effective January 1, 1995.............. *******
(10)(G) Asset Purchase Agreement dated as of May 28, 1996 among
North America Packaging Corporation, as Buyer, Bennett
Industries, Inc., as Seller, and Park-Ohio Industries,
Inc......................................................... ********
(10)(H) Non-Statutory Stock Option Agreement dated February 22, 1996
by and between Park-Ohio Industries, Inc., and Edward F.
Crawford.................................................... *********
(10)(I) 1996 Non-employee Director Stock Option Plan................ *********
(11) Computation of Net Income Per Common Share
30
32
(21) List of Subsidiaries of Park-Ohio Industries, Inc.
(23) Consent of Independent Auditors
(27) Financial Data Schedule (Electronic Filing Only)
- - ---------------
* These documents were filed as part of the registrant's Annual
Report on Form 10-K for the year ended December 31, 1992.
** These documents were filed as part of the registrant's Report on
Form 8-K filed with the Commission on November 1, 1993.
*** These documents were filed as part of the registrant's Report on
Form 8-K filed with the Commission on May 6, 1994.
**** These documents were filed as part of the registrant's Report on
Form S-3 (No. 33-86054)filed with the Commission on November 7,
1994.
***** These documents were part of the registrant's Form S-4 (No. 33-87230)
filed with the Commission on December 9, 1994, as amended.
****** These documents were filed as part of the Registrant's Report on Form
10-Q filed with the Commission on May 12, 1995.
******* These documents were filed as part of the Registrant's Report on Form
10-Q filed with the Commission on August 14, 1995.
******** These documents were filed as part of the Registrant's Report on Form
10-Q filed with the Commission on August 14, 1996.
********* These documents were filed as part of the Registrant's Definitive
Proxy Statement filed with the Commission on April 16, 1996.
Exhibits (10)(D), (10)(F) and (10)(H) are either a management
contract, compensatory plan or arrangement required to be filed as
an exhibit pursuant to Item 14(c) of this report.
(b) Reports on Form 8-K filed in the fourth quarter of 1996:
None
31
33
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
PARK-OHIO INDUSTRIES, INC.
(Registrant)
By: /s/ RONALD J.
COZEAN
----------------------
Ronald J. Cozean,
Secretary
Date: March 27, 1997
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.
/s/ EDWARD F. CRAWFORD Chairman and Chief Executive
- - ----------------------------------------
Officer (Principal Executive
Edward F. Crawford Officer) and Director
/s/ JOHN J. MURRAY President and Chief Operating
- - ----------------------------------------
Officer and Director
John J. Murray
/s/ JAMES S. WALKER Vice President -- and Chief
- - ----------------------------------------
Financial Officer (Principal
James S. Walker Financial and Accounting Officer)
/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/ RICHARD S. SHEETZ Director
- - ----------------------------------------
Richard S. Sheetz
/s/ JAMES W. WERT Director
- - ----------------------------------------
James W. Wert
March 27, 1997
32
34
ANNUAL REPORT ON FORM 10-K
PARK-OHIO INDUSTRIES, INC.
FOR THE YEAR ENDED DECEMBER 31, 1996
EXHIBIT INDEX
EXHIBIT
- - ----------------------------------------
(4)(D) First Amendment dated as of June 19, 1995 to the Credit Agreement among
Park-Ohio Industries, Inc. and various financial institutions dated April
11, 1995
(4)(E) Second Amendment dated as of December 5, 1995 to the Credit Agreement
among Park-Ohio Industries, Inc. and various financial institutions dated
April 11, 1995
(4)(F) Third Amendment dated as of April 11, 1996 to the Credit Agreement among
Park-Ohio Industries, Inc. and various financial institutions dated April
11, 1995
(4)(G) Fourth Amendment dated as of December 31, 1996 to the Credit Agreement
among Park-Ohio Industries, Inc. and various financial institutions dated
April 11, 1995
(11) Computation of Net Income per Common share
(21) List of Subsidiaries of Park-Ohio Industries,Inc.
(23) Consent of Independent Auditors
(27) Financial Data Schedule
(Electronic Filing Only)
33
