PARK OHIO HOLDINGS CORP

Previous wording

During the fourth quarter of 2022, we determined that our Aluminum Products business met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the held-for-sale assets and liabilities, the operating results and the cash flows of Aluminum Products in discontinued operations for all periods presented throughout this Report on Form 10-Q. On December 29, 2023, the Company sold this business to Angstrom Automotive Group (“Angstrom”) for approximately $50 million in cash and promissory notes, plus the assumption of approximately $3 million of financial lease obligations. The total purchase price consisted of a cash down payment of $20.0 million paid to the Company in December 2022; cash of $15.5 million paid to the Company at closing; and promissory notes totaling $15.0 million payable to the Company on approximately the one-year anniversary of the sale, of which $10.0 million is contingent on the Aluminum Products business attaining certain purchase commitments during 2024. See Note 5, “Discontinued Operations,” to the condensed consolidated financial statements, included elsewhere herein.

Current wording

During the fourth quarter of 2022, we determined that our Aluminum Products business met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the held-for-sale assets and liabilities, the operating results and the cash flows of Aluminum Products in discontinued operations for all periods presented throughout this Report on Form 10-Q. On December 29, 2023, the Company sold this business to Angstrom Automotive Group for approximately $50 million in cash and promissory notes, plus the assumption of approximately $3 million of financial lease obligations. The total purchase price consisted of a cash down payment of $20.0 million paid to the Company in December 2022; cash of $15.5 million paid to the Company at closing; and promissory notes totaling up to $15.0 million payable to the Company on approximately the one-year anniversary of the sale, of which $10.0 million is contingent on the Aluminum Products business attaining certain purchase commitments during 2024. See Note 5, “Discontinued Operations,” to the condensed consolidated financial statements, included elsewhere herein.

Previous wording

The factors explaining the changes in segment net sales for the three months ended March 31, 2024 compared to the corresponding 2023 period are contained in the “Segment Results” section below.

Current wording

The factors explaining the changes in segment net sales for the three months ended June 30, 2024 compared to the corresponding 2023 period are contained within the “Segment Results” section below.

Previous wording

Other Components of Pension and Other Postretirement Benefits Income, Net

Current wording

Other Components of Pension and Other Postretirement Benefits (“OPEB”) Income, Net

Previous wording

Net sales decreased 1.4% to $417.6 million in the first three months of 2024 compared to $423.5 million in the same period in 2023. This decrease was primarily due to lower sales in the Engineered Products and Assembly Components segments.

Current wording

Net sales decreased 0.2% to $850.2 million in the first six months of 2024 compared to $851.6 million in the same period in 2023. This decrease was primarily due to lower sales in the Assembly Components segment.

Previous wording

Cost of sales decreased 2.8% to $346.2 million in the first three months of 2024 compared to $356.3 million in the same period in 2023. The decrease in cost of sales was primarily due to the decrease in net sales described above. Gross margin was 17.1% in the 2024 period compared to 15.9% in the corresponding 2023 period. The year-over-year gross margin improvement was driven by higher operating profit in our Supply Technologies segment; and benefits from plant consolidation and other profit-improvement actions over the past two years, including product pricing.

Current wording

Cost of sales decreased to $705.6 million in the first six months of 2024 compared to $714.3 million in the same period in 2023, driven by ongoing profit improvement initiatives and the decrease in net sales described above. Gross margin was 17.0% in the 2024 period compared to 16.1% in the corresponding 2023 period. The year-over-year gross margin improvement was driven by improved operating profit in our Supply Technologies segment; higher sales and improved margins in our capital equipment business; and ongoing profit improvement initiatives.

Previous wording

SG&A expenses were $47.1 million in the first three months of 2024, compared to $45.3 million in the same period in 2023, an increase of 4.0%. As a percentage of net sales, SG&A expenses were 11.3% in the first three months of 2024 compared to 10.7% in the comparable period in 2023. These increases were driven by ongoing inflation and higher employee costs.

Current wording

SG&A expenses were $94.5 million in the first six months of 2024, compared to $92.1 million in the same period in 2023, an increase of 2.6%. As a percentage of net sales, SG&A expenses were 11.1% in the first six months of 2024 compared to 10.8% in the comparable period in 2023. These increases were driven by ongoing inflation and higher employee costs.

Previous wording

During the first three months of 2024, the Company recorded acquisition-related charges of $0.3 in connection with the acquisition of EMA Indutec GmbH (“EMA”).

Current wording

During 2024, the Company recorded acquisition-related charges of $0.3 million in connection with the acquisition of EMA Indutec GmbH (“EMA”), as well as $1.2 million in connection restructuring and other special charges, primarily in our Engineered Products segment.

Previous wording

During the first three months of 2023, the Company recorded restructuring, acquisition-related and other special charges of $2.5 million related primarily to severance in the Company's Engineered Products segment.

Current wording

During 2023, the Company recorded restructuring, acquisition-related and other special charges of $6.6 million, primarily in our Assembly Components and Engineered Products segments.

Previous wording

During the three months ended March 31, 2023, in connection with the plant closure and consolidation initiatives, the Company sold real estate within its Engineered Products segment for cash proceeds of $1.4 million, resulting in a gain of $0.8 million.

Current wording

During 2023, in connection with the plant closure and consolidation initiatives, the Company sold real estate within its Engineered Products segment for cash proceeds of $1.4 million, resulting in a gain of $0.8 million.

Previous wording

Other components of pension and other postretirement benefits income, net was $1.3 million in the first three months of 2024 compared to $0.7 million in the corresponding period in 2023. This increase was due to lower net actuarial losses impacting 2024 compared to 2023.

Current wording

Other components of pension and OPEB income, net was $2.7 million in the first six months of 2024 compared to $1.3 million in the corresponding period in 2023. This increase was due to lower net actuarial losses impacting 2024 compared to 2023.

Previous wording

Interest expense, net was $11.9 million in the first three months of 2024 compared to $10.7 million in the 2023 period. The increase was due primarily to higher interest rates, offset slightly by lower average outstanding debt balances in the 2024 period compared to the same period a year ago.

Current wording

Interest expense, net was $23.9 million in the first six months of 2024 compared to $21.8 million in the 2023 period. The increase was due primarily to higher interest rates, offset slightly by lower average outstanding debt balances in the 2024 period compared to the same period a year ago.

Previous wording

In the three months ended March 31, 2024, income tax expense was $3.3 million on pre-tax income from continuing operations of $13.4 million, representing an effective income tax rate of 25%. In the three months ended March 31, 2023, income tax expense was $2.6 million on pre-tax income of $10.2 million, representing an effective income tax rate of 25%.

Current wording

In the six months ended June 30, 2024, income tax expense was $5.9 million on pre-tax income from continuing operations of $27.4 million, representing an effective income tax rate of 22%. In the six months ended June 30, 2023, income tax expense was $4.7 million on pre-tax income of $18.9 million, representing an effective income tax rate of 25%.

Previous wording

Net sales increased $1.0 million in the three months ended March 31, 2024 compared to the 2023 period due continued strong demand in most of the Company's key end markets, with the largest increases in the civilian and military aerospace markets, partially offset by decreases in the consumer products, truck and truck-related, and agricultural and construction equipment markets. In addition, net sales benefited from higher customer demand for our proprietary products throughout North America and Europe.

Current wording

Net sales increased $6.4 million in the six months ended June 30, 2024 compared to the 2023 period due continued strong demand in most of the Company's key end markets, with the largest increases in the aerospace and defense and heavy-duty truck end markets, partially offset by decreases in the agricultural and industrial equipment, semiconductor and truck and truck-related equipment end markets. In addition, net sales benefited from higher customer demand for our proprietary products throughout North America and Europe in our fastener manufacturing business.

Previous wording

Segment operating income increased $5.5 million to $19.5 million for the three months ended March 31, 2024 compared to the 2023 period, and segment operating income margin increased 270 basis points in the 2024 period compared to the same period a year ago. These increases were due primarily to an increase in higher-margin sales and lower supply chain costs, and strong demand in our fastener manufacturing business.

Current wording

Segment operating income increased $9.1 million to $38.5 million in the six months ended June 30, 2024 compared to the 2023 period, and segment operating income margin increased 210 basis points in the 2024 period compared to the same period a year ago. These increases were due primarily to an increase in sales of higher-margin products and lower operating costs in our supply chain business, and strong demand in our fastener manufacturing business.

Previous wording

Segment operating income improved 17.8% to $8.6 million in the three months ended March 31, 2024 compared to $7.3 million in the 2023 period. The improvement in segment operating income in the 2024 period compared to the same period a year ago was driven by the benefit of ongoing profit improvement initiatives, improved product pricing and the benefit from completed plant closure and consolidation actions.

Current wording

Segment operating income of $15.5 million in the six months ended June 30, 2024 was in-line with the 2023 period. Segment operating income margin increased 30 basis points in the 2024 period compared to a year ago. The improvement in segment operating margin in the 2024 period compared to the same period a year ago was driven by the benefit of ongoing profit improvement initiatives and completed plant closure and consolidation actions, which more than offset the impact of lower product pricing and unit volumes. During the 2023 period, we incurred restructuring and other special charges of $1.5 million.

Previous wording

Net sales decreased 3.2% in the 2024 period compared to the 2023 period. The decrease was driven by lower capital equipment sales, partially offset by higher sales in our forged and machined business.

Current wording

Net sales increased 1.8% in the 2024 period compared to the 2023 period. The increase was driven by higher capital equipment sales and higher sales in our forged and machined products business.

Previous wording

Segment operating income in the 2024 period decreased $1.5 million compared to the 2023 period as a result of the lower sales and margins in our capital equipment business and higher operating costs in our forged and machined products business. The 2023 period included severance costs of $2.0 million.

Current wording

Segment operating income in the 2024 period increased $1.6 million compared to the 2023 period as a result of the higher sales and margins in our capital equipment business offset by higher operating costs in our forged and machined products business. During the 2024 and 2023 periods, we incurred restructuring and other special charges of $1.3 million and $4.9 million, respectively.

Previous wording

Capital expenditures were $5.8 million in the three months ended March 31, 2024 and were primarily to provide increased capacity for future growth in our Engineered Products and Assembly Components segments, to maintain existing operations and for information system implementation. Additionally, during the three months ended March 31, 2024, the Company paid $11.0 million, net of cash acquired for the EMA acquisition.

Current wording

Capital expenditures were $13.2 million in the six months ended June 30, 2024 and were primarily to provide increased capacity for future growth in our Engineered Products and Assembly Components segments, to maintain existing operations and for information system implementation. Additionally, during the six months ended June 30, 2024, the Company paid $11.0 million, net of cash acquired for the EMA acquisition.

Previous wording

Capital expenditures were $6.0 million in the three months ended March 31, 2023 and were primarily to provide increased capacity for future growth in our Engineered Products and Assembly Components segments, for facility consolidation in our Engineered Products segment and to maintain existing operations. Additionally, in the first quarter 2023, the Company sold real estate for cash proceeds of $1.4 million and made scheduled cash payments related to prior year acquisitions of $0.5 million.

Current wording

Capital expenditures were $13.4 million in the six months ended June 30, 2023 and were primarily to provide increased capacity for future growth in our Engineered Products and Assembly Components segments, for facility consolidation in our Engineered Products segment and to maintain existing operations.

Previous wording

During the three months ended March 31, 2023, we had net debt borrowings of $7.4 million to fund our higher working capital levels. In addition, in the three months ended March 31, 2023, the Company made a scheduled contingent consideration payment related to a prior acquisition totaling $1.3 million and cash dividend payments to shareholders totaling $1.6 million.

Current wording

During the six months ended June 30, 2024, we had net debt borrowings of $41.8 million to fund capital expenditures and the EMA acquisition. In addition, in the six months ended June 30, 2024, the Company made scheduled payments related to prior acquisitions totaling $0.8 million and made cash dividend payments to shareholders totaling $3.3 million.

Previous wording

During the three months ended March 31, 2024, we had net debt borrowings of $27.5 million to fund the EMA acquisition and capital expenditures. In addition, the Company made cash dividend payments to shareholders totaling $1.6 million.

Current wording

During the six months ended June 30, 2023, we had net debt borrowings of $18.5 million to fund our capital expenditures, made scheduled payments related to prior acquisitions totaling $2.0 million and made cash dividend payments to shareholders totaling $3.2 million.

Previous wording

As of March 31, 2024, we had total liquidity of $167.5 million, which included $61.6 million of cash and cash equivalents and $105.9 million of unused borrowing availability under our credit agreements.

Current wording

As of June 30, 2024, we had total liquidity of $158.2 million, which included $59.9 million of cash and cash equivalents and $98.3 million of unused borrowing availability under our credit agreements and excluded $2.4 million of suppressed availability.

Previous wording

The Company had cash and cash equivalents held by foreign subsidiaries of $50.4 million at March 31, 2024 and $44.6 million at December 31, 2023. We do not expect restrictions on repatriation of cash held outside the U.S. to have a material effect on our overall liquidity, financial condition or results of operations for the foreseeable future.

Current wording

The Company had cash and cash equivalents held by foreign subsidiaries of $49.4 million at June 30, 2024 and $44.6 million at December 31, 2023. We do not expect restrictions on repatriation of cash held outside the U.S. to have a material effect on our overall liquidity, financial condition or results of operations for the foreseeable future.

Previous wording

in September 2023, Park-Ohio Industries, Inc. (“Park-Ohio”) amended its Eighth Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for a revolving credit facility in the amount of $405.0 million, including a $40.0 million Canadian revolving subcommitment and a European revolving subcommitment in the amount of $30.0 million. Pursuant to the Credit Agreement, Park-Ohio has the option to increase the availability under the revolving credit facility by an aggregate incremental amount up to $70.0 million. The Credit Agreement matures on January 14, 2027.

Current wording

In September 2023, Park-Ohio amended its Seventh Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for a revolving credit facility in the amount of $405.0 million, including a $40.0 million Canadian revolving subcommitment and a European revolving subcommitment in the amount of $30.0 million. Pursuant to the Credit Agreement, Park-Ohio has the option to increase the availability under the revolving credit facility by an aggregate incremental amount up to $70.0 million. The Credit Agreement matures on January 14, 2027.

Previous wording

As of March 31, 2024, the Company had finance leases totaling $15.5 million.

Current wording

As of June 30, 2024, the Company had finance leases totaling $14.5 million.

Previous wording

The future availability of bank borrowings under the revolving credit facility provided by the Credit Agreement is based on (1) our calculated availability under the Credit Agreement and (2) if such calculated availability decreases below $50.625 million, our ability to meet a debt service ratio covenant. If our calculated availability is less than $50.625 million, our debt service coverage ratio must be greater than 1.0. At March 31, 2024, our calculated availability under the Credit Agreement was $100.8 million; therefore, the debt service ratio covenant did not apply.

Current wording

The future availability of bank borrowings under the revolving credit facility provided by the Credit Agreement is based on (1) our calculated availability under the Credit Agreement and (2) if such calculated availability decreases below $50.625 million, our ability to meet a debt service ratio covenant. If our calculated availability is less than $50.625 million, our debt service coverage ratio must be greater than 1.0. At June 30, 2024, our calculated availability under the Credit Agreement was $84.4 million; therefore, the debt service ratio covenant did not apply.

Previous wording

The Company declared and paid dividends to shareholders of $1.6 million during the three months ended March 31, 2024. On April 19 2024, the Company's Board of Directors declared a quarterly dividend of $0.125 per common share. The dividend will be paid on May 17, 2024 to shareholders of record as of the close of business on May 3, 2024 and will result in a cash outlay of approximately $1.6 million. Although we currently intend to pay a quarterly dividend on an ongoing basis, all future dividend declarations will be at the discretion of our Board of Directors and dependent upon then-existing conditions, including our operating results and financial condition, capital requirements, contractual restrictions, business prospects and other factors that our Board of Directors may deem relevant.

Current wording

The Company declared and paid dividends to shareholders of $3.3 million during the six months ended June 30, 2024. On July 19, 2024, the Company's Board of Directors declared a quarterly dividend of $0.125 per common share. The dividend will be paid on August 16, 2024 to shareholders of record as of the close of business on August 2, 2024 and will result in a cash outlay of approximately $1.6 million. Although we currently intend to pay a quarterly dividend on an ongoing basis, all future dividend declarations will be at the discretion of our Board of Directors and dependent upon then-existing conditions, including our operating results and financial condition, capital requirements, contractual restrictions, business prospects and other factors that our Board of Directors may deem relevant.