PARK OHIO HOLDINGS CORP

NOTE 1 —Basis of Presentation

The condensed consolidated financial statements include the accounts of Park-Ohio Holdings Corp. and its subsidiaries (collectively, “we,” “our” or the “Company”). All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- and six-month periods ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. The balance sheet at December 31, 2024 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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.

NOTE 2 —New Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This guidance requires additional annual disclosures for income taxes. This guidance will not affect the recognition, measurement or financial statement presentation. The amendments are effective for fiscal years beginning after December 15, 2024. We are in the process of evaluating the impact of adopting this guidance on our consolidated financial statement disclosures.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This guidance requires tabular footnote disclosure of certain operating expenses disaggregated into categories, such as employee compensation, depreciation, and intangible asset amortization, included within each interim and annual income statement’s expense caption, as applicable. The effective date of this guidance is for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. We are in the process of evaluating the impact of adopting this guidance on our consolidated financial statement disclosures.

No other recently-issued accounting standard updates are expected to have a material impact on our results of operations, financial condition or liquidity.

NOTE 3 —Revenue

We disaggregate our revenue by product line and geographic region of our customers as we believe these metrics best depict how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors. See details in the tables below.

For over time arrangements, contract assets primarily relate to revenue recognized in advance of billings to customers under long-term contracts accounted for under percentage of completion. These amounts, which totaled $50.6 million and $45.3 million at June 30, 2025 and December 31, 2024, respectively, are recorded in Other current assets in the Condensed Consolidated Balance Sheets.

For over time arrangements, contract liabilities primarily relate to advances or deposits received from the Company’s customers before revenue is recognized. These amounts, which totaled $43.4 million and $53.1 million at June 30, 2025 and December 31, 2024, respectively, are recorded in Accrued expenses and other in the Condensed Consolidated Balance Sheets.

NOTE 4 —Segments

The Company operates three reportable segments: Supply Technologies, Assembly Components and Engineered Products. The chief operating decision maker is the Company's Chief Executive Officer. For purposes of measuring business segment performance, the chief operating decision maker utilizes segment operating income, which is defined as revenues less expenses identifiable to the product lines within each segment. The Company does not allocate items that are non-operating; unusual in nature; or corporate costs, which include but are not limited to executive compensation and corporate office costs. Segment operating income reconciles to consolidated income before income taxes by adjusting for corporate costs; other components of pension and other postretirement benefits income, net; and interest expense, net.

Results by business segment were as follows:

NOTE 5 —Inventories

Inventories, net consist of the following:

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 6 —Accrued Warranty Costs

The Company estimates warranty claims that may be incurred based on current and historical data of products sold. Actual warranty expense could differ from the estimates made by the Company based on product performance. The following table presents changes in the Company’s product warranty liability for the three and six months ended June 30, 2025 and 2024:

NOTE 7 —Income Taxes

The Company’s tax provision for interim periods is determined using an estimate of its annual effective rate, adjusted for discrete items in each period, if any.

The effective income tax rates of 17% and 18% for the three and six months ended June 30, 2025, respectively, differed from the U.S. federal statutory rate of 21% (the “U.S. statutory rate”) due primarily to federal research and development tax credit benefit (“R&D benefit”), partially offset by income earned at certain of our foreign entities that are taxed at higher rates than the U.S. statutory rate.

The effective income tax rates of 19% and 22% for the three and six months ended June 30, 2024, respectively, differed from the U.S. statutory rate of due primarily to the R&D benefit and income earned at certain of our foreign entities that are taxed at higher rates than the U.S. statutory rate.

On July 4, 2025, the One Big Beautiful Bill Act (“2025 U.S. tax reform”) was enacted into law. The 2025 U.S. tax reform contains several key tax laws, including extensions and modifications of the Tax Cuts and Jobs Act. In accordance with Accounting Standards Codification (ASC) 740, Income Taxes, the Company is required to recognize the effect of the tax law changes in the period of enactment. The Company is in the process of assessing the impacts from the 2025 U.S. tax reform and will record any tax impact beginning in the third quarter.

NOTE 8 —Financing Arrangements

Debt consists of the following:

In September 2023, Park-Ohio Industries, Inc. (“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 was scheduled to mature on January 14, 2027. As of June 30, 2025, we had borrowing availability of $102.7 million under the Credit Agreement. In July 2025, Park-Ohio entered into an amendment to the Credit Agreement in order to, among other things, extend the maturity date to the fifth anniversary from the closing of the amendment.

We had outstanding bank guarantees and letters of credit under our credit arrangements of $37.7 million at June 30, 2025 and $38.5 million at December 31, 2024.

In 2017, Park-Ohio completed the issuance, in a private placement, of $350.0 million aggregate principal amount of 6.625% Senior Notes due 2027 (the “Notes”). The Notes are unsecured senior obligations of Park-Ohio and are guaranteed on an unsecured senior basis by the 100% owned material domestic subsidiaries of Park-Ohio. On July 31, 2025, Park-Ohio completed its offering of $350.0 million aggregate principal amount of senior secured notes due 2030 (the "New Notes") in a private offering. Park-Ohio intends to use the net proceeds from the New Notes, along with cash on hand, to redeem all of the outstanding Notes. See Note 14 for further discussion.

The following table represents fair value information of the Notes, classified as Level 1 using estimated quoted market prices.

The fair value of the revolving credit facility is equal to its carrying value as the Company has the ability to repay the outstanding principal at par value at any time. The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments.

NOTE 9 —Stock-Based Compensation

A summary of restricted share activity for the six months ended June 30, 2025 is as follows:

(a) - Included in this amount are 2,422 restricted share units.

Stock-based compensation is included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Income. Total stock-based compensation expense was $1.3 million and $1.2 million for the three months ended June 30, 2025 and 2024, respectively. Total stock-based compensation expense was $2.8 million and $2.7 million for the six months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, there was $6.1 million of unrecognized compensation cost related to non-vested stock-based compensation, which is expected to be recognized over a weighted-average period of 1.6 years.

NOTE 10 —Commitments and Contingencies

The Company is subject to a variety of claims, suits, investigations and administrative proceedings with respect to commercial, premises liability, product liability, employment, personal injury and environmental matters arising from the ordinary course of business. The Company records a liability for loss contingencies in the consolidated financial statements when a loss is known or considered probable and the amount can be reasonably estimated. Our provisions are based on historical experience, current information and legal advice, and they may be adjusted in the future based on new developments. Estimating probable losses requires the analysis of multiple forecasted factors that often depend on judgments and potential actions by third parties. Although it is not possible to predict with certainty the ultimate outcome or cost of these matters, the Company believes they will not have a material adverse effect on our consolidated financial statements.

Our subsidiaries are involved in a number of contractual and warranty-related disputes. We believe that appropriate liabilities for these contingencies have been recorded; however, actual results may differ materially from our estimates.

In addition to the routine lawsuits and asserted claims noted above, we are also a co-defendant in 110 cases asserting claims on behalf of 152 plaintiffs alleging personal injury as a result of exposure to asbestos. In every asbestos case in which we are named as a party, the complaints are filed against multiple named defendants. Historically, we have been dismissed from asbestos cases. We intend to vigorously defend these cases and believe we will continue to be successful in being dismissed from such cases.

While it is not possible to predict the ultimate outcome of asbestos-related lawsuits, claims and proceedings due to the unpredictable nature of personal injury litigation, and although our results of operations and cash flows for a particular period could be adversely affected by asbestos-related lawsuits, claims and proceedings, management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial condition, liquidity or results of operations.

NOTE 11 —Pension and Postretirement Benefits

The components of net periodic benefit (income) expense costs recognized for the three and six months ended June 30, 2025 and 2024 were as follows:

NOTE 12 —Accumulated Other Comprehensive Loss

The components of and changes in accumulated other comprehensive loss for the three and six months ended June 30, 2025 and 2024 were as follows:

(a)No income taxes were provided on currency translation as foreign earnings are considered permanently reinvested.

NOTE 13 —Weighted-Average Number of Shares Used in Computing Earnings Per Share

The following table sets forth the weighted-average number of shares used in the computation of earnings per share:

Anti-dilutive restricted stock awards, if any, are excluded from the computation of diluted earnings per share. Anti-dilutive shares were 0.0 million for both the three and six months ended June 30, 2025 and 2024.

In June 2024, the Company entered into an agreement providing for an at-the-market program (“ATM program”) authorizing the sale of up to $50.0 million of the Company's common stock. No sales were made in the six months ended June 30, 2025, and the Company has $34.1 million remaining under the ATM program.

NOTE 14 —Subsequent Events

On July 18, 2025, the Company's Board of Directors declared a quarterly dividend of $0.125 per common share. The dividend will be paid on August 15, 2025 to shareholders of record as of the close of business on August 1, 2025 and will result in a cash outlay of approximately $1.8 million.

On July 31, 2025, Park-Ohio completed its offering of $350.0 million aggregate principal amount of New Notes in a private offering. The New Notes were priced at 99.50% of par and bear an interest rate of 8.50% per annum. The New Notes are senior secured obligations of Park-Ohio and are guaranteed (with certain exceptions) by Park-Ohio's domestic subsidiaries that guarantee the debt under the Credit Agreement on a senior secured basis. Park-Ohio intends to use the net proceeds from the offering of the New Notes, along with cash on hand, to redeem all $350.0 million aggregate principal amount of its outstanding Notes and pay related fees and expenses.

In July 2025, Park-Ohio entered into an amendment to the Credit Agreement in order to, among other things, extend the maturity date to the fifth anniversary from the closing of the amendment.