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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 000-03134
Park-Ohio Holdings Corp.
(Exact name of registrant as specified in its charter)
Ohio 34-1867219
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
6065 Parkland Boulevard, Cleveland,Ohio 44124
(Address of principal executive offices) (Zip Code)
(440) 947-2000
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, Par Value $1.00 Per SharePKOHThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve 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   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   No





1

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountings standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   No
Number of shares outstanding of registrant’s Common Stock, par value $1.00 per share, as of October 31, 2023: 13,088,278 shares.
2

Park-Ohio Holdings Corp. and Subsidiaries

Index


2

Part I. Financial Information 
3

Item 1.Financial Statements

4

Park-Ohio Holdings Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
September 30,
2023
December 31,
2022
(In millions)
ASSETS
Current assets:
Cash and cash equivalents$51.2 $58.2 
Accounts receivable, net265.8 246.3 
Inventories, net404.2 406.5 
Other current assets141.3 114.2 
Current assets held-for-sale - discontinued operations1
102.5 107.2 
Total current assets965.0 932.4 
Property, plant and equipment, net182.5 181.1 
Operating lease right-of-use assets46.8 54.7 
Goodwill108.8 108.9 
Intangible assets, net73.8 78.7 
Other long-term assets79.6 80.8 
Total assets$1,456.5 $1,436.6 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable$202.1 $221.0 
Current portion of long-term debt and short-term debt12.2 10.9 
Current portion of operating lease liabilities10.9 11.2 
Accrued expenses and other191.8 161.7 
Current liabilities held-for-sale - discontinued operations1
34.4 43.8 
Total current liabilities451.4 448.6 
Long-term liabilities, less current portion:
Long-term debt659.1 655.1 
Long-term operating lease liabilities36.3 43.7 
Other long-term liabilities22.4 21.3 
Total long-term liabilities717.8 720.1 
Park-Ohio Holdings Corp. and Subsidiaries shareholders' equity276.6 256.5 
Noncontrolling interests10.7 11.4 
Total equity287.3 267.9 
Total liabilities and shareholders' equity$1,456.5 $1,436.6 
(1) - Our continuing operations exclude the results of our Aluminum Products business unit, which is held-for-sale as of September 30, 2023 and December 31, 2022 and presented in discontinued operations for all periods presented.

Refer to the accompanying notes to these unaudited condensed consolidated financial statements.
5

Park-Ohio Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
 
(In millions, except per share data)
Net sales$418.8 $383.8 $1,270.4 $1,111.3 
Cost of sales348.8 331.4 1,063.1 956.3 
Selling, general and administrative expenses43.0 36.5 135.1 117.2 
Restructuring and other special charges 4.3 6.6 9.9 
Gains on sales of assets  (0.8)(2.9)
Operating income27.0 11.6 66.4 30.8 
Other components of pension income and other postretirement benefits expense, net0.6 2.7 1.9 8.3 
Interest expense, net(11.6)(9.0)(33.4)(23.7)
Income from continuing operations before income taxes16.0 5.3 34.9 15.4 
Income tax (expense) benefit(3.8)2.2 (8.5)2.9 
Income from continuing operations12.2 7.5 26.4 18.3 
Loss (income) attributable to noncontrolling interests0.3 (0.4)0.7 (1.1)
Income from continuing operations attributable to Park-Ohio Holdings Corp. common shareholders12.5 7.1 27.1 17.2 
Loss from discontinued operations, net of tax (Note 5)(1.4)(4.4)(4.8)(7.4)
Net income attributable to Park-Ohio Holdings Corp. common shareholders$11.1 $2.7 $22.3 $9.8 
Earnings per common share attributable to Park-Ohio Holdings Corp. common shareholders:
Basic:
Continuing operations$1.01 $0.58 $2.22 $1.42 
Discontinued operations$(0.11)$(0.36)(0.39)(0.61)
Total$0.90 $0.22 $1.83 $0.81 
Diluted:
Continuing operations$0.99 $0.58 $2.19 $1.41 
Discontinued operations$(0.11)$(0.36)(0.39)(0.61)
Total$0.88 $0.22 $1.80 $0.80 

Refer to the accompanying notes to these unaudited condensed consolidated financial statements.

6

Park-Ohio Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
 (In millions)
Net income attributable to Park-Ohio Holdings Corp. common shareholders before noncontrolling interest$10.8 $3.1 $21.6 $10.9 
Other comprehensive income (loss), net of tax:
Currency translation(9.3)(17.0)(3.8)(35.5)
Foreign currency forward contracts(0.1) (0.5)0.5 
Pension and other postretirement benefits1.0 0.1 3.9 0.2 
Total other comprehensive loss(8.4)(16.9)(0.4)(34.8)
Total comprehensive income (loss), net of tax2.4 (13.8)21.2 (23.9)
Comprehensive loss (income) attributable to noncontrolling interests0.3 (0.4)0.7 (1.1)
Comprehensive income (loss) attributable to Park-Ohio Holdings Corp. common shareholders$2.7 $(14.2)$21.9 $(25.0)

Refer to the accompanying notes to these unaudited condensed consolidated financial statements.

7

Park-Ohio Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity (Unaudited)

Common Stock
SharesAmountAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive Loss
Noncontrolling InterestsTotal
 (In whole shares)(In millions)
Balance at January 1, 202316,653,928 $16.6 $149.8 $238.8 $(86.9)$(61.8)$11.4 $267.9 
Other comprehensive
income
— — — 5.8 — 5.1 0.1 11.0 
Stock-based compensation expense— — 1.6 — — — — 1.6 
Stock-based compensation activity9,535 0.1 (0.1)— — — —  
Dividends— — — (1.6)— — — (1.6)
Balance at March 31, 202316,663,463 16.7 151.3 243.0 (86.9)(56.7)11.5 278.9 
Other comprehensive income (loss)— — — 5.4 — 2.9 (0.5)7.8 
Stock-based compensation expense— — 1.7 — — — — 1.7 
Stock-based compensation activity309,237 0.3 (0.3)— — — —  
Dividends— — — (1.6)— — — (1.6)
Payments of withholding taxes on share awards
— — — — (1.2)— — (1.2)
Balance at June 30, 202316,972,700 17.0 152.7 246.8 (88.1)(53.8)11.0 285.6 
Other comprehensive income (loss) — — — 11.1 — (8.4)(0.3)2.4 
Stock-based compensation expense— 1.6 — — — — 1.6 
Stock-based compensation activity36,949 — — — — — — — 
Dividends— — — (1.6)— — — (1.6)
Payments of withholding taxes on share awards
— — — — (0.7)— — (0.7)
Balance at September 30, 202317,009,649 $17.0 $154.3 $256.3 $(88.8)$(62.2)$10.7 $287.3 
8

Common Stock
SharesAmountAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive Loss
Noncontrolling InterestsTotal
 (In whole shares)(In millions)
Balance at January 1, 202216,339,722 $16.3 $142.9 $259.4 $(85.3)$(19.2)$10.7 $324.8 
Other comprehensive
income (loss)
— — — 6.1 — (3.1)0.2 3.2 
Stock-based compensation expense— — 1.6 — — — — 1.6 
Stock-based compensation activity(5,502)— — — — — — — 
Dividends— — — (1.6)— — — (1.6)
Payments of withholding taxes on share awards
— — — — (0.1)— — (0.1)
Balance at March 31, 202216,334,220 16.3 144.5 263.9 (85.4)(22.3)10.9 327.9 
Other comprehensive income (loss)— — — 1.0 — (14.8)0.5 (13.3)
Stock-based compensation expense— — 1.8 — — — — 1.8 
Stock-based compensation activity308,621 0.3 (0.3)— — — —  
Dividends— — — (1.6)— — — (1.6)
Payments of withholding taxes on share awards
— — — — (1.0)— — (1.0)
Balance at June 30, 202216,642,841 16.6 146.0 263.3 (86.4)(37.1)11.4 313.8 
Other comprehensive income (loss)— — — 2.7 — (16.9)0.4 (13.8)
Stock-based compensation expense— — 2.0 — — — — 2.0 
Stock-based compensation activity7,497 — — — — — — — 
Dividends— — — (1.6)— — (0.6)(2.2)
Payments of withholding taxes on share awards
— — — — (0.2)— — (0.2)
Balance at September 30, 202216,650,338 $16.6 $148.0 $264.4 $(86.6)$(54.0)$11.2 $299.6 

Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Dividends per common share$0.125 $0.125 $0.375 $0.375 

Refer to the accompanying notes to these unaudited condensed consolidated financial statements.
9

Park-Ohio Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
 Nine Months Ended September 30,
 20232022
 (In millions)
OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Income from continuing operations$26.4 $18.3 
Adjustments to reconcile income from continuing operations to net cash provided (used) by operating activities from continuing operations:
Depreciation and amortization23.4 22.7 
Stock-based compensation expense4.9 5.4 
Gains on sales of assets(0.8)(2.9)
Changes in operating assets and liabilities:
Accounts receivable(20.2)(34.0)
Inventories2.5 (51.2)
Prepaid and other current assets(30.8)(2.1)
Accounts payable and accrued expenses14.2 23.6 
Other4.7 (6.8)
Net cash provided (used) by operating activities from continuing operations24.3 (27.0)
INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
Purchases of property, plant and equipment(20.8)(20.0)
Proceeds from sales of assets2.0 4.0 
Business acquisitions, net of cash acquired(1.2)(21.9)
Net cash used in investing activities from continuing operations(20.0)(37.9)
FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
Proceeds from revolving credit facility, net1.4 90.0 
Payments on other debt(1.4)(3.1)
Proceeds from other debt5.1 2.7 
Proceeds from (payments on) finance lease facilities, net0.3 (2.0)
Payments related to prior acquisitions(2.1) 
Dividends(4.9)(5.3)
Payments of withholding taxes on share awards(1.9)(1.3)
Net cash (used) provided by financing activities from continuing operations(3.5)81.0 
DISCONTINUED OPERATIONS1:
Total used by operating activities(3.4)(4.4)
Total used by investing activities(2.0)(3.7)
Total used by financing activities(1.9)(2.5)
Decrease in cash and cash equivalents from discontinued operations(7.3)(10.6)
Effect of exchange rate changes on cash(0.5)(5.9)
Decrease in cash and cash equivalents(7.0)(0.4)
Cash and cash equivalents at beginning of period58.2 54.1 
Cash and cash equivalents at end of period$51.2 $53.7 
Interest paid$29.6 $18.5 
Income taxes paid$7.1 $1.8 
(1) - Our continuing operations exclude the results of our Aluminum Products business unit, which is held-for-sale as of September 30, 2023 and December 31, 2022 and presented in discontinued operations for all periods presented.

Refer to the accompanying notes to these unaudited condensed consolidated financial statements.
10

Park-Ohio Holdings Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2023

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 nine-month periods ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The balance sheet at December 31, 2022 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, 2022.

We determined that our Aluminum Products business met the held-for-sale and discontinued operations accounting criteria as of December 31, 2022 and September 30, 2023. 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 Form 10-Q. Unless otherwise indicated, amounts and activity in this Form 10-Q are presented on a continuing operations basis. See Note 5, “Discontinued Operations,” in the Notes to Consolidated Financial Statements (Unaudited) for further information.

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

No recently-issued accounting standards 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 customer 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.
11

Park-Ohio Holdings Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2023

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In millions)
PRODUCT LINE
Supply Technologies$166.3 $159.1 $508.2 $459.5 
Engineered specialty fasteners and other products26.5 26.8 77.7 71.0 
Supply Technologies Segment192.8 185.9 585.9 530.5 
Fuel, rubber and plastic products108.4 101.0 330.8 294.3 
Assembly Components Segment108.4 101.0 330.8 294.3 
Industrial equipment81.4 67.3 253.9 201.1 
Forged and machined products36.2 29.6 99.8 85.4 
Engineered Products Segment117.6 96.9 353.7 286.5 
Total revenues$418.8 $383.8 $1,270.4 $1,111.3 
Supply Technologies SegmentAssembly Components SegmentEngineered Products SegmentTotal Revenues
(In millions)
Three Months Ended September 30, 2023
GEOGRAPHIC REGION
United States$117.7 $73.0 $64.2 $254.9 
Europe37.5 4.2 21.4 63.1 
Asia16.1 8.2 15.3 39.6 
Mexico17.4 13.4 3.0 33.8 
Canada2.9 8.2 10.3 21.4 
Other1.2 1.4 3.4 6.0 
Total$192.8 $108.4 $117.6 $418.8 
Three Months Ended September 30, 2022
GEOGRAPHIC REGION
United States$115.1 $73.0 $54.8 $242.9 
Europe29.2 3.7 19.7 52.6 
Asia18.4 6.4 14.1 38.9 
Mexico19.2 10.6 3.4 33.2 
Canada3.2 6.6 4.5 14.3 
Other0.8 0.7 0.4 1.9 
Total$185.9 $101.0 $96.9 $383.8 

12

Park-Ohio Holdings Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2023

Supply Technologies SegmentAssembly Components SegmentEngineered Products SegmentTotal Revenues
(In millions)
Nine Months Ended September 30, 2023
GEOGRAPHIC REGION
United States$358.1 $236.8 $201.0 $795.9 
Europe115.1 13.3 51.9 180.3 
Asia46.5 20.1 51.2 117.8 
Mexico54.1 33.3 11.6 99.0 
Canada10.0 23.7 25.6 59.3 
Other2.1 3.6 12.4 18.1 
Total$585.9 $330.8 $353.7 $1,270.4 
Nine Months Ended September 2022
GEOGRAPHIC REGION
United States$324.7 $214.8 $165.6 $705.1 
Europe91.8 12.2 50.2 154.2 
Asia50.2 15.8 39.1 105.1 
Mexico51.9 29.0 11.4 92.3 
Canada9.3 20.6 14.6 44.5 
Other2.6 1.9 5.6 10.1 
Total$530.5 $294.3 $286.5 $1,111.3 


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 $67.9 million and $52.6 million at September 30, 2023 and December 31, 2022, respectively, are recorded in Accrued expenses and other in the Condensed Consolidated Balance Sheets.

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 $79.3 million and $56.7 million at September 30, 2023 and December 31, 2022, respectively, are recorded in Other current assets in the Condensed Consolidated Balance Sheets.


NOTE 4 — Segments

Our operating segments are defined as components of the enterprise for which separate financial information is available and evaluated on a regular basis by our chief operating decision maker to allocate resources and assess performance.

For purposes of measuring business segment performance, the Company 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 and share-based compensation and corporate office costs. Segment operating income reconciles to consolidated income before income taxes by adjusting for corporate costs; gains on sales of assets; other components of pension income and other postretirement benefits expense, net; and interest expense, net.

13

Park-Ohio Holdings Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2023
Results by business segment were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
(In millions)
NET SALES OF CONTINUING OPERATIONS:
Supply Technologies$192.8 $185.9 $585.9 $530.5 
Assembly Components1
108.4 101.0 330.8 294.3 
Engineered Products117.6 96.9 353.7 286.5 
$418.8 $383.8 $1,270.4 $1,111.3 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES:
Supply Technologies$15.6 $10.7 $45.0 $35.4 
Assembly Components1
11.2 2.6 26.9 0.7 
Engineered Products7.1 5.8 15.3 14.7 
Total segment operating income33.9 19.1 87.2 50.8 
Corporate costs(6.9)(7.5)(21.6)(22.9)
Gains on sales of assets  0.8 2.9 
Operating income27.0 11.6 66.4 30.8 
Other components of pension income and other postretirement benefits expense, net
0.6 2.7 1.9 8.3 
Interest expense, net(11.6)(9.0)(33.4)(23.7)
Income from continuing operations before income taxes1
$16.0 $5.3 $34.9 $15.4 
(1) - Our continuing operations exclude the results of our Aluminum Products business unit, which is held-for-sale as of September 30, 2023 and December 31, 2022 and presented in discontinued operations for all periods presented. Aluminum Products was previously included in our Assembly Components segment.

NOTE 5 — Discontinued Operations
A business is classified as held-for-sale when management having the authority to approve the action commits to a plan to sell the business, the sale is probable to occur during the next 12 months at a price that is reasonable in relation to its current fair value, and certain other criteria of ASC 360 are met. A business classified as held-for-sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. When the carrying amount of the business exceeds its estimated fair value less costs to sell, a loss is recognized and updated each reporting period as appropriate. A business held-for-sale is classified as discontinued operations if the disposal group is a component of an entity; the component of an entity meets the held-for-sale criteria of ASC 360; and disposal of the component of an entity represents a strategic shift that will have a major effect on the entity's operations and financial results.
During the fourth quarter of 2022, the Company determined that the 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 and the operating results of Aluminum Products in discontinued operations for all periods presented in this Quarterly Report on Form 10-Q. The Aluminum Products business was previously reported in the Company’s Assembly Components segment until meeting the discontinued operations criteria. See Note 10 for further discussion related to the potential sale of this business.

14

Park-Ohio Holdings Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2023
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Net sales$45.4 $51.9 $137.7 $171.5 
Cost of sales41.6 52.8 129.6 165.5 
Selling, general and administrative4.9 3.3 12.5 10.6 
Restructuring and other special charges 0.5  3.7 
Operating loss(1.1)(4.7)(4.4)(8.3)
Interest expense1
(1.1)(0.6)(2.6)(2.0)
Loss from operation of discontinued operations(2.2)(5.3)(7.0)(10.3)
Income tax benefit0.8 0.9 2.2 2.9 
Loss from discontinued operations, net of tax$(1.4)$(4.4)$(4.8)$(7.4)
(1) - Interest expense includes an allocation of interest that is not directly attributable to our Aluminum Products business. The allocations were $1.0 million and $0.5 million in the three months ended September 30, 2023 and 2022, respectively, and $2.3 million and $1.7 million in the nine months ended September 30, 2023 and 2022, respectively.
The following represents the details of assets and liabilities held-for-sale in each period:
September 30, 2023December 31, 2022
(In millions, except share data)
ASSETS
Current assets:
Accounts receivable, net$29.2 $24.9 
Inventories, net20.5 30.2 
Other current assets1.8 1.2 
Current assets held-for-sale1
51.5 56.3 
Property, plant and equipment, net47.9 46.1 
Operating lease right-of-use assets3.1 4.8 
Long-term assets held-for-sale1
51.0 50.9 
Total assets held-for-sale$102.5 $107.2 
LIABILITIES
Current liabilities:
Trade accounts payable$19.9 $22.8 
Current portion of finance lease liabilities1.7 2.4 
Current portion of operating lease liabilities1.4 2.3 
Other accrued expenses7.7 10.7 
Current liabilities held-for-sale1
$30.7 $38.2 
Long-term liabilities, less current portion:
Long-term finance lease liabilities2.0 3.1 
Long-term operating lease liabilities1.7 2.5 
Long-term liabilities held-for-sale1
3.7 5.6 
Total liabilities held-for-sale$34.4 $43.8 

(1) - We reasonably expect to finalize the sale of the Aluminum Products business in the next twelve months, and therefore we have presented all assets and liabilities held-for-sale as current in the Condensed Consolidated Balance Sheet.
15

Park-Ohio Holdings Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2023


NOTE 6 — Plant Closure and Consolidation

During the three and nine months ended September 30, 2023 and 2022, the Company incurred the following expenses related to plant closure and consolidation in connection with its profit-improvement actions across its segments. These charges are included in Restructuring and other special charges in the Condensed Consolidated Statements of Income.

 Facility-Related CostsSeverance and Other Total
Three months ended September 30, 2023:
Assembly Components$ $ $ 
Engineered Products   
Total$ $ $ 
Three months ended September 30, 2022:
Assembly Components$1.2 $ $1.2 
Engineered Products1.4  1.4 
Total$2.6 $ $2.6 

 Facility-Related CostsSeverance and Other Total
Nine months ended September 30, 2023:
Assembly Components$0.5 $ $0.5 
Engineered Products2.7 1.9 4.6 
Total$3.2 $1.9 $5.1 
Nine months ended September 30, 2022:
Assembly Components$4.2 $ $4.2 
Engineered Products2.7 0.1 2.8 
Total$6.9 $0.1 $7.0 

The actions in the Assembly Components segment were primarily in connection with actions taken to close and consolidate its extrusion operations in Tennessee and its fuel operations in Michigan, relocate certain production to lower-cost facilities with open capacity, and complete other cost-reduction actions.

The actions in the Engineered Product segment were primarily in connection with plant closure and consolidation of multiple locations, and to complete other cost-reduction actions.

As of September 30, 2023, the Company was substantially complete with these actions.
16

Park-Ohio Holdings Corp. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 2023

NOTE 7 — Inventories

Inventories, net consist of the following:
September 30, 2023December 31, 2022
(In millions)
Raw materials and supplies$103.8 $105.0 
Work-in-process52.6 42.9 
Finished goods247.8 258.6 
Inventories, net$404.2 $406.5 

NOTE 8 — 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 nine months ended September 30, 2023 and 2022:

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In millions)
Beginning balance$5.8 $6.4 $5.2 $7.2 
Claims paid(0.4)(0.5)(1.7)(1.3)
Warranty expense0.1 0.1 2.4 0.6 
Foreign currency translation(0.3)(0.3)(0.7)(0.8)
Ending balance$5.2 $5.7 $5.2 $5.7 


NOTE 9 — 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.
In the three months ended September 30, 2023, income tax expense was $3.8 million on pre-tax income from continuing operations of $16.0 million, representing an effective income tax rate of 24%. In the three months ended September 30, 2022, income tax benefit was $2.2 million on pre-tax income of $5.3 million. The benefit in 2022 included a discrete tax benefit of $2.7 million related to various tax credits and a reduction to the Global Intangible Low-Taxed Income (“GILTI”) inclusion.

In the nine months ended September 30, 2023, income tax expense was $8.5 million on pre-tax income from continuing operations of $34.9 million, representing an effective income tax rate of 24%. In the nine months ended September 30, 2022, income tax benefit was $2.9 million on pre-tax income of $15.4 million. The benefit in 2022 included a discrete tax benefit of $5.9 million related to various tax credits and a reduction to the GILTI inclusion.


NOTE 10 — Financing Arrangements

Debt consists of the following:
17

Park-Ohio Holdings Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2023

Carrying Value at
Maturity DateInterest Rate at
September 30, 2023
September 30, 2023December 31, 2022
(In millions)
Senior NotesApril 15, 20276.625 %$350.0 $350.0 
Revolving credit facilityJanuary 14, 20277.17 %286.8 285.3 
Finance LeasesVariousVarious18.8 18.5 
OtherVariousVarious18.8 15.3 
Total debt674.4 669.1 
Less: Current portion of long-term debt and short-term debt(12.2)(10.9)
Less: Unamortized debt issuance costs (3.1)(3.1)
Total long-term debt$659.1 $655.1 

In addition to debt listed above, on December 30, 2022, the Company entered into a memorandum of understanding (the “MOU”) with a third party pursuant to which the third party would purchase our Aluminum Products business. The sale of the Aluminum Products business is subject to the successful completion of a definitive purchase agreement and other customary conditions. In connection with the MOU, the Company also entered into a financing arrangement with the third party pursuant to which the Company received a portion of the estimated purchase price of the Aluminum Products business, including $20.0 million of cash and a promissory note in the principal amount of $25.0 million, and recorded a financing arrangement liability of $45.0 million. The Company used the $20.0 million from this financing arrangement to repay indebtedness under its revolving credit facility. If a definitive purchase agreement between the parties is not entered into or the sale is not successfully consummated, the promissory note will be cancelled and the Company will repay the third party $20.0 million.

On September 13, 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. As of September 30, 2023, we had borrowing availability of $99.2 million under the Credit Agreement.

We had outstanding bank guarantees and letters of credit under our credit arrangements of approximately $42.5 million at September 30, 2023 and $41.0 million at December 31, 2022.

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.
The following table represents fair value information of the Notes, classified as Level 1 using estimated quoted market prices.
18

Park-Ohio Holdings Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2023


September 30, 2023December 31, 2022
(In millions)
Carrying amount$350.0 $350.0 
Fair value$306.0 $227.5 

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 11 — Stock-Based Compensation

A summary of restricted share activity for the nine months ended September 30, 2023 is as follows:

2023
Time-BasedPerformance-Based
Number of SharesWeighted Average
Grant Date
Fair Value
Number of SharesWeighted Average
Grant Date
Fair Value
(In whole shares)(In whole shares)
Outstanding - beginning of year716,242 $20.53 50,000 $32.55 
Granted(a)
369,238 16.12   
Vested(306,433)19.83   
Canceled or expired(4,517)19.91   
Outstanding - end of period774,530 $18.71 50,000 $32.55 
(a) - Included in this amount is 9,000 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 $1.6 million and $2.0 million for the three months ended September 30, 2023 and 2022, respectively. Total stock-based compensation expense was $4.9 million and $5.4 million for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there was $9.0 million of unrecognized compensation cost related to non-vested stock-based compensation, which cost is expected to be recognized over a weighted-average period of 2.0 years.

NOTE 12 — 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.

19

Park-Ohio Holdings Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2023

In addition to the routine lawsuits and asserted claims noted above, we are also a co-defendant in 128 cases asserting claims on behalf of 178 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 13 — Pension and Postretirement Benefits

The components of net periodic benefit (income) expense costs recognized for the three and nine months ended September 30, 2023 and 2022 were as follows:

Pension BenefitsPostretirement Benefits
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
 20232022202320222023202220232022
(In millions)
Service costs$0.9 $1.1 $3.4 $3.3 $ $ $ $ 
Interest costs0.9 0.4 2.6 1.3   0.2 0.1 
Expected return on plan assets(2.5)(3.2)(7.5)(9.7)  (