Form
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
SECURITIES
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
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000-03134
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) | |
Title of each class | Name of each exchange on which registered | |
| Common Stock, Par Value $1.00 Per Share | The NASDAQ Stock Market LLC | |
Large accelerated filer | ¨ | Accelerated filer | |||||||
| Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ | ||||||
30, 2014.
27, 2015
, 12,500,129 shares of the registrant’s common stock, $1 par value, were outstanding.Supply Technologies provides our customers with Total Supply Management allocated to segments excludes certain corporate expenses, interest expense, and Supply Technologies Assembly Components operating divisions or locations, accounted for approximately flexibility necessary to quickly adjust to the needs of its customers. There are few domestic companies with capabilities able to meet the customers’ stringent quality and service standards and lean manufacturing techniques. As one of these suppliers, Assembly Components is well-positioned to benefit as customers continue to consolidate their supplier base. Principal competitors in the Assembly Components segment are Chassix, Martinrea and Stant. components. Management believes that Assembly Components’ backlog as of any particular date is not a meaningful measure of sales for any future period as a significant portion of sales are on a release or firm order basis. The backlog of Engineered Products’ orders believed to be firm as of December 31, 2015. the proceedings on remand. regulation, reduced alternatives or failures of significant financial institutions could adversely affect our access to liquidity needed for our business. Any disruption could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged. Such measures could include deferring capital expenditures and reducing or eliminating future share repurchases or other discretionary uses of cash. Overall, our results of operations, financial condition and cash flows could be materially adversely affected by disruptions in the credit markets. the loss of any key customer, in whole or in part; the insolvency or bankruptcy of any key customer; a declining market in which customers reduce orders or demand reduced prices; or a strike or work stoppage at a key customer facility, which could affect both their suppliers and customers. fluctuations in currency exchange rates; limitations on ownership and on repatriation of earnings; transportation delays and interruptions; political, social and economic instability and disruptions; potential disruption that could be caused with the partial or complete reconfiguration of the European Union; government embargoes or foreign trade restrictions; the imposition of duties and tariffs and other trade barriers; import and export controls; labor unrest and current and changing regulatory environments; disadvantages of competing against companies from countries that are not subject to U.S. laws and regulations including the U.S. Foreign Corrupt Practices Act (“FCPA”); difficulties in staffing and managing multinational operations; limitations on our ability to enforce legal rights and remedies; and potentially adverse tax consequences. can sell our products or otherwise having an adverse effect on our business, financial condition or results of operations. We cannot assure you that we will continue to operate in compliance with applicable customs, currency exchange control regulations, transfer pricing regulations or any other laws or regulations to which we may be subject. We also cannot assure you that these laws will not be modified. historical results of operations. For additional information, see Note and have sufficient productive capacity to meet our current needs. Related Industry Segment Location Owned or Leased Approximate Square Footage Use ASSEMBLY COMPONENTS ENGINEERED PRODUCTS(4) 2014 Contents Quarter 1st 2nd 3rd 4th 444. Period October 1 — October 31, 2012 November 1 — November 30, 2012 (2) December 1 — December 31, 2012 (1) TOTAL Selected Statement of Operations Data: Net sales Cost of products sold(a) Gross profit Selling, general and administrative expenses Goodwill impairment charge Settlement of litigation Restructuring and impairment charges(a) Operating income (loss)(a) Gain on purchase of 8.375% senior subordinated notes Gain on acquisition of business Interest expense Income (loss) before income taxes Income tax expense (benefit) Net income (loss) Amounts per common share: Basic Diluted Other Financial Data: Net cash flows provided by operating activities Net cash flows used by investing activities Net cash flows provided (used) by financing activities Depreciation and amortization Capital expenditures, net Selected Balance Sheet Data (as of period end): Cash and cash equivalents Working capital Property, plant and equipment Total assets Total debt Shareholders’ equity Non-cash charges: Cost of products sold (inventory write-down) Asset impairment Restructuring and severance Total Charges reflected as restructuring and impairment charges on income statement 2012. assembly services that are incorporated into our customer’s end products. Our product offerings include cast and machined aluminum engine, transmission, brake, suspension and other components, such as pump housings, clutch retainers/pistons, control arms, knuckles, master cylinders, pinion housings, brake calipers, oil pans and flywheel spacers, Settlement Costs: Settlement Costs: approximately $5.2 million. Supply Technologies Assembly Components Engineered Products Consolidated Net Sales segment. Consolidated cost of products sold Consolidated gross profit Gross Margin Consolidated SG&A expenses SG&A percent Interest Expense: Percent Interest expense Debt extinguishment costs included in interest expense Amortization of deferred financing costs and bank service charges Average outstanding borrowings Average borrowing rate two years. Income before income taxes Income tax expense (benefit) Effective income tax rate Tax Expense: Percent Supply Technologies Assembly Components Engineered Products Consolidated Net Sales Consolidated cost of products sold Consolidated gross profit Gross Margin as follows: Consolidated SG&A expenses SG&A percent Percent Interest expense Debt extinguishment costs included in interest expense Amortization of deferred financing costs and bank service charges Average outstanding borrowings Average borrowing rate net sales was the incremental revenues in 2014 associated with the acquisitions of Bates of approximately $15.5 million and Autoform of approximately $13.1 million. These revenue increases were slightly offset by the expected reduced volumes in the fuel filler business of FRS as programs completed their life cycles in the second half of 2013. Income before income taxes Income tax (benefit) expense Effective income tax rate the associated reduction in overhead absorption related to the decline in volume. The first $22.0 million of borrowings is amortized based on a quarterly payment of $1.8 million commencing April 1, 2015. 2013 primarily consisted of net borrowings on debt instruments of $4.9 million, offset by financing activities related to stock compensation. (In thousands) Long-term debt obligations Interest obligations(1) Operating lease obligations Purchase obligations Postretirement obligations(2) Standby letters of credit and bank guarantees Total reported in our consolidated financial statements. Management has made their best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. We do not believe that there is great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Allowance for Obsolete and Slow Moving Inventory: Inventories are stated at the lower of cost or market value and have been reduced by an allowance for obsolete and slow-moving inventories. The estimated allowance is based on value when market information Business Combinations, Goodwill and Indefinite-Lived Assets: Business combinations are accounted for using the purchase method of accounting. This method requires the Company to record assets and liabilities of the business acquired at their estimated fair market values as of the acquisition date. Any excess of the cost of the acquisition over the fair value of the net assets acquired is recorded as goodwill. The Company uses valuation specialists to perform appraisals and assist in the determination of the fair values of the assets acquired and liabilities assumed. These valuations require management to make estimates and assumptions. segment, which typically ships a few large systems per year. products and services; raw material availability and pricing; fluctuations in energy costs; component part availability and pricing; changes in our relationships with customers and suppliers; the financial condition of our customers, including the impact of any bankruptcies; our ability to successfully integrate recent and future acquisitions into existing operations; the amounts and timing, if any, of purchases of our common stock; changes in general domestic economic conditions such as inflation rates, interest rates, tax rates, unemployment rates, higher labor and healthcare costs, recessions and changing government policies, laws and regulations, including the uncertainties related to the current global financial 2014 16, 2015 Apollo, Autoform and Saet. 16, 2015 Current assets: Cash and cash equivalents Accounts receivable, less allowances for doubtful accounts of $3,563 in 2012 and $5,483 in 2011 Inventories, net Deferred tax assets Unbilled contract revenue Other current assets Total current assets Property, plant and equipment: Land and land improvements Buildings Machinery and equipment Less accumulated depreciation Other assets: Goodwill and other intangible assets Other Current liabilities: Trade accounts payable Accrued expenses Current portion of long-term debt Current portion of other postretirement benefits Total current liabilities Long-term liabilities, less current portion: Senior Notes Credit facility Other long-term debt Deferred tax liabilities Other postretirement benefits and other long-term liabilities Shareholders’ equity: Capital stock, par value $1 per share Serial preferred stock: Authorized — 632,470 shares; Issued and outstanding — none Common stock: Authorized — 40,000,000 shares; Issued — 14,109,255 shares in 2012 and 13,813,774 in 2011 Additional paid-in capital Retained earnings Treasury stock, at cost, 1,872,265 shares in 2012 and 1,673,926 shares in 2011 Accumulated other comprehensive loss Net sales Cost of products sold Gross profit Selling, general and administrative expenses Restructuring and asset impairment charges Settlement of litigation Operating income Gain on acquisition of business Interest expense Income before income taxes Income tax expense (benefit) Net income Amounts per common share: Basic Diluted Net income Other comprehensive income: Foreign currency translation gain (loss) Pension and postretirement benefit adjustment, net of tax Total other comprehensive income (loss) Comprehensive income, net of tax Balance at January 1, 2010 Other comprehensive income Amortization of restricted stock Restricted share units exchanged for restricted stock Restricted stock awards Restricted stock cancelled Purchase of treasury stock (85,027 shares) Exercise of stock options (23,166 shares) Share-based compensation Balance at December 31, 2010 Other comprehensive income Amortization of restricted stock Restricted stock awards Purchase of treasury stock (114,930 shares) Exercise of stock options (223,300 shares) Share-based compensation Balance at December 31, 2011 Other comprehensive income Amortization of restricted stock Restricted stock awards Common stock award (31,606 shares) Restricted stock cancelled Purchase of treasury stock (198,339 shares) Exercise of stock options (38,250 shares) Income tax effect of share-based compensation exercises and vesting Income tax effect of suspended benefits from share-based compensation Share-based compensation Balance at December 31, 2012 OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization Restructuring and asset impairment charges Debt extinguishment costs Gain on acquisition of business Gain on sale of property Deferred income taxes Share-based compensation expense Changes in operating assets and liabilities excluding acquisitions of businesses: Accounts receivable Inventories and other current assets Accounts payable and accrued expenses Other Net cash provided by operating activities INVESTING ACTIVITIES Purchases of property, plant and equipment Proceeds from sale and leaseback transactions Business acquisitions, net of cash acquired Proceeds from the sale of property Net cash used by investing activities FINANCING ACTIVITIES Proceeds from term loans and other debt Payments on term loans and other debt Bank debt issue costs Proceeds from (payments on) revolving credit facility Issuance of 8.125% senior notes due 2021, net of deferred financing costs Redemption of 8.375% senior subordinated notes due 2014 Issuance of common stock under stock option plan Income tax effect of suspended benefits from share-based compensation Income tax effect of share-based compensation exercises and vesting Purchase of treasury stock Net cash provided (used) by financing activities Effect of exchange rate changes on cash (Decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Income taxes paid Interest paid (includes $5,720 of senior subordinated notes redemption costs in 2011) Finished goods Work in process Raw materials and supplies Property, Plant and Equipment: Property, plant and equipment are carried at cost. Additions and associated interest costs are capitalized and 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 ranging from December 31, 2014 and December 31, 2013: events or changes in circumstances indicate that we may not be able to recover the assets’ carrying amount. We measure the recoverability of assets to be held and used by a comparison of the carrying amount of the asset to the expected net future undiscounted cash flows to be generated by that asset, or, for identifiable intangibles with finite useful lives, by determining whether the amortization of the intangible asset balance over its remaining life can be recovered through undiscounted future cash flows. The amount of impairment of identifiable intangible assets with finite useful lives, if any, to be recognized is measured based on projected discounted future cash flows. We measure the amount of impairment of other long-lived assets (excluding goodwill) as the amount by which the carrying value of the asset exceeds the fair market value of the asset, which is generally determined, based on projected discounted future cash flows or appraised values. We classify long-lived assets to be disposed of other than by sale as held and used until they are disposed. . approach and other valuation techniques to estimate the fair value of our reporting units. Absent an indication of fair value from a potential buyer or similar specific transactions, we believe that using this methodology provides reasonable estimates of a reporting unit’s fair value. The income approach is based on projected future debt-free cash flow that is discounted to present value using factors that consider the timing and risk of the future cash flows. We believe that this approach is appropriate because it provides a fair value estimate based upon the reporting unit’s expected long-term operating and cash flow performance. This approach also mitigates most of the impact of cyclical 9) approximate fair value at December 31, 2014 and December 31, 2013. The fair values of long-term debt and pension plan assets are disclosed in Note 9 and Note 13, respectively. Net sales: Supply Technologies Assembly Components Engineered Products Segment operating income: Supply Technologies Assembly Components Engineered Products Corporate costs Settlement of litigation Gain on acquisition of business Restructuring and asset impairment charge Interest expense (includes $305 and $7,335 of debt extinguishment costs in 2012 and 2011) Income before income taxes Identifiable assets: Supply Technologies Assembly Components Engineered Products General corporate Depreciation and amortization expense: Supply Technologies Assembly Components Engineered Products General corporate Capital expenditures: Supply Technologies Assembly Components Engineered Products General corporate Supply Technologies: Supply Technologies Engineered specialty products Other Assembly Components: Fluid routing Aluminum products Rubber and plastics Screw products Engineered Products: Capital equipment Forged and machined products United States Asia Canada Mexico Europe Other Cash and cash equivalents Accounts receivable Inventories Prepaid expenses and other current assets Property, plant and equipment Customer relationships Trademarks and trade name Other assets Accounts payable Accrued expenses Deferred tax liability Other long-term liabilities Goodwill Total purchase price (Unaudited) Pro forma revenues Pro forma net income Earnings per share: Basic Diluted (Unaudited) Pro forma revenues Pro forma net income Earnings per share: Basic Diluted Balance at January 1, 2010 Foreign currency translation Acquisitions Balance at December 31, 2010 Foreign currency translation Finalization of Pillar purchase price allocation Balance at December 31, 2011 Foreign currency translation Acquisitions Balance at December 31, 2012 Non-contractual customer relationships Other Indefinite-lived tradenames Goodwill Goodwill and other intangible assets Pension assets Deferred financing costs, net Software development costs Other Totals Accrued salaries, wages and benefits Advance billings Warranty accrual Interest payable Taxes, income and other Other Totals Balance at beginning of year Claims paid during the year Warranty expense Acquired warranty liabilities Other Balance at end of year 8.125% senior notes due 2021 Revolving credit Term loan Other Less current maturities Total United States Outside the United States Current expense (benefit): Federal State Foreign Deferred expense (benefit): Federal State Foreign Income tax expense (benefit) Rate Reconciliation Tax at statutory rate Effect of state income taxes, net Effect of foreign operations Valuation allowance, federal and foreign Non-deductable items Gain on asset purchase Other, net Total Deferred tax assets: Postretirement benefit obligation Inventory Net operating loss and credit carryforwards Goodwill Other Total deferred tax assets Deferred tax liabilities: Depreciation and amortization Inventory Pension Intangible assets and other Total deferred tax liabilities Net deferred tax (liabilities) assets prior to valuation allowances Valuation allowances Net deferred tax (liability) asset Unrecognized Tax Benefit — January 1, Gross Increases — Tax Positions in Prior Period Gross Decreases — Tax Positions in Prior Period Gross Increases — Tax Positions in Current Period Settlements Lapse of Statute of Limitations Unrecognized Tax Benefit — December 31, October 1 of each year. The Notes mature on April 1, 2021. The Company is a party to a credit and security agreement, dated November 5, 2003, as amended (the “Credit Agreement”), with a group of banks, under which it may borrow or issue standby letters of credit or commercial letters of credit. Outstanding — beginning of year Granted Exercised Canceled or expired Outstanding — end of year Options exercisable $0.1 million. Outstanding — beginning of year Granted Vested Canceled or expired Outstanding — end of year 120,871. Litigation Judgment the Company to a foreign tax official that implicates the Foreign Corrupt Practices Act (“FCPA”). Change in benefit obligation Benefit obligation at beginning of year Service cost Interest cost Actuarial losses Benefits and expenses paid, net of contributions Benefit obligation at end of year Change in plan assets Fair value of plan assets at beginning of year Actual return (loss) on plan assets Company contributions Cash transfer to fund postretirement benefit payments Benefits and expenses paid, net of contributions Fair value of plan assets at end of year Funded (underfunded) status of the plans 2013: Noncurrent assets Noncurrent liabilities Current liabilities Amounts recognized in accumulated other comprehensive (income) loss Net actuarial loss Net prior service cost Net transition (asset) Accumulated other comprehensive loss Asset Category Equity securities Debt securities Other Collective trust and pooled insurance funds: Common stock Equity Funds Foreign Stock U.S. Government obligations Fixed income funds Corporate Bonds Cash and Cash Equivalents Hedge funds Other The following table presents a reconciliation of Level 3 assets, as defined in Note 1, held during the years ended December 31, Hedge Funds: 2012 2011 2013. Discount rate Expected return on plan assets Rate of compensation increase Components of net periodic benefit cost Service costs Interest costs Expected return on plan assets Transition obligation Amortization of prior service cost Recognized net actuarial loss Benefit (income) costs Other changes in plan assets and benefit obligations recognized in accumulated other comprehensive (income) loss AOCI at beginning of year Net (gain)/loss arising during the year Recognition of prior service cost/(credit) Recognition of (gain)/loss Total recognized in accumulated other comprehensive loss at end of year immaterial. 2013 2014 2015 2016 2017 2018 to 2022 Effect on total of service and interest cost components in 2012 Effect on postretirement benefit obligation as of December 31, 2012 2015. Accumulated Other Comprehensive Income (Loss) NUMERATOR Net income DENOMINATOR Denominator for basic earnings per share — weighted average shares Effect of dilutive securities: Employee stock options and restricted shares Denominator for diluted earnings per share — weighted average shares and assumed conversions Amounts per common share: Basic Diluted resulted in a cash outlay of approximately $1.6 million. Balance at January 1, 2010 Translation (loss) Net gain (loss) arising during the year, net of Recognition of prior service (cost) credit, net of tax of $(3) Recognition of gain (loss), net of tax of $71 Balance at December 31, 2010 Translation (loss) Net gain (loss) arising during the year, net of Recognition of prior service (cost) credit, net of tax of $(21) Recognition of gain (loss), net of tax of $203 Balance at December 31, 2011 Translation gain Net gain (loss) arising during the year, net of tax of $0 Recognition of prior service (cost) credit, net of tax of $(18) Recognition of gain (loss), net of tax of $563 Balance at December 31, 2012 Selected Quarterly Financial Data (Unaudited) 2012 Net sales Gross profit Net income Amounts per common share: Basic Diluted 2011 Net sales Gross profit Net income (loss) Amounts per common share: Basic Diluted Note Note Note Note Note Description Year Ended December 31, 2012: Allowances deducted from assets: Trade receivable allowances Inventory obsolescence reserve Tax valuation allowances Product warranty liability Year Ended December 31, 2011: Allowances deducted from assets: Trade receivable allowances Inventory obsolescence reserve Tax valuation allowances Product warranty liability Year Ended December 31, 2010: Allowances deducted from assets: Trade receivable allowances Inventory obsolescence reserve Tax valuation allowances Product warranty liability There were no changes in or disagreements with 2014 reference into this Item 9A. 2014. Plan Category Equity compensation plans approved by security holders (1) Equity compensation plans not approved by security holders Total 16, 2015 ExhibitItem No. Page 1. 1A. 1B. 2. 3. 4. 5. 6. 7. 7A. 8. 9. 9A. 9B. 10. 11. 12 13. 14. 15. On March 23, 2012, we completed the acquisition of Fluid Routing Solutions Holding Corp. (“FRS”), a leading manufacturer of automotive and industrial rubber and thermoplastic hose products and fuel filler and hydraulic fluid assemblies for the automotive and industrial industries. FRS will expand our sales of assembled components.During the second quarter of 2012, as a result of the FRS acquisition, we realigned our segments in order to better align our business with the underlying markets and customers that we serve. In so doing, we combined Aluminum Products, Rubber Products (previously included in the former Manufactured Products segment) and Delo Screw Products (previously included in thesegment) with FRS to form the Assembly Components segment. The former Manufactured Products segment is now referred to asand Engineered Products. The business segment results for the prior years have been reclassified to reflect these changes. Following is a description of each of our three reportable segments.TM™ services for a broad range of high-volume, specialty production components. Total Supply ManagementTM™ manages the efficiencies of every aspect of supplying production parts and materials to our customers’ manufacturing floor, from strategic planning to program implementation, and includes such services as engineering and design support, part usage and cost analysis, supplier selection, quality assurance, bar coding, product packaging and tracking, just-in-time and point-of-use delivery, electronic billing services and ongoing technical support. The principal customers of Supply Technologies are in the following industries: heavy-duty truck; automotive, truck automotive and vehicle parts,parts; power sports and recreational equipment; bus and coaches; electrical distribution and controls, consumer electronics, recreational equipment, HVAC,controls; agricultural and construction equipment,equipment; consumer electronics; HVAC; lawn and garden; semiconductor equipment, plumbing,equipment; aerospace and defense,defense; and appliance industries.plumbing. Assembly Components manufactures cast and machined aluminum components, automotive and industrial rubber and thermoplastic products, gasoline direct injection systems, fuel filler and hydraulic assemblies for automotive, agricultural equipment, construction equipment, heavy-duty truck and marine equipment industries. Assembly Components also provides value-added services such as design and engineering, machining and assembly. Engineered Products operates a diverse group of niche manufacturing businesses that design and manufacture a broad range of high quality products engineered for specific customer applications. The principal customers of Engineered Products are original equipment manufacturers (“OEM’s”OEMs”) and end users in the steel,ferrous and non-ferrous metals, silicon, coatings, forging, foundry, heavy-duty truck, construction equipment, automotive, oil and gas, rail and locomotive manufacturing and aerospace and defense industries.figuresfinancial results presented. Intersegment sales are accounted for at values based on market prices. Incomeinterest expense.certain other infrequent or unusual charges or credits. Identifiable assets by industry segment include assets directly identified with those operations. As of December 31, 2012,2014, we employed approximately 3,8006,000 persons.
Engineered Products Engineered Products NET SALES FOR 20122014 489.6490.5 million43%36% of total) 304.0328.6 million27%24% of total)$340.4 million(30% of total)SELECTED PRODUCTS SELECTED INDUSTRIES SERVED RecreationalAgricultural and construction equipmentElectrical components• Appliance• Semiconductor equipment• Recreational vehicles• Lawn and garden equipment TM™, a proactive solutions approach that manages the efficiencies of every aspect of supplying production parts and materials to our customers’ manufacturing floor, from strategic planning to program implementation. Total Supply ManagementTM™ includes such services as engineering and design support, part usage and cost analysis, supplier selection, quality assurance, bar coding, product packaging and tracking, just-in-time and point-of-use delivery, electronic billing services and ongoing technical support. We operate 4555 logistics service centers in the United States, Mexico, Canada, Puerto Rico, Scotland, Hungary, China, Taiwan, Singapore, India, United Kingdom and India,Ireland, as well as production sourcing and support centers in Asia. Through our supply chain management programs, we supply more than 190,000 globally-sourced production components, many of which are specialized and customized to meet individual customers’ needs.TM™ provides our customers with an expert partner in strategic planning, global sourcing, technical services, parts and materials, logistics, distribution and inventory management of production components. Some production components are characterized by low per unit supplier prices relative to the indirect costs of supplier management, quality assurance, inventory management and delivery to the production line. In addition, Supplyrecently began providingalso provides spare parts and aftermarket products to end users of its customers’ products.TM™ services are typically provided to customers pursuant to sole-source arrangements. We believe our services distinguish us from traditional buy/sell distributors, as well as manufacturers who supply products directly to customers, because we outsource our customers’ high-volume production components supply chain management, providing processes customized to each customer’s needs and replacing numerous current suppliers with a sole-source relationship. Our highly-developed, customized, information systems provide transparency and flexibility through the complete supply chain. This enables our customers to: (1) significantly reduce the direct and indirect cost of production component processes by outsourcing internal purchasing, quality assurance and inventory fulfillment responsibilities; (2) reduce the amount of working capital invested in inventory and floor space; (3) reduce component costs through purchasing efficiencies, including bulk buying and supplier consolidation; and (4) receive technical expertise in production component selection and design and engineering. Our sole-source arrangements foster long-term, entrenched supply relationships with our customers and, as a result, the average tenure of service for our top 50 Supply Technologies clients exceeds six years. Supply Technologies’ remaining sales are generated through the wholesale supply of industrial products to other manufacturers and distributors pursuant to master or authorized distributor relationships.2012,2014, approximately 82%74% of Supply Technologies’ net sales were to domestic customers. Remaining sales were primarily to manufacturing facilities of large, multinational customers located in Canada, Mexico, Europe and Asia. Total Supply ManagementTM™ services and production components are used extensively in a variety of industries, and demand is generally related to the state of the economy and to the overall level of manufacturing activity.5,5008,100 customers domestically and internationally. The principal marketsindustries served by Supply Technologies are the heavy-duty truck; automotive, truck automotive and vehicle parts,parts; power sports and recreational equipment; bus and coaches; electrical distribution and controls, consumer electronics, recreational equipment, recreational vehicles, HVAC,controls; agricultural and construction equipment,equipment; consumer electronics; HVAC; lawn and garden; semiconductor equipment,equipment; aerospace and defense,defense; and appliance industries.plumbing. The five largest customers, within which Supply Technologies sells through sole-source contracts to multiple31% and 27%32% of the sales of Supply Technologies for 2012in 2014 and 2011, respectively.31% in 2013. The loss of any two of its top five customers could have a material adverse effect on the results of operations and financial conditionscondition of this segment.Competition.Competition. A limited number of companies compete with Supply Technologies to provide supply management services for production parts and materials. Some global competitors include Anixter, Bossard and Wurth, and some domestic competitors include Endries, Fastenal and General. Supply Technologies competes in North America, Mexico, Europe and Asia, primarily on the basis of its Total Supply ManagementTM™ services, including engineering and design support, part usage and cost analysis, supplier selection, quality assurance, bar coding, product packaging and tracking, just-in-time and point-of-use delivery, electronic billing services and ongoing technical support, and its geographic reach, extensive product selection, price and reputation for high service levels. Numerous North American and foreign companies compete with Supply Technologies in manufacturing cold-formed and cold-extruded products. During On June 10, 2014, we acquired all the third quarteroutstanding capital stock of 2010, Supply Technologies completedApollo Aerospace Group (“Apollo”). Apollo is a supply chain management services company providing Class C production components and supply chain solutions to aerospace customers worldwide. Apollo's net sales for its fiscal year ended March 31, 2014 totaled approximately $8.1 million. For more information about the acquisition of certain assets and assumed specific liabilities relating to the Assembly Components Systems (“ACS”) business of Lawson Products, Inc. for $16.0 million in cash and a $2.2 million subordinated promissory note payable in equal quarterly installments over three years. ACS is a provider of supply chain management solutions for a broad range of production components through its service centers throughout North America. We recorded a gain of $2.2 million representing the excess of the aggregate fair value of purchased net assets over the purchase price. SeeApollo, see Note C3 to the consolidated financial statements included elsewhere herein.hashave the capability to provide a wide range of high-volume, high-quality products utilizing a broad range of processes including gravity and low pressure permanent mold, die-cast and lost-foam, as well as emerging alternative casting technologies. In 2012, we added machining capabilities to our aluminum products service offerings. We also design and manufacture fluid routing, gasoline direct injection systems, injection molded rubber and thermoplastic and screw products.and fuel filler assemblies.assemblies and gasoline direct injection systems. We produce our Assembly Components at nineteentwenty-five manufacturing facilities in Ohio, Michigan, Indiana, Tennessee, Florida, Georgia, Mexico, China and the Czech Republic. In addition, we also provide value-added services such as design engineering, machining and part assembly.45% and 49%46% of Assembly Components sales for 20122014 and 2011, respectively.45% for 2013. The loss of any one of these customers could have a material adverse effect on the results of operations and financial condition of this segment. On March 23, 2012, we completed Effective October 10, 2014, the Company acquired all the outstanding capital stock of Autoform Tool & Manufacturing (“Autoform”) for a total purchase consideration of $48.9 million in cash. The acquisition was funded from borrowings under the revolving credit facility provided by the Credit Agreement (as defined herein). Autoform is a supplier of high-end pressure fuel lines used in gasoline direct injection systems across a large number of engine platforms. Autoform's production facilities are located in Indiana. The financial results of Autoform are included in the Company’s Assembly Components segment and contributed $13.1 million in revenues in 2014 and were accretive from the date acquired. The purchase of Autoform was accounted for under the acquisition method of FRS, a leading manufacturer of automotive and industrial rubber and thermoplastic hose products and fuel filler and hydraulic fluid assemblies, in an all cash transaction valued at $98.8 million. FRS products include fuel filler, hydraulic, and thermoplastic assemblies and several forms of manufactured hose including bulk and formed fuel, power steering, transmission oil cooling, hydraulic and thermoplastic hose. FRS sells to automotive and industrial customers throughout North America, Europe and Asia. FRS has five production facilities located in Florida, Michigan, Ohio, Tennessee and the Czech Republic.accounting.On November 30, 2012, we completed the acquisition of Elastomeros Tecnicos Moldeados Inc. (“ETM”) for $1.1 million in cash, promissory notes payable for $0.5 million and $0.1 million annually in each of the next four years, if ETM achieves certain earnings levels. ETM is a provider of molded rubber products.On September 30, 2010, we entered a Bill of Sale with Rome Die Casting LLC (“Rome”), a producer of aluminum high pressure die castings, pursuant to which Rome agreed to transfer to us substantially all of its assets in exchange for approximately $7.5 million of notes receivable due from Rome held by us.As a result of incurred losses in the third quarter of 2011, projected losses for fiscal year 2011 and planned restructuring, we evaluated the long-lived assets of its rubber products business unit for impairment. Based on management’s analysis, certain long-lived assets were deemed abandoned and were written down to their scrap or liquidation value and we recorded a charge of $5.4 million.eleventwelve domestic facilities and ninetwelve international facilities in Canada, Mexico, the United Kingdom, Belgium, Germany, China, Italy, India and Japan.53%56% of our induction heating and melting systems’ revenues are derived from the sale of replacement parts and provision of field service, primarily for the installed base of our own products. Our pipe threading business serves the oil and gas industry. We also engineer and install mechanical forging presses, sell spare parts and provide field service for the large existing base of mechanical forging presses and hammers in North America. We machine, induction harden and surface finish crankshafts and camshafts, used primarily in locomotives. We forge aerospace and defense structural components such as landing gears and struts, as well as rail products such as railcar center plates and draft lugs.small- tosmall-to medium-sized domestic and international equipment manufacturers on the basis of service capability, ability to meet customer specifications, delivery performance and engineering expertise. We compete domestically and internationally with small- tosmall-to medium-sized forging and machining businesses on the basis of product quality and precision.31, 2010, through our subsidiary, Ajax Tocco Magnethermic,4, 2014, we acquired all of the assets and the related induction heating intellectual propertyoutstanding capital stock of ABP Induction’s U.S. heating business operating as Pillar InductionSaet S.p.A (“Pillar”Saet”) for $10.3a total purchase consideration of $22.1 million in cash. Pillar provides complete turnkey automatedSaet is a leader in the design, manufacturing and testing of induction power systemsheating equipment and aftermarket partsheat treat solutions. Saet operates through its locations in Italy, China, India and service to a worldwide market. See Note C toTennessee. The financial results of Saet are included in the consolidated financial statements included elsewhere herein.Company's Engineered Products segment.20122014 was $180.0$199.7 million compared with $192.0$145.3 million as of December 31, 2011.2013. Approximately $171.8 million74% of Engineered Products’ backlog as of December 31, 20122014 is scheduled to be shipped in 2013. The remainder is scheduled to be shipped in 2014. Industry Segment Reporting and Geographic AreasB2 to the consolidated financial statements included elsewhere herein relating to (1) net sales, income before income taxes, identifiable assets and other information by industry segment and (2) net sales and assets by geographic region for the years ended December 31, 2012, 20112014, 2013 and 20102012 is incorporated herein by reference.23, 2012,31, 2014 totaled approximately $8.1 million.completedacquired all the outstanding capital stock of Autoform for approximately $48.9 million in cash. The acquisition of FRS, a leading manufacturer of industrial hose products and fuel filler and hydraulic fluid assemblies, in an all cash transaction valued at $98.8 million. FRS products include fuel filler, hydraulic, and thermoplastic assemblies and several forms of manufactured hose including bulk and formed fuel, power steering, transmission oil cooling, hydraulic, and thermoplastic hose and has been integrated into our Assembly Components segment. FRS sells to automotive and industrial customers throughout North America, Europe and Asia. FRS has five production facilities located in Florida, Michigan, Ohio, Tennessee and the Czech Republic. In connection with the acquisition of FRS, we amended and restated our existing credit and security agreement, dated November 5, 2003, as amended (the “Credit Agreement”), to, among other things, increase the revolving loan commitmentwas funded from $200.0 million to $220.0 million and provide a seven-year amortizing term loan for $25.0 million that is secured by certain accounts receivable, inventory, real estate and machinery and equipment. We have the option, pursuant to the Credit Agreement, to increase the availabilityborrowings under the revolving credit facility provided by $30.0 million.During the second quarterCredit Agreement. Autoform is a supplier of 2012,high-end pressure fuel lines used in gasoline direct injection systems across a large number of engine platforms. Autoform's production facilities are located in Indiana. The financial results of Autoform are included in the Company's Assembly Components segment and contributed $13.1 million in revenues in 2014 and were accretive from the date acquired.agreed to settleacquired all the Evraz Highveld Steeloutstanding capital stock of Saet for approximately $22.1 million in cash. Saet is a leader in the design, manufacturing and Vanadium (“Evraz”testing of induction heating equipment and heat treat solutions. Saet operates through its locations in Italy, China, India and Tennessee. The financial results of Saet are included in the Company's Engineered Products segment. arbitration proceeding, a subsidiary of Park-Ohio Holdings Corporation, in the United States District Court for the sumEastern District of $13.0Arkansas claiming that equipment suppliedcash,damages plus an unspecified amount of punitive damages. ATM denied the allegations. ATM subsequently obtained summary judgment on the constructive fraud claim, which payment was madedismissed by the district court prior to trial. The remaining claims were the subject of a bench trial that occurred in June 2012.On November 30, 2012, we completedMay 2013. After IPSCO presented its case, the acquisitiondistrict court entered partial judgment in favor of ETMATM, dismissing the gross negligence claim, a portion of the breach of contract claim, and any claim for $1.1punitive damages. The trial proceeded with respect to the remainder of IPSCO’s claim for breach of contract. In September 2013, the district court issued a judgment in favor of IPSCO in the amount of $5.2 million. IPSCO subsequently filed a motion seeking to recover $3.8 million in cash, promissory notes payableattorneys’ fees and costs. The district court reserved ruling on that issue pending an appeal. In October 2013, ATM filed an appeal with the U.S. Court of $0.5 million and $0.1 million annually in eachAppeals for the Eighth Circuit seeking reversal of the next four years, if ETM achieves certain earnings levels. ETMjudgment in favor of IPSCO. In November 2013, IPSCO filed a cross-appeal seeking reversal of the dismissal of its claims for gross negligence and punitive damages. The Eighth Circuit issued an opinion in March 2015 affirming in part, reversing in part, and remanding the case. It affirmed the district court's determination that ATM was liable for breach of contract. It also affirmed the district court's dismissal of IPSCO's claims for gross negligence and punitive damages. However, the Eighth Circuit reversed nearly all of the damages awarded by the district court and remanded for further findings on the issue of damages, including whether consequential damages are barred under the express language of the contract. Because IPSCO did not appeal the award of $5.2 million in its favor, those damages may be decreased, but cannot be increased, on remand. Because IPSCO did not appeal the award of $5.2 million in its favor, those damages may be decreased, but cannot be increased, on remand. IPSCO's motion to recover attorneys' fees and costs is a providerstayed pending the outcome of molded rubber products and has been integrated into our Assembly Components segment.Name Age Position Edward F. Crawford 75 Chairman of the Board, Chief Executive Officer and Director Matthew V. Crawford 45 President and Chief Operating Officer and Director W. Scott Emerick 50 Vice President and Chief Financial Officer Robert D. Vilsack 54 Secretary and General Counsel Patrick W. Fogarty 53 Director of Corporate Development the adverse global economic conditions are difficult to forecast and mitigate. As a consequence, our operating results for a particular period are difficult to predict, and, therefore, prior results are not necessarily indicative of results to be expected in future periods. Any of the foregoing effects could have a material adverse effect on our business, results of operations and financial condition.2012,2014, we were in compliance with our debt service coverage ratio covenant and other covenants contained in our revolving credit facility. While we expect to remain in compliance throughout 2013,2015, declines in demand in the automotive industry and in sales volumes could adversely impact our ability to remain in compliance with certain of these financial covenants. Additionally, to the extent our customers are adversely affected by a decline in the economy in general,29%41% and 7% of our net sales during the year ended December 31, 20122014 from the automobileautomotive and heavy-duty truck industries, respectively.2012,2014, our ten largest customers accounted for approximately 29%33% of our net sales. Many of our customers place orders for products on an as-needed basis and operate in cyclical industries and, as a result, their order levels have varied from period to period in the past and may vary significantly in the future. Due to competitive issues, we have lost key customers in the past and may again in the future. Customer orders are dependent upon their markets and may be subject to delays or cancellations. As a result of dependence on our key customers, we could experience a material adverse effect on our business and results of operations if any of the following were to occur:ourHoldings’ outstanding common stock and if at such time neither Mr. E. Crawford nor Mr. M. Crawford holds the office of chairman, chief executive officer or president. The loss of the services of Messrs. E. Crawford and M. Crawford, senior and executive officers, and/or other key individuals could have a material adverse effect on our financial condition, liquidity and results of operations.IT technologies,information technology, services and products into our business, diversion of management’s attention, the assumption of unknown liabilities, increases in our indebtedness, the failure to achieve the strategic objectives of those acquisitions and other unanticipated problems, some or all of which could materially and adversely affect us. The process of integrating operations could cause an interruption of, or loss of momentum in, our activities. Any delays or difficulties encountered in connection with any acquisition and the integration of our operations could have a material adverse effect on our business, results of operations, financial condition or prospects of our business.2012,2014, we were a party to eightseven collective bargaining agreements with various labor unions that covered approximately 600 full-time employees. Our inability to negotiate acceptable contracts with these unions could result in, among other things, strikes, work stoppages or other slowdowns by the affected workers and increased operating costs as a result of higher wages or benefits paid to union members. If the unionized workers were to engage in a strike, work stoppage or other slowdown, or other employees were to become unionized, we could experience a significant disruption of our operations and higher ongoing labor costs, which could have a material adverse effect on our business, financial condition and results of operations.A1 to the consolidated financial statements included elsewhere herein.2012,2014, we had goodwill of $49.7$89.5 million. The future occurrence of a potential indicator of impairment, such as a significant adverse change in legal factors or business climate, an adverse action or assessment by a regulator, unanticipated competition, a material negative change in relationships with significant customers, strategic decisions made in response to economic or competitive conditions, loss of key personnel or a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or disposed of, could result in goodwill impairment charges, which could adversely impact our results of operations. We have recorded goodwill impairment charges in the past, and such charges materially impacted ourD, and Other Intangible Assets, to the consolidated financial statements included elsewhere herein.ourHoldings’ outstanding common stock and their interests may conflict with yours.2012,2014, Edward Crawford, our Chairman of the Board and Chief Executive Officer, and Matthew Crawford, our President and Chief Operating Officer, collectively beneficially owned approximately 26%27% of ourHoldings’ common stock. Mr. E. Crawford is Mr. M. Crawford’s father. Their interests could conflict with your interests. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of Messrs. E. Crawford and M. Crawford may conflict with your interests as a shareholder.interests.2012,2014, our operations included numerous manufacturing and supply chain logistics services facilities located in 26 states in the United States and in Puerto Rico, as well as in Asia, Canada, Europe and Mexico. Approximately 88% of the available square footage wasWe lease our world headquarters located in Cleveland, Ohio, which includes the United States. Approximately 55%world headquarters for certain of the available square footage was owned. As of December 31, 2012, approximately 21% of the available domestic square footage was used by the Supply Technologies segment, 42% was used by the Engineered Products segmentour businesses. We believe our manufacturing, logistics and 37% was used by the Assembly Components segment. Approximately 43% of the available foreign square footage was used by the Supply Technologies segment, 39% was used by the Engineered Products segment and 18% was used by the Assembly Components segment. In the opinion of management, ourcorporate office facilities are generally well maintainedwell-maintained and are suitable and adequate, for their intended uses.2012. SUPPLY TECHNOLOGIES(1) Cleveland, OH Leased 60,450 (2) Supply Technologies Corporate Office Dayton, OH Leased 70,600 Logistics Lawrence, PA Leased 116,000 Logistics and Manufacturing Minneapolis, MN Leased 87,100 Logistics Allentown, PA Leased 43,800 Logistics Atlanta, GA Leased 42,500 Logistics Memphis, TN Leased 48,750 Logistics Chicago, IL Leased 51,000 Logistics Tulsa, OK Leased 40,000 Logistics Lenexa, KS Leased 29,500 Logistics Austin, TX Leased 30,000 Logistics Streetsboro, OH Leased 45,000 Logistics Mississauga, Ontario, Canada Leased 145,000 Manufacturing Solon, OH Leased 47,100 Logistics Dublin, VA Leased 40,000 Logistics Conneaut, OH(3) Leased/Owned 258,300 Manufacturing Huntington, IN Leased 124,500 Manufacturing Fremont, IN Owned 112,000 Manufacturing Wapakoneta, OH Owned 188,000 Manufacturing Rootstown, OH Owned 176,800 Manufacturing Ravenna, OH Owned 64,000 Manufacturing Delaware, OH Owned 45,000 Manufacturing Ocala, FL Owned 433,000 Manufacturing Big Rapids, MI Owned 97,000 Manufacturing Lexington, TN Owned 240,000 Manufacturing Cleveland, OH Leased 150,000 Manufacturing Cuyahoga Hts., OH Owned 427,000 Manufacturing Cicero, IL Owned 450,000 Manufacturing Le Roeulx, Belgium Owned 120,000 Manufacturing Wickliffe, OH Owned 110,000 Manufacturing Brookfield, WI Leased 116,000 Manufacturing Warren, OH Owned 195,000 Manufacturing Canton, OH Leased 124,000 Manufacturing Madison Heights, MI Leased 128,000 Manufacturing Newport, AR Owned 200,000 Manufacturing Location Use SUPPLY Mississauga, Ontario, Canada Leased 145,000 Manufacturing TECHNOLOGIES (1) Lawrence, PA Leased 116,000 Logistics and Manufacturing Minneapolis, MN Leased 87,100 Logistics Dayton, OH Leased 63,800 Logistics Cleveland, OH (2) Leased 60,450 Supply Technologies Corporate Office Carol Stream, IL Leased 51,000 Logistics Memphis, TN Leased 48,750 Logistics Solon, OH Leased 47,100 Logistics Streetsboro, OH Leased 45,000 Manufacturing Allentown, PA Leased 43,800 Logistics Suwanee, GA Leased 42,500 Logistics Dublin, VA Leased 40,000 Logistics Tulsa, OK Leased 40,000 Logistics Lenexa, KS Leased 29,500 Logistics ASSEMBLY Ocala, FL Owned 433,000 Manufacturing COMPONENTS Conneaut, OH (4) Leased/Owned 283,800 Manufacturing Lexington, TN Owned 240,000 Manufacturing Lobelville, TN (5) Owned 208,700 Manufacturing Rootstown, OH Owned 208,000 Manufacturing Cleveland, OH (3) Leased/Owned 190,000 Manufacturing Wapakoneta, OH Owned 188,000 Manufacturing Angola, IN Owned 135,000 Manufacturing Huntington, IN Leased 124,500 Manufacturing Fremont, IN Owned 112,000 Manufacturing Big Rapids, MI Owned 97,000 Manufacturing Ravenna, OH Owned 69,000 Manufacturing Delaware, OH Owned 45,000 Manufacturing Bedford, OH Leased 43,300 Manufacturing ENGINEERED Cicero, IL Owned 450,000 Manufacturing PRODUCTS (6) Cuyahoga Heights, OH Owned 427,000 Manufacturing Newport, AR Owned 200,000 Manufacturing Warren, OH Owned 195,000 Manufacturing Leini, Italy Owned 161,500 Manufacturing Madison Heights, MI Leased 128,000 Manufacturing Canton, OH Leased 124,000 Manufacturing La Roeulx, Belgium Owned 120,000 Manufacturing Brookfield, WI Leased 116,000 Manufacturing Wickliffe, OH Owned 110,000 Manufacturing Albertville, AL Leased 56,000 Office Leini, Italy Leased 53,800 Manufacturing Leini, Italy Leased 37,700 Manufacturing Cortland, OH Owned 30,000 Office and Manufacturing (1) Supply Technologies has other facilities, none of which is deemed to be a principal facility. (2) Includes 20,150 square feet used by Holdings’ and Park-Ohio’s corporate office. (3) Includes twoone leased property with 150,000 square feet and one owned property with 40,000 square feet.(4) Includes three leased properties with square footage of 91,800, and 64,000 and two45,700, respectively, and one owned propertiesproperty with 82,300 and 20,200 square feet.(4)(5) Includes five facilities, which make up the total square footage of 208,700. (6) Engineered Products has other owned and leased facilities, none of which is deemed to be a principal facility. 2012:280254 cases asserting claims on behalf of approximately 600612 plaintiffs alleging personal injury as a result of exposure to asbestos. These asbestos cases generally relate to production and sale of asbestos-containing products and allege various theories of liability, including negligence, gross negligence and strict liability, and seek compensatory and, in some cases, punitive damages.sevensix asbestos cases, involving 2526 plaintiffs, that plead specified damages. In each of the sevensix cases, the plaintiff is seeking compensatory and punitive damages based on a variety of potentially alternative causes of action. In three cases, the plaintiff has alleged compensatory damages in the amount of $3.0 million for four separate causes of action and $1.0 million for another cause of action and punitive damages in the amount of $10.0 million. In the fourth case, the plaintiff has alleged against each named defendant, compensatory and punitive damages, each in the amount of $10.0 million, for seven separate causes of action. In the fifth case, the plaintiff has alleged compensatory damages in the amount of $20.0 million for three separate causes of action and $5.0 million for another cause of action and punitive damages in the amount of $20.0 million. In the remaining two cases,case, the plaintiffs have each alleged against each named defendant compensatory and punitive damages, each in the amount of $50.0 million, for four separate causes of action.plaintiff’splaintiff's injury, if any.One of our subsidiaries,(“ATM”Corporation ("ATM"), which is included in the Engineered Products segment, was a party to a binding arbitration proceeding pending in South Africa with its customer Evraz Highveld Steel and Vanadium (“Evraz”). The arbitration involved a dispute over the design and installationsubsidiary of a melting furnace. Evraz sought binding arbitration in September 2011 for breach of contract and sought compensatory damages in the amount of $37.0 million, as well as fees and expenses related to the arbitration. ATM counterclaimed in the arbitration, alleging breach of contract for non-payment of $2.7 million as well as fees and expenses related to the arbitration. The arbitration was scheduled to commence in June 2012. Prior to the start of the arbitration, after complete evaluation of Evraz’s evidence, consideration of the jurisdiction of the matter, the uncertainty of a specific outcome and other pertinent facts noted in preparation for the arbitration, we entered into a settlement agreement with Evraz pursuant to which we agreed to settle all claims subject to the arbitration proceeding by paying Evraz $13.0 million in cash, which payment was made in June 2012. The $2.7 million amount receivable from Evraz had been previously reserved and was written off in conjunction with the settlement.ATM is the defendant in a lawsuit pendingPark-Ohio Holdings Corporation, in the United States District Court for the Eastern District of Arkansas. The plaintiff is IPSCO Tubulars Inc. d/b/a TMK IPSCO.Arkansas claiming that equipment supplied by ATM for heat treating certain steel pipe at IPSCO’s Blytheville, Arkansas facility did not perform as required by the contract. The complaint alleges claimsalleged causes of action for breach of contract, gross negligence, and constructive fraud. TMK IPSCO is seekingsought approximately $6.0$10 million in direct and $4.0 million in consequential damages as well asplus an unspecified amount of punitive damages. ATM deniesdenied the allegations against it, believes it has a number of meritorious defenses and is vigorously defending the lawsuit. A motion for partialallegations. ATM subsequently obtained summary judgment on the constructive fraud claim, which was recently fileddismissed by ATM, is currently pending before the district court. Acourt prior to trial. The remaining claims were the subject of a bench trial that occurred in May 2013. After IPSCO presented its case, the district court entered partial judgment in favor of ATM, dismissing the gross negligence claim, a portion of the breach of contract claim, and any claim for punitive damages. The trial proceeded with respect to the remainder of IPSCO’s claim for breach of contract. In September 2013, the district court issued a judgment in favor of IPSCO in the amount of $5.2 million. IPSCO subsequently filed a motion seeking to recover $3.8 million in attorneys’ fees and costs. The district court reserved ruling on that issue pending an appeal. In October 2013, ATM filed an appeal with the U.S. Court of Appeals for the Eighth Circuit seeking reversal of the judgment in favor of IPSCO. In November 2013, IPSCO filed a cross-appeal seeking reversal of the dismissal of its claims for gross negligence and punitive damages. The Eighth Circuit issued an opinion in March 2015 affirming in part, reversing in part, and remanding the case. It affirmed the district court's determination that ATM was liable for breach of contract. It also affirmed the district court's dismissal of IPSCO's claims for gross negligence and punitive damages. However, the Eighth Circuit reversed nearly all of the damages awarded by the district court and remanded for further findings on the issue of damages, including whether consequential damages are barred under the express language of the contract. Because IPSCO did not appeal the award of $5.2 million in its favor, those damages may be decreased, but cannot be increased, on remand. Because IPSCO did not appeal the award of $5.2 million in its favor, those damages may be decreased, but cannot be increased, on remand. IPSCO's motion to recover attorneys' fees and costs is setstayed pending the outcome of the proceedings on remand.beginthe staff’s subpoena, we disclosed to the staff of the SEC that, in AprilNovember 2007, the third party participated in a payment on behalf of 2013.us to a foreign tax official that implicates the Foreign Corrupt Practices Act.Item 4A. Executive Officersthe RegistrantInformation with respect to our executive officers as of March 15, 2013 is as follows:NameAgePositionEdward F. Crawford73Chairman of the Board, Chief Executive Officer and DirectorMatthew V. Crawford43President and Chief Operating Officer and DirectorW. Scott Emerick48Vice President and Chief Financial OfficerRobert D. Vilsack52Secretary and General CounselPatrick W. Fogarty51Director of Corporate DevelopmentMr. E. Crawfordhas been a director and our Chairman of the Board and Chief Executive Officer since 1992. He has also served as the Chairman of Crawford Group, Inc., a management company for a group of manufacturing companies, since 1964.Mr. M. Crawfordhas been President and Chief Operating Officer since 2003 and joined us in 1995 as Assistant Secretary and Corporate Counsel. He was also our Senior Vice President from 2001 to 2003. Mr. M. Crawford became one of our directors in August 1997 and has served as President of Crawford Group, Inc. since 1995. Mr. E. Crawford is the father of Mr. M. Crawford.Mr. Emerickhas been Vice President and Chief Financial Officer since joining us in July 2012. From 2004 to 2011, Mr. Emerick served as Corporate Controller of The Lubrizol Corporation, a global specialty chemical company. From 2001 to 2004, he served as Director of Finance and Director of Accounting and External Financial Reporting at Noveon, Inc., a specialty chemical company. From 1997 to 2001, he served as the Director of Finance and Corporate Controller of Flexalloy Inc., a distributor and provider of vendor managed inventory services. Prior to joining Flexalloy, he spent seven years with the accounting firm Ernst & Young.Mr. Vilsackhas been Secretary and General Counsel since joining us in 2002. From 1999 until his employment with us, Mr. Vilsack was engaged in the private practice of law. From 1997 to 1999, Mr. Vilsack was Vice President, General Counsel and Secretary of Medusa Corporation, a manufacturer of Portland cement, and prior to that he was Vice President, General Counsel and Secretary of Figgie International Inc., a manufacturing conglomerate.Mr. Fogartyhas been Director of Corporate Development since 1997 and served as Director of Finance from 1995 to 1997.Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesNoThe Company declared and paid a quarterly dividend of $0.125 per share commencing in the second quarter of 2014 and has continued with quarterly dividends of $0.125 per share through the first quarter of 2015. Prior to the second quarter of 2014, no dividends were declared or paid during the five years ended December 31, 2012. There is no present intention to pay dividends.prior quarterly periods in the last four years. Additionally, the terms of the Credit Agreementcredit agreement governing our revolving credit facility and the indenture governing the 8.125% senior notes due 2021 restrict our ability to payprovide some restrictions on the amounts of dividends.Quarterly Common Stock Price Ranges 2012 2011 High Low High Low $ 21.00 $ 16.13 $ 24.48 $ 16.95 22.61 16.85 24.40 17.46 22.88 16.42 23.27 10.95 23.21 18.33 20.29 10.59 Quarterly Common Stock Price Ranges 2014 2013 Quarter High Low High Low 1st $ 58.76 $ 43.11 $ 33.35 $ 19.96 2nd $ 61.40 $ 50.04 $ 39.00 $ 30.61 3rd $ 63.29 $ 47.21 $ 38.75 $ 31.29 4th $ 65.24 $ 44.77 $ 53.32 $ 36.19 28, 201327, 2015 was 508. repurchases during the fourth quarter of the fiscal year ended December 31, 2012. Total
Number
of Shares
Purchased Average
Price Paid
Per Share Total Number
of Shares
Purchased as
Part of Publicly
Announced Plans
or Programs Maximum Number of Shares
That May Yet Be Purchased
Under the Plans or Program(1) — $ — — 340,920 1,805 19.03 — 340,920 135,522 20.01 135,522 205,398 137,327 $ 19.99 135,522 205,398 Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans (1) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Program (1) October 1 — October 31, 2014 — $ — — 988,334 November 1 — November 30, 2014 3,716 (2) 57.55 — 988,334 December 1 — December 31, 2014 7,194 (2) 60.51 — 988,334 Total 10,910 $ 59.50 — 988,334 (1) On September 27, 2006, we announced a share repurchase program whereby we may repurchase up to 1.0 million shares of our common stock. During the fourth quarter of 2012, 135,522 shares were purchased as part of this program. On March 4, 2013, we announced a share repurchase program whereby we may repurchase up to 1.0 million shares of our outstanding common stock, which program replaces the prior share repurchase program.stock.(2) Consists of an aggregate total of 10,910 shares of our common stock we acquired from recipients of restricted stock awards at the time of vesting of such awards in order to settle recipient statutory minimum withholding tax liabilities.(Dollars in thousands, except per share data) Year Ended December 31, 2012 2011 2010 2009 2008 $ 1,134,042 $ 966,573 $ 813,522 $ 701,047 $ 1,068,757 927,026 799,248 679,425 597,200 919,297 207,016 167,325 134,097 103,847 149,460 117,209 105,582 91,755 87,786 105,546 — — — — 95,763 13,000 — — — — — 5,359 3,539 5,206 25,331 76,807 56,384 38,803 10,855 (77,180 ) — — — (6,297 ) (6,232 ) — — (2,210 ) — — 26,350 32,152 23,792 23,189 27,869 50,457 24,232 17,221 (6,037 ) (98,817 ) 18,671 (5,203 ) 2,034 (828 ) 20,986 $ 31,786 $ 29,435 $ 15,187 $ (5,209 ) $ (119,803 ) $ 2.67 $ 2.54 $ 1.34 $ (0.47 ) $ (10.88 ) $ 2.62 $ 2.45 $ 1.29 $ (0.47 ) $ (10.88 ) Year Ended December 31, 2012 2011 2010 2009 2008 $ 55,881 $ 35,861 $ 67,059 $ 43,865 $ 8,547 (120,284 ) (11,098 ) (29,851 ) (4,772 ) (20,398 ) 30,573 17,927 (24,995 ) (33,820 ) 15,164 17,991 16,177 17,132 18,918 20,933 23,321 11,098 3,951 5,575 17,466 $ 44,437 $ 78,001 $ 35,311 $ 23,098 $ 17,825 272,255 291,454 219,193 222,748 252,873 100,431 61,810 68,783 76,631 90,642 726,620 614,772 552,532 502,268 619,220 378,678 347,580 316,213 333,997 374,646 101,751 65,442 46,375 22,810 12,755 (a)In each of the years ended December 31, 2011, 2010, 2009 and 2008, we recorded restructuring and asset impairment charges related to exiting product lines and closing or consolidating operating facilities. The restructuring charges related to the write-down of inventory, have no cash impact and are reflected by an increase in cost of products sold in the applicable period. The restructuring charges relating to asset impairment attributable to the closing or consolidating of operating facilities have no cash impact and are reflected in the restructuring and impairment charges. The charges for restructuring and severance are accruals for cash expenses. We made cash payments of $0.1 million and $0.5 million in the years ended December 31, 2010 and 2009, respectively, related to our severance accrued liabilities. The table below provides a summary of these restructuring and impairment charges. Year Ended December 31, 2011 2010 2009 2008 (Dollars in thousands) $ — $ — $ 1,797 $ 5,544 5,359 3,539 5,206 24,767 — — — 564 $ 5,359 $ 3,539 $ 7,003 $ 30,875 $ 5,359 $ 3,539 $ 5,206 $ 25,331 No dividends were paid during Year Ended December 31, 2014 2013 2012 2011 2010 (In millions, except per share data) Selected Statement of Operations Data: Net sales $ 1,378.7 $ 1,203.2 $ 1,128.2 $ 961.4 $ 808.9 Cost of sales 1,144.2 992.2 920.9 793.7 674.0 Gross profit 234.5 211.0 207.3 167.7 134.9 Selling, general and administrative expenses 136.6 120.2 113.8 102.5 88.5 Asset impairment charges — — — 5.4 3.5 Litigation judgment and settlement costs — 5.2 13.0 — — Operating income 97.9 85.6 80.5 59.8 42.9 Gain on acquisition of business — (0.6 ) — — (2.2 ) Interest expense 26.1 25.9 26.0 31.9 23.6 Income from continuing operations before income taxes 71.8 60.3 54.5 27.9 21.5 Income tax expense 24.9 19.4 20.3 (3.8 ) 2.0 Net income from continuing operations 46.9 40.9 34.2 31.7 19.5 Income (loss) from discontinued operations, net of taxes — 3.0 (2.4 ) $ (2.3 ) $ (4.3 ) Net income 46.9 43.9 31.8 29.4 15.2 Net income attributable to noncontrolling interest (1.3 ) (0.5 ) — — — Net income attributable to ParkOhio common shareholders $ 45.6 $ 43.4 $ 31.8 $ 29.4 $ 15.2 Earnings (loss) per common share attributable to ParkOhio common shareholders - Basic: Continuing operations $ 3.77 $ 3.40 $ 2.87 $ 2.74 $ 1.73 Discontinued operations — 0.25 (0.20 ) (0.20 ) (0.38 ) Total $ 3.77 $ 3.65 $ 2.67 $ 2.54 $ 1.35 Earnings (loss) per common share attributable to ParkOhio common shareholders - Diluted: Continuing operations $ 3.68 $ 3.31 $ 2.82 $ 2.64 $ 1.65 Discontinued operations — 0.25 (0.20 ) (0.19 ) (0.36 ) Total $ 3.68 $ 3.56 $ 2.62 $ 2.45 $ 1.29 Weighted-average shares used to compute earnings per share: Basic 12.1 11.9 11.9 11.6 11.3 Diluted 12.4 12.2 12.1 12.0 11.8 Year Ended December 31, 2014 2013 2012 2011 2010 (In millions) Other Financial Data: Net cash flows provided by operating activities $ 53.6 $ 60.3 $ 55.9 $ 35.9 $ 67.1 Net cash flows used by investing activities (96.4 ) (54.3 ) (120.3 ) (11.1 ) (29.9 ) Net cash flows provided (used) by financing activities 48.6 3.9 30.5 17.9 (25.0 ) Depreciation and amortization 23.2 19.2 18.0 16.2 17.1 Capital expenditures, net 25.8 30.1 29.6 12.7 4.0 Dividends paid 4.7 — — — — Cash and cash equivalents 58.0 55.2 44.4 78.0 35.3 Working capital 318.3 298.3 273.5 293.8 222.5 Property, plant and equipment 141.1 115.4 100.0 61.4 68.4 Total assets 974.2 818.7 726.6 614.8 552.5 Long-term debt 434.4 379.2 374.2 346.2 302.4 Total debt 443.8 383.6 378.6 347.6 316.2 Shareholders’ equity 191.9 164.0 101.8 65.4 46.4 five years ended December 31, 2012.discontinued operations.Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operationsrecording ofacquisitions and litigation costs in 2014, 2013 and 2012, dispositions in 2013 and a reversal of a tax valuation allowance in 2011, restructuring and impairment charges in 2011 and 2010, acquisitions in 2012 and 2010 and refinancing in 2012 and 2011.Executive OverviewManagementTMManagement™ and diversified manufacturing business, operating in three segments: Supply Technologies, Assembly Components and Engineered Products.ManagementTMManagement™, a proactive solutions approach that manages the efficiencies of every aspect of supplying production parts and materials to our customers’ manufacturing floor, from strategic planning to program implementation. Total Supply ManagementTMManagement™ includes such services as engineering and design support, part usage and cost analysis, supplier selection, quality assurance, bar coding, product packaging and tracking, just-in-time and point-of-use delivery, electronic billing services and ongoing technical support. The principal markets ofOur Supply Technologies arebusiness services customers in the following principal industries: heavy-duty truck; automotive, truck automotive and vehicle parts,parts; power sports and recreational equipment; bus and coaches; electrical distribution and controls, consumer electronics, recreational equipment, recreational vehicles, HVAC,controls; agricultural and construction equipment,equipment; consumer electronics; HVAC; lawn and garden; semiconductor equipment,equipment; aerospace and defense,defense; and appliance industries. plumbing.industrial hoseparts and injected molded rubber componentsassemblies and fuel filler assemblies. In addition, Assembly Components castsprovides value-added design, engineering and machinesfor automotive, agricultural, construction,industrial hose and injected molded rubber components, gasoline direct injection systems and fuel filler assemblies. Our products are primarily used in the following industries: automotive; agricultural; construction; heavy-duty trucktruck; and marine OEMs, primarily on a sole-source basis. Assembly Components also provides value-added services such as design and engineering and assembly. silicone,silicon, coatings, forging, foundry, heavy-duty truck, construction equipment, automotive, oil and gas, raillocomotive and locomotiverail manufacturing, and aerospace and defense industries. Sales,other relevant financial dataour Aluminum business unit of the Assembly Components segment.these three segments are provided in Note B2014 when compared to the consolidated financial statements, included elsewhere herein.Salesprior year. However, our unfavorable sales mix for 2014, compared to 2013, lead to a decrease in our gross margin percentage of 50 basis points.profitability continuedadministrative (“SG&A”) expenses primarily related to grow substantiallyour acquisitions, increased professional service fees and the incurrence of foreign currency exchange losses on non-permanent intercompany loans in 2012, continuing2014, our SG&A expenses increased 13.6% when compared to the trendprior year. Still, given our net sales increases, SG&A, as a percentage of net sales, decreased 10 basis points in 2014 compared to 2013. 2014 vs. 2013 2013 vs. 2012 2014 2013 2012 $ Change % Change $ Change % Change (Dollars in millions, except per share data) Net sales $ 1,378.7 $ 1,203.2 $ 1,128.2 $ 175.5 15 % $ 75.0 7 % Cost of sales 1,144.2 992.2 920.9 152.0 15 % 71.3 8 % Gross profit 234.5 211.0 207.3 23.5 11 % 3.7 2 % Gross profit as a percentage of net sales 17.0 % 17.5 % 18.4 % Selling, general and administrative expenses 136.6 120.2 113.8 16.4 14 % 6.4 6 % SG&A as a percentage of net sales 9.9 % 10.0 % 10.1 % Litigation judgment and settlement costs — 5.2 13.0 (5.2 ) * (7.8 ) * Operating income 97.9 85.6 80.5 12.3 14 % 5.1 6 % Gain on acquisition of business — (0.6 ) — 0.6 * (0.6 ) * Interest expense 26.1 25.9 26.0 0.2 1 % (0.1 ) — % Income from continuing operations before income taxes 71.8 60.3 54.5 11.5 19 % 5.8 11 % Income tax expense 24.9 19.4 20.3 5.5 28 % (0.9 ) * Net income from continuing operations 46.9 40.9 34.2 6.0 15 % 6.7 20 % Income (loss) from discontinued operations, net of taxes — 3.0 (2.4 ) (3.0 ) * 5.4 * Net income 46.9 43.9 31.8 3.0 7 % 12.1 38 % Net income attributable to noncontrolling interest (1.3 ) (0.5 ) — (0.8 ) * (0.5 ) * Net income attributable to ParkOhio common shareholders $ 45.6 $ 43.4 $ 31.8 $ 2.2 5 % $ 11.6 36 % Earnings (loss) per common share attributable to ParkOhio common shareholders - Basic: Continuing operations $ 3.77 $ 3.40 $ 2.87 $ 0.37 11 % $ 0.53 18 % Discontinued operations — 0.25 (0.20 ) (0.25 ) * 0.45 * Total $ 3.77 $ 3.65 $ 2.67 $ 0.12 3 % $ 0.98 37 % Earnings (loss) per common share attributable to ParkOhio common shareholders - Diluted: Continuing operations $ 3.68 $ 3.31 $ 2.82 $ 0.37 11 % $ 0.49 17 % Discontinued operations — 0.25 (0.20 ) (0.25 ) * 0.45 * Total $ 3.68 $ 3.56 $ 2.62 $ 0.12 3 % $ 0.94 36 % domestic and international economies come outAssembly Components net sales, carrying a lower gross margin percentage, were a higher percentage of consolidated net sales than in the recession. Net sales prior year. 17% and net income increased 8% 14% in 20122014 compared to 2011. Net income2013, but SG&A expenses as a percent of sales decreased by 10 basis points to 9.9%. SG&A expenses increased in 20122014 compared to 2013 primarily due to $6.7 million of incremental expense associated with our acquisitions, increased professional fees and increased salary and wage expenses. This increase in expense was affected by an unfavorable $13.0 million litigation settlement. Net income in 2011 was affected by a favorable $16.8 million reversal of the deferred tax asset valuation allowance, partially offset by $5.4 million of impairment chargesan increase in pension income.debt refinancing costs of $7.3 million.Approximately 29% of our consolidated net sales are to the automotive markets.2010,2013, the United States District Court for the Eastern District of Arkansas awarded TMK IPSCO damages of approximately $5.2 million. Year Ended December 31, 2014 2013 Change (Dollars in millions) Interest expense $ 26.1 $ 25.9 $ 0.2 1 % Average outstanding borrowings $ 397.1 $ 385.5 $ 11.6 3 % Average borrowing rate 6.57 % 6.71 % (14 ) basis points completedsegment for $8.5 million in cash, which resulted in a net gain of approximately $3.8 million, after taxes of $1.5 million. The income from discontinued operations of $3.0 million in 2013 is predominantly comprised of the gain on sale, but also includes the operating losses, net of tax, of the business unit sold.certain assetsFluid Routing Solutions LLC (“FRS”) and assumed specific liabilities relatingthe 2013 acquisitions of Bates, Henry Halstead and QEF were the primary drivers of the 2013 revenue growth. Combined, these acquisitions contributed $82.1 million of the increase in net sales. Overall, our organic growth declined slightly in 2013 as the strength of new automotive platform business in our Aluminum business within the Assembly Components segment was slightly more than offset by industrial slowness for the truck and defense industries in Supply Technologies segment for the industrial equipment business of the Engineered Products segment.ACS businessprior year are contained within the “Segment Analysis” section.Lawson Products, Inc.Sales & Gross Profit:$16.02013, compared to $920.9 million in cash and a $2.2 million subordinated promissory note payable2012. The increase in equal quarterly installments over three years. ACS is a providercost of supply chain management solutions for a broad range of production components through its service centers throughout North America. We recorded a gain of $2.2 million representing the excess of the aggregate fair value of purchased net assets over the purchase price. See Note Csales was primarily due to the increase in net sales volumes, which increased 7%. The gross profit margin percentage was 17.5% in 2013 compared to 18.4% in 2012. This 90 basis point decline in gross margin percentage is largely due to a change in the sales mix between the comparable periods as the Assembly Components net sales, carrying a lower gross margin percentage, were a higher percentage of consolidated financial statements included elsewhere herein.On September 30, 2010, we enterednet sales than in the prior year.Billpercentage of Sale with Rome, a producer of aluminum high pressure die castings, pursuantsales declined by 10 basis points to which Rome agreed10.0%. SG&A expenses increased in 2013 compared to transfer2012 primarily due to us substantially all of its assets in exchange for approximately $7.5$4.3 million of notes receivable due from Rome heldincremental expense associated with our acquisitions, increases in payroll, payroll related expenses and share-based compensation offset by us. See Note C to the consolidated financial statements included elsewhere herein.On December 31, 2010, through our subsidiary, Ajax Tocco Magnethermic, we acquired the assets and the related induction heating intellectual propertyFRS acquisition expenses of Pillar for $10.3$1.1 million in cash. Pillar provides complete turnkey automated induction power systems2012.aftermarket parts and service to a worldwide market. See Note C to the consolidated financial statements included elsewhere herein.2010, we recorded an asset impairment charge2013, the United States District Court for the Eastern District of $3.5 million related to the writedownArkansas awarded TMK IPSCO damages of one of our investments.On April 7, 2011, we completed the sale of $250.0 million aggregate principal amount of 8.125% senior notes due 2021 (the “Notes”). The Notes bear an interest rate of 8.125% per annum, payable semi-annually in arrears on April 1 and October 1 of each year commencing on October 1, 2011. The Notes mature on April 1, 2021. In connection with the sale of the Notes, we also entered into an amended credit agreement. We also purchased all of our outstanding $183.8 millionaggregate principal amount of the senior subordinated notes due 2014 (the “Senior Subordinated Notes”) that were not held by our affiliates pursuant to a tender offer and subsequent redemption, repaid all of the term loan A and term loan B outstanding under our then existing credit facility and retired the Senior Subordinated Notes in the aggregate principal amount of $26.2 million that were held by an affiliate. We incurred debt extinguishment costs related to premiums and other transaction costs associated with the tender offer and subsequent redemption of the Senior Subordinated Notes and wrote off deferred financing costs totaling $7.3 million and recorded a provision for foreign income taxes of $2.1 million resulting from the retirement of the Senior Subordinated Notes that were held by an affiliate.During the third quarter of 2011, we recorded an asset impairment charge of $5.4 million associated with the underperformance of the assets of its rubber products business unit within the Assembly Components business segment.On March 23, 2012, we completed the acquisition of FRS, a leading manufacturer of automotive and industrial rubber and thermoplastic hose products and fuel filler and hydraulic fluid assemblies, in an all cash transaction valued at $96.0 million, net of cash acquired. FRS products include fuel filler, hydraulic, and thermoplastic assemblies and several forms of manufactured hose including bulk and formed fuel, power steering, transmission oil cooling, hydraulic and thermoplastic hose. FRS sells to automotive and industrial customers throughout North America, Europe and Asia. FRS has five production facilities located in Florida, Michigan, Ohio, Tennessee and the Czech Republic. FRS is included in our Assembly Components segment.In connection with the acquisition of FRS, we amended and restated our existing credit and security agreement, dated November 5, 2003, as amended (the “Credit Agreement”), to, among other things, increase the revolving loan commitment from $200.0 million to $220.0 million and provide a seven-year amortizing term loan for $25.0 million that is secured by certain accounts receivable, inventory, real estate and machinery and equipment. We funded the acquisition with cash of $40.0 million, the $25.0 million term loan provided by the Credit Agreement and $33.8 million of borrowings under the revolving credit facility provided by the Credit Agreement. Highveld Steel and Vanadium (“Evraz”) arbitration proceeding for the sum of $13.0 million in cash, which payment was made in June 2012.On November 30, 2012, we completedETM for $1.1 million in cash, promissory notes payable of $0.5 million and $0.1 million annually in each ofbusiness relates to the next four years, if ETM achieves certain earnings levels. ETM isbargain purchase associated with a provider of molded rubber products and has been integrated into our Assembly Components segment.Results of Operations2012 versus 2011Net Sales by Segment: Year Ended
December 31, Change Percent
Change 2012 2011 (Dollars in millions) $ 489.6 $ 486.6 $ 3.0 1 % 304.0 157.8 146.2 93 % 340.4 322.2 18.2 6 % $ 1,134.0 $ 966.6 $ 167.4 17 % Net sales increased $167.4 million to $1,134.0 million in 2012 compared to $966.6 million in 2011 as we experienced volume increases in each of our segments. Supply Technologies sales increased 1% primarily due to volume increasessmall bolt-on acquisition in the heavy-duty truck, recreational, computer office equipment, consumer electronics and lawn and garden industries, which were offset primarily by declines in the appliance, semi-conductor, HVAC and instruments industries. Assembly Components sales increased 93%, primarily from sales of $152.4 million resulting from the acquisition of FRS and increased sales in the rubber products business unit, offset by lower sales in the aluminum business unit. Engineered Products sales increased 6% primarily due to increased business in the capital equipment and forged and machined products business units.Cost of Products Sold & Gross Profit: Year Ended
December 31, Change Percent
Change 2012 2011 (Dollars in millions) $ 927.0 $ 799.2 $ 127.8 16 % $ 207.0 $ 167.3 $ 39.7 24 % 18.3 % 17.3 % Cost of products sold increased $127.8 million in 2012 to $927.0 million compared to $799.2 million in 2011, while gross margin increased to 18.3% in 2012 from 17.3% in 2011. Cost of products sold increased primarily due to the inclusion of FRS results of $125.7 million in 2012, volume increases and increases in commodity prices, including the prices of steel, aluminum, nickel and copper.Supply Technologies gross margin increased primarily due to product mix. Engineered Products gross margin increased primarily due to volume increases. Gross margin in the Assembly Components segment increased primarily from sales volume associated with the FRS acquisition, product mix, higher margins on the FRS business and improved operating efficiencies.Selling, General & Administrative (SG&A) Expenses: Year Ended
December 31, Change Percent
Change 2012 2011 (Dollars in millions) $ 117.2 $ 105.6 $ 11.6 11 % 10.3 % 10.9 % Consolidated SG&A expenses increased 11% in 2012 compared to 2011. However, we generated a 60 basis point decrease in SG&A expenses as a percent of sales. SG&A expenses increased $11.6 million in 2012 compared to 2011 primarily due to $7.6 million of incremental expense associated with FRS, increases in payroll and payroll related expenses of $1.9 million, FRS acquisition expenses of $1.1 million and $1.0 million of legal expenses associated with the Evraz litigation settlement. Year Ended
December 31, Change
Change 2012 2011 (Dollars in millions) $ 26.4 $ 32.2 $ (5.8 ) (18)% $ 0.3 $ 7.3 $ (7.0 ) (96)% $ 1.9 $ 1.9 $ 379.2 $ 337.3 $ 41.9 12% 6.88 % 7.38 % 50 basis points Year Ended December 31, Adjusted Adjusted 2013 2012 Change (Dollars in millions) Interest expense $ 25.9 $ 26.0 $ (0.1 ) — % Debt extinguishment costs included in interest expense $ — $ 0.3 $ (0.3 ) (100 )% Average outstanding borrowings $ 385.5 $ 379.2 $ 6.3 2 % Average borrowing rate 6.72 % 6.78 % 6 basis points decreased $5.8 million in 2012 compared to 2011, primarily due to higher debt extinguishment costs in 2011 as a result ofwas comparable between the refinancing of our Senior Subordinated Notes and the amendment of the Credit Agreement. Average borrowings in 2012 were higher when compared to 2011 due to additional borrowings to fund the acquisition of FRS and the Evraz litigation settlement. The lower average borrowing rate in 2012 was due primarily to the interest rate mix of our credit facility and Notes when compared to the interest rate mix in 2011.Tax: Year Ended
December 31, 2012 2011 (Dollars in millions) $ 50.5 $ 24.2 $ 18.7 $ (5.2 ) 37.0 % (21.5 ) % $18.7$19.4 million in 2012 compared to2013, which was a benefit of $(5.2) million in 2011. The32.2% effective income tax rate, was 37.0%compared to the income taxes of $20.3 million provided in 2012 comparedwith a 37.2% effective income tax rate. The reduction in the effective rate is primarily due to (21.5)% in 2011.As of December 31, 2011, we were not in a cumulative three-year loss position and determined that it was more likely than notour ability to realize certain deductions, such as the Manufacturer's Deduction, now that our U. S.net operating loss carryforwards were utilized in 2012 combined with the reversal of valuation allowances against certain U.S. net deferred tax assets would be realized. As of December 31, 2011, we released $16.8in 2013 that reduced tax expense by $1.6 million.valuation allowance attributable to continuing operations in 2011.Our net operating loss carryforward precluded the paymentoutstanding equity interests of most U.S. federal income taxes in both 2012 and 2011. At December 31, 2012, we had fully utilized the net operating loss carryforwards for U.S. federal income tax purposes.2011 versus 2010Net Sales by Segment: Year Ended
December 31, Change
Change 2011 2010 (Dollars in millions) $ 486.6 $ 397.0 $ 89.6 23% 157.8 173.6 (15.8 ) (9)% 322.2 242.9 79.3 33% $ 966.6 $ 813.5 $ 153.1 19% Net sales increased $153.1 million to $966.6 million in 2011 compared to $813.5 million in 2010 as we experienced volume increases in the Supply Technologies and Engineered Products segments. Supply Technologies sales increased 23% primarily due to volume ($53.8 million) increases in the heavy-duty truck, electrical, industrial equipment, auto, recreational, HVAC, furniture, agricultural and construction equipment industries and price increases of $7.3 million, which were offset primarily by declines in the instruments, medical and semi-conductor industries. In addition, there were $29.8 million of incremental sales resulting from the acquisition of the ACS business. Assembly Components sales decreased 9%, resulting primarily from the completion of certain automotive supply contracts ($31.7 million), a minor decline in sales in the rubber productsnon-core business unit offset by sales of $9.6 million resulting from the acquisition of the Rome business and price increases of $5.4 million. Engineered Products sales increased 33% primarily due to increased business in both the capital equipment and forged and machined products business units. In addition, there were $26.3 million of incremental sales resulting from the acquisition of Pillar.Cost of Products Sold & Gross Profit: Year Ended
December 31, Change Percent
Change 2011 2010 (Dollars in millions) $ 799.2 $ 679.4 $ 119.8 18 % $ 167.3 $ 134.1 $ 33.2 25 % 17.3 % 16.5 % Cost of products sold increased $119.8 million in 2011 to $799.2 million compared to $679.4 million in 2010, while gross margin increased to 17.3% in 2011 from 16.5% in 2010. Cost of products sold increased primarily due to volume increases and increases in commodity prices, including the prices of steel, aluminum, nickel and copper.Engineered Products gross margin increased primarily due to volume increases. Gross margin in the Assembly Components segment decreased primarily from reduced sales volume. Gross margin in the Supply Technologies segment, for $8.5 million in cash, which resulted in a net gain of approximately $3.8 million, after taxes of $1.5 million. The income from discontinued operations of $3.0 million in 2013 is predominantly comprised of the gain on sale, but also includes operating losses, net of tax, of the business unit sold. The loss from discontinued operations of $2.4 million in 2012 is comprised of the operating losses, net of tax, of the business unit sold. As a result of the sale, the business unit has been removed from the Supply Technologies segment and presented as a discontinued operation for all of the periods presented.essentially unchanged from 2010. Year Ended December 31, 2014 2013 2012 Revenues: Supply Technologies 40 % 39 % 43 % Assembly Components 36 % 34 % 27 % Engineered Products 24 % 27 % 30 % Segment Operating Income: Supply Technologies 33 % 31 % 33 % Assembly Components 33 % 28 % 18 % Engineered Products 34 % 41 % 49 % 2014 vs. 2013 2013 vs. 2012 2014 2013 2012 $ Change % Change $ Change % Change (Dollars in millions) Net sales $ 559.6 $ 471.9 $ 483.8 $ 87.7 19 % $ (11.9 ) (2 )% Segment operating income $ 42.5 $ 35.0 $ 37.5 $ 7.5 21 % $ (2.5 ) (7 )% Segment operating income margin 7.6 % 7.4 % 7.8 % Selling, General & Administrative (SG&A) Expenses:2014 Compared with 2013 Year Ended
December 31, Change Percent
Change 2011 2010 (Dollars in millions) $ 105.6 $ 91.8 $ 13.8 15 % 10.9 % 11.3 % Consolidated SG&A expenses20112014.same periodoperating margin of 7.4% in 2010. SG&A expenses increased $13.8 million2013. The increase in 2011 compared to 2010margin is primarily due to increased sales volume and to increases in payroll and payroll related expensesoperational leverage as a result of $8.2 million and to $3.4 million of incremental expenses resulting from theour acquisitions of ACS, RomeHenry Halstead, QEF and Pillar.Interest Expense: Year Ended
December 31, Change
Change 2011 2010 (Dollars in millions) $ 32.2 $ 23.8 $ 8.4 35% $ 7.3 $ 1.9 $ 1.9 $ 337.3 $ 322.0 $ 15.3 5% 7.38 % 7.39 % 1 basis point Interest expense increased $8.4 millionApollo and overall customer product mix swings in 2011 compared to 2010, primarily due to debt extinguishment costs of $7.3 million related to premiums2014 and other transactionless acquisition-related costs associated with the tenderinventory step-up in purchase accounting for acquisitions, offset by increased professional service fees.early redemptiona 25% decline in volume associated with the defense industry market combined with the exit of low margin business approximating $11.0 million. These unfavorable impacts to revenues were partially offset by approximately $8.5 million in sales from our two fourth-quarter 2013 acquisitions, Henry Halstead and write offQEF, greater volume in our power sports and recreational equipment market of deferred financing7% and increased tooling sales in our small fastener manufacturing division.Senior Subordinated Notes.inventory step-up in purchased accounting for the Henry Halstead and QEF acquisitions. Excluding these acquisition-related costs, interest increasedsegment operating income remained comparable with the prior year, even though revenues were slightly down compared to prior year. While the acquisition-related costs unfavorably impacted segment operating income by 30 basis points, our overall segment operating margin only decreased 20 basis points to 7.6% in 2013 compared with the prior year as a result of effective cost control management and the pairing of low margin business. 2014 vs. 2013 2013 vs. 2012 2014 2013 2012 $ Change % Change $ Change % Change (Dollars in millions) Net sales $ 490.5 $ 412.8 $ 304.0 $ 77.7 19 % $ 108.8 36 % Segment operating income $ 42.0 $ 31.8 $ 19.9 $ 10.2 32 % $ 11.9 60 % Segment operating income margin 8.6 % 7.7 % 6.5 % anthe incremental sales from new programs with our automotive customers in our aluminum business. The aluminum business revenues increased 35%. Also contributing to the overall increase in average outstanding borrowings.Income Tax:Segment Operating Income: Year Ended
December 31, 2011 2010 (Dollars in millions) $ 24.2 $ 17.2 $ (5.2 ) $ 2.0 (21.5 )% 11.6 % The provision for On the strength of the aluminum business incremental contribution from the new program launches with our automotive customers in 2013 and the Bates and Autoform acquisitions, segment operating income taxes was $(5.2) millionincreased 32% in 20112014 compared to $2.0 million in 2010. The effective2013. Our segment operating income tax ratemargin was (21.5)% in 20118.6%, which was a 90 basis point increase compared to 11.6%operating income margin of 7.7% in 2010.We released $16.8 million2013. The increase in margin is primarily attributable to the volume increase in our aluminum business.valuation allowancegrowth is organic. 2014 vs. 2013 2013 vs. 2012 2014 2013 2012 $ Change % Change $ Change % Change (Dollars in millions) Net sales $ 328.6 $ 318.5 $ 340.4 $ 10.1 3 % $ (21.9 ) (6 )% Segment operating income $ 42.7 $ 47.1 $ 55.0 $ (4.4 ) (9 )% $ (7.9 ) (14 )% Segment operating income margin 13.0 % 14.8 % 16.2 % continuing operationsa 5% increase in 2011the capital equipment business within our industrial equipment business unit. Global economic uncertainty in 2013 caused many industrial customers to defer orders. The aftermarket volume in the industrial equipment business was up less than 1% in 2014 compared to $5.8 million2013. Offsetting these net sales increases, our forging business sales declined 2% in 2010. As2014 as sales were unfavorably impacted by reduced demand for some of December 31, 2011, we were notits aircraft forging products.a cumulative three-year loss position2014. The decrease in operating income dollars and determined that itthe 180 basis point decline in segment operating income margin are associated with the sales mix in 2014 and the associated reduction in overhead absorption related to the decline in volume in our forging business.more likely than not thatjust 2% less in 2013 compared to 2012. Offsetting these net sales declines, our U.S.forging business demand continued to be very strong in 2013 led by our rail business, and net deferred tax assets would be realized. As of December 31, 2010, we determined that it was not more likely than not that oursales increased 7% over the prior year.U.S.sales in 2013, segment operating income also decreased 14%. The decrease in operating income dollars and certain foreign deferred tax assets would be realized.Our netthe 140 basis point decline in segment operating loss carryforward precludedincome margin are associated with the payment of most U.S. federal income taxesvolume decline in both 20112013 and 2010. At December 31, 2011, we had net operating loss carryforwards for U.S. federal income tax purposes of approximately $10.4 million, which will expire between 2024 and 2031. 2014 2013 (Dollars in millions) Cash and cash equivalents $ 58.0 $ 55.2 Working capital $ 318.3 $ 298.3 Current ratio 2.21 2.51 Debt as a % of capitalization 70 % 70 % Net debt as a % of capitalization 61 % 60 % 2014 2013 2012 Cash provided (used) by: (In millions) Operating activities $ 53.6 $ 60.3 $ 55.9 Investing activities (96.4 ) (54.3 ) (120.3 ) Financing activities 48.6 3.9 30.5 Effect of exchange rate changes on cash (3.0 ) 0.9 0.3 Increase (decrease) in cash and cash equivalents $ 2.8 $ 10.8 $ (33.6 ) 2012,2014, we had $101.9$162.0 million outstanding under the revolving credit facility, approximately $60.4$55.4 million of unused borrowing availability under the revolving credit facility and cash and cash equivalents of $44.4 million.$58.0 million.long-term debt securities. On April 7, 2011, we completed the sale of $250.0 million aggregate principal amount of Senior Notes. The Senior Notes bear an interest rate of 8.125% per annum and will be payable semi-annually in arrears on April 1 and October 1 of each year commencing October 1, 2011.year. The Senior Notes mature on April 1, 2021.the Credit Agreementa credit agreement (the “Credit Agreement”) with a group of banks which,that, as subsequently amended, matures at April 7, 2016on July 31, 2019. Pursuant to the Credit Agreement, we may borrow or issue standby letters of credit or commercial letters of credit. On July 31, 2014, and assubsequently on October 24, 2014, the Credit Agreement was amended currently provides for aand restated to, among other things, increase the revolving credit facility with availability of up toloan commitment from $220.0 million subject to an asset-based formula$250.0 million, and provide a term loan for $25.0up to $35.0 million that is secured by certain accounts receivable, inventory, real estate and machinery and equipment. The term loan topped out at $31.2 million in the first quarter of 2015. We have the option to increase the availability under the revolving loan portion of the credit facility by $30.0$50.0 million. The revolving credit facility is secured by substantially all our accounts receivable and inventory in the United States, Canada and Canada.Europe. Borrowings from this revolving credit facility will be used for general corporate purposes. Amounts borrowed under the revolving credit facility may be borrowed at either (i) LIBOR plus 1.75%1.5% to 2.75%2.5% or (ii) the bank’s prime lending rate minus .25%0.25% to 1.00%1.25%, at our election.the Company's election except the first $22.0 million of domestic borrowings shall carry a rate of (i) Libor plus 3.5% or (ii) the bank's prime lending rate plus 1%. The LIBOR-based interest rate is dependent on ourthe Company's debt service coverage ratio, as defined in the Credit Agreement. Under the Credit Agreement, a detailed borrowing base formula provides borrowing availability to usthe Company based on percentages of eligible accounts receivable and inventory. Interest on the term loan is at either (i) LIBOR plus 2.75%2.0% to 3.0% or (ii) the bank’s prime lending rate plus .25%0.25% to 1.25%, at ourthe Company's election. The term loan is amortized based on a seven-year schedule with the first payment commencing April 1, 2015 and the balance due at maturity (April 7, 2016)(July 31, 2019).loan portion ofcredit facility provided by the credit facilityCredit Agreement is based on our ability to meet a debt service ratio covenant, which could be materially impacted by negative economic trends. Failure to meet the debt service ratio could materially impact the availability and interest rate of future borrowings.We$42.2$44.5 million and $61.2 million at December 31, 20122014 and 2011, respectively.$40.0 million at December 31, 2013. For each of our foreign subsidiaries, we make a determination regarding the amount of earnings intended for permanent reinvestment, with the balance, if any, available to be repatriated to the United States. The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the foreign subsidiaries’ operational activities and/or future foreign investments. At December 31, 2012,2014, management believed that sufficient liquidity was available in the United States, and it is our current intention to permanently reinvest undistributed earnings of our foreign subsidiaries outside of the United States. WeAlthough we have no intention to repatriate the approximately $77.2$90.2 million of undistributed earnings of our foreign subsidiaries, as of December 31, 2012. If2014, if we were to repatriate these earnings, there would potentially be an adverse tax impact.2012,2014, our debt service coverage ratio was 2.3,2.2, and, therefore, we were in compliance with the debt service coverage ratio covenant contained in the revolving credit facility provided by the Credit Agreement. We were also in compliance with the other covenants contained in the Credit Agreementrevolving credit facility as of December 31, 2012.2014. The debt service coverage ratio is calculated at the end of each fiscal quarter and is based on the most recently ended four fiscal quarters of consolidated EBITDA minus cash taxes paid, minus unfunded capital expenditures, plus cash tax refunds to consolidated debt charges that are consolidated cash interest expense plus scheduled principal payments on indebtedness plus scheduled reductions in our term debt as defined in the Credit Agreement. The debt service coverage ratio must be greater than 1.0 and not less than 1.1 for any two consecutive fiscal quarters. While we expect to remain in compliance throughout 2013,2015, declines in sales volumes in 20132015 could adversely impact our ability to remain in compliance with certain of these financial covenants. We expect to remain in compliance throughout 2013.2.422.21 at December 31, 20122014 versus 2.642.51 at December 31, 2011.2013. Working capital which we define as current assets less current liabilities, decreasedincreased by $19.2$20.0 million to $272.3$318.3 million at December 31, 20122014 from $291.5$298.3 million at December 31, 2011.2013. Accounts receivable increased $21.4$42.3 million to $161.3$208.0 million in 2012 at December 31, 2014, from $139.9$165.7 million in 2011 at December 31, 2013, primarily resulting from the acquisition of FRS and its $19.8acquisitions in 2014. Inventory increased by $17.0 million at December 31, 2014, to $238.4 million from $221.4 million at December 31, 2013, primarily resulting from $8.3 million of accounts receivableincreases associated with the acquisitions in 2014 and planned inventory increases resulting from the growth in sales. Accounts payable increased$48.3 million to $160.3 million at December 31, 2012 and the increase in sales volume in 2012. Inventory increased by $13.62014 from $112.0 million in 2012 to $215.6 million from $202.0 million in 2011 at December 31, 2013, primarily resulting from the acquisition of FRS. Accounts payable increased $2.5 million to $102.1 million in 2012 from $99.6 million in 2011 as a result of acquiring the accounts payable of FRS of $13.4 million offset by2014 acquisitions and the timing of payments at December 31, 2012.2014. Accrued expenses increased by $8.8$17.6 million to $83.3$103.6 million in 2012at December 31, 2014, from $74.5$86.0 million in 2011at December 31, 2013, primarily resulting from acquiring the accrued liabilities of FRS of $12.6 million,the 2014 acquisitions, partially offset by a decreasereduction in advance billings of $3.0 million.During 2012, we billings. $55.9 million from operating activities as compared to providing $35.9 million in 2011. The increase in cash provided by operating activities of $20.0decreased $6.7 million to $53.6 million in 2014 compared to $60.3 million in 2013. The decrease in operating cash flows was primarily the result of a decreaseincreases in changes in operatingaccounts receivable of $27.9 million, inventory and other current assets and liabilities excluding acquisitions of businesses of $4.2$23.3 million in 2012 compared to decreases of $11.7 million in 2011,offset by an increase in accounts payable of $27.9 million, net income of $2.4$3.0 million and an increase in deferred taxesnon-cash charges added back to net income.$20.4increases in net income in 2013 compared to 2012 of $12.1 million, offset by an increase in gains on sales of businesses and assets and gains of acquisitions of $6.4 million. Duringinvested $97.0generated proceeds from the sale of assets of $14.2 million, forprimarily associated with the $8.5 million sale of the outstanding equity interests of a non-core business unit in the Supply Technologies segment and the $5.0 million sale of a 25% interest in the Southwest Steel Processing business in the Engineered Products segment.$29.6Saet.capital expenditures, which were offset by the receipt2014 consisted of $5.9 million from the salenet borrowings and leasebackdebt instruments of equipment under operating leases. These activities, plus a net increase in borrowings of $31.1$57.9 million, offset by purchasespayment of our common stockcash dividends of $4.0$4.7 million resulted in a decrease in cash of $33.6 million in 2012.During 2011, we provided $35.9 million from operating activities as compared to providing $67.1 million in 2010. The decrease in cash provided by operating activities of $31.2 million was primarily the result of a decrease in changes in operating assets and liabilities excluding acquisitions of businesses of $11.7 million in 2011 compared to an increase of $32.8 million in 2010 offset by an increase in net income of $14.2 million. During 2011, we invested $12.7 million in capital expenditures which were offset by the receipt of $1.6 million from the sale of property. These activities, plus cash interest and tax payments of $31.6 million, a net increase in borrowings of $34.8 million, the issuance of the Notes, and purchases of treasury stock of $2.1 million, resulted in an increase in cash$4.4 million.$42.7$3.9 million in 2011.2012,2014, none were outstanding. We currently have no other derivative instruments.2012: Payments Due or Commitment Expiration Per
Period Total Less Than
1 Year 1-3 Years 3-5 Years More than
5 Years $ 378,678 $ 4,411 $ 8,829 $ 115,073 $ 250,365 167,578 20,313 40,625 40,625 66,015 45,446 12,588 16,007 9,518 7,333 127,964 127,939 25 — — 16,206 2,140 3,970 3,440 6,656 18,163 10,727 894 6,542 — $ 754,035 $ 178,118 $ 70,350 $ 175,198 $ 330,369 Payments Due or Commitment Expiration Per Period (In millions) Total Less Than 1 Year 1-3 Years 3-5 Years More than 5 Years Long-term debt obligations $ 443.8 $ 9.4 $ 24.3 $ 160.1 $ 250.0 127.0 20.3 40.7 40.7 25.3 Operating and capital lease obligations 49.6 15.1 23.1 9.1 2.3 246.6 246.0 0.6 — — 13.8 1.7 3.2 2.9 6.0 Standby letters of credit and bank guarantees 25.7 12.6 4.1 9.0 — Total $ 906.5 $ 305.1 $ 96.0 $ 221.8 $ 283.6 (1) Interest obligations are included on the Senior Notes only and assume the Senior Notes are paid at maturity. The calculation of interest on debt outstanding under our revolving credit facility and other variable rate debt ($ 2.84.4 million based on 2.23%2.32% average interest rate and outstanding borrowings of $124.2$190.8 million at December 31, 2012)2014) is not included above due to the subjectivity and estimation required.(2) Purchase obligations include contractual obligations for raw materials and services. (3) Postretirement obligations include projected postretirement benefit payments to participants only through 2021.2023.H10 to the consolidated financial statements included elsewhere herein, since we cannot predict with reasonable reliability, the timing of potential cash settlements with the respective taxing authorities.11%8% of consolidated revenue) is accounted for under the percentage of completion method, and recognized on the basis of the percentage each contract’s cost to date bears to the total estimated contract cost. Revenue earned on contracts in process that are in excess of billings, is classified in other current assetsunbilled contract revenue in the accompanying consolidated balance sheet. Billings that are in excess of revenue earned on contracts in process are classified in accrued expenses on the accompanying balance sheet. Our revenue recognition policies are in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition.”Allowance for Doubtful Accounts: Accounts receivable have been reduced by an allowance for amounts that may become uncollectable in the future. Allowances are developed by the individual operating units based on historical losses, adjusting for economic conditions. Our policy is to identify and reserve for specific collectability concerns based on customers’ financial condition and payment history. The establishment of reserves requires the use of judgment and assumptions regarding the potential for losses on receivable balances.Equipment”,Equipment,” management performs impairment tests of long-lived assets, including property and equipment, whenever an event occurs or circumstances change that indicate that the carrying value may not be recoverable or the useful life of the asset has changed. We reviewedreview our long-lived assets for indicators of impairment such as a decision to idle certain facilities and consolidate certain operations, a current-period operating or cash flow loss or a forecast that demonstrates continuing losses associated with the use of a long-lived asset and the expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. When we identifiedidentify impairment indicators, we determineddetermine whether the carrying amount of our long-lived assets wasis recoverable by comparing the carrying value to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. We consideredconsider whether impairments existedexist at the lowest level of independent identifiable cash flows within a reporting unit (for example, plant location, program level or asset level). If the carrying value of the assets exceededexceeds the expected cash flows, we estimatedestimate the fair value of these assets by using appraisals or recent selling experience in selling similar assets or for certain assets with reasonably predictable cash flows by performing discounted cash flow analysis using the same discount rate used as the weighted average cost of capital in the respective goodwill impairment analysis to estimate fairwasis not available to determine whether an impairment existed. Certain assets were abandoned and written down to scrap or appraised value. We recorded $5.4 million of asset impairment charges in 2011 based on appraisals and scrap values. See Note O to the consolidated financial statements included elsewhere herein.Restructuring: We recognize costs in accordance with ASC 420, “Exit or Disposal Cost Obligations”. Detailed contemporaneous documentation is maintained and updated on a quarterly basis to ensure that accruals are properly supported. If management determines that there is a change in the estimate, the accruals are adjusted to reflect the changes.—- Goodwill and Other” (“ASC 350”), management performs impairment testing of goodwill and indefinite-lived assets at least annually, as of October 1 of each year, or more frequently if impairment indicators arise.a reportablean operating segment having similar economic characteristics.During 2011, we—- Goodwill and Other (Topic 350): Testing Goodwill for Impairment,” which allows companies to assess qualitative factors to determine if goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test. BasedIn 2014 and 2013, based on a review of variousthe qualitative factors set forth in ASC 350, management concluded that the goodwill for the Capital Equipment reporting unit was not impairedas of October 1, 2014 and that the two-step approach was not required to be performed for this reporting unit. Based on a review of various qualitative factors, management concluded that the goodwill for the Aluminum Products reporting unit would be tested under the two-step approach. We prepare the quantitative goodwill impairment analysis by comparing the estimated fair value of each reporting unit to its carrying value. Management determined fair value through the use of a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved for2013, the reporting unit. If the calculatedunits had fair value is less than thevalues that exceeded their carrying value, impairment of the reporting unit may exist. The use of a discounted cash flow valuation model to determine estimated fair value is common practice in impairment testing in the absence of available domestic and international transactional market evidence to determine the fair value. The key assumptions used in the discounted cash flow valuation model for impairment testing include discount rates, growth rates, cash flow projections and terminal value rates. Discount rates are determined by using the weighted average cost of capital (“WACC”) methodology. The WACC considers market and industry data as well as company-specific risk factors for each reporting unit in determining the appropriate discount rates to be used. The discount rate utilized for the Aluminum reporting unit was 12% which is indicative of the return an investor would expect to receive for investing in such a business. Operational management, considering industry and company-specific historical and projected data, develops growth rates and cash flow projections. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates.values. As a result of this analysis, we concluded that no impairment existed.2012,2014, we completed the acquisitions of FRSApollo, Autoform and ETMSaet and recorded additional goodwill of $40.2$28.9 million. At December 31, 2012,2014, we had goodwill of $49.7$89.5 million. In 2012, based on a reviewThere were no interim indicators of various qualitative factors,impairment and management concluded that the goodwill related to the Aluminum Products, FRS, and the Capital Equipment and Supply Technologies reporting units was not impaired and that the two-step approach was not required to be performed.At performed through 2012,2014.one indefinite—lived tradename$14.0 million of indefinite-lived trade names primarily related to the 2012 acquisition of FRS in the amount of $11.5 million.FRS. For purposes of impairment testing in 2012, we estimated the fair value of the trade name using a “relief from royalty” approach. This approach involves two steps: (1) estimating a reasonable royalty rate for the trade name and (2) applying this royalty rate to a net sales stream and discounting the resulting cash flows to determine fair value. Fair value is then compared with the carrying value of the trade name. As a result of this analysis, we concluded that no impairment existed.Stock-Based Compensation: ASC 718, “Compensation-Stock Compensation,” requiresWe consult with our actuaries at least annually when reviewing and selecting the discount rates to be used. The discount rates used by the Company are based on yields of various corporate and governmental bond indices with actual maturity dates that approximate the estimated benefit payment streams of the related pension plans. The discount rates are also reviewed in comparison with current benchmark indices, economic market conditions and the movement in the benchmark yield since the previous fiscal year. The liability weighted-average discount rate for the defined benefit pension plan is 3.82% for 2014, compared with 4.51% in 2013. For the other postretirement benefit plan, the rate is 3.60% for 2014 and 4.21% for 2013. This rate represents the interest rates generally available in the United States, which is the Company’s only country with other postretirement benefit liabilities. Another assumption that affects the Company’s pension expense is the expected long-term rateChange in Assumption Impact on 2014 Benefit Expense Impact on 2014 Projected Benefit Obligation for Pension Benefits Impact on 2014 Projected Benefit Obligation for Postretirement Benefits 50 basis point decrease in discount rate $ — $ 3.3 $ 0.8 50 basis point increase in discount rate $ — $ (3.1 ) $ (0.7 ) 50 basis point decrease in expected return on assets $ 0.6 $ — $ — resulting from all share-based payment transactionscan be recognizedestimated within a range, we accrue the minimum amount in the financial statementsrange. Based upon facts and establishesinformation currently available, we believe the amounts reserved are adequate for such pending matters. We monitor the development of legal proceedings on a fair-value measurement objective in determiningregular basis and will adjust our reserves when, and to the value of such a cost. We recorded expense related to stock-based compensation in 2012, 2011, and 2010 of $2.7 million, $2.1 million and $1.7 million (before tax), respectively.extent, additional information becomes available.20122014December 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities,” which requires entities to disclose both gross and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting agreement. The objective of the disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS. In January 2013,April 2014, the FASB issued ASU 2013-01, “Balance Sheet2014-08, “Presentation of Financial Statements (Topic 210)205) and Property, Plant, and Equipment (Topic 360): Clarifying the ScopeReporting Discontinued Operations and Disclosures of Disclosures about Offsetting Assets and Liabilities,Disposals of Components of an Entity,” which clarifiesraises the scopethreshold for disposals to qualify as discontinued operations and requires new disclosures for discontinued operations and for individually material disposal transactions that do not meet the definition of a discontinued operation. The ASU is effective prospectively for reporting periods beginning with the first quarter of 2015. Early adoption is permitted for disposals that have not been previously reported in the financial statements. We believe the adoption of this ASU will have an insignificant effect on our consolidated financial statement as it only applies to future disposals. The Company is currently evaluating early adoption of this ASU.offsetting disclosures ofrevenue that is recognized. The ASU 2011-11. Both ASUs areis effective for fiscal years,annual reporting periods beginning after December 15, 2016, and interim periods within those years, beginning onwill require either retrospective application to each prior reporting period presented or after January 1, 2013. Retrospective presentation for all comparative periods presentedretrospective application with the cumulative effect of initially applying the standard recognized at the date of adoption. The Company is required. We are currently evaluating the impact of adopting this guidance.In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” which requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail on these amounts. This ASU is effective prospectively for reporting periods beginning after December 15, 2012. We are currently evaluating the impact of adopting this guidance.capitalindustrial equipment businesses,business unit included in the Engineered Products segment.annual reportAnnual Report on Form 10-K contains certain statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The words “believes”, “anticipates”, “plans”, “expects”, “intends”, “estimates” and similar expressions are intended to identify forward-looking statements.crisis;crises; adverse impacts to us, our suppliers and customers from acts of terrorism or hostilities; our ability to meet various covenants, including financial covenants, contained in the agreements governing our indebtedness; disruptions, uncertainties or volatility in the credit markets that may limit our access to capital; increasingly stringent domestic and foreign governmental regulations, including those affecting the environment; potential disruption due to a partial or complete reconfiguration of the European Union; increasingly stringent domestic and foreign governmental regulations, including those affecting the environment; inherent uncertainties involved in assessing our potential liability for environmental remediation-related activities; the outcome of pending and future litigation and other claims and disputes with customers; the outcome of the review being conducted by the special committee of our Board of Directors; our dependence on the automotive and heavy-duty truck industries, which are highly cyclical; the dependence of the automotive industry on consumer spending, which could be lower due to the effects of the recent financial crises; our ability to negotiate contracts with labor unions; our dependence on key management; our dependence on information systems; and the other factors we describe under the “Item 1A. Risk Factors”. included in this annual report on Form 10-K. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. In light of these and other uncertainties, the inclusion of a forward-looking statement herein should not be regarded as a representation by us that our plans and objectives will be achieved.ourborrowings under the floating rate revolving credit facility and term loan provided by our Credit Agreement, which consisted of borrowings of $124.2$190.8 million at December 31, 2012.2014. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $1.2$1.9 million for during the year ended December 31, 2012.2012,2014, we recorded a favorablean unfavorable foreign currency translation adjustment of $0.6$7.9 million related to net assets located outside the United States. This foreign currency translation adjustment resulted primarily from the strengthening of the U.S. dollar. Our foreign operations are also subject to other customary risks of operating in a global environment, such as unstable political situations, the effect of local laws and taxes, tariff increases and regulations and requirements for export licenses, the potential imposition of trade or foreign exchange restrictions and transportation delays. Page 4142434445464748737374Corp.Corp and subsidiaries as of December 31, 20122014 and 2011,2013 and the related consolidated statements of income, comprehensive income, shareholders’shareholders' equity and cash flows for each of the three years in the period ended December 31, 2012.2014. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.20122014 and 20112013 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 20122014, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.subsidiariessubsidiaries' internal control over financial reporting as of December 31, 2012,2014, based on criteria established in the Internal Control —- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 15, 201316, 2015 expressed an unqualified opinion thereon.
15, 20132012,2014, based on criteria established in Internal Control — IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Park-Ohio Holdings Corp. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control overOver Financial Reporting. Our responsibility is to express an opinion on the Company’scompany’s internal control over financial reporting based on our audit.that:that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Over financialover Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Fluid Routing Solutions Holding Corp. (FRS)Apollo Aerospace Group (“Apollo”), Autoform Tool & Manufacturing (“Autoform”) and Saet S.p.A (“Saet”), which isare included in the 20122014 consolidated financial statements of Park-Ohio Holdings Corp. and subsidiaries and constituted 19%8% of total assets as of December 31, 20122014 and 13% and 22%less than 2% of net sales and net income, respectively,revenues for the year then ended. Our audit of internal control over financial reporting of Park-Ohio Holdings Corp. and subsidiaries also did not include an evaluation of the internal control over financial reporting of FRS.2012,2014, based on the COSO criteria. also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Park-Ohio Holdings Corp. and subsidiaries as of December 31, 20122014 and 2011,2013, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 20122014 of Park-Ohio Holdings Corp. and subsidiaries and our report dated March 15, 201316, 2015 expressed an unqualified opinion thereon.15, 2013 December 31, 2012 2011 (Dollars in thousands) ASSETS $ 44,437 $ 78,001 161,273 139,941 215,579 202,039 19,850 20,561 1,385 18,778 21,473 9,622 463,997 468,942 5,675 3,654 56,008 47,594 247,402 208,727 309,085 259,975 208,654 198,165 100,431 61,810 99,295 20,187 62,897 63,833 $ 726,620 $ 614,772 LIABILITIES AND SHAREHOLDERS’ EQUITY $ 102,097 $ 99,588 83,328 74,483 4,411 1,415 1,906 2,002 191,742 177,488 250,000 250,000 120,629 93,000 3,638 3,165 31,507 1,392 27,353 24,285 433,127 371,842 — — 14,109 13,814 76,870 70,248 42,178 10,392 (24,575 ) (20,607 ) (6,831 ) (8,405 ) 101,751 65,442 $ 726,620 $ 614,772 See December 31,
2014 December 31,
2013 (In millions, except share
and per share data)ASSETS Current assets: Cash and cash equivalents $ 58.0 $ 55.2 Accounts receivable, less allowances for doubtful accounts of $4.1 million at December 31, 2014 and $3.7 million at December 31, 2013 208.0 165.7 Inventories, net 238.4 221.4 Deferred tax assets 28.9 25.2 Unbilled contract revenue 26.8 8.7 Prepaid and other current assets 22.1 20.1 Total current assets 582.2 496.3 Net property, plant and equipment 141.1 115.4 Goodwill 89.5 60.4 Intangible assets, net 88.1 66.2 Other long-term assets 73.3 80.4 Total assets $ 974.2 $ 818.7 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 160.3 $ 112.0 Accrued expenses and other 103.6 86.0 Total current liabilities 263.9 198.0 Long-term liabilities, less current portion: Debt 434.4 379.2 Deferred tax liabilities 43.9 45.3 Other postretirement benefits and other long-term liabilities 40.1 32.2 Total long-term liabilities 518.4 456.7 Park-Ohio Holdings Corp. and Subsidiaries shareholders' equity: Capital stock, par value $1 a share Serial preferred stock: Authorized -- 632,470 shares: Issued and outstanding -- none — — Common stock: Authorized - 40,000,000 shares; Issued - 14,513,821 shares in 2014 and 14,364,239 in 2013 14.5 14.4 Additional paid-in capital 89.8 82.4 Retained earnings 126.5 85.6 Treasury stock, at cost, 2,014,692 shares in 2014 and 1,934,959 shares in 2013 (31.2 ) (26.8 ) Accumulated other comprehensive (loss) income (14.0 ) 3.4 Total Park-Ohio Holdings Corp. and Subsidiaries shareholders' equity 185.6 159.0 Noncontrolling interest 6.3 5.0 Total equity 191.9 164.0 Total liabilities and shareholders' equity $ 974.2 $ 818.7 toare an integral part of these consolidated financial statements. Year Ended December 31, 2012 2011 2010 (Dollars in thousands,
except per share data) $ 1,134,042 $ 966,573 $ 813,522 �� 927,026 799,248 679,425 207,016 167,325 134,097 117,209 105,582 91,755 — 5,359 3,539 13,000 — — 76,807 56,384 38,803 — — (2,210 ) 26,350 32,152 23,792 50,457 24,232 17,221 18,671 (5,203 ) 2,034 $ 31,786 $ 29,435 $ 15,187 $ 2.67 $ 2.54 $ 1.34 $ 2.62 $ 2.45 $ 1.29 See Year Ended December 31, 2014 2013 2012 (In millions, except earnings per share data) Net sales $ 1,378.7 $ 1,203.2 $ 1,128.2 Cost of sales 1,144.2 992.2 920.9 Gross profit 234.5 211.0 207.3 Selling, general and administrative expenses 136.6 120.2 113.8 Litigation judgment and settlement costs — 5.2 13.0 Operating income 97.9 85.6 80.5 Gain on acquisition of business — (0.6 ) — Interest expense 26.1 25.9 26.0 Income from continuing operations before income taxes 71.8 60.3 54.5 Income tax expense 24.9 19.4 20.3 Net income from continuing operations 46.9 40.9 34.2 Income (loss) from discontinued operations, net of taxes — 3.0 (2.4 ) Net income 46.9 43.9 31.8 Net income attributable to noncontrolling interest (1.3 ) (0.5 ) — Net income attributable to ParkOhio common shareholders $ 45.6 $ 43.4 $ 31.8 Earnings (loss) per common share attributable to ParkOhio common shareholders - Basic: Continuing operations $ 3.77 $ 3.40 $ 2.87 Discontinued operations — 0.25 (0.20 ) Total $ 3.77 $ 3.65 $ 2.67 Earnings (loss) per common share attributable to ParkOhio common shareholders - Diluted: Continuing operations $ 3.68 $ 3.31 $ 2.82 Discontinued operations — 0.25 (0.20 ) Total $ 3.68 $ 3.56 $ 2.62 Weighted-average shares used to compute earnings per share: Basic 12.1 11.9 11.9 Diluted 12.4 12.2 12.1 Dividend per common share $ 0.375 $ — $ — toare an integral part of these consolidated financial statements. Year Ended December 31, 2012 2011 2010 (Dollars in thousands) $ 31,786 $ 29,435 $ 15,187 585 (1,387 ) (711 ) 989 (9,456 ) 8,263 1,574 (10,843 ) 7,552 $ 33,360 $ 18,592 $ 22,739 See (Loss) Year Ended December 31, 2014 2013 2012 (In millions) Net income $ 46.9 $ 43.9 $ 31.8 Other comprehensive income (loss): Foreign currency translation (loss) gain (7.9 ) (2.6 ) 0.6 Pension and postretirement benefit adjustments, net of tax (9.5 ) 12.8 1.0 Total other comprehensive (loss) income (17.4 ) 10.2 1.6 Total comprehensive income, net of tax 29.5 54.1 33.4 Comprehensive income attributable to noncontrolling interest (1.3 ) (0.5 ) — Comprehensive income attributable to ParkOhio common shareholders $ 28.2 $ 53.6 $ 33.4 toare an integral part of these consolidated financial statements. Common
Stock Additional
Paid-In
Capital Retained
Earnings
(Deficit) Treasury
Stock Accumulated
Other
Comprehensive
Income (Loss) Total (Dollars in thousands) $ 13,274 $ 66,323 $ (34,230 ) $ (17,443 ) $ (5,114 ) $ 22,810 — — 15,187 — 7,552 22,739 — 1,463 — — — 1,463 13 (13 ) — — — — 101 (101 ) — — — — (14 ) 14 — — — — — — — (1,059 ) — (1,059 ) 23 127 — — — 150 — 272 — — — 272 13,397 68,085 (19,043 ) (18,502 ) 2,438 46,375 — — 29,435 — (10,843 ) 18,592 — 1,988 — — — 1,988 194 (194 ) — — — — — — — (2,105 ) — (2,105 ) 223 271 — — — 494 — 98 — — — 98 13,814 70,248 10,392 (20,607 ) (8,405 ) 65,442 — — 31,786 — 1,574 33,360 — 2,584 — — — 2,584 258 (258 ) — — — — 31 573 — — — 604 (32 ) 32 — — — — — — — (3,968 ) — (3,968 ) 38 441 — — — 479 — 416 — — — 416 — 2,819 — — — 2,819 — 15 — — — 15 $ 14,109 $ 76,870 $ 42,178 $ (24,575 ) $ (6,831 ) $ 101,751 See Common Stock Shares Amount Additional
Paid-In
Capital Retained (Deficit)
Earnings Treasury Stock Accumulated
Other
Comprehensive
(Loss) Income Noncontrolling Interest Total (In whole shares) (In millions) Balance at January 1, 2012 13,813,774 $ 13.8 $ 70.3 $ 10.4 $ (20.6 ) $ (8.4 ) $ — $ 65.5 Other comprehensive income — — — 31.8 — 1.6 — 33.4 Share-based compensation — — 2.6 — — — — 2.6 Restricted stock awards 258,000 0.3 (0.3 ) — — — — — Common stock award 31,606 — 0.6 — — — — 0.6 Restricted stock cancelled (32,375 ) — — — — — — — Purchase of treasury stock (198,339 shares) — — — — (4.0 ) — — (4.0 ) Exercise of stock options 38,250 — 0.5 — — — — 0.5 Income tax effect of share-based compensation exercises and vesting — — 0.4 — — — — 0.4 Income tax effect of suspended benefits from share-based compensation — — 2.8 — — — — 2.8 Balance at December 31, 2012 14,109,255 14.1 76.9 42.2 (24.6 ) (6.8 ) — 101.8 Other comprehensive income — — — 43.4 — 10.2 0.5 54.1 Share-based compensation — — 4.1 — — — — 4.1 Restricted stock awards and options exercised 204,650 0.2 (0.2 ) — — — — — Restricted stock cancelled (4,000 ) — — — — — — — Performance shares issued 14,000 — 0.4 — — — — 0.4 Capital contribution from non-controlling interest — — 0.5 — — — 4.5 5.0 Purchase of treasury stock (62,694 shares) — — — — (2.2 ) — — (2.2 ) Exercise of stock options 40,334 0.1 0.3 — — — — 0.4 Income tax effect of share-based compensation exercises and vesting — — 0.4 — — — — 0.4 Balance at December 31, 2013 14,364,239 14.4 82.4 85.6 (26.8 ) 3.4 5.0 164.0 Other comprehensive income (loss) — — — 45.6 — (17.4 ) 1.3 29.5 Share-based compensation — — 5.8 — — — — 5.8 Restricted stock awards 140,250 0.1 (0.1 ) — — — — — Restricted stock cancelled (4,668 ) — (0.1 ) — — — — (0.1 ) Performance shares issued 14,000 — 0.7 — — — — 0.7 Dividends — — — (4.7 ) — — — (4.7 ) Purchase of treasury stock (79,733 shares) — — — — (4.4 ) — — (4.4 ) Income tax effect of share-based compensation exercises and vesting — — 1.1 — — — — 1.1 Balance at December 31, 2014 14,513,821 $ 14.5 $ 89.8 $ 126.5 $ (31.2 ) $ (14.0 ) $ 6.3 $ 191.9 toare an integral part of these consolidated financial statements. Year Ended December 31, 2012 2011 2010 (Dollars in thousands) $ 31,786 $ 29,435 $ 15,187 17,991 16,177 17,132 — 5,359 3,539 305 7,335 — — — (2,210 ) (250 ) — — 7,539 (12,817 ) (1,126 ) 2,725 2,086 1,735 9,754 (13,533 ) (7,624 ) 7,133 (8,763 ) 10,067 (21,397 ) 18,057 28,068 295 (7,475 ) 2,291 55,881 35,861 67,059 (29,625 ) (12,673 ) (3,951 ) 5,904 — — (96,963 ) — (25,900 ) 400 1,575 — (120,284 ) (11,098 ) (29,851 ) 25,870 — — (3,650 ) (37,598 ) (8,944 ) (876 ) (1,079 ) (4,142 ) 8,879 2,800 (11,000 ) — 244,970 — — (189,555 ) — 1,083 494 150 2,819 — — 416 — — (3,968 ) (2,105 ) (1,059 ) 30,573 17,927 (24,995 ) 266 — — (33,564 ) 42,690 12,213 78,001 35,311 23,098 $ 44,437 $ 78,001 $ 35,311 $ 5,548 $ 4,648 $ 1,217 23,832 26,993 23,324 See Year Ended December 31, 2014 2013 2012 OPERATING ACTIVITIES (In millions) Net income $ 46.9 $ 43.9 $ 31.8 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 23.2 19.2 18.0 Debt extinguishment costs — — 0.3 Share-based compensation 5.8 4.7 2.7 Gain on sale of business and assets (1.9 ) (6.0 ) (0.2 ) Gain on acquisition of business — (0.6 ) — Deferred income taxes 0.5 (2.3 ) 7.5 Other 1.0 — — Changes in operating assets and liabilities, excluding business acquisitions: Accounts receivable (27.9 ) 8.5 9.8 Inventories and other current assets (23.3 ) (4.9 ) 7.1 Accounts payable and accrued expenses 27.9 (7.5 ) (21.4 ) Other 1.4 5.3 0.3 Net cash provided by operating activities 53.6 60.3 55.9 INVESTING ACTIVITIES Purchases of property, plant and equipment (25.8 ) (30.1 ) (29.6 ) Proceeds from sale and leaseback transactions — 7.4 5.9 Proceeds from sale of assets 2.1 14.2 0.4 Business acquisitions, net of cash acquired (72.7 ) (45.8 ) (97.0 ) Net cash used by investing activities (96.4 ) (54.3 ) (120.3 ) FINANCING ACTIVITIES Proceeds from term loans and other debt 14.2 — 25.9 Payments on term loans and other debt (6.6 ) (4.2 ) (3.7 ) Proceeds from revolving credit facility, net 50.3 9.1 8.9 Bank debt issue costs — — (0.9 ) Other (1.3 ) 0.8 1.1 Income tax effect of suspended benefits from share-based compensation — — 2.8 Income tax effect of share-based compensation exercises and vesting 1.1 0.4 0.4 Dividend (4.7 ) — — Purchase of treasury stock (4.4 ) (2.2 ) (4.0 ) Net cash provided by financing activities 48.6 3.9 30.5 Effect of exchange rate changes on cash (3.0 ) 0.9 0.3 Increase in cash and cash equivalents 2.8 10.8 (33.6 ) Cash and cash equivalents at beginning of period 55.2 44.4 78.0 Cash and cash equivalents at end of period $ 58.0 $ 55.2 $ 44.4 Income taxes paid $ 25.8 $ 25.0 $ 5.5 Interest paid $ 24.0 $ 24.8 $ 23.8 toare an integral part of these consolidated financial statements.2012, 20112014, 2013 and 20102012thousands,millions, except per share data)A1 — Summary of Significant Accounting PoliciesL.12. Transactions with related parties are in the ordinary course of business are conducted on an arm’s-length basis, and are not material to the Company’s financial position, results of operations or cash flows. In December 2014, the Company purchased real estate owned by a company owned by the Chairman and Chief Executive Officer of the Company for cash of $1.8 million. The transaction is included in the capital expenditures of the cash flow statement.Inventory reserves were $27,206 and $24,881 at December 31, 2012 and 2011, respectively. Inventory consigned to others was $6,585 and $6,546 at December 31, 2012 and 2011, respectively.Major Classes of Inventories December 31, 2014 December 31, 2013 (In millions) Finished goods $ 146.0 $ 124.1 Work in process 19.8 36.0 Raw materials and supplies 72.6 61.3 Inventories, net $ 238.4 $ 221.4 Other inventory items Inventory reserves $ 29.9 $ 28.4 Consigned Inventory $ 7.8 $ 6.6 Major Classes of Inventories December 31, 2012 2011 $ 112,986 $ 122,010 27,909 20,660 74,684 59,369 $ 215,579 $ 202,039 25five to 4050 years for buildings, and 3one to 20 years for machinery and equipment.Company reviews long-lived assets for impairment when events or changes in business conditions indicate that their full carrying value may not be recoverable. See Note O.following table summarizes property, plant and equipment at December 31,
2014 December 31,
2013Property, plant and equipment: Land and land improvements $ 7.1 $ 6.5 Buildings 68.4 58.2 Machinery and equipment 293.5 261.5 Total property, plant and equipment 369.0 326.2 Less accumulated depreciation 227.9 210.8 Net property, plant and equipment $ 141.1 $ 115.4 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)“Intangibles“Intangibles — Goodwill and Other”Other” (“ASC 350”), the Company does not amortize goodwill or indefinite-lived intangible assets recorded in connection with business acquisitions. Other intangible assets, which consist primarily of non-contractual customer relationships, are amortized over their estimated useful lives.Intangibles — Goodwill and Other.assets. We have identified our reporting units atassets, compared to the component level, or one level below our operating segments.fair value. In September 2011, the Financial Accounting Standards Board (“FASB”) issuedaccordance with Accounting Standard Update (“ASU”) 2011-08, which amends the rules for testing goodwill for impairment. Under the new rules, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step quantitative impairment test is unnecessary. We early adopted ASU 2011-08 for our October 1, 2011 annual goodwill impairment test.PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Stock-Based Compensation:follows the provisionscompleted its annual indefinite-lived intangible impairment assessment. As a result of ASC 718, “Compensation — Stock Compensation” (“ASC 718”), which requires all share-based payments to employees, including grantsthis analysis, we concluded that no impairment existed.employee stock options,Financial Instruments: Certain financial instruments are required to be recognizedrecorded at fair value. The Company measures financial assets and liabilities at fair value in three levels of inputs. The three-tier fair value hierarchy, which prioritizes the inputs used in the income statementvaluation methodologies, is:their fair values. Compensation expensequoted prices for awards with service conditions onlyidentical assets and liabilities in active markets.subject to graded vesting is recognizednot active, or other inputs that are observable or can be corroborated by observable market data.straight-line basis overmaterial impact on our financial condition, results of operations or cash flows. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and borrowings under the term of the vesting period.Additional information regarding our share-based compensation program is providedCredit Agreement (as defined in Note I.Revenue Recognition:Stock-Based Compensation: The Company recognizes revenue, other than from long-term contracts, when title is transferredfollows the provisions of ASC 718, “Compensation — Stock Compensation” (“ASC 718”), which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the customer, typically upon shipment. Revenue from long-term contracts (approximately 11% of consolidated revenue) is accountedincome statement based on their fair values. Compensation expense for under the percentage of completion method, and recognized on the basis of the percentage each contract’s cost to date bears to the total estimated contract cost. Revenue earned on contracts in processawards with service conditions only that are in excess of billings,subject to graded vesting is classified in unbilled contract revenues in the accompanying consolidatedPARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)balance sheet. Billings that are in excess of revenues earned on contracts in process are classified in accrued expenses in the accompanying balance sheet.Accounts Receivable and Allowance for Doubtful Accounts: Accounts receivable are recorded at net realizable value. Accounts receivable are reduced by an allowance for amounts that may become uncollectable in the future. The Company’s policy is to identify and reserve for specific collectability concerns based on customers’ financial condition and payment history. During 2012 and 2011, we sold approximately $76,482 and $63,202, respectively, of accounts receivable to mitigate accounts receivable concentration risk and to provide additional financing capacity. In compliance with ASC 860, “Transfers and Servicing”, sales of accounts receivable are reflected as a reduction of accounts receivable in the Consolidated Balance Sheets and the proceeds are included in the cash flows from operating activities in the Consolidated Statements of Cash flows. In 2012 and 2011, a loss in the amount of $314 and $281, respectively, related to the sale of accounts receivable is recorded in the Consolidated Statements of Income. These losses represented implicit interest on the transactions.Software Development Costs: Software development costs incurred subsequent to establishing feasibility through the general release of the software products are capitalized and included in other assets in the consolidated balance sheet. Technological feasibility is demonstrated by the completion of a working model. All costs prior to the development of the working model are expensed as incurred. Capitalized costs are amortizedrecognized on a straight-line basis over five years, which is the estimated useful life of the software product. Amortization expense was $1,183, $1,533 and $2,213 in 2012, 2011 and 2010, respectively.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, 2012, the Company had uncollateralized receivables with four customers in the automotive industry, each with several locations, aggregating $18,791, which represented approximately 12% of the Company’s trade accounts receivable. During 2012, sales to these customers amounted to approximately $132,321, which represented approximately 12% of the Company’s net sales.Shipping and Handling Costs: All shipping and handling costs are included in cost of products sold in the Consolidated Statements of Income.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 that 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 reduced for possible recoveries from insurance carriers.Foreign Currency Translation: The functional currency for a majority of subsidiaries outside the United States is the local currency. Financial statements for these subsidiaries are translated into U.S. dollars at year-end exchange rates as to assets and liabilities and weighted-averagePARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)exchange rates as to revenues and expenses. The resulting translation adjustments are recorded in accumulated comprehensive income (loss) in shareholders’ equity.New Accounting PronouncementsIn June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”. ASU No. 2011-05 amends existing guidance by allowing only two options for presenting the components of net income and other comprehensive income: (1) in a single continuous financial statement, statement of comprehensive income or (2) in two separate but consecutive financial statements, consisting of an income statement followed by a separate statement of other comprehensive income (“OCI”). Also, items that are reclassified from OCI to net income must be presented on the face of the financial statements. ASU No. 2011-05 requires retrospective application, and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. In December 2011, the FASB issued ASU No. 2011-12, deferring its requirement that companies present reclassification adjustments for each component of accumulated other comprehensive income in both net income and OCI on the face of the financial statements. Entities continue to be required to present amounts reclassified out of accumulated other comprehensive income on the face of the financial statements or to disclose those amounts in the notes to the financial statements. The requirement to present reclassification adjustments in interim periods was also deferred. However, entities are required to report a total for comprehensive income in condensed financial statements of interim periods in a single continuous statement or in two consecutive statements. The Company adopted ASU No. 2011-05 in the first quarter 2012 and elected to present the components of net income and comprehensive income in two separate but consecutive statements.In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” which requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail on these amounts. This ASU is effective prospectively for reporting periods beginning after December 15, 2012. The Company is currently evaluating the impact of adopting this guidance.In May 2011, the FASB amended ASC 820, “Fair Value Measurement.” This amendment is intended to result in convergence between U.S. GAAP and International Financial Reporting Standards (“IFRS”) requirements for measurement of and disclosures about fair value. This guidance clarifies the application of existing fair value measurements and disclosures, and changes certain principles or requirements for fair value measurements and disclosures. The amendment is effective for interim and annual periods beginning after December 15, 2011. The adoption of this amendment did not have a material impact on our consolidated financial statements.Reclassification: Certain amounts in the prior years’ financial statement have been reclassified to conform to the current year presentation.PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)NOTE B — SegmentsOn March 23, 2012, the Company completed the acquisition of Fluid Routing Solutions Holding Corp. (“FRS”), a leading manufacturer of automotive and industrial rubber and thermoplastic hose products and fuel filler and hydraulic fluid assemblies for the automotive and industrial industries. FRS expanded the Company’s sales of assembled components.During the second quarter of 2012, as a result of the FRS acquisition, the Company realigned its segments in order to better align its business with the underlying markets and customers that the Company serves. In so doing, we combined Aluminum Products, Rubber Products (previously included in the former Manufactured Products segment) and Delo Screw Products (previously included in the Supply Technologies segment) with FRS to form the Assembly Components segment. The former Manufactured Products segment is now referred to as Engineered Products. The results of operations of FRS from the date of the acquisition through December 31, 2012 are included in the Assembly Components segment. The business segment results for the prior years have been reclassified to reflect these changes. Following is a description of each of our three reportable segments.Supply Technologies provides our customers with Total Supply ManagementTM services for a broad range of high-volume, specialty production components. Total Supply ManagementTM manages the efficiencies of every aspect of supplying production parts and materials to our customers’ manufacturing floor, from strategic planning to program implementation, and includes such services as engineering and design support, part usage and cost analysis, supplier selection, quality assurance, bar coding, product packaging and tracking, just-in-time and point-of-use delivery, electronic billing services and ongoing technical support. The principal customers of Supply Technologies are in the heavy-duty truck, automotive and vehicle parts, electrical distribution and controls, consumer electronics, recreational equipment, HVAC, agricultural and construction equipment, semiconductor equipment, plumbing, aerospace and defense, and appliance industries. Assembly Components manufactures cast aluminum components, automotive and industrial rubber and thermoplastic products, fuel filler and hydraulic assemblies for automotive, agricultural equipment, construction equipment, heavy-duty truck and marine equipment industries. Assembly Components also provides value-added services such as design and engineering, machining and assembly. Engineered Products operates a diverse group of niche manufacturing businesses that design and manufacture a broad range of high quality products engineered for specific customer applications. The principal customers of Engineered Products are original equipment manufacturers and end users in the steel, coatings, forging, foundry, heavy-duty truck, construction equipment, automotive, oil and gas, rail and locomotive manufacturing and aerospace and defense industries.The Company’s sales are made through its own sales organization, distributors and representatives. Intersegment sales are immaterial and eliminated in consolidation and are not included in the figures presented. Intersegment sales are accounted for at values based on market prices. Income allocated to segments excludes certain corporate expenses and interest expense. Identifiable assets by industry segment include assets directly identified with those operations.PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Corporate assets generally consist of cash and cash equivalents, deferred tax assets, property and equipment, and other assets. Year Ended December 31, 2012 2011 2010 $ 489,651 $ 486,571 $ 397,038 304,003 157,764 173,555 340,388 322,238 242,929 $ 1,134,042 $ 966,573 $ 813,522 $ 33,748 $ 31,303 $ 21,738 19,944 1,425 6,972 55,040 45,289 28,827 108,732 78,017 57,537 (18,925 ) (16,274 ) (15,195 ) (13,000 ) — — — — 2,210 — (5,359 ) (3,539 ) (26,350 ) (32,152 ) (23,792 ) $ 50,457 $ 24,232 $ 17,221 $ 207,002 $ 225,346 $ 215,147 230,049 73,065 82,819 199,362 195,834 174,185 90,207 120,527 80,381 $ 726,620 $ 614,772 $ 552,532 $ 3,885 $ 4,555 $ 5,205 9,475 7,180 7,967 3,153 3,900 3,589 1,478 542 371 $ 17,991 $ 16,177 $ 17,132 $ 1,632 $ 1,308 $ 1,414 22,115 7,747 707 3,132 895 1,786 2,746 2,723 44 $ 29,625 $ 12,673 $ 3,951 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)The percentage of net sales by product line included in each segment was as follows: Year Ended December 31, 2012 2011 2010 87 % 88 % 88 % 12 % 11 % 11 % 1 % 1 % 1 % 100 % 100 % 100 % 50 % — — 39 % 81 % 83 % 9 % 15 % 14 % 2 % 4 % 3 % 100 % 100 % 100 % 80 % 81 % 81 % 20 % 19 % 19 % 100 % 100 % 100 % The Company’s approximate percentage of net sales by geographic region was as follows: Year Ended
December 31, 2012 2011 2010 77 % 76 % 73 % 6 % 9 % 10 % 8 % 5 % 6 % 4 % 3 % 3 % 4 % 5 % 5 % 1 % 2 % 3 % 100 % 100 % 100 % The basis for attributing revenue to individual countries is final shipping destination.At December 31, 2012, 2011 and 2010, approximately 81%, 68% and 75%, respectively, of the Company’s assets were maintained in the United States.NOTE C — AcquisitionsOn March 23, 2012, the Company completed the acquisition of FRS, a leading manufacturer of automotive and industrial rubber and thermoplastic hose products and fuel filler and hydraulic fluid assemblies, in an all cash transaction valued at $95,962, net of cash acquired. FRS products include fuel filler, hydraulic, and thermoplastic assemblies and several forms of manufactured rubber and thermoplastic hose, including bulk and formed fuel, power steering, transmission oil cooling, hydraulic and thermoplastic hose. FRS sells to automotive and industrial customers throughout North America,PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Europe and Asia. FRS has five production facilities located in Florida, Michigan, Ohio, Tennessee and the Czech Republic. FRS is included in the Company’s Assembly Components segment and had revenues of $152,445 and net income of $7,140 for the period from the date acquired through December 31, 2012. The Company funded the acquisition with cash of $40,000, a $25,000 seven-year amortizing term loan provided by the Credit Agreement and secured by accounts receivable, inventory, certain real estate and machinery and equipment of the Company and $33,772 of borrowings under the revolving credit facility provided by the Credit Agreement. The acquisition was accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total estimated purchase price is allocated to FRS’ net tangible assets and intangible assets acquired and liabilities assumed based on their estimated fair values as of March 23, 2012, the effective date of the acquisition. Based on management’s valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions, the preliminary purchase price is allocated as follows: $ 2,810 30,920 12,355 2,674 30,258 29,400 11,500 212 (17,815 ) (15,599 ) (26,424 ) (776 ) 39,257 $ 98,772 There were $1,139 of direct transaction costs included in selling, general and administrative expenses during the year ended December 31, 2012 related to the acquisition of FRS.The following pro forma information gives effect to the Company’s acquisition of FRS as if the acquisition occurred on January 1, 2011 and FRS had been included in the Company’s Consolidated Statements of Income for the years ended December 31, 2012 and 2011. Years ended December 31, 2012 2011 $ 1,184,911 $ 1,152,072 $ 39,134 $ 39,436 $ 3.28 $ 3.41 $ 3.23 $ 3.29 The historical consolidated financial information of the Company and FRS has been adjusted in the pro forma information to give effect to adjustments that are: (1) directly related to the business combination; (2) factually supportable; and (3) expected to have a continuing impact on the combined results.PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)On November 30, 2012, the Company completed the acquisition of Elastomeros Tecnicos Moldeados Inc, (“ETM”) for $1,082 in cash, $500 in promissory notes payable and $125 annually in each of the next four years, if ETM achieves certain earnings levels. ETM is a provider of molded rubber products and has been integrated into the Company’s Assembly Components segment. The acquisition was accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the purchase price is allocated to ETM’s tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of November 30, 2012, the effective date of the acquisition. Based on the preliminary purchase price allocation, goodwill of $960 was recorded.Direct transaction costs associated with this acquisition during the year ended December 31, 2012 were not material. Assuming this acquisition had taken place at the beginning of 2011, pro forma results would not have been materially different.Effective August 31, 2010, the Company completed the acquisition of certain assets and assumed specific liabilities relating to Assembly Components Systems (“ACS”) business unit of Lawson Products, Inc. The net assets acquired were integrated into the Company’s Supply Technologies business segment. The fair value of the net assets acquired exceeded the total purchase price and, accordingly, resulted in a gain on acquisition of business of $2,210. On September 30, 2010, the Company entered a Bill of Sale with Rome Die Casting LLC (“Rome”), a producer of aluminum high pressure die castings. The assets of Rome were integrated into the Company’s Assembly Components segment. On December 31, 2010, the Company, through its subsidiary Ajax Tocco Magnathermic, acquired the assets and the related induction heating intellectual property of ABP Induction’s United States heating business operating as Pillar Induction (“Pillar”). The assets of Pillar have been integrated into the Company’s Engineered Products segment. The acquisitions of Rome and Pillar were accounted for under the acquisition method of accounting and resulted in goodwill of $4,572 and $990, respectively.The following unaudited pro forma information is provided to present a summary of the combined results of the Company’s operations with ACS, Rome and Pillar as if the acquisitions had occurred on January 1, 2009. The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of what the results would have been had the acquisitions been completed at the date indicated above. December 31,
2010 $ 881,271 $ 15,072 $ 1.33 $ 1.28 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)NOTE D — Goodwill and Other Intangible AssetsThe changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2012, 2011 and 2010 were as follows: Supply
Technologies Assembly
Components Engineered
Products Total $ — $ — $ 4,155 $ 4,155 — — (211 ) (211 ) — 4,572 584 5,156 — 4,572 4,528 9,100 — — (43 ) (43 ) — — 406 406 — 4,572 4,891 9,463 — — 35 35 — 40,217 — 40,217 $ — $ 44,789 $ 4,926 $ 49,715 Other intangible assets were acquired in connection with acquisitions. Information regarding other intangible assets as of December 31, 2012 and 2011 follows: 2012 2011 Acquisition
Costs Accumulated
Amortization Net Acquisition
Costs Accumulated
Amortization Net $ 41,720 $ 5,724 $ 35,996 $ 11,670 $ 3,320 $ 8,350 3,420 1,336 2,084 3,420 1,046 2,374 $ 45,140 $ 7,060 38,080 $ 15,090 $ 4,366 10,724 11,500 — 49,715 9,463 $ 99,295 $ 20,187 Amortization of other intangible assets was $2,511 for the year ended December 31, 2012, $1,449 for the year ended December 31, 2011 and $745 for the year ended December 31, 2010. Amortization expense for each of the five years following December 31, 2012 is approximately $3,139 in 2013 and $3,081 for each of the four subsequent years thereafter. The weighted-average amortization period for the acquired intangible assets was 13.3 years for non-contractual customer relationships and 12.2 years for other intangible assets.PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)NOTE E — Other AssetsOther assets consists of the following: December 31, 2012 2011 $ 52,949 $ 49,575 6,970 7,253 791 1,920 2,187 5,085 $ 62,897 $ 63,833 NOTE F — Accrued ExpensesAccrued expenses include the following: December 31, 2012 2011 $ 20,117 $ 15,771 27,165 30,180 6,889 4,208 5,497 5,106 6,092 4,331 17,568 14,887 $ 83,328 $ 74,483 Substantially all advance billings relate to the Company’s capital equipment business unit. Warranty liabilities are primarily associated with the Company’s capital equipment business unit and the fluid routing solutions business.The changes in the aggregate product warranty liability are as follows for the year ended December 31, 2012, 2011 and 2010: 2012 2011 2010 $ 4,208 $ 4,046 $ 2,760 (6,030 ) (3,421 ) (1,260 ) 5,395 3,583 2,294 3,316 — — — — 252 $ 6,889 $ 4,208 $ 4,046 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)NOTE G — Financing ArrangementsLong-term debt consists of the following: December 31, 2012 2011 $ 250,000 $ 250,000 101,879 93,000 22,321 — 4,478 4,580 378,678 347,580 4,411 1,415 $ 374,267 $ 346,165 On April 7, 2011, the Company completed the sale of $250,000 in the aggregate principal amount of 8.125% senior notes due 2021 (the “Notes”). The Notes bear an interest rate of 8.125% per annum, payable semi-annually in arrears on April 1 and October 1 of each year commencing on October 1, 2011. The Notes mature on April 1, 2021. The Company is a party to a credit and security agreement dated November 5, 2003, as amended (the “Credit Agreement”) with a group of banks, under which it may borrow or issue standby letters of credit or commercial letters of credit. On March 23, 2012, the Credit Agreement was amended and restated to, among other things, increase the revolving loan commitment from $200,000 to $220,000, and provide a term loan for $25,000. The Company may increase the commitment by an additional $30,000 during the term of the Credit Agreement. The Credit Agreement is secured by accounts receivable, inventory, certain real estate and machinery and equipment. At December 31, 2012, in addition to amounts borrowed under the revolving credit facility, there was $9,001 outstanding for standby letters of credit. An annual fee of up to .5% is imposed by the bank on the unused borrowing capacity and is based on the total aggregate credit facility used. Amounts borrowed under the revolving credit facility may be borrowed at either LIBOR plus 1.75% to 2.75% or the bank’s prime lending rate minus .25% to 1.00% at the Company’s election. The interest rate is dependent on the Company’s debt service coverage ratio, as defined in the Credit Agreement. Under the Credit Agreement, a detailed borrowing base formula provides borrowing availability to the Company based on percentages of eligible accounts receivable and inventory. The interest rate on the revolving credit facility was 2.0% at December 31, 2012. At December 31, 2012 the Company had approximately $60,364 of unused borrowing capacity available under the revolving credit facility. Interest on the term loan is at either (i) LIBOR plus 2.75% or (ii) the bank’s prime lending rate plus .25%, at the Company’s election. The term loan is amortized based on a seven-year schedule with the balance due at maturity (April 7, 2016). The interest rate on the term loan was 3.14% at December 31, 2012.Maturities of long-term debt during each of the five years following December 31, 2012 are approximately $4,411 in 2013, $4,413 in 2014, $4,416 in 2015, $114,332 in 2016 and $741 in 2017.Foreign subsidiaries of the Company had no borrowings at December 31, 2012 and 2011, respectively and outstanding bank guarantees of approximately $9,161 at December 31, 2012 under their credit arrangements.PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESvesting period.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)The Notes are general unsecured senior obligations of the Company and are fully and unconditionally guaranteed on a joint and several basis by all material domestic subsidiaries of the Company. Provisions of the indenture governing the Notes and the Credit Agreement contain restrictions on the Company’s ability to incur additional indebtedness, to create liens or other encumbrances, to make certain payments, investments, loans and guarantees and to sell or otherwise dispose of a substantial portion of assets or to merge or consolidate with an unaffiliated entity. At December 31, 2012, the Company was in compliance with all financial covenants of the Credit Agreement.The weighted average interest rate on all debt was 6.15% at December 31, 2012.The carrying value of cash and cash equivalents, accounts receivable, accounts payable and borrowings under the Credit Agreement approximate fair value at December 31, 2012 and 2011. The approximate fair value of the Notes was $266,250 at December 31, 2012 and $247,500 at December 31, 2011. The fair value of the Notes is estimated based on a third-party’s bid price, which was determined to be a Level 1 input.In connection with the sale of the Notes, the Company incurred debt extinguishment costs related primarily to premiums and other transaction costs and wrote off deferred financing costs totaling $7,335 in 2011. In connection with the amendment to the Credit Agreement in 2012, the Company wrote off deferred financing costs of $305.NOTE H — Income TaxesIncome from continuing operations before income tax expense consists of the following: Year Ended December 31 2012 2011 2010 $ 35,027 $ 13,844 $ 6,723 15,430 10,388 10,498 $ 50,457 $ 24,232 $ 17,221 Income taxes consisted of the following: Year Ended December 31, 2012 2011 2010 $ 5,920 $ (41 ) $ 61 812 497 573 4,400 7,158 2,526 11,132 7,614 3,160 7,522 (9,661 ) (2,014 ) (262 ) (2,563 ) 689 279 (593 ) 199 7,539 (12,817 ) (1,126 ) $ 18,671 $ (5,203 ) $ 2,034 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)The reasons for the difference between income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes for the years ended December 31, 2012, 2011 and 2010 are as follows: 2012 2011 2010 $ 17,660 $ 8,477 $ 6,027 920 153 1,048 (71 ) 2,910 1,472 (167 ) (16,820 ) (6,475 ) 577 378 480 — — (772 ) (248 ) (301 ) 254 $ 18,671 $ (5,203 ) $ 2,034 Significant components of the Company’s net deferred tax assets and liabilities are as follows: December 31, 2012 2011 $ 7,031 $ 6,970 11,522 11,682 5,290 9,677 626 1,862 13,166 12,725 37,635 42,916 8,707 83 611 — 19,176 17,491 16,556 1,764 45,050 19,338 (7,415 ) 23,578 (4,242 ) (4,409 ) $ (11,657 ) $ 19,169 At December 31, 2012, the Company has state and foreign net operating loss carryforwards for income tax purposes. The foreign net operating loss carryforward is $2,760, of which $650 expires in 2022 and the remainder has no expiration date. The Company also has a tax benefit from a state net operating loss carryforward of $4,804 that expires between 2013 and 2032. The Company also has alternative minimum tax credit carryforwards of $879 that have no expiration date.The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. The Company’s tax years for 2009 through 2012 remain open for examination by the U.S. and various state and foreign taxing authorities.PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)As of December 31, 2012 and 2011, the Company was not in a cumulative three-year loss position and it was determined that it was more likely than not that its U.S. deferred tax assets will be realized. As of December 31, 2012, the Company reversed a valuation allowance of $328 against its state net operating loss carryforward and as of December 31, 2011, the Company reversed a valuation allowance of $16,820 against its U.S. deferred tax assets. As of December 31, 2012 and 2011, the Company recorded valuation allowances of $161 and $565, respectively, against certain foreign net deferred tax assets. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income (including reversals of deferred tax liabilities). The Company reviews all valuation allowances related to deferred tax assets and will reverse these valuation allowances, partially or totally, when appropriate under ASC 740.A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 2012 2011 2010 $ 5,977 $ 6,142 $ 5,718 123 32 283 (2 ) (129 ) (4 ) 60 135 341 — — (18 ) (70 ) (203 ) (178 ) $ 6,088 $ 5,977 $ 6,142 The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $4,870 at December 31, 2012 and $4,794 at December 31, 2011. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the year ended December 31, 2012 and 2011, the Company recognized approximately $58 and $19, respectively, in net interest and penalties. The Company had approximately $759 and $701 for the payment of interest and penalties accrued at December 31, 2012 and 2011, respectively. The Company does not expect that the unrecognized tax benefit will change significantly within the next twelve months.Deferred taxes have not been provided on approximately $77,221 of undistributed earnings of the Company’s foreign subsidiaries as it is the Company’s policy and intent to permanently reinvest such earnings. The Company has determined that it is not practicable to determine the unrecognized tax liability on such undistributed earnings.NOTE I — Stock Planshares,share units, performance shares or stock awards may be awarded to directors and all employees of the Company and its subsidiaries. Stock options will be exercisable in whole or in installments as may be determined provided that no options will be exercisable more than ten years from date of grant. The exercise price will be the fair market value at the date of grant. The aggregate number of shares of the Company’s common stock that may be awarded under the 1998 Plan is 3,700,000, all of which may be incentive stock options. No more than 500,000 shares shall be the subject of awards to any individual participant in any one calendar year.There were no The functional currency for a majority of subsidiaries outside the United States is the local currency. Financial statements for these subsidiaries are translated into U.S. dollars at year-end exchange rates for assets and liabilities and weighted-average exchange rates for revenues and expenses. The resulting translation adjustments are recorded in accumulated comprehensive income (loss) in shareholders’ equity. Year Ended December 31, 2014 2013 2012 (In whole shares) Weighted average basic shares outstanding 12,097,018 11,936,772 11,920,593 Plus dilutive impact of employee stock awards 279,058 295,393 195,836 Weighted average diluted shares outstanding 12,376,076 12,232,165 12,116,429 awardedwith exercise prices greater than the average price of the common shares are anti-dilutive and are not included in the computation of diluted earnings per share. For the year endedDecember 31, 2014 and 2013, the anti-dilutive shares were insignificant. Year Ended December 31, 2014 2013 2012 (In millions) Net sales: Supply Technologies $ 559.6 $ 471.9 $ 483.8 Assembly Components 490.5 412.8 304.0 Engineered Products 328.6 318.5 340.4 $ 1,378.7 $ 1,203.2 $ 1,128.2 Segment operating income: Supply Technologies $ 42.5 $ 35.0 $ 37.5 Assembly Components 42.0 31.8 19.9 Engineered Products 42.7 47.1 55.0 Total segment operating income 127.2 113.9 112.4 Corporate costs (29.3 ) (23.1 ) (18.9 ) Litigation judgment and settlement costs — (5.2 ) (13.0 ) Gain on acquisition of business — 0.6 — Interest expense (26.1 ) (25.9 ) (26.0 ) Income from continuing operations before income taxes $ 71.8 $ 60.3 $ 54.5 Year Ended December 31, 2014 2013 2012 (In millions) Identifiable assets: Supply Technologies $ 277.6 $ 241.7 $ 207.0 Assembly Components 340.5 276.7 230.0 Engineered Products 246.9 183.1 199.4 General corporate 109.2 117.2 90.2 $ 974.2 $ 818.7 $ 726.6 Depreciation and amortization expense: Supply Technologies $ 4.5 $ 3.0 $ 3.9 Assembly Components 14.2 11.6 9.5 Engineered Products 3.3 3.4 3.2 General corporate 1.2 1.2 1.4 $ 23.2 $ 19.2 $ 18.0 Capital expenditures: Supply Technologies $ 5.8 $ 3.8 $ 1.6 Assembly Components 14.0 21.5 22.1 Engineered Products 2.4 3.6 3.1 General corporate 1.5 1.2 2.8 $ 23.7 $ 30.1 $ 29.6 Year Ended December 31, 2014 2013 2012 Supply Technologies: Supply Technologies 88 % 87 % 88 % Engineered specialty products 12 % 13 % 12 % 100 % 100 % 100 % Assembly Components: Fluid routing 49 % 54 % 50 % Aluminum products 43 % 37 % 39 % Rubber and plastics 6 % 7 % 9 % Screw products 2 % 2 % 2 % 100 % 100 % 100 % Engineered Products: Industrial equipment business 78 % 77 % 80 % Forged and machined products 22 % 23 % 20 % 100 % 100 % 100 % 2014 2013 2012 United States 74 % 74 % 77 % Canada 7 % 8 % 8 % Europe 6 % 5 % 4 % Asia 6 % 6 % 6 % Mexico 5 % 5 % 4 % Other 2 % 2 % 1 % 100 % 100 % 100 % (In millions) Cash and cash equivalents $ 2.8 Accounts receivable 30.9 Inventories 12.4 Prepaid expenses and other current assets 2.7 Property, plant and equipment 30.2 Customer relationships 29.4 Trademarks and trade name 11.5 Other assets 0.2 Accounts payable (17.8 ) Accrued expenses (15.6 ) Deferred tax liability (26.4 ) Other long-term liabilities (0.8 ) Goodwill 39.3 Total purchase price $ 98.8 Year Ended December 31, 2012 (In millions) Pro forma revenues $ 1,179.1 Pro forma net income $ 39.1 Year Ended December 31, 2013 2012 Net sales $ 5.2 $ 5.8 Loss from discontinued operations before tax $ (1.3 ) $ (4.0 ) Income tax benefit from operations 0.5 1.6 Net loss from discontinued operations (0.8 ) (2.4 ) Gain on sale of business before tax 5.3 — Income tax expense from gain on sale of business (1.5 ) — Net gain on sale of business 3.8 — Income (loss) from discontinued operations, net of taxes $ 3.0 $ (2.4 ) Supply Technologies Assembly Components Engineered Products Total (In millions) Balance at January 1, 2012 $ — $ 4.6 $ 4.9 $ 9.5 Acquisitions — 40.2 — 40.2 Balance at December 31, 2012 — 44.8 4.9 49.7 Acquisitions 6.2 4.2 — 10.4 Foreign currency translation 0.2 — 0.1 0.3 Balance at December 31, 2013 6.4 49.0 5.0 60.4 Acquisitions 0.7 5.0 23.2 28.9 Foreign currency translation 0.5 — (0.3 ) 0.2 Balance at December 31, 2014 $ 7.6 $ 54.0 $ 27.9 $ 89.5 December 31, 2014 December 31, 2013 Weighted Average Useful Life (Years) Acquisition
Costs Accumulated
Amortization Net Acquisition
Costs Accumulated
Amortization Net (In millions) Non-contractual customer relationships 11.9 $ 77.3 $ 13.2 $ 64.1 $ 61.1 $ 8.7 $ 52.4 Indefinite-lived tradenames * 14.0 * 14.0 11.7 * 11.7 Other 17.5 12.3 2.3 10.0 3.9 1.8 2.1 Total $ 103.6 $ 15.5 $ 88.1 $ 76.7 $ 10.5 $ 66.2 * Not meaningful, tradenames have an indefinite life. Year Ended December 31, 2014 2013 2012 (In millions) Amortization expense $ 4.8 $ 3.5 $ 2.5 (In millions) 2015 $ 6.5 2016 $ 6.4 2017 $ 6.4 2018 $ 6.2 2019 $ 5.8 December 31, 2014 2013 (In millions) Pension assets $ 64.6 $ 73.3 Deferred financing costs, net 5.1 5.7 Other 3.6 1.4 Total $ 73.3 $ 80.4 December 31, 2014 2013 (In millions) Accrued salaries, wages and benefits $ 25.4 $ 22.2 Advance billings 28.4 20.4 Current portion of long-term debt 9.4 4.4 Warranty accrual 6.9 5.4 Interest payable 5.2 5.6 Current portion of other post-retirement liabilities 1.6 1.7 Taxes, income and other — 2.9 Other 26.7 23.4 Total $ 103.6 $ 86.0 Year Ended December 31, 2014 2013 2012 (In millions) Balance at January 1, $ 5.4 $ 6.9 $ 4.2 Claims paid during the year (2.9 ) (6.4 ) (6.0 ) Warranty expense 4.0 4.9 5.4 Acquired warranty liabilities 0.4 — 3.3 Balance at December 31, $ 6.9 $ 5.4 $ 6.9 Carrying Value at Issuance Date Maturity Date December 31, 2014 December 31, 2013 (In millions) Senior Notes April 1, 2011 April 1, 2021 8.125 % $ 250.0 $ 250.0 Revolving credit — July 31, 2019 1.69 % 162.0 111.0 Term loan — July 31, 2019 2.25 % 28.8 18.7 Other Various Various Various 3.0 3.9 Total debt 443.8 383.6 Less current maturities 9.4 4.4 Total long-term debt, net of current portion $ 434.4 $ 379.2 2010. December 31, 2014 December 31, 2013 (In millions) Carrying amount $ 250.0 $ 250.0 Fair value $ 266.3 $ 275.6 (In millions) 2015 $ 9.4 2016 $ 12.2 2017 $ 12.1 2018 $ 6.5 2019 $ 153.6 Year Ended December 31, 2014 2013 2012 (In millions) United States $ 53.1 $ 48.4 $ 39.1 Outside the United States 18.7 11.9 15.4 $ 71.8 $ 60.3 $ 54.5 Year Ended December 31, 2014 2013 2012 (In millions) Current expense: Federal $ 17.4 $ 16.0 $ 7.5 State 0.8 1.5 0.8 Foreign 6.2 4.2 4.4 24.4 21.7 12.7 Deferred expense (benefit): Federal 1.0 1.2 7.5 State (0.8 ) (2.6 ) (0.2 ) Foreign 0.3 (0.9 ) 0.3 0.5 (2.3 ) 7.6 Income tax expense $ 24.9 $ 19.4 $ 20.3 Year Ended December 31, Rate Reconciliation 2014 2013 2012 (In millions) Tax at statutory rate $ 25.1 $ 21.1 $ 19.3 Effect of state income taxes, net 1.4 1.1 0.9 Effect of foreign operations (0.9 ) (0.2 ) (0.1 ) Valuation allowance (1.1 ) (1.6 ) (0.2 ) Non-deductible items 1.8 0.7 0.6 Manufacturer's deduction (1.4 ) (1.4 ) (0.6 ) Other, net — (0.3 ) 0.4 Total $ 24.9 $ 19.4 $ 20.3 Year Ended December 31, 2014 2013 (In millions) Deferred tax assets: Postretirement benefit obligation $ 6.2 $ 5.9 Inventory 13.7 13.2 Net operating loss and credit carryforwards 6.3 3.8 Goodwill 1.0 0.5 Warranty reserve 2.5 2.1 Compensation 6.0 4.3 Other 11.5 10.7 Total deferred tax assets 47.2 40.5 Deferred tax liabilities: Depreciation and amortization 13.2 11.7 Pension 23.3 26.4 Goodwill 2.7 2.7 Intangible assets 14.5 15.4 Other 1.4 1.8 Total deferred tax liabilities 55.1 58.0 Net deferred tax liabilities prior to valuation allowances (7.9 ) (17.5 ) Valuation allowances (7.1 ) (2.6 ) Net deferred tax liability $ (15.0 ) $ (20.1 ) 2014 2013 2012 (In millions) Unrecognized Tax Benefit — January 1, $ 5.9 $ 6.1 $ 6.0 Gross Increases — Tax Positions in Prior Period 0.8 0.4 0.1 Gross Decreases — Tax Positions in Prior Period (0.2 ) (0.6 ) — Gross Increases — Tax Positions in Current Period — — 0.1 Lapse of Statute of Limitations — — (0.1 ) Unrecognized Tax Benefit — December 31, $ 6.5 $ 5.9 $ 6.1 20122014 and changes during the year then ended is presented below: 2012 Number
of Shares Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value 228,334 $ 14.58 — — (38,250 ) 12.52 (3,750 ) 13.40 186,334 $ 15.02 3.5 years $ 1,172 186,334 15.02 3.5 years 1,172 2014 (in whole shares) (in millions) Outstanding — beginning of year 146,000 $ 16.71 Granted — — Exercised (2,500 ) 14.12 Canceled or expired — — Outstanding — end of year 143,500 $ 16.76 1.7 $ 6.6 Options exercisable 143,500 $ 16.76 1.7 $ 6.6 20122014 range from $3.05 to $6.28, $14.12 to $15.61 and $20.00 to $24.92. The number of options outstanding and exercisable at December 31, 2012,2014, which correspond with these ranges, are 29,500, 116,834108,500 and 40,000,35,000, respectively. The weighted average contractual life of these options is 3.5 years.The fair value provisions for option awards resulted in compensation expense of $15, $98, and $272 (before tax), for 2012, 2011 and 2010, respectively.2011was $0.1 million, $1.1 million and 2010 was $755, $3,609 and $368,$0.8 million, respectively. Net cash proceeds from the exercise of stock options were $479, $494$0.0 million, $0.4 million and $150,$0.5 million, respectively.$500$0.5 million of common stock at its then currentthen-current market value at a 20% discount and recognized compensation expense of $125.20122014 is as follows: 2012 Number of
Shares Weighted
Average
Grant Date
Fair Value 393,094 $ 9.77 258,000 19.57 (233,551 ) 9.19 (32,375 ) 15.73 385,168 $ 14.94 2014 Time-Based Performance-Based (in whole shares) (in whole shares) Outstanding — beginning of year 422,898 $ 21.04 42,000 $ 20.30 Granted 137,750 57.04 — — Vested (211,048 ) 23.71 (14,000 ) 20.30 Canceled or expired (4,668 ) 38.19 — — Outstanding — end of year 344,932 $ 33.55 28,000 $ 20.30 $2,584, $1,988$5.8 million, $4.7 million and $1,463$2.7 million for the years ended December 31, 2012, 20112014, 2013 and 2010,2012, respectively, relating to restricted shares and performance shares.PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)2011was $11.5 million, $6.1 million and 2010 was $4,642, $3,986, and $4,043,$4.6 million, respectively. an expense on a straight-line basis over the vesting period of the awards.2012,2014, the Company had unrecognized compensation expense of $5,549,$9.8 million, before taxes, related to stock option awards and restricted shares. The unrecognized compensation expense is expected to be recognized over a total weighted average period of 2.12.0 years.20122014 is 491,003.J12 — Commitments, Contingencies and ContingenciesOne of our subsidiaries,(“ATM”Corporation ("ATM"), which is included in the Engineered Products segment, was a party to a binding arbitration proceeding pending in South Africa with its customer Evraz Highveld Steel and Vanadium (“Evraz”). The arbitration involved a dispute over the design and installationsubsidiary of a melting furnace. Evraz sought binding arbitration in September 2011 for breach of contract and sought compensatory damages in the amount of $37,000, as well as fees and expenses related to the arbitration. ATM counterclaimed in the arbitration, alleging breach of contract for non-payment of $2,700 as well as fees and expenses related to the arbitration. The arbitration was scheduled to commence in June 2012. Prior to the start of the arbitration, after complete evaluation of Evraz’s evidence, consideration of the jurisdiction of the matter, the uncertainty of a specific outcome and other pertinent facts noted in preparation for the arbitration, we entered into a settlement agreement with Evraz pursuant to which we agreed to settle all claims subject to the arbitration proceeding by paying Evraz $13,000 in cash, which payment was made in June 2012. The $2,700 amount receivable from Evraz had been previously reserved and was written off in conjunction with the settlement.PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)ATM is the defendant in a lawsuit pendingPark-Ohio Holdings Corporation, in the United States District Court for the Eastern District of Arkansas. The plaintiff is IPSCO Tubulars Inc. d/b/a TMK IPSCO.Arkansas claiming that equipment supplied by ATM for heat treating certain steel pipe at IPSCO’s Blytheville, Arkansas facility did not perform as required by the contract. The complaint alleges claimsalleged causes of action for breach of contract, gross negligence, and constructive fraud. TMK IPSCO is seekingsought approximately $6,000$10 million in direct and $4,000 in consequential damages as well asplus an unspecified amount of punitive damages. ATM deniesdenied the allegations against it, believes it has a number of meritorious defenses and is vigorously defending the lawsuit. A motion for partialallegations. ATM subsequently obtained summary judgment on the constructive fraud claim, which was recently fileddismissed by ATM, is currently pending before the district court. Acourt prior to trial. The remaining claims were the subject of a bench trial that occurred in May 2013. After IPSCO presented its case, the district court entered partial judgment in favor of ATM, dismissing the gross negligence claim, a portion of the breach of contract claim, and any claim for punitive damages. The trial proceeded with respect to the remainder of IPSCO’s claim for breach of contract. In September 2013, the district court issued a judgment in favor of IPSCO in the amount of $5.2 million. IPSCO subsequently filed a motion seeking to recover $3.8 million in attorneys’ fees and costs. The district court reserved ruling on that issue pending an appeal. In October 2013, ATM filed an appeal with the U.S. Court of Appeals for the Eighth Circuit seeking reversal of the judgment in favor of IPSCO. In November 2013, IPSCO filed a cross-appeal seeking reversal of the dismissal of its claims for gross negligence and punitive damages. The Eighth Circuit issued an opinion in March 2015 affirming in part, reversing in part, and remanding the case. It affirmed the district court's determination that ATM was liable for breach of contract. It also affirmed the district court's dismissal of IPSCO's claims for gross negligence and punitive damages. However, the Eighth Circuit reversed nearly all of the damages awarded by the district court and remanded for further findings on the issue of damages, including whether consequential damages are barred under the express language of the contract. Because IPSCO did not appeal the award of $5.2 million in its favor, those damages may be decreased, but cannot be increased, on remand. Because IPSCO did not appeal the award of $5.2 million in its favor, those damages may be decreased, but cannot be increased, on remand. IPSCO's motion to recover attorneys' fees and costs is setstayed pending the outcome of the proceedings on remand.beginthe staff’s subpoena, the Company disclosed to the staff of the SEC that, in AprilNovember 2007, the third party participated in a payment on behalf of 2013. (In millions) 2015 $ 14.8 2016 $ 12.7 2017 $ 9.9 2018 $ 6.1 2019 $ 2.9 Thereafter $ 2.3 K13 — Pensions and Postretirement Benefits$1,100.$1.1 million. Under a cash balance formula, a plan participant accumulates a retirement benefit consisting of pay credits that are based upon a percentage of current eligible earnings and current interest credits. For the remaining defined benefit plans, benefits are based on the employee’s years of service. For the defined contribution plans, the costs charged to operations and the amount funded are based upon a percentage of the covered employees’ compensation.20122014 and 2011: Pension Postretirement
Benefits 2012 2011 2012 2011 $ 52,259 $ 49,672 $ 18,559 $ 18,432 2,157 1,627 49 52 2,243 2,329 771 857 4,318 3,015 1,143 1,346 (4,545 ) (4,384 ) (2,040 ) (2,128 ) $ 56,432 $ 52,259 $ 18,482 $ 18,559 $ 101,834 $ 110,458 $ — $ — 13,692 (2,740 ) — — — — 2,040 2,128 (1,600 ) (1,500 ) — — (4,545 ) (4,384 ) (2,040 ) (2,128 ) $ 109,381 $ 101,834 $ — $ — $ 52,949 $ 49,575 $ (18,482 ) $ (18,559 ) PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Pension Benefits Postretirement Benefits 2014 2013 2014 2013 (In millions) Change in benefit obligation Benefit obligation at beginning of year $ 52.1 $ 56.4 $ 16.2 $ 18.5 Service cost 2.2 2.6 — 0.1 Interest cost 2.2 2.0 0.6 0.6 Actuarial (gains) losses 8.8 (4.4 ) 1.9 (1.3 ) Plan amendment 0.4 — — — Benefits and expenses paid, net of contributions (4.6 ) (4.5 ) (1.7 ) (1.7 ) Benefit obligation at end of year $ 61.1 $ 52.1 $ 17.0 $ 16.2 Change in plan assets Fair value of plan assets at beginning of year $ 125.4 $ 109.4 $ — $ — Actual return on plan assets 5.8 21.8 — — Company contributions — — 1.7 1.7 Cash transfer to fund postretirement benefit payments (0.9 ) (1.3 ) — — Benefits and expenses paid, net of contributions (4.6 ) (4.5 ) (1.7 ) (1.7 ) Fair value of plan assets at end of year $ 125.7 $ 125.4 $ — $ — Funded (underfunded) status of the plans $ 64.6 $ 73.3 $ (17.0 ) $ (16.2 ) Pension Postretirement
Benefits 2012 2011 2012 2011 $ 52,949 $ 49,575 $ — $ — — — 16,576 16,557 — — 1,906 2,002 $ 52,949 $ 49,575 $ 18,482 $ 18,559 $ 20,275 $ 22,345 $ 7,592 $ 7,052 104 148 — — (51 ) (91 ) — — $ 20,328 $ 22,402 $ 7,592 $ 7,052 Pension Benefits Postretirement Benefits 2014 2013 2014 2013 (In millions) Noncurrent assets $ 64.6 $ 73.3 $ — $ — Noncurrent liabilities — — 15.4 14.5 Current liabilities — — 1.6 1.7 $ 64.6 $ 73.3 $ 17.0 $ 16.2 Amounts recognized in accumulated other comprehensive loss Net actuarial loss $ 15.3 $ 2.1 $ 7.6 $ 6.3 Net prior service cost (credit) 0.4 0.1 (0.4 ) (0.5 ) Accumulated other comprehensive loss $ 15.7 $ 2.2 $ 7.2 $ 5.8 20122014 and 2011,2013, the Company’s defined benefit pension plans did not hold a material amount of shares of the Company’s common stock.20122014 and 20112013 and target allocation for 20132015 are as follows: Plan Assets Target 2013 2012 2011 45-75 % 64.4 % 66.4 % 10-40 27.8 24.6 0-20 7.8 9.0 100 % 100 % 100 % Plan Assets Target 2015 2014 2013 Asset Category Equity securities 45-75% 64.6 % 67.2 % Debt securities 10-40 27.9 % 25.4 % Other 0-20 7.5 % 7.4 % 100% 100 % 100 % 2012 2011 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total $ 40,082 $ 2,468 $ — $ 42,550 $ 40,649 $ 2,088 $ — $ 42,737 23,852 — — 23,852 21,102 — — 21,102 4,099 — — 4,099 3,820 — — 3,820 6,460 — — 6,460 7,176 — — 7,176 17,079 — — 17,079 12,492 — — 12,492 6,838 — — 6,838 5,420 — — 5,420 1,970 — — 1,970 2,964 — — 2,964 — — 6,374 6,374 — — 5,936 5,936 159 — — 159 187 — — 187 $ 100,539 $ 2,468 $ 6,374 $ 109,381 $ 93,810 $ 2,088 $ 5,936 $ 101,834 2014 2013 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total (In millions) Collective trust and pooled insurance funds: Common stock $ 45.6 $ 2.2 $ — $ 47.8 $ 48.3 $ 2.5 $ — $ 50.8 Equity Funds 26.9 — — 26.9 26.9 — — 26.9 Foreign Stock 5.4 — — 5.4 5.6 — — 5.6 U.S. Government obligations 7.0 — — 7.0 5.1 — — 5.1 Fixed income funds 19.6 — — 19.6 18.8 — — 18.8 Balanced funds 2.1 — — 2.1 2.1 — — 2.1 Corporate Bonds 7.5 — — 7.5 6.8 — — 6.8 Cash and Cash Equivalents 1.8 — — 1.8 2.0 — — 2.0 Hedge funds — — 7.6 7.6 — — 7.3 7.3 $ 115.9 $ 2.2 $ 7.6 $ 125.7 $ 115.6 $ 2.5 $ 7.3 $ 125.4 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)The fair value hierarchy has three levels based on the reliability of the inputs used to determine the fair value. Level 1 refers to the fair value determined based on unadjusted quoted prices for identical assets in active markets. Level 2 refers to the fair values based on quoted markets that are not active, quoted prices for similar assets in active markets, and inputs that are observable for the asset either directly or indirectly, for substantially the full term of the asset and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 refers to fair value based on prices or valuation techniques that require inputs that are both unobservable and significant to the fair value measurement.20122014 and 2011. Balance
Beginning
of Year Net Unrealized
Gain (Loss) Purchases Balance
End of
Year $ 5,936 $ 438 $ — $ 6,374 $ — $ (64 ) $ 6,000 $ 5,936 Purchases (In millions) Hedge Funds: 2014 $ 7.3 $ 0.3 $ — $ 7.6 2013 $ 6.4 $ 0.9 $ — $ 7.3 Weighted-Average assumptions as of December 31, Pension Postretirement
Benefits 2012 2011 2010 2012 2011 2010 3.66 % 4.50 % 5.00 % 3.35 % 4.50 % 5.00 % 8.25 % 8.25 % 8.25 % N/A N/A N/A 2.00 % 2.00 % N/A N/A N/A N/A Weighted-Average assumptions as of December 31, Pension Benefits Postretirement Benefits 2014 2013 2012 2014 2013 2012 Discount rate 3.82 % 4.51 % 3.66 % 3.60 % 4.21 % 3.35 % Expected return on plan assets 8.25 % 8.25 % 8.25 % N/A N/A N/A Rate of compensation increase 3.00 % 2.00 % 2.00 % N/A N/A N/A Medical health care benefits rate increase N/A N/A N/A 7.00 % 6.50 % 7.00 % Medical drug benefits rate increase N/A N/A N/A 7.00 % 6.50 % 7.25 % Ultimate health care cost trend rate N/A N/A N/A 5.00 % 5.00 % 5.00 % Year of ultimate trend rate N/A N/A N/A 2022 2042 2042 2012,2014, the Company considered historical experience, its asset allocation, expected future long-term rates of return for each major asset class, and an assumed long-term inflation rate. Based on these factors, the Company derived an expected return on plan assets for the year ended December 31, 20122014 of 8.25%. This assumption was supported by the asset return generation model, which projected future asset returns using simulation and asset class correlation.For measurement purposes, a 7.0% and a 7.25% annual rate of increase in the per capita cost of covered medical health care benefits and drug benefits, respectively were assumed for 2012. The rates were assumed to decrease gradually to 5.0% for medical and drug for 2042 and remain at that level thereafter.PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Pension Benefits Postretirement Benefits 2012 2011 2010 2012 2011 2010 $ 2,157 $ 1,627 $ 295 $ 49 $ 52 $ 31 2,243 2,329 2,596 771 857 959 (8,231 ) (8,950 ) (7,932 ) — — — (40 ) (40 ) (40 ) — — — 44 44 61 (96 ) (96 ) (96 ) 927 — 366 699 449 381 $ (2,900 ) $ (4,990 ) $ (4,654 ) $ 1,423 $ 1,262 $ 1,275 $ 22,402 $ 7,701 $ 15,900 $ 7,052 $ 6,059 $ 4,980 (1,143 ) 14,704 (7,811 ) 1,143 1,346 1,364 (44 ) (44 ) (62 ) 96 96 96 (887 ) 41 (326 ) (699 ) (449 ) (381 ) $ 20,328 $ 22,402 $ 7,701 $ 7,592 $ 7,052 $ 6,059 Pension Benefits Postretirement Benefits 2014 2013 2012 2014 2013 2012 (In millions) Components of net periodic benefit cost Service costs $ 2.2 $ 2.6 $ 2.2 $ — $ 0.1 $ — Interest costs 2.2 2.0 2.2 0.6 0.6 0.8 Expected return on plan assets (10.1 ) (8.9 ) (8.2 ) — — — Amortization of prior service cost (credit) 0.1 — — (0.1 ) (0.1 ) (0.1 ) Recognized net actuarial loss — 0.8 0.9 0.5 0.7 0.7 Benefit (income) costs $ (5.6 ) $ (3.5 ) $ (2.9 ) $ 1.0 $ 1.3 $ 1.4 Other changes in plan assets and benefit obligations recognized in accumulated other comprehensive (income) loss AOCI at beginning of year $ 2.2 $ 20.3 $ 22.4 $ 5.8 $ 7.6 $ 7.1 Net (gain) loss arising during the year 13.1 (17.3 ) (1.2 ) 1.8 (1.2 ) 1.1 Recognition of prior service credit — — — 0.1 0.1 0.1 Recognition of actuarial loss 0.4 (0.8 ) (0.9 ) (0.5 ) (0.7 ) (0.7 ) Total recognized in accumulated other comprehensive loss at end of year $ 15.7 $ 2.2 $ 20.3 $ 7.2 $ 5.8 $ 7.6 20132015 are $(731), $44 and $(40), respectively.20132015 is $802$0.2 million and $(96),$0.6 million, respectively. Postretirement Benefits Pension
Benefits Gross Expected
Medicare Subsidy Net including
Medicare Subsidy $ 4,072 $ 2,140 $ 234 $ 1,906 4,067 2,040 223 1,817 4,044 1,930 210 1,720 4,051 1,780 197 1,583 4,236 1,660 182 1,478 21,569 6,656 739 5,917 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Postretirement Benefits Pension Benefits Gross (In millions) 2015 $ 4.3 $ 1.7 $ 0.1 $ 1.6 2016 4.2 1.6 0.1 1.5 2017 4.3 1.6 0.1 1.5 2018 4.3 1.5 0.1 1.4 2019 4.3 1.4 0.1 1.3 2020 to 2024 23.1 6.0 0.5 5.5 1-Percentage
Point
Increase 1-Percentage
Point
Decrease $ 63 $ (56 ) $ 1,501 $ (1,328 ) (In millions) Effect on total of service and interest cost components in 2014 $ 0.1 $ — Effect on postretirement benefit obligation as of December 31, 2014 $ 1.5 $ (1.3 ) 2013.$375$0.4 million upon the CEO’s termination of employment with the Company. The vested retirement benefit will be equal to a percentage of the Supplemental Pension that is equal to the ratio of the sum of his credited service with the Company prior to January 1, 2008 (up to a maximum of thirteen years), and his credited service on or after January 1, 2008 (up to a maximum of seven years) to twenty years of credited service. In the event of a change in control before the CEO’s termination of employment, he will receive 100% of the Supplemental Pension. The Company recorded an expense of $476$0.5 million in 2014, 2013 and 2012 related to the SERP and $389 in 2011 and 2010.SERP. Additionally, a non-qualified defined contribution retirement benefit was also approved in which the Company will credit $94$0.1 million quarterly ($3750.4 million annually) for a seven-year period to an account in which the CEO will always be 100% vested. The seven year period began on March 31, 2008.NOTE L — LeasesFuture minimum lease commitments during eachM14 — Earnings Per Sharefollowing table sets forth the computationcomponents of basic and diluted earnings per share: Year Ended December 31, 2012 2011 2010 $ 31,786 $ 29,435 $ 15,187 11,920 11,580 11,314 196 419 493 12,116 11,999 11,807 $ 2.67 $ 2.54 $ 1.34 $ 2.62 $ 2.45 $ 1.29 Basic earnings per common share is computed as netchanges in accumulated other comprehensive income available to common shareholders divided by the weighted average basic shares outstanding. Diluted earnings per common share is computed as net income available to common shareholders divided by the weighted average diluted shares outstanding.Outstanding stock options with exercise prices greater that the average price of the common shares are anti-dilutive and are not included in the computation of diluted earnings per share. Stock options(loss) for 20,000, 40,000 and 201,100 shares of common stock were excluded in the years ended 2011were as follows: Cumulative Translation Adjustment Pension and Postretirement Benefits Total (In millions) Balance at January 1, 2012 $ 4.8 $ (13.2 ) $ (8.4 ) Foreign currency translation adjustments (a) 0.6 — 0.6 Recognition of actuarial gain (b) — 1.6 1.6 Tax adjustment (c) — (0.6 ) (0.6 ) Recognition of actuarial gain, net — 1.0 1.0 Balance at December 31, 2012 5.4 (12.2 ) (6.8 ) Foreign currency translation adjustments (a) (2.6 ) — (2.6 ) Recognition of actuarial gain, net (b) — 19.9 19.9 Tax adjustment (c) — (7.1 ) (7.1 ) Recognition of actuarial gain, net — 12.8 12.8 Balance at December 31, 2013 2.8 0.6 3.4 Foreign currency translation adjustments (a) (7.9 ) — (7.9 ) Recognition of actuarial gain, net (b) — (14.9 ) (14.9 ) Tax adjustment (c) — 5.4 5.4 Recognition of actuarial gain, net — (9.5 ) (9.5 ) Balance at December 31, 2014 $ (5.1 ) $ (8.9 ) $ (14.0 ) (a) (b) The recognition of actuarial gains are reclassified out of accumulated other comprehensive income and included in the computation of net periodic benefit cost in selling, general and administrative expenses. (c) The tax adjustments are reclassified out of accumulated other comprehensive income and included in income tax expense. 2010, respectively.N16 — Accumulated Comprehensive Income (Loss)The changes in accumulated comprehensive income (loss) are as follows for the years ended December 31, 2012, 2011 and 2010: Cumulative
Translation
Adjustment Pension and
Postretirement
benefits Total $ 6,950 $ (12,064 ) $ (5,114 ) (711 ) — (711 )
tax of $(1,211) — 7,658 7,658 — (31 ) (31 ) — 636 636 6,239 (3,801 ) 2,438 (1,387 ) — (1,387 )
tax of $(6,420) — (9,630 ) (9,630 ) — (31 ) (31 ) — 205 205 4,852 (13,257 ) (8,405 ) 585 — 585 — — — — (34 ) (34 ) — 1,023 1,023 �� $ 5,437 $ (12,268 ) $ (6,831 ) NOTE O — Restructuring and Unusual ChargesDuring the third quarter of 2011, the Company recorded a $5,359 restructuring and asset impairment charge related to the write down of underperforming assets in its rubber products business unit.During the third quarter of 2010, the Company reviewed one of its investments and determined there was diminution in value and therefore recorded an asset impairment charge of $3,539 included in the Assembly Components segment. Quarter Ended March 31 June 30 Sept. 30 Dec. 31 (Dollars in thousands, except per share data) $ 263,056 $ 308,817 $ 286,462 $ 275,707 48,879 55,950 53,930 48,257 $ 8,956 $ 4,443 $ 10,728 $ 7,659 $ 0.76 $ 0.37 $ 0.89 $ 0.64 $ 0.74 $ 0.37 $ 0.88 $ 0.63 $ 241,628 $ 246,808 $ 243,544 $ 234,593 41,935 45,180 41,844 38,366 $ 8,729 $ (1,107 ) $ 2,870 $ 18,943 $ 0.76 $ (0.10 ) $ 0.25 $ 1.62 $ 0.73 $ (0.10 ) $ 0.24 $ 1.58 Quarter Ended Mar. 31, Jun. 30, Sept. 30, Dec. 31, (Dollars in millions, except per share data) 2014 Net sales $ 317.8 $ 343.3 $ 344.6 $ 373.0 Gross profit 56.0 61.0 60.6 56.9 Net income from continuing operations 10.3 12.9 12.5 11.2 Net income attributable to noncontrolling interest (0.2 ) (0.5 ) (0.1 ) (0.5 ) Net income attributable to ParkOhio common shareholders $ 10.1 $ 12.4 $ 12.4 $ 10.7 Earnings (loss) per common share attributable to ParkOhio common shareholders - Basic: Continuing operations $ 0.84 $ 1.02 $ 1.02 $ 0.89 Earnings (loss) per common share attributable to ParkOhio common shareholders - Diluted: Continuing operations $ 0.82 $ 1.00 $ 1.00 $ 0.87 Cash dividends per common share $ — $ 0.125 $ 0.125 $ 0.125 2013 Net sales $ 283.0 $ 307.3 $ 303.5 $ 309.4 Gross profit 51.6 57.5 54.6 47.3 Net income from continuing operations 10.7 12.1 8.7 9.4 (Loss) Income from discontinued operations, net of taxes (0.4 ) (0.1 ) 3.7 (0.2 ) Net income attributable to noncontrolling interest — — (0.2 ) (0.3 ) Net income attributable to ParkOhio common shareholders $ 10.3 $ 12.0 $ 12.2 $ 8.9 Earnings (loss) per common share attributable to ParkOhio common shareholders - Basic: Continuing operations $ 0.90 $ 1.02 $ 0.71 $ 0.76 Discontinued operations (0.03 ) (0.01 ) 0.31 (0.02 ) Total $ 0.87 $ 1.01 $ 1.02 $ 0.74 Earnings (loss) per common share attributable to ParkOhio common shareholders - Diluted: Continuing operations $ 0.88 $ 0.99 $ 0.69 $ 0.76 Discontinued operations (0.03 ) (0.01 ) 0.30 (0.02 ) Total $ 0.85 $ 0.98 $ 0.99 $ 0.74 1 A —In the first quarter of 2012,On June 10, 2014, the Company completed the acquisition of FRS,Apollo, a leading manufacturer of industrial rubbersupply chain management services company providing Class C production components and thermoplastic hose productssupply chain solutions to aerospace customers worldwide and fuel filler and hydraulic fluid assemblies for the automotive and industrial industries,is included in an all cash transaction for approximately $98,772.our Supply Technologies segment.2 B —On October 10, 2014, the Company completed the acquisition of Autoform, a supplier of high end pressure fuel lines used in gasoline direct injection systems across a large number of engine platforms and is included in our Assembly Components segment. Note C — On December 4, 2014, the Company completed the acquisition of Saet, a leader in the design, manufacturing and testing of induction heating equipment and heat treat solutions. Saet is included in our Engineered Products segment. Note D — In the second quarter of 2012,2013, the Company entered intocompleted the acquisition of substantially all of the assets of Bates, a settlement agreement with a customer pursuant to which it agreed to settle all claims subject to an arbitration agreement by paying the customer $13,000manufacturer of extruded, formed and molded products and is included in cash.our Assembly Components segment.3E —In the second quarter of 2011,incurred debt extinguishment costs related primarily to premiums and other transaction costs associated with the tender and early redemption and wrote off deferred financing costs associated withsold a 25% interest in its 8.375% senior subordinated notes due 2014 totaling $7,335 and recorded a provision for foreign taxes of $2,100 resulting from the retirement of $26,165 of such notes that were held by an affiliate.Southwest Steel Processing business.4F —Note G — In the third quarter of 2011,September 2013, the Company recorded a $5,359 restructuring and asset impairment charge related to the write down of underperforming assets in its rubber products business unit$5.2 million pre-tax litigation judgment.5 H —InDuring the fourth quarter of 2011,2013, the Company reversed its deferred tax valuation allowanceacquired the outstanding capital stock of $11,271.Henry Halstead and QEF. Both companies are providers of supply chain management solutions.Schedule Balance at
Beginning of
Period Charged to
Costs and
Expenses Deductions
and
Other Balance at
End of
Period $ 5,483 $ 1,776 $ (3,696 )(A) $ 3,563 24,881 11,641 (9,316 )(B) 27,206 4,409 (167 ) — 4,242 4,208 5,395 (2,714 )(C) 6,889 $ 6,011 $ 708 $ (1,236 )(A) $ 5,483 22,788 7,433 (5,340 )(B) 24,881 22,386 (17,977 ) — 4,409 4,046 3,583 (3,421 )(C) 4,208 $ 8,388 $ 2,581 $ (4,958 )(A) $ 6,011 21,456 8,956 (7,624 )(B) 22,788 30,668 (5,754 ) (2,528 )(D) 22,386 2,760 2,294 (1,008 )(C) 4,046 Description (In millions) Year Ended December 31, 2014: Allowances deducted from assets: Trade receivable allowances $ 3.7 $ 0.3 $ 0.1 (A) $ 4.1 Inventory obsolescence reserve 28.4 8.4 (6.9 ) (B) 29.9 Tax valuation allowances 2.6 (1.1 ) 5.6 (C) 7.1 Year Ended December 31, 2013: Allowances deducted from assets: Trade receivable allowances $ 3.5 $ 1.8 $ (1.6 ) (A) $ 3.7 Inventory obsolescence reserve 27.2 9.4 (8.2 ) (B) 28.4 Tax valuation allowances 4.2 (1.6 ) — 2.6 Year Ended December 31, 2012: Allowances deducted from assets: Trade receivable allowances $ 5.5 $ 1.8 $ (3.8 ) (A) $ 3.5 Inventory obsolescence reserve 24.9 11.6 (9.3 ) (B) 27.2 Tax valuation allowances 4.4 (0.2 ) — 4.2 Claims paid, netAmounts accounted for under the acquisition method of acquired warranty liabilitiesaccounting.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure the our independent auditors on accounting and financial disclosure matters within the two-year period ended 2012.annual reportAnnual Report on Form 10-K, our disclosure controls and procedures were effective.2012.2014. The framework on which such evaluation was based is contained in the report entitled “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the “COSO Report”). Management’s assessment and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Fluid Routing Solutions Holding Corp.,Apollo, Autoform and Saet, which is included in our 2012 consolidated financial statements andthe aggregate constituted 19%8% of total assets as of December 31, 20122014 and 13% and 22%less than 2% of net sales and net income, respectively,revenues for the year then ended. Based upon the evaluation described above under the framework contained in the COSO Report, our management has concluded that our internal control over financial reporting was effective as of December 31, 2012.haswho audited the consolidated financial statements of the Company for the year ended December 31, 2014, also issued an auditattestation report on the effectiveness of ourCompany’s internal control over financial reporting asunder Auditing Standard No. 5 of December 31, 2012 based on the framework contained in the COSO Report.Public Company Accounting Oversight Board. This attestation report is included atset forth on page 4244 of this annual reportAnnual Report on Form 10-K and is incorporated herein by reference.20122014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.the our definitive proxy statement for the 20132015 annual meeting of shareholders to be filed with the SEC pursuant to Regulation 14A not later than 120 days after the close of the fiscal year (the “Proxy Statement”). The information concerning Section 16(a) beneficial ownership reporting compliance is incorporated herein by reference from the material contained under the caption “Principal Shareholders — Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement. Information relating to executive officers is contained in Part I of this annual reportAnnual Report on Form 10-K.Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2012. Number of securities
to be issued upon
exercise price of
outstanding options
warrants and rights Weighted-average
exercise price of
outstanding
options, warrants
and rights Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a)) (a) (b) (c) 186,334 $ 15.02 491,003 — — — 186,334 $ 15.02 491,003 Plan Category (a) (b) (c) Equity compensation plans approved by security holders (1) 143,500 $ 16.76 120,871 Equity compensation plans not approved by security holders — — — Total 143,500 $ 16.76 120,871 (1) Includes our Amended and Restated 1998 Long-Term Incentive Plan. Item 13. CertainRelationships and Related Transactions, and Director IndependenceAccountingAccountant Fees and Services Page 414243444546474873(2) Financial Statement Schedules 74annual reportAnnual Report on Form 10-K are listed on the Exhibit Index immediately preceding such exhibits and are incorporated herein by reference. of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.PARK-OHIO HOLDINGS CORP. (Registrant) By: /s/ W. SCOTT EMERICKScott EmerickName: W. Scott Emerick Vice PresidentTitle: 15, 2013reportreport has beenbeen signed by the following persons in the capacities and on the dates indicated. Chairman, Chief Executive Officer and Director *W. Scott EmerickVice President and Chief Financial Officer (Principal Financial and AccountingExecutive Officer) March 16, 2015 President, Chief Operating Officer and Director Director Director March 15, 2013 Director Director Director Director Director * The undersigned, pursuant to a Power of Attorney executed by each of the directors and officers identified above and filed with the Securities and Exchange Commission, by signing his name hereto, does hereby sign and execute this report on behalf of each of the persons noted above, in the capacities indicated. March 15, 201316, 2015 By: Robert D. Vilsack, Attorney-in-Fact 20122014EXHIBIT INDEX2.1 Agreement and Plan of Merger by and among Fluid Routing Solutions Holding Corp., FRS Group, LLP, Automotive Holding Acquisition Corp and Park-Ohio Industries, Inc., dated as of March 5, 2012 (filed as Exhibit 2.1 to FromForm 10-Q of Park-Ohio Holdings Corp. filed on May 10, 2012, SEC File No. 000-03134 and incorporated by reference and made a part hereof)3.1 Amended and Restated Articles of Incorporation of Park-Ohio Holdings Corp. (filed as Exhibit 3.1 to the Form 10-K of Park-Ohio Holdings Corp. for the year ended December 31, 1998, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 3.2 Code of Regulations of Park-Ohio Holdings Corp. (filed as Exhibit 3.2 to the Form 10-K of Park-Ohio Holdings Corp. for the year ended December 31, 1998, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 4.1 FifthSixth Amended and Restated Credit Agreement, dated March 23, 2012,July 31, 2014, among Park-Ohio Industries, Inc., the other Loan Parties (as defined therein), the Lenders (as defined therein), JP Morgan Chase Bank, N.A., as Administrative Agent, JP Morgan Chase Bank, N.A., Toronto Branch, as Canadian Agent, JP Morgan Europe Limited, as European agent, RBS Business Capital, as Syndication Agent, Key BankKeyBank National Association and First National Bank of Pennsylvania, as Co-Documentation Agent,Agents, U.S. Bank National Association, as Co-Documentation Agent and Joint Bookrunner, PNC Bank, National Association , as Joint Bookrunner, and J.P. Morgan Securities, Inc. as Sole Lead Arranger and Bookrunning Manager (filed as Exhibit 4.110.1 to the Form 8-K10-Q of Park-Ohio Holdings Corp., filed on March 27, 2012,November 10, 2014, SEC File No. 000-03134 and incorporated by reference and made a part hereof)4.2 Amendment No. 1 to Sixth Amended and Restated Credit Agreement, dated October 24, 2014, among Park-Ohio Industries, Inc. and RB&W Corporation of Canada, as borrowers, the Ex-Im Borrowers party to the Credit Agreement (as defined therein) the other Loan Parties party to the Credit Agreement, the lenders party to the Credit Agreement, JPMorgan Chase Bank, N.A., as Administrative Agent and JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian Agent and JPMorgan Europe Limited, as European Agent. 4.2 4.3 Indenture, dated as of April 7, 2011, among Park-Ohio Industries, Inc., the Guarantors (as defined therein) and Wells Fargo Bank, NA, as trustee (filed as Exhibit 4.1 to the Form 8-K of Park-Ohio Holdings Corp. filed on April 13, 2011, SEC File No. 000-03134 and incorporated herein by reference and made a part hereof) 10.1 Form of Indemnification Agreement entered into between Park-Ohio Holdings Corp. and each of its directors and certain officers (filed as Exhibit 10.1 to the Form 10-K of Park-Ohio Holdings Corp. for the year ended December 31, 1998, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 10.2* Amended and Restated 1998 Long-Term Incentive Plan (filed as Exhibit 10.1 to Form 8-K of Park-Ohio Holdings Corp., filed on May 30, 2012, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 10.3* Form of Restricted Share Agreement between the Company and each non-employee director (filed as Exhibit 10.1 to Form 8-K of Park-Ohio Holdings Corp., filed on January 25, 2005, SEC File No. 000-03134 and incorporated herein by reference and made a part hereof) 10.4*Exhibit10.4* Form of Restricted Share Agreement for Employees (filed as Exhibit 10.1 to Form 10-Q for Park-Ohio Holdings Corp. for the quarter ended September 30, 2006, SEC File No. 000-03134 and incorporated herein by reference and made a part hereof) Exhibit 10.5* Form of Incentive Stock Option Agreement (filed as Exhibit 10.5 to Form 10-K of Park-Ohio Holdings Corp. for the year ended December 31, 2004, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 10.6* Form of Non-Statutory Stock Option Agreement (filed as Exhibit 10.6 to Form 10-K of Park-Ohio Holdings Corp. for the year ended December 31, 2004, SEC File No. 000-03134 and incorporated herein by reference and made a part hereof) 10.7* Park-Ohio Industries, Inc. Annual Cash Bonus Plan (filed as Exhibit 10.1 to the Form 8-K for Park-Ohio Holdings Corp, filed June 1, 2011, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 10.8* Supplemental Executive Retirement Plan for Edward F. Crawford, effective as of March 10, 2008 (filed as Exhibit 10.9 to Form 10-K of Park-Ohio Holdings Corp. for the year ended December 31, 2007, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 10.9* Non-qualified Defined Contribution Retirement Benefit Letter Agreement for Edward F. Crawford, dated March 10, 2008 (filed as Exhibit 10.10 to Form 10-K of Park-Ohio Holdings Corp. for the year ended December 31, 2007, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 10.10* 2009 Director Supplemental Defined Contribution Plan of Park-Ohio Holdings Corp. (Filed as Exhibit 10 to Form 10-Q of Park-Ohio Holdings Corp. filed on May 10, 2011, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 10.11 Agreement of Settlement and Release, dated July 1, 2008 (filed as Exhibit 10.1 to Form 10-Q of Park-Ohio Holdings Corp. for the quarter ended September 30, 2008, SEC File No. 000-03134 and incorporated herein by reference and made a part hereof)10.12Asset Purchase Agreement, dated as of August 31, 2010, by and among Assembly Component Systems, Inc., Lawson Products, Inc., Supply Technologies LLC and Park-Ohio Industries, Inc. (filed as Exhibit 10.1 to the Form 10-Q of Park-Ohio Holdings Corp., filed on November 15, 2010, SEC File No. 000-03134 and incorporated by reference and made a part hereof)10.13Bill of Sale, dated September 30, 2010, by Rome Die Casting LLC and Johnny Johnson in favor of General Aluminum Mfg. Company (filed as Exhibit 10.2 to the Form 10-Q of Park-Ohio Holdings Corp., filed on November 15, 2010, SEC File No. 000-03134 and incorporated by reference and made a part hereof)21.1 List of Subsidiaries of Park-Ohio Holdings Corp. 23.1 Consent of Independent Registered Public Accounting Firm 24.1 Power of Attorney 31.1Exhibit31.1 Principal Executive Officer’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Principal Financial Officer’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification requirement under Section 906 of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Exhibit 101.LAB101.DEF XBRL Taxonomy Extension Label Linkbase Document 101.PRE101.LAB XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF101.PRE XBRL Taxonomy Extension Definition Linkbase Document * Reflects management contract or other compensatory arrangement required to be filed as an exhibit pursuant to Item 15(c) of this Report. 82