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UNITED STATES

FORM 10-Q

Commission file no. 333-43005

PARK-OHIO INDUSTRIES, INC.

Registrant’s telephone number, including area code: 216/692-7200

Pursuant to a corporate reorganization effective June 15, 1998, Park-Ohio Industries, Inc.

The registrant meets the conditions set forth in general instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this form in reduced disclosure format.

Indicate by check mark whether the registrant:

(1)	Has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports) and
(2)	Has been subject to such filing requirements for the past 90 days.

                      YES x              NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

                      YES o              NO x

All of the outstanding capital stock of the registrant is held by Park-Ohio Holdings Corp. As of October 31, 2004, 100 shares of the registrant’s common stock, $1 par value, were outstanding.

The Exhibit Index is located on page 23.

PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

INDEX

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PART I

FINANCIAL INFORMATION

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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

Note:	The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

See notes to consolidated financial statements.

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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

See notes to consolidated financial statements.

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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

See notes to consolidated financial statements.

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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

See notes to consolidated financial statements.

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PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES

September 30, 2004

(Amounts in Thousands)

NOTE A — Basis of Presentation

      The consolidated financial statements include the accounts of Park-Ohio Industries, Inc. and its subsidiaries (“Park-Ohio”, “the Company”). Park-Ohio is a wholly-owned subsidiary of Park-Ohio Holdings Corp. All significant intercompany transactions have been eliminated in consolidation.

      The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periods ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

NOTE B — Acquisition and Dispositions

      On August 23, 2004, the Company acquired substantially all of the assets of the Automotive Components Group (“Amcast Components Group”) of Amcast Industrial Corporation. The purchase price was approximately $10.0 million in cash and the assumption of approximately $9.0 million of operating liabilities. The acquisition was funded with borrowings under the Company’s revolving credit facility. The purchase price and the results of operations of Amcast Components Group prior to its date of acquisition were not deemed significant as defined in Regulation S-X. The results of operations for Amcast Components Group have been included since August 23, 2004.

      The tentative allocation of the purchase price has been performed based on the assignment of fair values to assets acquired and liabilities assumed. Final fair values will be based primarily on appraisals yet to be performed by an independent appraisal firm.

      The tentative allocation of the purchase price is as follows:

      The Company has a plan for integration activities and plant rationalizations. In accordance with FASB EITF Issue No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination”, the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) —  Continued

Company recorded accruals for severance, exit and relocation costs in the purchase price allocation. A reconciliation of the beginning and ending accrual balances is as follows:

      On April 1, 2004, the Company acquired the remaining 66% of the common stock of Japan Ajax Magnethermic Company (“Jamco”) for cash existing on the balance sheet of Jamco at that date. No additional purchase price was paid by the Company. The purchase price and the results of operations of Jamco prior to its date of acquisition were not deemed significant as defined in Regulation S-X.

      During the first quarter of 2003, the Company completed the sale of substantially all of the assets of Green Bearing (“Green”) and St. Louis Screw and Bolt (“St. Louis Screw”) for cash of approximately $7.3 million in the aggregate. No gains or losses were recorded on the sales. Green and St. Louis Screw were non-core businesses in the ILS Segment and Manufactured Products Segment, respectively, and had been identified as businesses the Company was selling as part of its restructuring activities during 2002 and 2001.

NOTE C — Recent Accounting Pronouncements

      In December 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 132R, “Employers’ Disclosure about Pensions and Other Postretirement Benefits.” SFAS No. 132R requires, among other things, additional disclosures about the components of pension expense for interim periods beginning after December 15, 2003. The Company adopted this pronouncement as of December 31, 2003 and included the revised annual disclosure in its 2003 Form 10-K. See Note H to the consolidated financial statements in this report for the required interim disclosures.

      In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Medicare Act”) was enacted in the United States. The Medicare Act, among other things, expanded existing Medicare healthcare benefits to include an outpatient prescription drug benefit to Medicare eligible residents of the U.S. (“Part D”) beginning in 2006. Prescription drug coverage will be available to eligible individuals who voluntarily enroll under a Part D plan. As an alternative, employers may provide drug coverage at least “actuarially equivalent to standard coverage” and receive a tax-free federal subsidy equal to 28% of a portion of a Medicare beneficiary’s drug costs. However, if covered retirees enroll in a Part D plan, the employer would not receive the subsidy.

      The FASB has proposed Staff Position (“FSP”) FAS No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” to provide guidance on accounting for effects of this healthcare benefit legislation. The FSP would treat the effect of the employer subsidy on the accumulated postretirement benefit obligation (“APBO”) as an actuarial gain. The effect of the subsidy would also be reflected in the estimate of service cost in measuring the cost of benefits attributable to current service. The effects of plan amendments adopted subsequent to the adoption of the Medicare Act to qualify plans as actuarially equivalent would be treated as actuarial gains if the net effect of the amendments reduces the APBO. The net effect on the APBO of any plan amendments that (a) reduce benefits under the plan and thus disqualify the benefits as actuarially equivalent and (b) eliminate the subsidy would be accounted for as prior service cost.

      The Company has completed its assessment of the provisions of the Medicare Act on its postretirement healthcare plans. The effect of the Medicare Act is a reduction to the APBO of $2.4 million. The effect of the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) —  Continued

Medicare Act will reduce the net periodic postretirement benefit cost by $.3 million in 2004. During the three months ended September 30, 2004, the Company recorded reduction to the net periodic postretirement benefit cost of $.2 million.

NOTE D — Inventories

      The components of inventory consist of the following:

NOTE E — Pension Plans and Other Postretirement Benefits

      Effective December 31, 2003, the Company adopted SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”. This standard requires the disclosure of the components of net periodic benefit cost recognized during interim periods.

      The Company has completed its assessment of the provisions of the Medicare Act on its postretirement healthcare plans. The effect of the Medicare Act is a reduction to the APBO of $2.4 million. The effect of the Medicare Act will reduce the net periodic postretirement benefit cost by $.3 million in 2004. During the three months ended September 30, 2004, the Company recorded reduction to the net periodic postretirement benefit cost of $.2 million.

NOTE F — Segments

      The Company operates through three segments: Integrated Logistics Solutions (“ILS”), Aluminum Products and Manufactured Products. ILS is a leading supply chain logistics provider of production components to large, multinational manufacturing companies, other manufacturers and distributors. In connection with the supply of such production components, ILS provides a variety of value-added, cost-effective supply chain management services. Aluminum Products manufactures cast aluminum components for the automotive, agricultural equipment, heavy duty truck and construction equipment industries. Aluminum Products also provides value-added services such as design and engineering, machining and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) —  Continued

assembly. Manufactured 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.

      Results by business segment were as follows:

NOTE G — Comprehensive Income (Loss)

      Total comprehensive income was as follows:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) —  Continued

      The components of accumulated comprehensive loss at September 30, 2004 and December 31, 2003 are as follows:

NOTE H — Restructuring Activities

      The Company responded to the economic downturn by reducing costs in a variety of ways, including restructuring businesses and selling non-core manufacturing assets. These activities, which included asset write-downs and other exit costs related to the shutdown of facilities, generated restructuring and asset impairment charges of $19.4 million, $19.2 million and $28.5 million in 2003, 2002 and 2001, respectively (of which $1.0 million in 2003, $5.6 million (490 employees) in 2002 and $6.9 million (525 employees) in 2001 related to severance and exit costs). For further details on the restructuring plan, see Note N to the audited financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

      The accrued liability balance for severance and exit costs and related cash payments consisted of:

      As of September 30, 2004, all of the 525 employees identified in 2001 and 490 employees identified in 2002 had been terminated. The workforce reductions under the restructuring plan consisted of hourly and salaried employees at various operating facilities due to either closure or consolidation.

      Net sales for the businesses that were included in net assets held for sale were $-0- and $1,139 for the nine months ended September 30, 2004 and 2003, respectively. Operating income for these entities was $-0- and ($8) for the nine months ended September 30, 2004 and 2003, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) —  Continued

NOTE I — Accrued Warranty Costs

      The Company estimates the amount of warranty claims on sold products that may be incurred based on current and historical data. The actual warranty expense could differ from the estimates made by the Company based on product performance. The following table presents the changes in the Company’s product warranty liability:

NOTE J — Income Taxes

      The effective income tax rate for the nine-month period ended September 30, 2004 was 13%, compared to 17% for the corresponding period in 2003. Only foreign and state income taxes were provided for in both periods, because federal income taxes were offset by net operating loss carryforwards that were not recognized previously due to valuation allowances. At December 31, 2003, the Company had net operating loss carryforwards of approximately $35.7 million. Tax benefits related to these carryforwards were fully offset by valuation allowances in 2002, because the Company was in a three-year cumulative loss position.

NOTE K — Derivatives and Hedging

      The Company recognizes all derivative financial instruments as either assets or liabilities at fair value. The Company has no derivative instruments that are classified as fair value hedges. Changes in the fair value of derivative instruments that are classified as cash flow hedges are recognized in other comprehensive income until such time as the hedged items are recognized in net income.

      During the second quarter of 2004, the Company entered into forward contracts, for the purpose of hedging exposure to changes in the value of accounts receivable in Euros against the US dollar, for a notional amount of $5.1 million, of which $2.2 million was outstanding at September 30, 2004. These transactions are considered cash flow hedges and, therefore, the fair market value at the end of the third quarter 2004 of a $.1 million loss, has been recognized in other comprehensive income (loss). Because there is no ineffectiveness on the cash flow hedges, all changes in fair value of these derivatives are recorded in equity and not included in the current period’s income statement. The $.1 million of loss on the fair value of the hedges is classified in current accrued liabilities.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholder

      We have reviewed the accompanying consolidated balance sheet of Park-Ohio Industries, Inc. and subsidiaries as of September 30, 2004 and the related consolidated statements of income for the three-month and nine-month periods ended September 30, 2004 and 2003, the consolidated statement of shareholder’s equity for the nine-month period ended September 30, 2004 and the consolidated statements of cash flows for the nine-month periods ended September 30, 2004 and 2003. These financial statements are the responsibility of the Company’s management.

      We conducted our review in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

      Based upon our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

      We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Park-Ohio Industries, Inc. and subsidiaries as of December 31, 2003 and the related consolidated statements of operations, shareholder’s equity, and cash flows for the year then ended, not presented herein, and in our report dated March 9, 2004, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2003, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

	/s/ Ernst & Young LLP

Cleveland, Ohio

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      The consolidated financial statements of the Company include the accounts of Park-Ohio Industries, Inc. and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation. Financial information for the three-months and nine-month periods ended September 30, 2004 is not directly comparable to the financial information for the same periods in 2003 primarily due to acquisitions and divestitures.

Executive Overview

      The Company is an industrial supply chain logistics and diversified manufacturing business operating in three business segments, Integrated Logistics Solutions, or ILS, Aluminum Products and Manufactured Products. ILS provides our customers with integrated supply chain management services for a broad range of high-volume specialty production components and has a leading position in North America. Our Aluminum Products business manufactures cast and machined aluminum components and our Manufactured Products business is a major manufacturer of highly engineered industrial products. Our businesses serve large, industrial equipment manufacturers, or OEMs, in a variety of industrial sectors, including the automotive, heavy-duty truck, industrial equipment, steel, rail, electrical controls, aerospace and defense, lawn and garden, and semiconductor industries. Sales, earnings and other relevant financial data for these three segments are provided in Note F to the consolidated financial statements, included elsewhere herein.

      The Company continues to experience the increased sales and profitability it previously forecast for 2004 as the manufacturing economy returns to growth, particularly in three of the Company’s customer segments, heavy-duty truck, semiconductor equipment and equipment for steel manufacturing. Net sales increased 29% in the first nine months of 2004 compared to the same period in 2003. Net income more than tripled in the first nine months of 2004 compared to the same period in 2003.

      Sustained growth in the Company’s sales and profitability from 1993 through early 2000 was followed by declines in later 2000 and 2001, primarily due to economic weakness. The Company’s sales stabilized in 2002 and 2003, declining slightly due primarily to divestitures, and losses (including restructuring and impairment charges) began to diminish.

      The Company responded to the economic downturn by reducing costs, increasing prices on targeted products, restructuring many of its businesses and selling non-core manufacturing assets. Since 2000, the Company has consolidated 28 supply chain logistics facilities, and closed or sold 11 manufacturing plants. In regard to these actions, the Company recorded restructuring and impairment charges in 2001, 2002 and 2003. For more information on these charges, see Note H to the consolidated financial statements, included elsewhere herein.

      The Company’s primary sources of liquidity are funds provided by operations and funds available from an existing bank revolving credit arrangement. The Company may borrow up to $185.0 million under its revolving credit agreement, expiring July 30, 2007, subject to an asset based formula. The credit agreement is secured by substantially all the assets of the Company. At September 30, 2004, the Company had $46.3 million of unused borrowing availability from the revolving credit agreement. The Company’s $199.9 million of outstanding Senior Subordinated Notes mature in December, 2007. On November 9, the Company announced that it had commenced a cash tender offer for any and all of its outstanding Senior Subordinated Notes. The Company intends to fund the tender offer primarily with the proceeds from a new issuance of long-term debt. Funds provided by operations plus available borrowings under the revolving credit agreement are expected to be adequate to meet the Company’s cash requirements until 2007.

      The Company completed the sale of substantially all of the assets of St. Louis Screw and Bolt (“St. Louis Screw”) and Green Bearing (“Green”) in the first quarter 2003, for cash totaling approximately $7.3 million in the aggregate. The Company acquired the remaining 66% of the common stock of Japan Ajax Magnethermic Company (“Jamco”) on April 1, 2004 for cash existing on the balance sheet of Jamco at that date. No additional purchase price was paid by the Company.

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      The Company acquired substantially all the assets of the Amcast Components Group on August 23, 2004, for $10.0 million cash and the assumption of approximately $9.0 million of operating liabilities. This acquisition included accounts receivable and inventory of $10.6 million and property and equipment of $16.3 million, based on a tentative allocation of the purchase price. Approximately $2.3 million was accrued for severance, exit and relocation costs, of which a balance of $2.0 million remained at September 30, 2004. For more details, see Note B to the Consolidated Financial Statements included herewith.

Results of Operations

      Net sales increased 29% for the first nine months of 2004, compared to the same period in 2003. ILS sales increased due to general economic growth, and in particular to significant growth in the heavy-duty truck and semiconductor industries. The divestiture of Green reduced ILS sales by $1.0 million in the first nine months of 2004. Aluminum Products sales increased primarily due to volume increases in the automotive industry, as well as $10.2 million in sales resulting from the Amcast Components Group acquisition on August 23, 2004. Manufactured Products sales increased primarily in the induction, pipe threading equipment and forging businesses. Of this increase, $1.2 million was due to the net effect of the second quarter 2004 acquisition of the remaining 66% of the common stock of Jamco, partially offset by the divestiture of St. Louis Screw in the first quarter of 2003.

      Cost of products sold increased 28% for the first nine months of 2004, compared to the same period in 2003, while gross margin increased to 16.0% from 15.6%. ILS gross margin decreased modestly, primarily due to steel price increases and mix changes. Aluminum Products gross margin decreased due to a combination of product mix and pricing changes and specific one-time costs incurred in the first nine months for product startup, scrap and reserves. Gross margin in the Manufactured Products segment increased, primarily as a result of increased sales and overhead efficiencies achieved in the induction business, and the absorption of fixed overhead over a larger sales base.

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      SG&A expenses increased 25% for the first nine months of 2004, compared to the same period in 2003. Approximately half of this increase was due to acquisitions, primarily Jamco and Amcast Components Group, Sarbanes-Oxley compliance costs and specific one-time charges and credits, while the remainder was primarily due to increased sales and production volumes. Despite this increase, SG&A expenses as a percent of sales decreased by .3% due both to cost reductions from restructuring and to the absorption of these expenses over increased sales. SG&A expenses were reduced in the first nine months of 2004 compared to the same period in 2003 by a $1.7 million increase in net pension credits reflecting improved returns on pension plan assets.