2015 Annual Report We see value... where others don’t. To Our Fellow Shareholders: As a diversified multinational corporation providing production components and supply chain management services to world-class companies, ParkOhio continues to identify value-creation opportunities that will benefit our customers. Edward F. Crawford Chairman and Chief Executive Officer Net Sales (in millions) 1 1 % C A G R $1,463.8 $1,378.7 $1,203.2 $1,128.2 $961.4 Operating Income (in millions) 1 3 % C A G R $80.5 $85.6 $97.9 $97.9 $59.8 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Earnings Per Share from Continuing Operations 10 % CAG R $2.64 $2.82 $3.31 $3.68 $3.88 $35.9 Cash Flow from Operations (in millions) 3 % CAG R $55.9 $60.3 $53.6 $44.7 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2015 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 or ‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 to For the transition period from Commission file number: 000-03134 PARK-OHIO HOLDINGS CORP. (Exact name of registrant as specified in its charter) Ohio 34-1867219 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 6065 Parkland Boulevard, Cleveland, Ohio (Address of principal executive offices) 44124 (Zip Code) Registrant’s telephone number, including area code (440) 947-2000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, Par Value $1.00 Per Share The NASDAQ Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None Park-Ohio Holdings Corp. is a successor issuer to Park-Ohio Industries, Inc. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ‘ No Í Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No Í 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 12 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 Í No ‘ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes Í No ‘ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Í Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ‘ Accelerated filer Í Non-accelerated filer Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ‘ Yes Í No Aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant: Approximately $423,938,000 based on ‘ (Do not check if a smaller reporting company) Smaller reporting company ‘ the closing price of $48.46 per share of the registrant’s Common Stock on June 30, 2015. Number of shares outstanding of registrant’s Common Stock, par value $1.00 per share, as of February 29, 2016: 12,392,626 shares of the registrant’s common stock, $1 par value, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive proxy statement for the Annual Meeting of Shareholders to be held on or about May 19, 2016 are incorporated by reference into Part III of this Form 10-K. PARK-OHIO HOLDINGS CORP. FORM 10-K ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015 TABLE OF CONTENTS Item No. PART I. 1. 1A. 1B. 2. 3. 4. Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures PART II. 5. 6. 7. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations 7A. Quantitative and Qualitative Disclosures About Market Risk 8. 9. 9A. 9B. Financial Statements and Supplementary Data Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III 10. 11. 12 13. 14. Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services PART IV. 15. Exhibits and Financial Statement Schedules Signatures Page 2 10 18 18 20 21 22 23 25 44 45 84 84 84 85 85 85 86 86 87 88 1 Part I Item 1. Business Overview Park-Ohio Holdings Corp. (“Holdings”) was incorporated as an Ohio corporation in 1998. Holdings, primarily through the subsidiaries owned by its direct subsidiary, Park-Ohio Industries, Inc. (“Park-Ohio”), is an industrial supply chain logistics and diversified manufacturing business operating in three segments: Supply Technologies, Assembly Components and Engineered Products. References herein to “we” or “the Company” include, where applicable, Holdings, Park-Ohio and Holdings’ other direct and indirect subsidiaries. The Company operates through three reportable segments: Supply Technologies, Assembly Components and Engineered Products. Supply Technologies provides our customers with Total Supply Management™ services for a broad range of high-volume, specialty production components. Total Supply Management™ 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 and vehicle parts; power sports and recreational equipment; bus and coaches; electrical distribution and controls; agricultural and construction equipment; consumer electronics; HVAC; lawn and garden; semiconductor equipment; aerospace and defense; and plumbing. Assembly Components manufactures products oriented toward fuel efficiency and reduced emission requirements. 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 (“OEMs”) and end users in the 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. Our sales are made through our own sales organization, distributors and independent sales representatives. Intersegment sales are immaterial and eliminated in consolidation and are not included in the financial results presented. Income allocated to segments excludes certain corporate expenses, interest expense, and certain other infrequent or unusual charges or credits. Identifiable assets by segment include assets directly identified with those operations. As of December 31, 2015, we employed approximately 6,000 persons. 2 The following chart reflects our end-use market mix for the year ended December 31, 2015: Other: 17% Semiconductor: 2% Consumer Electronics: 2% Agriculture & Construction: 2% Aerospace/Defense: 2% Truck Related/Bus: 3% Rail: 3% Oil & Gas: 4% Metal Fabrication: 4% Automotive: 43% Power Sports: 5% Industrial Machinery: 6% Heavy-Duty Truck: 7% The following chart reflects our geographic mix for the year ended December 31, 2015: Other: 1% Mexico: 6% Canada: 6% Europe: 7% Asia Pacific: 8% United States: 72% 3 The following table summarizes the key attributes of each of our business segments: Supply Technologies Assembly Components Engineered Products NET SALES FOR 2015 $578.7 million (40% of total) $569.2 million (39% of total) $315.9 million (21% of total) SELECTED PRODUCTS SELECTED INDUSTRIES SERVED Sourcing, planning and procurement of over 190,000 production components, including: • Fasteners • Pins • Valves • Hoses • Wire harnesses • Clamps and fittings • Rubber and plastic components • Heavy-duty truck • Power sports and recreational equipment • Electrical distribution and controls • Consumer electronics • Bus and coaches • Automotive • Agricultural and construction equipment • HVAC • Lawn and garden • Semiconductor equipment • Aerospace and defense • Control arms • Knuckles • Injection molded rubber products • Pump housings • Clutch retainers/pistons • Rubber and • Induction heating and melting systems • Pipe threading systems • Industrial oven systems • Forging presses • Forged steel and machined products thermoplastic hose • Oil pans • Flywheel spacers • Fuel filler assemblies • Gasoline direct injection systems • Automotive • Agricultural equipment • Construction equipment • Heavy-duty truck • Marine equipment • Ferrous and non-ferrous metals • Coatings • Forging • Foundry • Heavy-duty truck • Construction equipment • Silicon • Automotive • Oil and gas • Rail and locomotive manufacturing • Aerospace and defense Supply Technologies Our Supply Technologies business provides our customers with Total Supply Management™, 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 Management™ 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 54 logistics service centers in the United States, Mexico, Canada, Puerto Rico, Scotland, Hungary, China, Taiwan, Singapore, India, United Kingdom, Poland and 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. 4 Products and Services. Total Supply Management™ 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, Supply Technologies delivers an increasingly broad range of higher- cost production components including valves, electro-mechanical hardware, labels, fittings, steering components and many others. Applications engineering specialists and the direct sales force work closely with the engineering staff of OEM customers to recommend the appropriate production components for a new product or to suggest alternative components that reduce overall production costs, streamline assembly or enhance the appearance or performance of the end product. As an additional service, Supply Technologies also provides spare parts and aftermarket products to end users of its customers’ products. Total Supply Management™ 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. The Supply Technologies segment also engineers and manufactures precision cold formed and cold extruded products, including locknuts, SPAC® nuts and wheel hardware, which are principally used in applications where controlled tightening is required due to high vibration. Supply Technologies produces both standard items and specialty products to customer specifications, which are used in large volumes by customers in the automotive, heavy-duty truck and rail industries. Markets and Customers. For the year ended December 31, 2015, approximately 71% 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 Management™ 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. Supply Technologies markets and sells its services to over 7,800 customers domestically and internationally. The principal industries served by Supply Technologies are the heavy-duty truck; automotive, truck and vehicle parts; power sports and recreational equipment; bus and coaches; electrical distribution and controls; agricultural and construction equipment; consumer electronics; HVAC; lawn and garden; semiconductor equipment; aerospace and defense; and plumbing. The five largest customers, within which Supply Technologies sells through sole-source contracts to multiple operating divisions or locations, accounted for approximately 34% of the sales of Supply Technologies in 2015 and 32% in 2014. The loss of any two of its top five customers could have a material adverse effect on the results of operations and financial condition of this segment. Competition. A limited number of companies compete with Supply Technologies to provide supply management services for production parts and materials. Some global competitors include Bossard, Fastenal, 5 Optimus, Wolseley and Wurth. Supply Technologies competes in North America, Mexico, Europe and Asia, primarily on the basis of its Total Supply Management™ 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. Assembly Components Assembly Components manufactures products oriented towards fuel efficiency and reduced emission standards. Assembly Components designs, develops and manufactures aluminum products and highly efficient, high pressure Direct Fuel Injection fuel rails and pipes, fuel filler pipes that mount on to the gas tank, as well as flexible multi-layer plastic and rubber assemblies used to transport fuel to the vehicle’s gas tank and then, at extreme high pressure, to the engine’s fuel injector nozzles. These advanced products coupled with Turbo Enabled engines make up large and growing engine architecture for all worldwide car manufacturers. Assembly Components also designs and manufactures Turbo Charging hoses along with Turbo Coolant hoses that will be required as engines get downsized to 3 and 4 cylinders from 6 or 8 cylinders. This engine downsizing increases efficiency, while dramatically decreasing pollution levels. In addition, our Assembly Components segment operates what we believe is one of the few aluminum component suppliers that have 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. Products and Services. Assembly Components manufactures cast aluminum components, automotive and industrial rubber and thermoplastic products, fuel filler, gasoline direct injection systems and hydraulic assemblies for automotive, agricultural equipment, construction equipment, heavy-duty truck and marine equipment industries. Assembly Components’ principal products include control arms, knuckles, pump housings, clutch retainers and pistons, master cylinders, oil pans and flywheel spacers, injected molded rubber and silicone products, including wire harnesses, shock and vibration mounts, spark plug boots and nipples and general sealing gaskets, rubber and thermoplastic hose, fuel filler assemblies and gasoline direct injection systems. We produce our Assembly Components at twenty-five manufacturing facilities in Ohio, Michigan, Indiana, Tennessee, Florida, Mexico, China and the Czech Republic. In addition, we also provide value-added services such as design engineering, machining and part assembly. Markets and Customers. The five largest customers, to which Assembly Components sells to multiple operating divisions through sole-source contracts, accounted for approximately 49% of Assembly Components sales for 2015 and 46% for 2014. 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. Competition. Assembly Components competes principally on the basis of its ability to: (1) engineer and manufacture high-quality, cost-effective, assemblies utilizing multiple technologies in large volumes; (2) provide timely delivery; and (3) retain the manufacturing 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, Compass Automotive, Martinrea and Stant. Engineered Products Our Engineered Products segment operates a diverse group of niche manufacturing businesses that design and manufacture a broad range of highly-engineered products, including induction heating and melting systems, 6 pipe threading systems and forged and machined products. We manufacture these products in twelve domestic facilities and twelve international facilities in Canada, Mexico, the United Kingdom, Belgium, Germany, China, Italy, India and Japan. Products and Services. Our induction heating and melting business utilizes proprietary technology and specializes in the engineering, construction, service and repair of induction heating and melting systems, primarily for the ferrous and non-ferrous metals, silicon, coatings, forging, foundry, automotive and construction equipment industries. Our induction heating and melting systems are engineered and built to customer specifications and are used primarily for melting, heating, and surface hardening of metals and curing of coatings. Approximately 46% 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. Markets and Customers. We sell induction heating and other capital equipment to component manufacturers and OEMs in the ferrous and non-ferrous metals, silicon, coatings, forging, foundry, automotive, truck, construction equipment and oil and gas industries. We sell forged and machined products to locomotive manufacturers, machining companies and sub-assemblers who finish aerospace and defense products for OEMs, and railcar builders and maintenance providers. Competition. We compete with small-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-to medium-sized forging and machining businesses on the basis of product quality and precision. Sales and Marketing Supply Technologies markets its products and services in the United States, Mexico, Canada, Western and Eastern Europe and East and South Asia primarily through its direct sales force, which is assisted by applications engineers who provide the technical expertise necessary to assist the engineering staff of OEM customers in designing new products and improving existing products. Assembly Components primarily markets and sells its products in North America through internal sales personnel and independent sales representatives. Engineered Products primarily markets and sells its products in North America through both internal sales personnel and independent sales representatives. Induction heating and pipe threading equipment is also marketed and sold in Europe, Asia, Latin America and Africa through both internal sales personnel and independent sales representatives. In some instances, the internal engineering staff assists in the sales and marketing effort through joint design and applications-engineering efforts with major customers. Raw Materials and Suppliers Supply Technologies purchases substantially all of its production components from third-party suppliers. Supply Technologies has multiple sources of supply for its components. An increasing portion of Supply Technologies’ production components are purchased from suppliers in foreign countries, primarily Canada, Taiwan, China, South Korea, Singapore, India and multiple European countries. Supply Technologies is dependent upon the ability of such suppliers to meet stringent quality and performance standards and to conform to delivery schedules. Assembly Components and Engineered Products purchase substantially all of their raw materials, principally metals and certain component parts incorporated into their products, from third-party suppliers and manufacturers. Most raw materials required by Assembly Components and Engineered Products are commodity products available from several domestic suppliers. Management believes that raw materials and component parts other than certain specialty products are available from alternative sources. 7 Our suppliers of raw materials and component parts may significantly and quickly increase their prices in response to increases in costs of the raw materials, such as steel, that they use to manufacture our raw materials and component parts. We generally attempt to pass along increased raw materials prices to our customers in the form of price increases, there may be a time delay between the increased raw materials prices and our ability to increase the price of our products, or we may be unable to increase the prices of our products due to pricing pressure or other factors. See the discussion of risks associated with raw material supply and costs in Item 1A “Risk Factors”. Backlog Management believes that backlog is not a meaningful measure for Supply Technologies, as a majority of Supply Technologies’ customers require just-in-time delivery of production 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 was $147.2 million compared with $199.7 million as of December 31, 2014. Approximately 90% of Engineered Products’ backlog as of December 31, 2015 is scheduled to be shipped in 2016. Environmental, Health and Safety Regulations We are subject to numerous federal, state and local laws and regulations designed to protect public health and the environment, particularly with regard to discharges and emissions, as well as handling, storage, treatment and disposal, of various substances and wastes. Our failure to comply with applicable environmental laws and regulations and permit requirements could result in civil and criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures. Pursuant to certain environmental laws, owners or operators of facilities may be liable for the costs of response or other corrective actions for contamination identified at or emanating from current or former locations, without regard to whether the owner or operator knew of, or was responsible for, the presence of any such contamination, and for related damages to natural resources. Additionally, persons who arrange for the disposal or treatment of hazardous substances or materials may be liable for costs of response at sites where they are located, whether or not the site is owned or operated by such person. From time to time, we have incurred, and are presently incurring, costs and obligations for correcting environmental noncompliance and remediating environmental conditions at certain of our properties. In general, we have not experienced difficulty in complying with environmental laws in the past, and compliance with environmental laws has not had a material adverse effect on our financial condition, liquidity and results of operations. Our capital expenditures on environmental control facilities were not material during the past five years and such expenditures are not expected to be material to us in the foreseeable future. We are currently, and may in the future be, required to incur costs relating to the investigation or remediation of property, including property where we have disposed of our waste, and for addressing environmental conditions. For instance, we have been identified as a potentially responsible party at third-party sites under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or comparable state laws, which provide for strict and, under certain circumstances, joint and several liability. We are participating in the cost of certain clean-up efforts at several of these sites. The availability of third-party payments or insurance for environmental remediation activities is subject to risks associated with the willingness and ability of the third party to make payments. However, our share of such costs has not been material and, based on available information, we do not expect our exposure at any of these locations to have a material adverse effect on our results of operations, liquidity or financial condition. 8 Information as to Segment Reporting and Geographic Areas The information contained in Note 2 to the consolidated financial statements included elsewhere herein relating to (1) net sales, income before income taxes, identifiable assets and other information by segment and (2) net sales and assets by geographic region for the years ended December 31, 2015, 2014 and 2013 is incorporated herein by reference. Recent Developments IPSCO Tubulars Inc. d/b/a TMK IPSCO sued Ajax Tocco Magnethermic Corporation (“ATM”), a subsidiary of Holdings, in the United States District Court for the Eastern District of 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 alleged causes of action for breach of contract, gross negligence, and constructive fraud. IPSCO sought approximately $10 million in damages plus an unspecified amount of punitive damages. ATM denied the allegations. ATM subsequently obtained summary judgment on the constructive fraud claim, which was dismissed by the district court 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, which the Company recognized and accrued for at that time. 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 could be decreased, but could not be increased, on remand. On remand, the district court entered an order once again awarding IPSCO $5.2 million in damages. In December 2015, ATM filed a second appeal with the Eighth Circuit seeking reversal of the damages award. In March 2016, the district court issued an order granting, in part, IPSCO’s motion for fees and costs and awarding $2.2 million to IPSCO. ATM expects to appeal that decision. Available Information We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K proxy statements and other information, including amendments to these reports and statements, with the Securities and Exchange Commission (“SEC”). The public can obtain copies of these materials by visiting the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549, by calling the SEC at 1-800-SEC-0330, or by accessing the SEC’s website at http://www.sec.gov. In addition, as soon as reasonably practicable after such materials are filed with or furnished to the SEC, we make such materials available on our website free of charge at http://www.pkoh.com. The information on our website is not a part of this annual report on Form 10-K. 9 Executive Officers of the Registrant Information with respect to our executive officers as of March 14, 2016 is as follows: Name Age Position Edward F. Crawford . . . . . . . . . . . . . . . . . . . 76 Chairman of the Board, Chief Executive Officer and Director Matthew V. Crawford . . . . . . . . . . . . . . . . . . 46 President and Chief Operating Officer and Director Patrick W. Fogarty . . . . . . . . . . . . . . . . . . . . 54 Vice President and Chief Financial Officer Robert D. Vilsack . . . . . . . . . . . . . . . . . . . . . 55 Secretary and General Counsel Mr. E. Crawford has 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. Crawford has 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. Fogarty has been Vice President and Chief Financial Officer since 2015. Prior to that, Mr. Fogarty was Director of Corporate Development since 1997 and served as Director of Finance from 1995 to 1997. Prior to 1995, Mr. Fogarty was employed by Ernst & Young from 1983 to 1995. Mr. Vilsack has 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. Item 1A. Risk Factors The following are certain risk factors that could affect our business, results of operations and financial condition. These risks are not the only ones we face. If any of the following risks occur, our business, results of operations or financial condition could be adversely affected. Adverse credit market conditions may significantly affect our access to capital, cost of capital and ability to meet liquidity needs. Disruptions, uncertainty or volatility in the credit markets may adversely impact our ability to access credit already arranged and the availability and cost of credit to us in the future. These market conditions may limit our ability to replace, in a timely manner, maturing liabilities and access the capital necessary to grow and maintain our business. Accordingly, we may be forced to delay raising capital or pay unattractive interest rates, which could increase our interest expense, decrease our profitability and significantly reduce our financial flexibility. Longer-term disruptions in the capital and credit markets as a result of uncertainty, changing or increased 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. 10 Adverse global economic conditions may have significant effects on our customers and suppliers that could result in material adverse effects on our business and operating results. Significant reductions in available capital and liquidity from banks and other providers of credit, substantial reductions and fluctuations in equity and currency values worldwide, volatility in commodity prices for such items as crude oil, and concerns that the worldwide economy may enter into a prolonged recessionary period, may materially adversely affect our customers’ access to capital or willingness to spend capital on our products or their ability to pay for products that they will order or have already ordered from us. In addition, unfavorable global economic conditions may materially adversely affect our suppliers’ access to capital and liquidity with which they maintain their inventories, production levels and product quality, which could cause them to raise prices or lower production levels. These potential effects of 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. Adverse global economic conditions may have significant effects on our customers that would result in our inability to borrow or to meet our debt service coverage ratio in our revolving credit facility. As of December 31, 2015, 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 2016, 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, they may not be able to pay their accounts payable to us on a timely basis or at all, which would make the accounts receivable ineligible for purposes of the revolving credit facility and could reduce our borrowing base and our ability to borrow. The industries in which we operate are cyclical and are affected by the economy in general. We sell products to customers in industries that experience cyclicality (expectancy of recurring periods of economic growth and slowdown) in demand for products and may experience substantial increases and decreases in business volume throughout economic cycles. Industries we serve, including the automotive and vehicle parts, heavy-duty truck, industrial equipment, steel, rail, oil and gas, electrical distribution and controls, aerospace and defense, recreational equipment, HVAC, electrical components, appliance and semiconductor equipment industries, are affected by consumer spending, general economic conditions and the impact of international trade. A downturn in any of the industries we serve could have a material adverse effect on our financial condition, liquidity and results of operations. Because a significant portion of our sales is to the automotive and heavy-duty truck industries, a decrease in the demand of these industries or the loss of any of our major customers in these industries could adversely affect our financial health. Demand for certain of our products is affected by, among other things, the relative strength or weakness of the automotive and heavy-duty truck industries. The domestic automotive and heavy-duty truck industries are highly cyclical and may be adversely affected by international competition. In addition, the automotive and heavy-duty truck industries are significantly unionized and subject to work slowdowns and stoppages resulting from labor disputes. We derived 43% and 7% of our net sales during the year ended December 31, 2015 from the automotive and heavy-duty truck industries, respectively. The loss of a portion of business to any of our major automotive or heavy-duty truck customers could have a material adverse effect on our financial condition, cash flow and results of operations. We cannot assure you that 11 we will maintain or improve our relationships in these industries or that we will continue to supply these customers at current levels. Our Supply Technologies customers are generally not contractually obligated to purchase products and services from us. Most of the products and services are provided to our Supply Technologies customers under purchase orders as opposed to long-term contracts. When we do enter into long-term contracts with our Supply Technologies customers, many of them only establish pricing terms and do not obligate our customers to buy required minimum amounts from us or to buy from us exclusively. Accordingly, many of our Supply Technologies customers may decrease the amount of products and services that they purchase from us or even stop purchasing from us altogether, either of which could have a material adverse effect on our net sales and profitability. We are dependent on key customers. We rely on several key customers. For the year ended December 31, 2015, our ten largest customers accounted for approximately 35% 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: • • • • 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. If any of our key customers become insolvent or file for bankruptcy, our ability to recover accounts receivable from that customer would be adversely affected and any payments we received in the preference period prior to a bankruptcy filing may be potentially recoverable, which could adversely impact our results of operations. We operate in highly competitive industries. The markets in which all three of our segments sell their products are highly competitive. Some of our competitors are large companies that have greater financial resources than we have. We believe that the principal competitive factors for our Supply Technologies segment are an approach reflecting long-term business partnership and reliability, sourced product quality and conformity to customer specifications, timeliness of delivery, price and design and engineering capabilities. We believe that the principal competitive factors for our Assembly Components and Engineered Products segments are product quality and conformity to customer specifications, design and engineering capabilities, product development, timeliness of delivery and price. The rapidly evolving nature of the markets in which we compete may attract new entrants as they perceive opportunities, and our competitors may foresee the course of market development more accurately than we do. In addition, our competitors may develop products that are superior to our products or may adapt more quickly than we do to new technologies or evolving customer requirements. We expect competitive pressures in our markets to remain strong. These pressures arise from existing competitors, other companies that may enter our existing or future markets and, in some cases, our customers, which may decide to internally produce items we sell. We cannot assure you that we will be able to compete successfully with our competitors. Failure to compete successfully could have a material adverse effect on our financial condition, liquidity and results of operations. 12 The loss of key executives could adversely impact us. Our success depends upon the efforts, abilities and expertise of our executive officers and other senior managers, including Edward Crawford, our Chairman and Chief Executive Officer, and Matthew Crawford, our President and Chief Operating Officer, as well as the president of each of our operating units. An event of default occurs under our revolving credit facility if Messrs. E. Crawford and M. Crawford or certain of their related parties own in the aggregate less than 15% of Holdings’ 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. We may encounter difficulty in expanding our business through targeted acquisitions. We have pursued, and may continue to pursue, targeted acquisition opportunities that we believe would complement our business. We cannot assure you that we will be successful in consummating any acquisitions. Any targeted acquisitions will be accompanied by the risks commonly encountered in acquisitions of businesses. We may not successfully overcome these risks or any other problems encountered in connection with any of our acquisitions, including the possible inability to integrate an acquired business’ operations, 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. Our Supply Technologies business depends upon third parties for substantially all of our component parts. Our Supply Technologies business purchases substantially all of its component parts from third-party suppliers and manufacturers. As such, it is subject to the risk of price fluctuations and periodic delays in the delivery of component parts. Failure by suppliers to continue to supply us with these component parts on commercially reasonable terms, or at all, could have a material adverse effect on us. We depend upon the ability of these suppliers, among other things, to meet stringent performance and quality specifications and to conform to delivery schedules. Failure by third-party suppliers to comply with these and other requirements could have a material adverse effect on our financial condition, liquidity and results of operations. The raw materials used in our production processes and by our suppliers of component parts are subject to price and supply fluctuations that could increase our costs of production and adversely affect our results of operations. Our supply of raw materials for our Assembly Components and Engineered Products businesses could be interrupted for a variety of reasons, including availability and pricing. Prices for raw materials necessary for production have fluctuated significantly in the past and significant increases could adversely affect our results of operations and profit margins. While we generally attempt to pass along increased raw materials prices to our customers in the form of price increases, there may be a time delay between the increased raw materials prices and our ability to increase the price of our products, or we may be unable to increase the prices of our products due to pricing pressure or other factors. Our suppliers of component parts, particularly in our Supply Technologies business, may significantly and quickly increase their prices in response to increases in costs of the raw materials, such as steel, that they use to manufacture our component parts. We may not be able to increase our prices commensurate with our increased costs. Consequently, our results of operations and financial condition may be materially adversely affected. 13 The energy costs involved in our production processes and transportation are subject to fluctuations that are beyond our control and could significantly increase our costs of production. Our manufacturing process and the transportation of raw materials, components and finished goods are energy intensive. Our manufacturing processes are dependent on adequate supplies of electricity and natural gas. A substantial increase in the cost of transportation fuel, natural gas or electricity could have a material adverse effect on our margins. We may experience higher than anticipated gas costs in the future, which could adversely affect our results of operations. In addition, a disruption or curtailment in supply could have a material adverse effect on our production and sales levels. Potential product liability risks exist from the products that we sell. Our businesses expose us to potential product liability risks that are inherent in the design, manufacture and sale of our products and products of third-party vendors that we use or resell. While we currently maintain what we believe to be suitable and adequate product liability insurance, we cannot assure you that we will be able to maintain our insurance on acceptable terms or that our insurance will provide adequate protection against potential liabilities. In the event of a claim against us, a lack of sufficient insurance coverage could have a material adverse effect on our financial condition, liquidity and results of operations. Moreover, even if we maintain adequate insurance, any successful claim could have a material adverse effect on our financial condition, liquidity and results of operations. Some of our employees belong to labor unions, and strikes or work stoppages could adversely affect our operations. As of December 31, 2015, we were a party to seven 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. We operate and source internationally, which exposes us to the risks of doing business abroad. Our operations are subject to the risks of doing business abroad, including the following: • • • • • 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; the potential for nationalization of enterprises; 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. • • • • • • • • • 14 In addition, we could be adversely affected by violations of the FCPA and similar worldwide anti-bribery laws. The FCPA and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws. We operate in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We cannot assure you that our internal controls and procedures always will protect us from the reckless or criminal acts committed by our employees or agents. For example, in connection with responding to a subpoena from the staff of the SEC, regarding a third party, we disclosed to the staff that the third party participated in a payment on our behalf to a foreign tax official that implicates the FCPA. If we are found to be liable for FCPA violations (either due to our own acts or our inadvertence or due to the acts or inadvertence of others), we could suffer from criminal or civil penalties or other sanctions, which could have a material adverse effect on our business. Any of the events enumerated above could have an adverse effect on our operations in the future by reducing the demand for our products and services, decreasing the prices at which we 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. We are subject to significant environmental, health and safety laws and regulations and related compliance expenditures and liabilities. Our businesses are subject to many foreign, federal, state and local environmental, health and safety laws and regulations, particularly with respect to the use, handling, treatment, storage, discharge and disposal of substances and hazardous wastes used or generated in our manufacturing processes. Compliance with these laws and regulations is a significant factor in our business. We have incurred and expect to continue to incur significant expenditures to comply with applicable environmental laws and regulations. Our failure to comply with applicable environmental laws and regulations and permit requirements could result in civil or criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, installation of pollution control equipment or remedial actions. We are currently, and may in the future be, required to incur costs relating to the investigation or remediation of property, including property where we have disposed of our waste, and for addressing environmental conditions. Some environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities and sites for contamination at such facilities and sites without regard to causation or knowledge of contamination. In addition, we occasionally evaluate various alternatives with respect to our facilities, including possible dispositions or closures. Investigations undertaken in connection with these activities may lead to discoveries of contamination that must be remediated, and closures of facilities may trigger compliance requirements that are not applicable to operating facilities. Consequently, we cannot assure you that existing or future circumstances, the development of new facts or the failure of third parties to address contamination at current or former facilities or properties will not require significant expenditures by us. We expect to continue to be subject to increasingly stringent environmental and health and safety laws and regulations. It is difficult to predict the future interpretation and development of environmental and health and safety laws and regulations or their impact on our future earnings and operations. We anticipate that compliance will continue to require increased capital expenditures and operating costs. Any increase in these costs, or unanticipated liabilities arising from, among other things, discovery of previously unknown conditions or more aggressive enforcement actions, could adversely affect our results of operations, and there is no assurance that they will not exceed our reserves or have a material adverse effect on our financial condition. 15 If our information systems fail, our business could be materially affected. We believe that our information systems are an integral part of the Supply Technologies segment and, to a lesser extent, the Assembly Components and Engineered Products segments. We depend on our information systems to process orders, manage inventory and accounts receivable collections, purchase products, maintain cost-effective operations, route and re-route orders, maintain confidential and proprietary information and provide superior service to our customers. These systems are subject to failure due to design flaws, improper use, cyber intrusions and other electronic service breaches. We cannot assure you that a failure of or a disruption in the operation of our information systems used by Supply Technologies, including the failure of the supply chain management software to function properly, or those used by Assembly Components and Engineered Products, will not occur. Any such failure or disruption could damage our relation with our customer in our industries or otherwise have a material adverse effect on our financial condition, liquidity and results of operations. Operating problems in our business may materially adversely affect our financial condition and results of operations. We are subject to the usual hazards associated with manufacturing and the related storage and transportation of raw materials, products and waste, including explosions, fires, leaks, discharges, inclement weather, natural disasters, mechanical failure, unscheduled downtime and transportation interruption or calamities. The occurrence of material operating problems at our facilities may have a material adverse effect on our operations as a whole, both during and after the period of operational difficulties. We have a significant amount of goodwill, and any future goodwill impairment charges could adversely impact our results of operations. As of December 31, 2015, we had goodwill of $82.0 million. The future occurrence of a potential indicator of impairment, such as a significant adverse change in legal factors or business climate, 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 our historical results of operations. For additional information, see Note 5, Goodwill, to the consolidated financial statements included elsewhere herein. Our Chairman of the Board and Chief Executive Officer and our President and Chief Operating Officer collectively beneficially own a significant portion of Holdings’ outstanding common stock and their interests may conflict with yours. As of December 31, 2015, Edward Crawford, our Chairman of the Board and Chief Executive Officer, and Matthew Crawford, our President and Chief Operating Officer, collectively beneficially owned approximately 28% of Holdings’ 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. Our business and operating results may be adversely affected by natural disasters or other catastrophic events beyond our control. While we have taken precautions to prevent production and service interruptions at our global facilities, severe weather conditions such as hurricanes or tornadoes, as well as major earthquakes and other natural disasters, in areas in which we have manufacturing facilities or from which we obtain products may cause physical damage to our properties, closure of one or more of our business facilities, lack of adequate work force in a market, temporary disruption in the supply of inventory, disruption in the transport of products and utilities, 16 and delays in the delivery of products to our customers. Any of these factors may disrupt our operations and adversely affect our financial condition and results of operations. The insurance that we maintain may not fully cover all potential expenses. We maintain property, business interruption and casualty insurance, but such insurance may not cover all risks associated with the hazards of our business and is subject to limitation, including deductible and maximum liabilities covered. We are potentially at risk if one or more of our insurance carries fail. Additionally, severe disruptions in the domestic and global financial markets could adversely impact the ratings and survival of some insurers. In the future, we may not be able to obtain coverage at current levels, and our premiums may increase significantly on coverage that we maintain. 17 Item 1B. Unresolved Staff Comments None. Item 2. Properties As of December 31, 2015, our operations included numerous manufacturing and supply chain logistics services facilities located in 25 states in the United States and in Puerto Rico, as well as in Asia, Canada, Europe and Mexico. We lease our world headquarters located in Cleveland, Ohio, which includes the world headquarters for certain of our businesses. We believe our manufacturing, logistics and corporate office facilities are well- maintained and are suitable and adequate, and have sufficient productive capacity to meet our current needs. 18 The following table provides information relative to our principal facilities as of December 31, 2015. Related Industry Segment Location Owned or Leased Approximate Square Footage Use SUPPLY Mississauga, Ontario, Canada Leased 145,000 Manufacturing TECHNOLOGIES (1) Lawrence, PA ASSEMBLY COMPONENTS ENGINEERED PRODUCTS (6) Minneapolis, MN Cleveland, OH (2) Dayton, OH Carol Stream, IL Memphis, TN Solon, OH Streetsboro, OH Allentown, PA Suwanee, GA Dublin, VA Tulsa, OK Lenexa, KS Ocala, FL Conneaut, OH (4) Lexington, TN Lobelville, TN (5) Rootstown, OH Cleveland, OH (3) Wapakoneta, OH Angola, IN Huntington, IN Fremont, IN Big Rapids, MI Ravenna, OH Delaware, OH Cicero, IL Cuyahoga Heights, OH Pune, India Newport, AR Warren, OH Leini, Italy Madison Heights, MI Canton, OH La Roeulx, Belgium Brookfield, WI Wickliffe, OH Albertville, AL Leini, Italy Leini, Italy Cortland, OH Leased Leased Leased Leased Leased Leased Leased Leased Leased Leased Leased Leased Leased Owned Leased/Owned Owned Owned Owned Leased/Owned Owned Owned Leased Owned Owned Owned Owned Owned Owned Owned Owned Owned Owned Leased Leased Owned Leased Owned Leased Leased Leased Owned 116,000 Logistics and Manufacturing 87,100 Logistics 60,450 Supply Technologies Corporate Office 56,000 Logistics 51,000 Logistics 48,750 Logistics 47,100 Logistics 45,000 Manufacturing 43,800 Logistics 42,500 Logistics 40,000 Logistics 40,000 Logistics 29,500 Logistics 433,000 Manufacturing 283,800 Manufacturing 240,000 Manufacturing 208,700 Manufacturing 208,000 Manufacturing 190,000 Manufacturing 188,000 Manufacturing 135,000 Manufacturing 124,500 Manufacturing 112,000 Manufacturing 97,000 Manufacturing 69,000 Manufacturing 45,000 Manufacturing 450,000 Manufacturing 427,000 Manufacturing 275,000 Manufacturing 200,000 Manufacturing 195,000 Manufacturing 161,500 Manufacturing 128,000 Manufacturing 124,000 Manufacturing 120,000 Manufacturing 116,000 Manufacturing 110,000 Manufacturing 56,000 Office 53,800 Manufacturing 37,700 Manufacturing 30,000 Office and Manufacturing (1) Supply Technologies has other facilities, none of which is deemed to be a principal facility. (2) (3) (4) Includes 20,150 square feet used by Holdings’ and Park-Ohio’s corporate office. Includes one leased property with 150,000 square feet and one owned property with 40,000 square feet. Includes three leased properties with square footage of 91,800, 64,000 and 45,700, respectively, and one owned property with 82,300 square feet. Includes five facilities, which make up the total square footage of 208,700. (5) (6) Engineered Products has other owned and leased facilities, none of which is deemed to be a principal facility. 19 Item 3. Legal Proceedings We are subject to various pending and threatened lawsuits in which claims for monetary damages are asserted in the ordinary course of business. While any litigation involves an element of uncertainty, in the opinion of management, liabilities, if any, arising from currently pending or threatened litigation are not expected to have a material adverse effect on our financial condition, liquidity or results of operations. In addition to the routine lawsuits and asserted claims noted above, we were a party to the lawsuits and legal proceedings described below as of December 31, 2015: We were a co-defendant in approximately 110 cases asserting claims on behalf of approximately 287 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. In every asbestos case in which we are named as a party, the complaints are filed against multiple named defendants. In substantially all of the asbestos cases, the plaintiffs either claim damages in excess of a specified amount, typically a minimum amount sufficient to establish jurisdiction of the court in which the case was filed (jurisdictional minimums generally range from $25,000 to $75,000), or do not specify the monetary damages sought. To the extent that any specific amount of damages is sought, the amount applies to claims against all named defendants. There are only eight asbestos cases, involving 26 plaintiffs, that plead specified damages against named defendants. In each of the eight 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 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 eight separate causes of action and punitive damages in the amount of $20.0 million. In two cases, the plaintiff has alleged compensatory damages in the amount of $10.0 million for five separate causes of action and $5.0 million for the sixth cause of action and punitive damages in the amount for $10.0 million for each cause of action. In the eighth case the plaintiff has alleged compensatory and punitive damages, each in the amount $10.0 million, for five separate causes of action. Historically, we have been dismissed from asbestos cases on the basis that the plaintiff incorrectly sued one of our subsidiaries or because the plaintiff failed to identify any asbestos-containing product manufactured or sold by us or our subsidiaries. We intend to vigorously defend these asbestos cases, and believe we will continue to be successful in being dismissed from such cases. However, it is not possible to predict the ultimate outcome of asbestos-related lawsuits, claims and proceedings due to the unpredictable nature of personal injury litigation. Despite this uncertainty, and although our results of operations and cash flows for a particular period could be adversely affected by asbestos- related lawsuits, claims and proceedings, management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial condition, liquidity or results of operations. Among the factors management considered in reaching this conclusion were: (a) our historical success in being dismissed from these types of lawsuits on the bases mentioned above; (b) many cases have been improperly filed against one of our subsidiaries; (c) in many cases the plaintiffs have been unable to establish any causal relationship to us or our products or premises; (d) in many cases, the plaintiffs have been unable to demonstrate that they have suffered any identifiable injury or compensable loss at all or that any injuries that they have incurred did in fact result from alleged exposure to asbestos; and (e) the complaints assert claims against multiple defendants and, in most cases, the damages alleged are not attributed to individual defendants. Additionally, we do not believe that the amounts claimed in any of the asbestos cases are meaningful indicators of our potential exposure because the amounts claimed typically bear no relation to the extent of the plaintiff’s injury, if any. 20 Our cost of defending these lawsuits has not been material to date and, based upon available information, our management does not expect its future costs for asbestos-related lawsuits to have a material adverse effect on our results of operations, liquidity or financial position. IPSCO Tubulars Inc. d/b/a TMK IPSCO sued ATM, a subsidiary of Holdings, in the United States District Court for the Eastern District of 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 alleged causes of action for breach of contract, gross negligence, and constructive fraud. IPSCO sought approximately $10 million in damages plus an unspecified amount of punitive damages. ATM denied the allegations. ATM subsequently obtained summary judgment on the constructive fraud claim, which was dismissed by the district court 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, which the Company recognized and accrued for at that time. 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 could be decreased, but could not be increased, on remand. On remand, the district court entered an order once again awarding IPSCO $5.2 million in damages. In December 2015, ATM filed a second appeal with the Eighth Circuit seeking reversal of the damages award. In March 2016, the district court issued an order granting, in part, IPSCO’s motion for fees and costs and awarding $2.2 million to IPSCO. ATM expects to appeal that decision. In August 2013, we received a subpoena from the staff of the SEC in connection with the staff’s investigation of a third party. At that time, we also learned that the Department of Justice (“DOJ”) is conducting a criminal investigation of the third party. In connection with its initial response to the staff’s subpoena, we disclosed to the staff of the SEC that, in November 2007, the third party participated in a payment on behalf of us to a foreign tax official that implicates the Foreign Corrupt Practices Act. The Board of Directors formed a special committee to review our transactions with the third party and to make any recommendations to the Board of Directors with respect thereto. The Company intends to cooperate fully with the SEC and the DOJ in connection with their investigations of the third party and with the SEC in light of our disclosure. We are unable to predict the outcome or impact of the special committee’s investigation or the length, scope or results of the SEC’s review or the impact on our results of operations. Item 4. Mine Safety Disclosures Not applicable. 21 Part II Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock, par value $1.00 per share, trades on the Nasdaq Global Select Market under the symbol “PKOH”. The table below presents the high and low sales prices of the common stock during the periods presented. The 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 2016. Prior to the second quarter of 2014, no dividends were declared or paid during the prior quarterly periods in the last four years. Additionally, the terms of the credit agreement governing our revolving credit facility and the indenture governing the 8.125% senior notes due 2021 provide some restrictions on the amounts of dividends. Quarterly Common Stock Price Ranges Quarter 1st 2nd 3rd 4th 2015 2014 High Low High Low $ $ $ $ 61.33 54.35 50.97 42.73 $ $ $ $ 49.00 44.97 28.30 28.82 $ $ $ $ 57.21 60.67 60.98 64.74 $ $ $ $ 44.06 51.05 47.86 45.01 The number of shareholders of record for our common stock as of February 29, 2016 was 412. Issuer Purchases of Equity Securities Set forth below is information regarding repurchases of our common stock during the fourth quarter of the fiscal year ended December 31, 2015. Period October 1 — October 31, 2015 November 1 — November 30, 2015 December 1 — December 31, 2015 Total Total Number of Shares Purchased Average Price Paid Per Share 796 (2) $ 149,834 116,867 (2) 33.63 39.25 39.45 267,497 $ 39.32 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) — 149,834 112,473 262,307 988,334 838,500 726,027 726,027 (1) 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. (2) Consists of an aggregate total of 5,190 shares of common stock we acquired from recipients of restricted stock awards at the time of vesting of such awards in order to settle recipient minimum withholding tax liabilities. 22 Item 6. Selected Financial Data Selected Statement of Operations Data: Net sales Cost of sales Gross profit Selling, general and administrative expenses Asset impairment charges Litigation judgment and settlement costs Operating income Gain on acquisition of business Interest expense Income from continuing operations before income taxes Income tax expense Net income from continuing operations Income (loss) from discontinued operations, net of taxes Net income Net income attributable to noncontrolling interest Net income attributable to ParkOhio common shareholders Earnings (loss) per common share attributable to ParkOhio common shareholders - Basic: Continuing operations Discontinued operations Total Earnings (loss) per common share attributable to ParkOhio common shareholders - Diluted: Continuing operations Discontinued operations Total Weighted-average shares used to compute $ $ $ $ $ earnings per share: Basic Diluted Year Ended December 31, 2015 2014 2013 2012 2011 (In millions, except per share data) $ 1,463.8 $ 1,378.7 $ 1,228.6 1,144.2 1,203.2 $ 992.2 1,128.2 $ 920.9 235.2 135.1 — 2.2 97.9 — 27.9 70.0 21.3 48.7 — 48.7 (0.6) 234.5 136.6 — — 97.9 — 26.1 71.8 24.9 46.9 — 46.9 (1.3) 211.0 120.2 — 5.2 85.6 (0.6) 25.9 60.3 19.4 40.9 3.0 43.9 (0.5) 207.3 113.8 — 13.0 80.5 — 26.0 54.5 20.3 34.2 (2.4) 31.8 — 961.4 793.7 167.7 102.5 5.4 — 59.8 — 31.9 27.9 (3.8) 31.7 (2.3) 29.4 — 48.1 $ 45.6 $ 43.4 $ 31.8 $ 29.4 3.94 $ — 3.94 $ 3.77 $ — 3.77 $ 3.40 $ 0.25 3.65 $ 2.87 $ (0.20) 2.74 (0.20) 2.67 $ 2.54 3.88 $ — 3.88 $ 3.68 $ — 3.68 $ 3.31 $ 0.25 3.56 $ 2.82 $ (0.20) 2.64 (0.19) 2.62 $ 2.45 12.2 12.4 12.1 12.4 11.9 12.2 11.9 12.1 11.6 12.0 23 Other Financial Data: Net cash flows provided by operating activities Net cash flows used by investing activities Net cash flows provided by financing activities Depreciation and amortization Capital expenditures, net Dividends paid Selected Balance Sheet Data (as of period end) (1): Cash and cash equivalents Working capital Property, plant and equipment Total assets Long-term debt Total debt Shareholders’ equity (1) Adjusted to reflect the discontinued operations. Year Ended December 31, 2015 2014 2013 2012 2011 (In millions) $ 44.7 (36.5) 0.7 28.7 (36.5) (6.3) $ 53.6 $ (96.4) 48.6 23.2 (25.8) (4.7) 62.0 324.4 151.3 946.6 450.3 468.1 212.2 58.0 318.3 141.1 974.2 434.4 443.8 191.9 60.3 (54.3) 3.9 19.2 (30.1) — 55.2 298.3 115.4 818.7 379.2 383.6 164.0 $ $ 55.9 (120.3) 30.5 18.0 (29.6) — 44.4 273.5 100.0 726.6 374.2 378.6 101.8 35.9 (11.1) 17.9 16.2 (12.7) — 78.0 293.8 61.4 614.8 346.2 347.6 65.4 24 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Our consolidated financial statements include the accounts of Park-Ohio Holdings Corp. and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation. The historical financial information discussed below is not directly comparable on a year-to-year basis, primarily due to acquisitions and litigation costs in 2015, 2014 and 2013 and dispositions in 2013. EXECUTIVE OVERVIEW General We are an industrial Total Supply Management™ and diversified manufacturing business, operating in three segments: Supply Technologies, Assembly Components and Engineered Products. Our Supply Technologies business provides our customers with Total Supply Management™, 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 Management™ 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. Our Supply Technologies business services customers in the following principal industries: heavy-duty truck; automotive, truck and vehicle parts; power sports and recreational equipment; bus and coaches; electrical distribution and controls; agricultural and construction equipment; consumer electronics; HVAC; lawn and garden; semiconductor equipment; aerospace and defense; and plumbing. Assembly Components manufactures parts and assemblies and provides value-added design, engineering and assembly services that are incorporated into our customer’s end products and oriented toward improving fuel efficiency and reducing weight in the customers end product. 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, 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 truck; and marine OEMs, primarily on a sole-source basis. Engineered Products operates a diverse group of niche manufacturing businesses that design and manufacture a broad range of highly-engineered products including induction heating and melting systems, pipe threading systems, industrial oven systems, and forged and machined products. Engineered Products also produces and provides services and spare parts for the equipment it manufactures. The principal customers of Engineered Products are OEMs, sub-assemblers and end users in the ferrous and non-ferrous metals, silicon, coatings, forging, foundry, heavy-duty truck, construction equipment, automotive, oil and gas, locomotive and rail manufacturing, and aerospace and defense industries. Primary Factors Affecting 2015 Results The following factors most affected our consolidated 2015 results: • The net sales growth in 2015 was driven by strategic acquisitions in 2014. Our 2014 strategic bolt-on acquisitions of Saet, Autoform and Apollo, added a combined $97.4 million of incremental revenues in 2015. These acquisitions have been successfully integrated into our segments, and the earnings results of these combined acquisitions were accretive to us for the year ended December 31, 2015. 25 • Overall, we had net sales growth of 6.2% for 2015 when compared to the prior year. However, our unfavorable sales mix for 2015, compared to 2014, and the reduced demand from the oil and gas and steel industries lead to a decrease in our gross margin percentage of 90 basis points. Subsequent Events • On February 1, 2016, the Company’s Board of Directors declared a quarterly dividend of $0.125 per common share. The dividend was paid on February 29, 2016, to shareholders of record as of the close of business on February 15, 2016, and resulted in a cash outlay of approximately $1.5 million. • On March 7, 2016 the United States District Court for the Eastern District of Arkansas issued an order granting, in part, IPSCO’s motion for fees and costs and awarding $2.2 million to IPSCO, which the Company accrued for as of December 31, 2015. ATM expects to appeal that decision. 26 RESULTS OF OPERATIONS 2015 Compared with 2014 and 2014 Compared with 2013 2015 2014 2013 $ Change % Change $ Change % Change 2015 vs. 2014 2014 vs. 2013 Net sales Cost of sales Gross profit Gross profit as a percentage of net sales Selling, general and administrative expenses (“SG&A”) SG&A as a percentage of net sales Litigation judgment and settlement costs Operating income Gain on acquisition of business Interest expense Income from continuing operations before income taxes Income tax expense Net income from continuing operations Income from discontinued operations, net of taxes Net income Net income attributable to noncontrolling interest Net income attributable to ParkOhio common shareholders Earnings per common share attributable to ParkOhio common shareholders - Basic: Continuing operations Discontinued operations Total Earnings per common share attributable to ParkOhio common shareholders - Diluted: Continuing operations Discontinued operations Total * Calculation not meaningful $1,463.8 1,228.6 $ 1,378.7 1,144.2 (Dollars in millions, except per share data) $ 85.1 84.4 $ 1,203.2 992.2 6% $ 175.5 152.0 7% 235.2 234.5 211.0 0.7 —% 23.5 16.1% 17.0% 17.5% 15% 15% 11% 135.1 136.6 120.2 (1.5) (1)% 16.4 14% 9.2% 9.9% 10.0% 2.2 97.9 — 27.9 70.0 21.3 48.7 — 48.7 — 97.9 — 26.1 71.8 24.9 46.9 — 46.9 5.2 85.6 (0.6) 25.9 60.3 19.4 40.9 3.0 43.9 (0.6) (1.3) (0.5) 2.2 — — 1.8 * —% * 7% (5.2) 12.3 0.6 0.2 * 14% * 1% (1.8) (3.6) (3)% (14)% 11.5 5.5 19% 28% 1.8 — 1.8 0.7 4% * 4% * 6.0 15% (3.0) 3.0 (0.8) * 7% * $ 48.1 $ 45.6 $ 43.4 $ 2.5 5% $ 2.2 5% 3.40 0.25 3.65 $ 0.17 — $ 0.17 5% $ * 0.37 (0.25) 5% $ 0.12 11% * 3% 3.31 0.25 3.56 $ 0.20 — $ 0.20 5% $ * 0.37 (0.25) 5% $ 0.12 11% * 3% $ $ $ $ 3.94 — 3.94 3.88 — 3.88 $ $ $ $ 3.77 — 3.77 3.68 — 3.68 $ $ $ $ 27 2015 Compared with 2014 Net Sales: Net sales increased $85.1 million, or 6%, to $1,463.8 million in 2015, compared to $1,378.7 million in 2014. The increase in net sales is mainly due to the incremental sales from acquisitions of $97.4 million and organic volume increase from our Supply Technologies and Assembly Component segments partially offset by reduced sales in our Engineered Products segment. The factors explaining the changes in segment revenues for 2015 compared to the prior year are contained within the “Segment Analysis” section. Cost of Sales & Gross Profit: Cost of sales increased $84.4 million, or 7%, to $1,228.6 million in 2015, compared to $1,144.2 million in 2014. The increase in cost of sales was primarily due to the increase in net sales volumes, which increased 6%. The gross profit margin percentage was 16.1% in 2015 compared to 17.0% in 2014. This 90 basis point decline in gross margin percentage is largely due to a decrease in higher margin new equipment and aftermarket sales volume to the oil and gas, steel and military and commercial aerospace end markets in our Engineered Products segment. SG&A Expenses: Consolidated SG&A expenses decreased 1% in 2015 compared to 2014. SG&A expenses as a percent of sales decreased by 70 basis points to 9.2%. SG&A expenses decreased in 2015 compared to 2014, primarily due to a reduction in professional fees. Litigation Judgment and Settlement Costs: The Company accrued for the United States District Court for the Eastern District of Arkansas award to IPSCO for approximately $2.2 million. Interest Expense: Interest expense Average outstanding borrowings Average borrowing rate Year Ended December 31, 2015 2014 Change Percent Change (Dollars in millions) $ $ 27.9 461.6 6.04% $ $ 26.1 397.1 6.57% $ $ 1.8 64.5 (53) 6.9% 16.2% basis points Interest expense increased $1.8 million in 2015 compared to 2014 as average borrowings in 2015 were higher when compared to 2014 due to additional borrowings to fund acquisitions that occurred in the fourth quarter of 2014, capital expenditures and working capital. Income Tax Expense: The provision for income taxes was $21.3 million in 2015, which was a 30.4% effective income tax rate, compared to income taxes of $24.9 million provided in 2014, a 34.7% effective income tax rate. The decrease in the effective tax rate in 2015 is primarily due to the reversal of a valuation allowance against certain foreign net deferred tax assets and an increase in earnings in jurisdictions in which the income tax rates are lower than the U.S. statutory income tax rate. 28 Net Income from Continuing Operations and Net Income: Net income from continuing operations and net income both increased $1.8 million to $48.7 million in 2015, compared to $46.9 million in 2014, due to the reasons described above. Net Income Attributable to Noncontrolling Interest: As a result of the sale of the 25% equity interest in one of our forging businesses in 2013, the income of $0.6 million attributable to the noncontrolling interest is deducted from net income to derive net income attributable to ParkOhio common shareholders. Net Income Attributable to ParkOhio Common Shareholders: Net income attributable to ParkOhio common shareholders increased $2.5 million to $48.1 million in 2015, compared to $45.6 million in 2014, due to the reasons described above. 2014 Compared with 2013 Net Sales: Net sales increased $175.5 million, or 15%, to $1,378.7 million in 2014, compared to $1,203.2 million in 2013. The increase in net sales is principally attributable to strong organic growth of 9% and the strategic acquisitions in 2014 and 2013. Supply Technologies and Assembly Components segments were the primary contributors to the strong organic growth. Overall, our organic growth increased in 2014 on the strength of new automotive platform business in our Aluminum business within the Assembly Components segment, growth in the heavy-duty truck, power sports and recreational equipment, semiconductor and HVAC markets in the Supply Technologies segment and increased sales in the industrial equipment business of Engineered Products segment. These increases were offset by a slight decline in sales in the forging business. The 2013 acquisitions of Bates, Henry Halstead and QEF and the 2014 acquisitions of Apollo, Autoform and Saet also contributed to the 2014 revenue growth. Combined, these acquisitions contributed $70.8 million of the increase in net sales in 2014. The factors explaining the changes in segment revenues for 2014 compared to the prior year are contained within the “Segment Analysis” section. Cost of Sales & Gross Profit: Cost of sales increased $152.0 million, or 15%, to $1,144.2 million in 2014, compared to $992.2 million in 2013. The increase in cost of sales was primarily due to the increase in net sales volumes, which increased 15%. The gross profit margin percentage was 17.0% in 2014 compared to 17.5% in 2013. This 50 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 net sales than in the prior year. SG&A Expenses: Consolidated SG&A expenses increased 14% in 2014 compared to 2013, but SG&A expenses as a percent of sales decreased by 10 basis points to 9.9%. SG&A expenses increased in 2014 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 partially offset by an increase in pension income. 29 Litigation Judgment and Settlement Costs: During the third quarter of 2013, the United States District Court for the Eastern District of Arkansas awarded TMK IPSCO damages of approximately $5.2 million. Gain on Acquisition of Business: The $0.6 million gain on the acquisition of business in 2013 relates to the bargain purchase associated with a small bolt-on acquisition in the Engineered Products segment. Interest Expense: Interest expense Average outstanding borrowings Average borrowing rate Year Ended December 31, 2014 2013 Change Percent Change (Dollars in millions) $ $ 26.1 397.1 6.57% $ $ 25.9 385.5 6.71% $ $ 0.2 11.6 (14) 1% 3% basis points Interest expense increased $0.2 million in 2014 compared to 2013 as average borrowings in 2014 were higher when compared to 2013 due to additional borrowings to fund acquisitions. Income Tax Expense: The provision for income taxes was $24.9 million in 2014, which was a 34.7% effective income tax rate, compared to income taxes of $19.4 million provided in 2013, a 32.2% effective income tax rate. The increase in the effective tax rate in 2014 is primarily due to various non-deductible items. Net Income from Continuing Operations: Net income from continuing operations increased $6.0 million to $46.9 million in 2014, compared to $40.9 million in 2013, due to the reasons described above. Income (Loss) from Discontinued Operations: In September 2013, the Company sold all of the outstanding equity interests of a non-core business unit 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 the operating losses, net of tax, of the business unit sold. Net Income: Net income increased $3.0 million to $46.9 million in 2014, compared to $43.9 million in 2013, due to the reasons described above. Net Income Attributable to Noncontrolling Interest: As a result of the sale of the 25% equity interest in a small forging business in 2013, the income of $1.3 million attributable to the noncontrolling interest is deducted from the net income to derive net income attributable to ParkOhio common shareholders. 30 Net Income Attributable to ParkOhio Common Shareholders: Net income attributable to ParkOhio common shareholders increased $2.2 million to $45.6 million in 2014, compared to $43.4 million in 2013, due to the reasons described above. SEGMENT ANALYSIS We primarily evaluate performance and allocate resources based on segment operating income as well as projected future performance. Segment operating income is defined as revenues less expenses identifiable to the business units and product lines included within each segment. Segment operating income will reconcile to consolidated income from continuing operations before income taxes by deducting corporate costs that are not attributable to the segments, litigation judgment and settlement costs and net interest expense and by adding the gain on acquisition of business. The proportion of consolidated revenues and segment operating income attributed to each segment was as follows: Revenues: Supply Technologies Assembly Components Engineered Products Segment Operating Income: Supply Technologies Assembly Components Engineered Products Supply Technologies Segment Year Ended December 31, 2015 2014 2013 40% 39% 21% 39% 45% 16% 40% 36% 24% 33% 33% 34% 39% 34% 27% 31% 28% 41% 2015 2014 2013 $ Change % Change $ Change % Change 2015 vs. 2014 2014 vs. 2013 578.7 50.3 $ $ 559.6 42.5 $ $ 471.9 35.0 $ $ 19.1 7.8 3% $ 18% $ 87.7 7.5 19% 21% (Dollars in millions) $ Net sales Segment operating income $ Segment operating income margin 8.7% 7.6% 7.4% 2015 Compared with 2014 Net Sales: The majority of our growth in 2015 was organic growth in our diversified markets. This growth was driven by strong demand in the heavy-duty truck market, which was up 12%; the power sports and recreational equipment market, which increased 12%; and the semiconductor market, which was up 21%. Approximately 28% of the sales increase in the year ended December 31, 2015, compared to 2014, is directly attributable to the acquisition of Apollo. In addition, our fastener manufacturing division generated an increase of sales of 20% in 2015 primarily from the automotive market. Segment Operating Income: With increases in net sales, segment operating income increased $7.8 million, or 18%, to $50.3 million. Segment operating income margin was 8.7%, which was a 110 basis point increase compared to the operating margin of 7.6% in 2014. These improvements were driven largely by improved operating leverage in several facilities, the full integration of the Apollo acquisition and continued focus on more highly engineered products in the portfolio. 31 2014 Compared with 2013 Net Sales: Approximately 44% of the sales increase in the year ended December 31, 2014, compared to 2013, is directly attributable to the acquisitions of Henry Halstead, QEF and Apollo. The remainder of our growth in 2014 was organic growth in our diversified markets. This growth was driven by the heavy-duty truck market, which was up 30%; the power sports and recreational equipment market, which increased 21%; the semiconductor market, which was up 56%; and the HVAC market, which was up 15%. In addition our fastener manufacturing division generated sales increases of 9% in 2014. Segment Operating Income: With increases in net sales, segment operating income increased $7.5 million, or 21%, to $42.5 million. Segment operating income margin was 7.6%, which was a 20 basis point increase compared to the operating margin of 7.4% in 2013. The increase in margin is primarily due to increased operational leverage as a result of our acquisitions of Henry Halstead, QEF and Apollo and overall customer product mix swings in 2014 and less acquisition-related costs associated with the inventory step-up in purchase accounting for acquisitions, offset by increased professional service fees. Assembly Components Segment 2015 2014 2013 $ Change % Change $ Change % Change 2015 vs. 2014 2014 vs. 2013 Net sales Segment operating income Segment operating income margin 2015 Compared with 2014 $ $ 569.2 57.9 $ $ 490.5 42.0 $ $ (Dollars in millions) 78.7 15.9 $ $ 412.8 31.8 16% $ 38% $ 77.7 10.2 19% 32% 10.2% 8.6% 7.7% Net Sales: The significant increase in net sales in 2015 is primarily due to the incremental sales from new programs with our automotive customers in our aluminum business of $30.4 million and the incremental sales in 2015 associated with the acquisition of Autoform of approximately $51.8 million offset by a decline in our other assembly components businesses. Segment Operating Income: Segment operating income increased 38% in 2015 compared to 2014. Our segment operating income margin was 10.2%, which was a 160 basis point increase compared to operating income margin of 8.6% in 2014. The increase in margin is primarily attributable to operating improvements in our aluminum business. 2014 Compared with 2013 Net Sales: The significant increase in net sales in 2014 is primarily due to the incremental sales from new programs with our automotive customers in our aluminum business. The aluminum business sales increased 35%. Also contributing to the overall increase in 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 sales 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. Segment Operating Income: 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 increased 32% in 2014 compared to 2013. Our segment operating income margin was 8.6%, which was a 90 basis point increase compared to operating income margin of 7.7% in 2013. The increase in margin is primarily attributable to the volume increase in our aluminum business. 32 Engineered Products Segment 2015 2014 2013 $ Change % Change $ Change % Change 2015 vs. 2014 2014 vs. 2013 315.9 20.9 $ $ 328.6 42.7 $ $ 318.5 47.1 $ $ (12.7) (21.8) (4)% $ 10.1 (4.4) (51)% $ 3% (9)% (Dollars in millions) Net sales $ Segment operating income $ Segment operating income margin 6.6% 13.0% 14.8% 2015 Compared with 2014 Net Sales: The decrease in net sales of 4% in 2015 is primarily attributable to a 15% decrease in the forged and machine products business, which was impacted by reduced demand in aircraft forging products and a decrease in our capital equipment group and its aftermarket business, which was impacted by reduced demand from the oil and gas and steel industries. This reduction was offset by incremental sales of $38.5 million related to the Saet acquisition. Segment Operating Income: Segment operating income decreased to 6.6% in 2015. The decrease in operating income dollars and the segment operating income margin are associated with the sales mix in 2015 and the associated reduction in overhead absorption related to the decline in volume in our forging business. 2014 Compared with 2013 Net Sales: The increase in net sales of 3% in 2014 is primarily attributable to a 5% increase in the 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 2013. Offsetting these net sales increases, our forging business sales declined 2% in 2014 as sales were unfavorably impacted by reduced demand for some of its aircraft forging products. Segment Operating Income: Segment operating income decreased 9% in 2014. The decrease in operating income dollars and the 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. Working Capital, Liquidity, and Sources of Capital The following table summarizes our financial indicators of liquidity: Cash and cash equivalents Working capital Current ratio Debt as a % of capitalization Net debt as a % of capitalization 2015 2014 (Dollars in millions) $ $ 62.0 324.4 2.44 69% 60% $ $ 58.0 318.3 2.21 70% 61% 33 The following table summarizes the major components of cash flows: Cash provided (used) by: Operating activities Investing activities Financing activities Effect of exchange rate changes on cash Increase (decrease) in cash and cash equivalents 2015 2014 2013 $ 44.7 (36.5) 0.7 (4.9) (In millions) $ 53.6 (96.4) 48.6 (3.0) $ 60.3 (54.3) 3.9 0.9 $ 4.0 $ 2.8 $ 10.8 As of December 31, 2015, we had $169.0 million outstanding under the revolving credit facility, approximately $69.3 million of unused borrowing availability and cash and cash equivalents of $62.0 million. Our liquidity needs are primarily for working capital and capital expenditures. Our primary sources of liquidity have been funds provided by operations and funds available from existing bank credit arrangements and the sale of our 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 payable semi-annually in arrears on April 1 and October 1 of each year. The Senior Notes mature on April 1, 2021. The Company is a party to a credit and security agreement, dated November 5, 2003, as amended and restated (the “Credit Agreement”), with a group of banks, under which it may borrow or issue standby letters of credit or commercial letters of credit. As of December 31, 2015, we had $196.9 million total outstanding borrowings and approximately $69.3 million of unused borrowing availability under the revolving credit facility provided by the Credit Agreement. Also, as of December 31, 2015, we had cash and cash equivalents of $62.0 million. On July 31, 2014, the Company entered into a sixth amendment and restatement of the credit agreement (the “Amended Credit Agreement”), which was further amended on October 24, 2014, January 20, 2015 and March 12, 2015. Please refer to Note 9—Financing Arrangements for further discussion. Current financial resources (working capital and available bank borrowing arrangements) and anticipated funds from operations are expected to be adequate to meet current cash requirements for at least the next twelve months. The future availability of bank borrowings under the revolving credit facility provided by the Credit 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 may from time to time seek to refinance, retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. We may also repurchase shares of our outstanding common stock. Any such actions will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Disruptions, uncertainty or volatility in the credit markets may adversely impact the availability of credit already arranged and the availability and cost of credit in the future. These market conditions may limit our ability to replace, in a timely manner, maturing liabilities and access the capital necessary to grow and maintain its business. Accordingly, we may be forced to delay raising capital or pay unattractive interest rates, which could increase our interest expense, decrease our profitability and significantly reduce its financial flexibility. The Company had cash and cash equivalents held by foreign subsidiaries of $48.4 million at December 31, 2015 and $44.5 million at December 31, 2014. 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 34 used to finance the foreign subsidiaries’ operational activities and/or future foreign investments. At December 31, 2015, 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. Although we have no intention to repatriate the approximately $91.2 million of undistributed earnings of our foreign subsidiaries, as of December 31, 2015, if we were to repatriate these earnings, there would potentially be an adverse tax impact. At December 31, 2015, our debt service coverage ratio was 2.4, 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 revolving credit facility as of December 31, 2015. 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 2016, declines in sales volumes in 2016 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 declines in the economy in general, they may not be able to pay their accounts payable to us on a timely basis or at all, which would make the accounts receivable ineligible for purposes of the revolving credit facility and could reduce our borrowing base and our ability to borrow under such facility. The ratio of current assets to current liabilities was 2.44 at December 31, 2015 versus 2.21 at December 31, 2014. Working capital increased by $6.1 million to $324.4 million at December 31, 2015 from $318.3 million at December 31, 2014. Accounts receivable decreased $8.7 million to $199.3 million at December 31, 2015, from $208.0 million at December 31, 2014, primarily resulting from the timing of shipments at the end of 2015. Inventory increased by $10.6 million at December 31, 2015, to $249.0 million from $238.4 million at December 31, 2014, primarily resulting from planned inventory increases resulting from the growth in sales. Accounts payable decreased $30.6 million to $129.7 million at December 31, 2015 from $160.3 million at December 31, 2014, primarily resulting from the timing of payments at December 31, 2015. Accrued expenses and other current liabilities decreased by $8.1 million to $95.5 million at December 31, 2015, from $103.6 million at December 31, 2014, primarily resulting from a reduction in advance billings at our industrial equipment business unit. Operating Activities Cash provided by operating activities decreased $8.9 million to $44.7 million in 2015 compared to $53.6 million in 2014. The decrease in operating cash flows was primarily the result of a reduction in accounts payable and accrued expenses of $36.9 million, compared to an increase of $27.9 million in 2014, a reduction in accounts receivable of $3.8 million compared to an increase of $27.9 million in 2014, an increase in inventories and other current assets of $6.7 million in 2015 compared to an increase of $23.3 million in 2014 and an increase in 2015 in net income of $1.8 million, depreciation and amortization of $5.5 million and share-based compensation of $1.5 million. Cash provided by operating activities decreased $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 increases in accounts receivable of $27.9 million, inventory and other current assets of $23.3 million offset by an increase in accounts payable of $27.9 million, net income of $3.0 million and an increase in non-cash charges added back to net income. 35 Investing Activities Our purchases of property, plant and equipment were $36.5 million in 2015, $25.8 million in 2014 and $30.1 million in 2013, respectively. The capital expenditure spending for 2015, 2014 and 2013 were primarily associated with growth spending in the aluminum business of the Assembly Components segment. In 2014, we spent a combined $72.7 million on the business acquisitions, net of cash acquired, for Apollo, Autoform and Saet. In 2013, we spent a combined $45.8 million on the business acquisitions, net of cash acquired, primarily for Bates, Henry Halstead and QEF. In 2013, we generated proceeds from the sale of assets of $14.2 million, primarily 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. Financing Activities Cash provided by financing activities of $0.7 million in 2015 consisted of net borrowings and debt instruments of $20.4 million, offset by payment of cash dividends of $6.3 million and purchases of treasury stock of $15.5 million. Cash provided by financing activities of $48.6 million in 2014 consisted of net borrowings and debt instruments of $57.9 million, offset by payment of cash dividends of $4.7 million and purchases of treasury stock of $4.4 million. Cash provided by financing activities of $3.9 million in 2013 primarily consisted of net borrowings on debt instruments of $4.9 million, offset by financing activities related to stock compensation. Off-Balance Sheet Arrangements We do not have off-balance sheet arrangements, financing or other relationships with unconsolidated entities or other persons. There are occasions whereupon we enter into forward contracts on foreign currencies, primarily the euro, purely for the purpose of hedging exposure to changes in the value of accounts receivable in those currencies against the U.S. dollar. At December 31, 2015, none were outstanding. We currently have no derivative instruments. The following table summarizes our principal contractual obligations and other commercial commitments over various future periods as of December 31, 2015: (In millions) Long-term debt obligations Interest obligations (1) Operating lease obligations Capital lease obligations Purchase obligations (2) Postretirement obligations (3) Standby letters of credit and bank guarantees Total Payments Due or Commitment Expiration Per Period Total Less Than 1 Year 1-3 Years 3-5 Years More than 5 Years $ $ 450.3 106.6 45.5 17.7 174.0 12.2 25.3 $ 13.4 20.3 14.5 4.4 172.1 1.6 11.6 $ 19.7 40.6 18.6 6.9 1.8 2.9 13.7 $ 167.2 40.6 7.3 6.4 0.1 2.5 — 250.0 5.1 5.1 — — 5.2 — $ 831.6 $ 237.9 $ 104.2 $ 224.1 $ 265.4 36 (1) Interest obligations are included on the Senior Notes due 2021 only and assume the Senior Notes due 2021 are paid at maturity. The calculation of interest on debt outstanding under our revolving credit facility and other variable rate debt ($4.2 million based on 2.13% average interest rate and outstanding borrowings of $196.9 million at December 31, 2015) 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 2025. The table above excludes the liability for unrecognized income tax benefits disclosed in Note 10 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. We expect that funds provided by operations plus available borrowings under our revolving credit facility to be adequate to meet our cash requirements for at least the next twelve months. Critical Accounting Policies and Estimates Preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make certain estimates and assumptions which affect amounts reported in our consolidated financial statements. On an ongoing basis, we evaluate the accounting policies and estimates that are used to prepare 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. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed below. On a regular basis, critical accounting policies are reviewed with the Audit Committee of the Board of Directors. Revenue Recognition: We recognize revenue, other than from long-term contracts, when title is transferred to the customer, typically upon shipment. Revenue from long-term contracts (approximately 4% 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. We follow this method since reasonably dependable estimates of revenue and costs of a contract can be made. Revenue earned on contracts in process that are in excess of billings, is classified in unbilled 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.” Translation of Foreign Currency Financial Statements and Foreign Currency Transactions: Our reporting currency is the U.S. dollar. However, the functional currency of each of our foreign subsidiaries is its principal operating currency. We translate the amounts included in our Consolidated Statements of Income from our foreign subsidiaries into U.S. dollars at weighted-average exchange rates, which we believe are representative of the actual exchange rates on the dates of the transactions. Our foreign subsidiaries’ assets and liabilities are translated into U.S. dollars from local currency at the actual exchange rates as of the end of each reporting date, and we record the resulting foreign exchange translation adjustments in our Consolidated Balance Sheets as a component of accumulated other comprehensive income (loss). If the U.S. dollar strengthens, we reflect the resulting losses as a component of accumulated other comprehensive income (loss). Conversely, if the U.S. dollar weakens, foreign exchange translation gains result, which favorably impact accumulated other comprehensive income (loss). 37 As appropriate, we use permanently invested intercompany loans as a source of capital to reduce foreign currency fluctuations at our foreign subsidiaries. These loans, on a consolidated basis, are treated as being analogous to equity for accounting purposes. Therefore, foreign exchange gains or losses on these intercompany loans are recorded in accumulated other comprehensive income (loss). 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 management’s review of inventories on hand with minimal sales activity, which is compared to estimated future usage and sales. Inventories identified by management as slow-moving or obsolete are reserved for based on estimated selling prices less disposal costs. Though we consider these allowances adequate and proper, changes in economic conditions in specific markets in which we operate could have a material effect on reserve allowances required. Impairment of Long-Lived Assets: In accordance with Accounting Standards Codification (“ASC”) 360, “Property, Plant and 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 review 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 identify impairment indicators, we determine whether the carrying amount of our long-lived assets is 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 consider whether impairments exist 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 exceeds the expected cash flows, we estimate 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 to estimate fair value when market information is not available to determine whether an impairment existed. 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 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. Generally, goodwill recorded in business combinations is more susceptible to risk of impairment soon after the acquisition primarily because the business combination is recorded at fair value based on operating plans and economic conditions present at the time of the acquisition. If operating results or economic conditions deteriorate soon after an acquisition, it could result in the impairment of the acquired goodwill. A change in macroeconomic conditions in the United States or Europe, as well as future changes in the judgments, assumptions and estimates that were used in the Company’s goodwill impairment testing, including the discount rate and future cash flow projections, could result in a significantly different estimate of the fair value. As required by ASC 350, “Intangibles - Goodwill and Other” (“ASC 350”), management performs impairment testing of goodwill at least annually, as of October 1 of each year, or more frequently if impairment indicators arise. In accordance with ASC 350, management tests goodwill for impairment at the reporting unit level. A reporting unit is an operating segment pursuant to ASC 280, “Segment Reporting”, or one level below the operating segment (component level) as determined by the availability of discrete financial information that is regularly reviewed by operating segment management. Our reporting units have been identified at the component level. 38 We follow the guidance found in ASC 350 that simplifies how an entity tests goodwill for impairment. It provides an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, and whether it is necessary to perform the two-step goodwill impairment test. We assess these qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. This quantitative test is required only if we conclude that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. The quantitative goodwill impairment analysis is a two-step process. Step one compares the carrying amount of the reporting unit to its estimated fair value. To the extent that the carrying value of the reporting unit exceeds its estimated fair value, step two is performed, where the reporting unit’s carrying value of goodwill is compared to the implied fair value of goodwill. To the extent that the carrying value of goodwill exceeds the implied fair value of goodwill, impairment exists and must be recognized. In applying the quantitative approach, we rely on a number of factors, including future business plans, actual and forecasted operating results, and market data. The significant assumptions employed under this method include discount rates; revenue growth rates, including assumed terminal growth rates; and operating margins used to project future cash flows for a reporting unit. The discount rates utilized reflect market-based estimates of capital costs and discount rates adjusted for management’s assessment of a market participant’s view with respect to other risks associated with the projected cash flows of the individual reporting unit. Our estimates are based upon assumptions we believe to be reasonable, but which by nature are uncertain and unpredictable. We believe we incorporate ample sensitivity ranges into our analysis of goodwill impairment testing for a reporting unit, such that actual experience would need to be materially out of the range of expected assumptions in order for an impairment to remain undetected. In 2015, 2014 and 2013, based on a review of the quantitative and qualitative factors set forth in ASC 350, management concluded that as of October 1, 2015, 2014 and 2013, the reporting units had fair values that exceeded their carrying values. As a result of this analysis, we concluded that no impairment existed. In 2015, the Company performed a quantitative analysis on the Industrial Equipment Group reporting unit and concluded that no impairment existed. Based on the excess of fair value over carrying value, the reporting unit is not at risk of failing Step 1 of the quantitative goodwill impairment analysis. Additionally, we test all indefinite-lived intangible assets for impairment at least annually, as of October 1 of each year, or more frequently if impairment indicators arise. We follow the guidance provided by ASC 350 that simplifies how an entity tests indefinite-lived intangible assets for impairment. It provides an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. Our fiscal 2015, 2014 and 2013 annual impairment tests of each of our indefinite-lived intangible assets did not result in any impairment loss. See Notes 5 and 6 of the consolidated financial statements for additional disclosure on goodwill and indefinite-lived intangibles. Income Taxes: In accordance with ASC 740, “Income Taxes” (“ASC 740”), we account for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and the tax bases of assets and liabilities and are measured using the currently enacted tax rates. Specifically, we measure gross deferred tax assets for deductible temporary differences and carryforwards, such as operating losses and tax credits, using the applicable enacted tax rates and apply the more likely than not measurement criterion. In determining the adequacy of valuation allowances we consider cumulative and anticipated amounts of domestic and international earnings or losses, anticipated amounts of foreign source income as well as the anticipated taxable income resulting from the reversal of future taxable temporary differences. We intend to maintain any recorded valuation allowances until sufficient positive evidence, for example cumulative positive foreign earnings or additional foreign source income exists, to support reversal of the tax valuation allowances. 39 Further, at each interim reporting period, we estimate an effective income tax rate that is expected to be applicable for the full year. Significant judgment is involved regarding the application of global income tax laws and regulations and when projecting the jurisdictional mix of income. Additionally, interpretation of tax laws, court decisions or other guidance provided by taxing authorities influences our estimate of the effective income tax rates. As a result, our actual effective income tax rates and related income tax liabilities may differ materially from our estimated effective tax rates and related income tax liabilities. Any resulting differences are recorded in the period they become known. Pension and Other Postretirement Benefit Plans: We and our subsidiaries have pension plans, principally noncontributory defined benefit or noncontributory defined contribution plans and postretirement benefit plans covering substantially all employees. The measurement of liabilities related to these plans is based on management’s assumptions related to future events, including interest rates, return on pension plan assets, rate of compensation increases, and health care cost trends. Pension plan asset performance in the future will directly impact our net income. We have evaluated our pension and other postretirement benefit assumptions, considering current trends in interest rates and market conditions and believe our assumptions are appropriate. We 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 4.13% for 2015, compared with 3.82% in 2014. For the other postretirement benefit plan, the rate is 3.80% for 2015 and 3.60% for 2014. 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 rate of return on assets. The Company’s pension plans are funded. The weighted-average expected long-term rate of return on assets assumption is 8.25% for 2015. In determining the expected return on plan assets, we consider both historical performance and an estimate of future long-term rates of return on assets similar to those in our plan. We consult with and consider opinions of financial and actuarial experts in developing appropriate return assumptions. Changes in the related pension benefit costs may occur in the future due to changes in assumptions. The following table illustrates the sensitivity to a change in the assumed discount rate and expected long-term rate of return on assets for the Company’s pension plans and other postretirement plans as of December 31, 2015: Change in Assumption Impact on 2015 Benefit Expense Impact on 2015 Projected Benefit Obligation for Pension Benefits Impact on 2015 Projected Benefit Obligation for Postretirement Benefits 50 basis point decrease in discount rate 50 basis point increase in discount rate 50 basis point decrease in expected return on assets $ $ $ — $ — $ 0.6 $ 2.9 (2.8) $ $ — $ 0.5 (0.5) — See Note 13 of the consolidated financial statements for further analysis regarding the sensitivity of the key assumptions applied in the actuarial valuations. Legal Contingencies: We are involved in a variety of claims, suits, investigations and administrative proceedings with respect to commercial, premises liability, product liability, employment and environmental matters arising from the ordinary course of business. We accrue reserves for legal contingencies, on an undiscounted basis, when it is probable that we have incurred a liability and we can reasonably estimate an amount. When a single amount cannot be reasonably estimated, but the cost can be estimated within a range and when no amount within the range is a better estimate than any other amount, we accrue the minimum amount in 40 the range. Based upon facts and information currently available, we believe the amounts reserved are adequate for such pending matters. We monitor the development of legal proceedings on a regular basis and will adjust our reserves when, and to the extent, additional information becomes available. Accounting Pronouncements Adopted In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” the adoption of which is reflected in the accompanying Consolidated Balance Sheets. The provisions were adopted on a prospective basis. Based on the new accounting guidance, all deferred tax amounts are classified as long-term in 2015. Recent Accounting Pronouncements Not Yet Adopted In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which was the result of a joint project by the FASB and International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. generally accepted accounting principles and International Financial Reporting Standards. The issuance of a comprehensive and converged standard on revenue recognition is expected to enable financial statement users to better understand and consistently analyze an entity’s revenue across industries, transactions, and geographies. The ASU will require additional disclosures to help financial statement users better understand the nature, amount, timing, and potential uncertainty of the revenue that is recognized. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The ASU will require either retrospective application to each prior reporting period presented or retrospective application with the cumulative effect of initially applying the standard recognized at the date of adoption. The Company is currently evaluating the impact of adopting this guidance. In April 2015, the FASB issued ASU 2015-03, “Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs.” The amendment requires an entity to present debt issuance costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the debt issuance costs will continue to be reported as interest expense. In August 2015, the FASB issued an amendment to this standard to address line of credit arrangements, which would allow an entity to present debt issuance costs as an asset and subsequently amortize the debt issuance costs ratably over the term of the line of credit arrangement. This ASU is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. The new guidance will be applied retrospectively to each prior period presented. The new guidance will only impact the presentation of the Company’s financial position and is not expected to materially affect the Company’s results of operations or other financial statement disclosures. In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory.” The amendment requires an entity to measure inventory within the scope of this update at the lower of cost and net realizable value. This ASU is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. Early adoption is permitted. The new guidance will be applied prospectively. The Company is currently evaluating the impact of adopting this guidance. In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.” The amendments in this update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this update require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. This ASU is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. The new guidance will be applied prospectively, and the impact of adoption will be dependent on the nature of measurement period adjustments that may be necessary. 41 In January 2016, the FASB issued ASU 2016-1, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The Board also is addressing measurement of credit losses on financial assets in a separate project. This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is not permitted. The new guidance will be applied prospectively. The Company is currently evaluating the impact of adopting this guidance. In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” The amendment establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. This ASU is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial application. The Company is currently evaluating the impact of adopting this guidance. Environmental We have been identified as a potentially responsible party at third-party sites under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or comparable state laws, which provide for strict and, under certain circumstances, joint and several liability. We are participating in the cost of certain clean-up efforts at several of these sites. However, our share of such costs has not been material and based on available information, our management does not expect our exposure at any of these locations to have a material adverse effect on our results of operations, liquidity or financial condition. We have been named as one of many defendants in a number of asbestos-related personal injury lawsuits. Our cost of defending such lawsuits has not been material to date and, based upon available information, our management does not expect our future costs for asbestos-related lawsuits to have a material adverse effect on our results of operations, liquidity or financial condition. We caution, however, that inherent in management’s estimates of our exposure are expected trends in claims severity, frequency and other factors that may materially vary as claims are filed and settled or otherwise resolved. Seasonality; Variability of Operating Results The timing of orders placed by our customers has varied with, among other factors, orders for customers’ finished goods, customer production schedules, competitive conditions and general economic conditions. The variability of the level and timing of orders has, from time to time, resulted in significant periodic and quarterly fluctuations in the operations of our business units. Such variability is particularly evident at the industrial equipment business unit included in the Engineered Products segment, which typically ships a few large systems per year. Forward-Looking Statements This Annual 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. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements, or industry results, to be materially different from 42 any future results, performance or achievements expressed or implied by such forward-looking statements. These factors that could cause actual results to differ materially from expectations include, but are not limited to the following: our ability to successfully integrate acquired companies and achieve the expected results of such acquisitions; our substantial indebtedness; the uncertainty of the global economic environment; general business conditions and competitive factors, including pricing pressures and product innovation; demand for our 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; 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, 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; 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 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; our ability to negotiate contracts with labor unions; our dependence on key management; our dependence on information systems; our ability to continue to pay cash dividends; 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. 43 Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk, including changes in interest rates. We are subject to interest rate risk on borrowings under the floating rate revolving credit facility and term loan provided by our Credit Agreement, which consisted of borrowings of $196.9 million at December 31, 2015. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $2.0 million during the year ended December 31, 2015. Our foreign subsidiaries generally conduct business in local currencies. During 2015, we recorded an unfavorable foreign currency translation adjustment of $11.8 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. The Company periodically enters into forward contracts on foreign currencies, primarily the euro and the British pound sterling, purely for the purpose of hedging exposure to changes in the value of accounts receivable in those currencies against the U.S. dollar. We currently use no other derivative instruments. At December 31, 2015, there were no such currency hedge contracts outstanding. Our largest exposures to commodity prices relate to steel and natural gas prices, which have fluctuated widely in recent years. We do not have any commodity swap agreements, forward purchase or hedge contracts. 44 Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements and Supplementary Financial Data Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets — December 31, 2015 and 2014 Consolidated Statements of Income — Years Ended December 31, 2015, 2014 and 2013 Consolidated Statements of Comprehensive Income (Loss) — Years Ended December 31, 2015, 2014 and 2013 Consolidated Statements of Shareholders’ Equity — Years Ended December 31, 2015, 2014 and 2013 Consolidated Statements of Cash Flows — Years Ended December 31, 2015, 2014 and 2013 Notes to Consolidated Financial Statements Selected Quarterly Financial Data (Unaudited) — Years Ended December 31, 2015 and 2014 Supplementary Financial Data Schedule II — Valuation and Qualifying accounts Page 46 47 48 49 50 51 52 53 82 83 83 45 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of Park-Ohio Holdings Corp. We have audited the accompanying consolidated balance sheets of Park-Ohio Holdings Corp and Subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015. 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. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Park-Ohio Holdings Corp. and Subsidiaries at December 31, 2015 and 2014, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, 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. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Park-Ohio Holdings Corp. and Subsidiaries’ internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated March 14, 2016 expressed an unqualified opinion thereon. Cleveland, Ohio March 14, 2016 46 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of Park-Ohio Holdings Corp. We have audited Park-Ohio Holdings Corp. and Subsidiaries’ internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-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 over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Park-Ohio Holdings Corp. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria. We also have 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, 2015 and 2014, and the related consolidated statements of income, comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015 of Park- Ohio Holdings Corp. and Subsidiaries and our report dated March 14, 2016 expressed an unqualified opinion thereon. Cleveland, Ohio March 14, 2016 47 Park-Ohio Holdings Corp. and Subsidiaries Consolidated Balance Sheets Current assets: Cash and cash equivalents Accounts receivable, less allowances for doubtful accounts of $3.3 million at December 31, 2015 and $4.1 million at December 31, 2014 ASSETS Inventories, net Deferred tax assets Unbilled contract revenue Prepaid and other current assets Total current assets Net property, plant and equipment Goodwill Intangible assets, net Other long-term assets Total assets LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Trade accounts payable Accrued expenses and other Total current liabilities Long-term liabilities, less current portion: Debt Deferred tax liabilities Other postretirement benefits and other long-term liabilities Total long-term liabilities 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 - 14,653,985 shares in 2015 and 14,513,821 in 2014 Additional paid-in capital Retained earnings Treasury stock, at cost, 2,383,903 shares in 2015 and 2,014,692 shares in 2014 Accumulated other comprehensive loss Total Park-Ohio Holdings Corp. and Subsidiaries shareholders’ equity Noncontrolling interest Total equity Total liabilities and shareholders’ equity December 31, 2015 December 31, 2014 (In millions, except share and per share data) $ 62.0 $ 58.0 199.3 249.0 — 26.5 12.8 549.6 151.3 82.0 92.8 70.9 946.6 129.7 95.5 225.2 450.3 20.4 38.5 509.2 — 14.7 99.0 168.3 (46.7) (30.0) 205.3 6.9 212.2 946.6 $ $ $ 208.0 238.4 28.9 26.8 22.1 582.2 141.1 89.5 88.1 73.3 974.2 160.3 103.6 263.9 434.4 43.9 40.1 518.4 — 14.5 89.8 126.5 (31.2) (14.0) 185.6 6.3 191.9 974.2 $ $ $ The accompanying notes are an integral part of these consolidated financial statements. 48 Park-Ohio Holdings Corp. and Subsidiaries Consolidated Statements of Income Year Ended December 31, 2013 2014 2015 (In millions, except earnings per share data) $ 1,463.8 1,228.6 $ 1,378.7 1,144.2 $ Net sales Cost of sales Gross profit Selling, general and administrative expenses Litigation judgment and settlement costs Operating income Gain on acquisition of business Interest expense Income from continuing operations before income taxes Income tax expense Net income from continuing operations Income from discontinued operations, net of taxes Net income Net income attributable to noncontrolling interest Net income attributable to ParkOhio common shareholders Earnings per common share attributable to ParkOhio common shareholders - Basic: Continuing operations Discontinued operations Total Earnings per common share attributable to ParkOhio common shareholders - Diluted: Continuing operations Discontinued operations Total Weighted-average shares used to compute earnings per share: Basic Diluted $ $ $ $ $ 235.2 135.1 2.2 97.9 — 27.9 70.0 21.3 48.7 — 48.7 (0.6) 234.5 136.6 — 97.9 — 26.1 71.8 24.9 46.9 — 46.9 (1.3) 48.1 $ 45.6 $ $ $ $ $ 3.94 — 3.94 3.88 — 3.88 12.2 12.4 $ $ $ $ 3.77 — 3.77 3.68 — 3.68 12.1 12.4 1,203.2 992.2 211.0 120.2 5.2 85.6 (0.6) 25.9 60.3 19.4 40.9 3.0 43.9 (0.5) 43.4 3.40 0.25 3.65 3.31 0.25 3.56 11.9 12.2 — Dividend per common share $ 0.500 $ 0.375 $ The accompanying notes are an integral part of these consolidated financial statements. 49 Park-Ohio Holdings Corp. and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) Net income Other comprehensive income (loss): Foreign currency translation (loss) Pension and postretirement benefit adjustments, net of tax Total other comprehensive (loss) income Total comprehensive income, net of tax Comprehensive income attributable to noncontrolling interest Comprehensive income attributable to ParkOhio common Year Ended December 31, 2015 $ 48.7 2014 (In millions) 46.9 $ 2013 $ 43.9 (11.8) (4.2) (16.0) 32.7 (0.6) (7.9) (9.5) (17.4) 29.5 (1.3) (2.6) 12.8 10.2 54.1 (0.5) shareholders $ 32.1 $ 28.2 $ 53.6 The accompanying notes are an integral part of these consolidated financial statements. 50 Park-Ohio Holdings Corp. and Subsidiaries Consolidated Statements of Shareholders’ Equity Common Stock Shares Amount (In whole shares) Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive (Loss) Income Noncontrolling Interest Total (In millions) 76.9 $ — 4.1 42.2 $ 43.4 — $ (24.6) — — $ (6.8) 10.2 — — $ 101.8 54.1 0.5 4.1 — Balance at December 31, 2012 14,109,255 $ 14.1 $ Other comprehensive income Share-based compensation Restricted stock awards and options exercised Restricted stock cancelled Performance shares issued Capital contribution from non- controlling interest Purchase of treasury stock (62,694 shares) Exercise of stock options Income tax effect of share-based compensation exercises and vesting — — 204,650 (4,000) 14,000 — — 40,334 — — 0.2 — — — — 0.1 — — Balance at December 31, 2013 14,364,239 14.4 Other comprehensive income (loss) Share-based compensation Restricted stock awards Restricted stock cancelled Performance shares issued Dividends Purchase of treasury stock (79,733 shares) Income tax effect of share-based compensation exercises and vesting — — 140,250 (4,668) 14,000 — — — — — 0.1 — — — — — Balance at December 31, 2014 14,513,821 14.5 Other comprehensive income (loss) Share-based compensation Restricted stock awards Restricted stock cancelled Performance shares issued Exercise of stock options Dividends Purchase of treasury stock (369,211 shares) Income tax effect of share-based compensation exercises and vesting — — 72,500 (29,836) 14,000 83,500 — — — — — 0.1 — — 0.1 — — (0.2) — 0.4 0.5 — 0.3 0.4 82.4 — 5.8 (0.1) (0.1) 0.7 — — 1.1 89.8 — 7.3 (0.1) — — 1.1 — — — — — — — — — 85.6 45.6 — — — — (4.7) — — — — — — (2.2) — — (26.8) — — — — — — (4.4) — 126.5 (31.2) 48.1 — — — — — (6.3) — — — — — — — — — (15.5) — — — — — — — — 3.4 (17.4) — — — — — — — (14.0) (16.0) — — — — — — — — — — — 4.5 — — — 5.0 1.3 — — — — — — — 6.3 0.6 — — — — — — — — — 0.4 5.0 (2.2) 0.4 0.4 164.0 29.5 5.8 — (0.1) 0.7 (4.7) (4.4) 1.1 191.9 32.7 7.3 — — — 1.2 (6.3) (15.5) — 0.9 — 0.9 Balance at December 31, 2015 14,653,985 $ 14.7 $ 99.0 $ 168.3 $ (46.7) $ (30.0) $ 6.9 $ 212.2 The accompanying notes are an integral part of these consolidated financial statements. 51 Park-Ohio Holdings Corp. and Subsidiaries Consolidated Statements of Cash Flows OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Share-based compensation Gain on sale of business and assets Gain on acquisition of business Deferred income taxes Other Changes in operating assets and liabilities, excluding business acquisitions: 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 Proceeds from sale of assets Business acquisitions, net of cash acquired Net cash used by investing activities FINANCING ACTIVITIES Proceeds from term loans and other debt Payments on term loans and other debt Proceeds from revolving credit facility, net Proceeds from capital lease credit facility, net Other Income tax effect of share-based compensation exercises and vesting Dividend Purchase of treasury stock Net cash provided by financing activities Effect of exchange rate changes on cash Increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Income taxes paid Interest paid Year Ended December 31, 2015 2014 2013 $ 48.7 (In millions) 46.9 $ $ 43.9 28.7 7.3 — — 2.9 — 3.8 (6.7) (36.9) (3.1) 44.7 (36.5) — — — (36.5) 2.3 (3.6) 7.9 13.8 1.2 0.9 (6.3) (15.5) 0.7 (4.9) 4.0 58.0 62.0 19.0 25.7 $ $ $ 23.2 5.8 (1.9) — 0.5 1.0 (27.9) (23.3) 27.9 1.4 53.6 (25.8) — 2.1 (72.7) (96.4) 14.2 (6.6) 50.3 — (1.3) 1.1 (4.7) (4.4) 48.6 (3.0) 2.8 55.2 58.0 25.8 24.0 $ $ $ $ $ $ 19.2 4.7 (6.0) (0.6) (2.3) — 8.5 (4.9) (7.5) 5.3 60.3 (30.1) 7.4 14.2 (45.8) (54.3) — (4.2) 9.1 — 0.8 0.4 — (2.2) 3.9 0.9 10.8 44.4 55.2 25.0 24.8 The accompanying notes are an integral part of these consolidated financial statements. 52 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2015, 2014 and 2013 (Dollars in millions, except per share data) NOTE 1 — Summary of Significant Accounting Policies Consolidation and Basis of Presentation: The consolidated financial statements include the accounts of the Company and all of its majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation. The Company does not have off-balance sheet arrangements or financings with unconsolidated entities or other persons. The Company leases certain real properties owned by related parties as described in Note 12. Transactions with related parties are not material to the Company’s financial position, results of operations or cash flows. Accounting Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Inventories: Inventories are stated at the lower of first-in, first-out (“FIFO”) cost or market value. Major Classes of Inventories Finished goods Work in process Raw materials and supplies Inventories, net Other inventory items Inventory reserves Consigned Inventory December 31, 2015 December 31, 2014 (In millions) $ $ $ $ 147.5 37.4 64.1 249.0 29.0 10.3 $ $ $ $ 146.0 19.8 72.6 238.4 29.9 7.8 Property, Plant and Equipment: Property, plant and equipment are carried at cost. Additions and improvements that extend the lives of assets are capitalized and expenditures for repairs and maintenance are charged to operations as incurred. Depreciation and amortization of fixed assets, including capital leases, is computed principally by the straight-line method based on the estimated useful lives of the assets ranging from five to 40 years for buildings, and one to 20 years for machinery and equipment. 53 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table summarizes property, plant and equipment at December 31, 2015 and December 31, 2014: Property, plant and equipment: Land and land improvements Buildings Machinery and equipment Leased property under capital leases Total property, plant and equipment Less accumulated depreciation Net property, plant and equipment December 31, 2015 December 31, 2014 $ $ 8.5 65.3 304.6 16.2 394.6 243.3 151.3 $ $ 7.1 68.4 292.6 0.9 369.0 227.9 141.1 Information regarding depreciation expense of property, plant and equipment follows: Depreciation expense Year Ended December 31, 2015 2014 2013 $ 22.3 (In millions) $ 18.4 $ 15.7 Impairment of Long-Lived Assets: We assess the recoverability of long-lived assets (excluding goodwill) and identifiable acquired intangible assets with finite useful lives, whenever impairment indicators exists. When impairment indicators exist, 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. 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 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. Goodwill and Indefinite-Lived Assets: In accordance with Accounting Standards Codification (“ASC”) 350, “Intangibles — Goodwill and Other” (“ASC 350”), the Company does not amortize goodwill or indefinite-lived intangible assets recorded in connection with business acquisitions. Goodwill and indefinite life intangible assets are tested annually for impairment as of October 1, or whenever events or changes in circumstances indicate there may be an indicator of impairment in accordance with ASC 350. Goodwill is tested for impairment at the reporting unit level and is based on the net assets for each reporting unit, including goodwill and intangible assets, compared to the fair value. Our reporting units have been identified at the component level. In accordance with Accounting Standard Update (“ASU”) 2011-08, 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. 54 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) In assessing the qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we identify and assess relevant drivers of fair value and events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments and assumptions. The judgments and assumptions include the identification of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, Company-specific events and share price trends, and the assessment of whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact. If our qualitative assessment concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying amount then a quantitative assessment is required. In a quantitative assessment, we use an income 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 downturns that occur in the reporting unit’s industry. The income approach is based on a reporting unit’s projection of operating results and cash flows that is discounted using a weighted-average cost of capital. The projection is based upon our best estimates of projected economic and market conditions over the related period including growth rates, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, terminal value margin rates, future capital expenditures and changes in future working capital requirements based on management projections. There are inherent uncertainties, however, related to these factors and to our judgment in applying them to this analysis. Nonetheless, we believe that this method provides a reasonable approach to estimate the fair value of our reporting units. The Company completed its annual goodwill impairment test using quantitative or qualitative assessments for each year presented and confirmed no reporting unit was at risk of failing the impairment test for any periods presented herein. Indefinite life intangible assets are tested annually for impairment as of October 1, or whenever events or changes in circumstances indicate there may be a possible permanent loss of value in accordance with ASC 350. In accordance with ASU 2011-08, an entity may elect to first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible is less than its carrying value. The Company completed its annual indefinite-lived intangible impairment assessment. As a result of this analysis, we concluded that no impairment existed. Fair Values of Financial Instruments: Certain financial instruments are required to be recorded 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 valuation methodologies, is: Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. 55 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Level 3 — Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. Changes in assumptions or estimation methods could affect the fair value estimates; however, we do not believe any such changes would have a material 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 Credit Agreement (as defined in Note 9) approximate fair value at December 31, 2015 and December 31, 2014 because of the short-term nature of these instruments. The fair values of long-term debt and pension plan assets are disclosed in Note 9 and Note 13, respectively. The Company has not changed its valuation techniques for measuring fair value during 2015, and there were no transfers between levels during the periods presented. Income Taxes: The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and the tax bases of assets and liabilities and are measured using the current enacted tax rates. In determining these amounts, management determined the probability of realizing deferred tax assets, taking into consideration factors including historical operating results, cumulative earnings and losses, expectations of future earnings, taxable income and the extended period of time over which the postretirement benefits will be paid and accordingly records valuation allowances if, based on the weight of available evidence, it is more likely than not that some portion or all of our deferred tax assets will not be realized as required by ASC 740, “Income Taxes” (“ASC 740”). Share-Based Compensation: The Company follows 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 income statement based on their grant date fair values. Compensation expense for awards with service conditions only that are subject to graded vesting is recognized on a straight-line basis over the term of the vesting period. Under the provisions of the Company’s 2015 Equity and Incentive Compensation Plan (“2015 Plan”), which is administered by the Compensation Committee of the Company’s Board of Directors, incentive stock options, non-statutory stock options, stock appreciation rights (“SARs”), restricted share units, performance shares or stock awards may be awarded to directors and all employees of the Company and its subsidiaries. The 2015 Plan replaces in its entirety the 1998 Long-Term Incentive Plan, as amended (“1998 Plan”), but shares that remained available under the 1998 Plan were added to the aggregate share limit under that 2015 Plan. 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 value at the date of grant. The aggregate number of shares of the Company’s common stock that may be awarded under the 2015 Plan is 650,000, plus the 106,806 shares that remained available for award under the 1998 Plan, all of which may be incentive stock options. No more than 400,000 shares shall be the subject of awards to any individual participant in any one calendar year. Revenue Recognition: The Company recognizes revenue, other than from long-term contracts, when title is transferred to the customer, typically upon shipment. Revenue from long-term contracts (approximately 4% 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. We follow this method since reasonably dependable estimates of revenue and costs of a contract can be made. Revenue earned on 56 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) contracts in process that are in excess of billings, is classified in unbilled contract revenues in the accompanying consolidated balance sheets. Billings that are in excess of revenues earned on contracts in process are classified in accrued expenses in the accompanying balance sheets. Our revenue recognition policies are in accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition.” Cost of Sales: Cost of sales is primarily comprised of direct materials and supplies consumed in the manufacture of product, as well as manufacturing labor, depreciation expense and direct overhead expense necessary to acquire and convert the purchased materials and supplies into finished product. Cost of sales also includes the cost to distribute products to customers, inbound freight costs, internal transfer costs, warehousing costs and other shipping and handling activity. Shipping and Handling Costs: All shipping and handling costs are included in cost of sales in the Consolidated Statements of Income. 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 as well as a general reserve based on historical trends and other information. During 2015 and 2014, we sold approximately $118.5 million and $95.0 million, 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 2015 and 2014, an expense in the amount of $0.6 million and $0.5 million, respectively, related to the discount on sale of accounts receivable is recorded in the Consolidated Statements of Income. 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, 2015, the Company had uncollateralized receivables with six customers in the automotive industry, each with several locations, aggregating $36.7 million, which represented approximately 18% of the Company’s trade accounts receivable. During 2015, sales to these customers amounted to approximately $315.7 million, which represented approximately 22% of the Company’s net sales. 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 and is undiscounted. Legal Contingencies: We are involved in a variety of claims, suits, investigations and administrative proceedings with respect to commercial, premises liability, product liability, employment and environmental matters arising from the ordinary course of business. We accrue reserves for legal contingencies, on an undiscounted basis, when it is probable that we have incurred a liability and we can reasonably estimate an amount. When a single amount cannot be reasonably estimated, but the cost can be estimated within a range and when no amount within the range is a better estimate than any other amount, we accrue the minimum amount in 57 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) the range. Based upon facts and information currently available, we believe the amounts reserved are adequate for such pending matters. We monitor the development of legal proceedings on a regular basis and will adjust our reserves when, and to the extent, additional information becomes available. 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 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. Weighted-Average Number of Shares Used in Computing Earnings Per Share: The following table sets forth the weighted-average number of shares used in the computation of earnings per share: Weighted average basic shares outstanding Plus dilutive impact of employee stock awards Weighted average diluted shares outstanding Year Ended December 31, 2015 2014 2013 12,215,425 167,526 12,382,951 (In whole shares) 12,097,018 279,058 12,376,076 11,936,772 295,393 12,232,165 Earnings from continuing operations per common share is computed as net income from continuing operations less net income attributable to noncontrolling interests divided by the weighted average basic shares outstanding. Diluted earnings from continuing operations per common share is computed as net income from continuing operations less net income attributable to noncontrolling interests divided by the weighted average diluted shares outstanding. Earnings from discontinued operations per common share is computed as income from discontinued operations, net of taxes divided by the weighted average basic shares outstanding. Diluted earnings from discontinued operations per common share is computed as income from discontinued operations, net of taxes divided by the weighted average diluted shares outstanding. Total basic earnings per common share is computed as net income attributable to Park-Ohio common shareholders divided by the weighted average basic shares outstanding. Total diluted earnings per common share is computed as net income attributable to Park-Ohio common shareholders divided by the weighted average diluted shares outstanding. Outstanding stock options with 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 ended December 31, 2015 and 2014, the anti-dilutive shares were insignificant. Accounting Pronouncements Adopted In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” the adoption of which is reflected in the accompanying Consolidated Balance Sheets. The provisions were adopted on a prospective basis. Based on the new accounting guidance, all deferred tax amounts are classified as long- term in 2015. 58 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Recent Accounting Pronouncements Not Yet Adopted In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which was the result of a joint project by the FASB and International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. generally accepted accounting principles and International Financial Reporting Standards. The issuance of a comprehensive and converged standard on revenue recognition is expected to enable financial statement users to better understand and consistently analyze an entity’s revenue across industries, transactions, and geographies. The ASU will require additional disclosures to help financial statement users better understand the nature, amount, timing, and potential uncertainty of the revenue that is recognized. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The ASU will require either retrospective application to each prior reporting period presented or retrospective application with the cumulative effect of initially applying the standard recognized at the date of adoption. The Company is currently evaluating the impact of adopting this guidance. In April 2015, the FASB issued ASU 2015-03, “Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs.” The amendment requires an entity to present debt issuance costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the debt issuance costs will continue to be reported as interest expense. In August 2015, the FASB issued an amendment to this standard to address line of credit arrangements, which would allow an entity to present debt issuance costs as an asset and subsequently amortize the debt issuance costs ratably over the term of the line of credit arrangement. This ASU is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. The new guidance will be applied retrospectively to each prior period presented. The new guidance will only impact the presentation of the Company’s financial position and is not expected to materially affect the Company’s results of operations or other financial statement disclosures. In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory.” The amendment requires an entity to measure inventory within the scope of this update at the lower of cost and net realizable value. This ASU is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. Early adoption is permitted. The new guidance will be applied prospectively. The Company is currently evaluating the impact of adopting this guidance. In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.” The amendments in this update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this update require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. This ASU is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. The new guidance will be applied prospectively, and the impact of adoption will be dependent on the nature of measurement period adjustments that may be necessary. In January 2016, the FASB issued ASU 2016-1, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The Board also is addressing measurement of credit losses on financial assets in a separate project. This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is not permitted. The new guidance will be applied prospectively. The Company is currently evaluating the impact of adopting this guidance. 59 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” The amendment establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. This ASU is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial application. The Company is currently evaluating the impact of adopting this guidance. NOTE 2 — Segments The Company operates through three reportable segments: Supply Technologies, Assembly Components and Engineered Products. Supply Technologies provides our customers with Total Supply Management™ services for a broad range of high-volume, specialty production components. Total Supply Management™ 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. Assembly Components manufactures cast 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 Company primarily evaluates performance and allocates resources based on segment operating income as well as projected future performance. Segment operating income is defined as revenues less expenses identifiable to the product lines included within each segment. Segment operating income reconciles to consolidated income from continuing operations before income taxes by deducting corporate costs, which includes, but is not limited to executive compensation, corporate office costs and other income or expense items that are not attributed to the segments and net interest expense. 60 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Results by reportable segment were as follows: Year Ended December 31, 2015 2014 (In millions) 2013 $ $ $ 578.7 569.2 315.9 1,463.8 50.3 57.9 20.9 129.1 (29.0) (2.2) — (27.9) $ $ $ 559.6 490.5 328.6 1,378.7 42.5 42.0 42.7 127.2 (29.3) — — (26.1) 471.9 412.8 318.5 1,203.2 35.0 31.8 47.1 113.9 (23.1) (5.2) 0.6 (25.9) 70.0 $ 71.8 $ 60.3 Year Ended December 31, 2015 2014 (In millions) 2013 276.3 344.8 243.1 82.4 946.6 4.7 18.6 4.2 1.2 28.7 3.7 27.3 5.5 — 36.5 $ $ $ $ $ $ 277.6 340.5 246.9 109.2 974.2 4.5 14.2 3.3 1.2 23.2 5.8 14.0 2.4 1.5 23.7 $ $ $ $ $ $ 241.7 276.7 183.1 117.2 818.7 3.0 11.6 3.4 1.2 19.2 3.8 21.5 3.6 1.2 30.1 $ $ $ $ $ $ $ $ $ $ Net sales: Supply Technologies Assembly Components Engineered Products Segment operating income: Supply Technologies Assembly Components Engineered Products Total segment operating income Corporate costs Litigation judgment and settlement costs Gain on acquisition of business Interest expense Income from continuing operations 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 61 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The percentage of net sales by product line included in each segment was as follows: Supply Technologies: Supply Technologies Engineered specialty products Assembly Components: Fluid routing Aluminum products Rubber and plastics Screw products Engineered Products: Industrial equipment business Forged and machined products Year Ended December 31, 2015 2014 2013 87% 13% 100% 50% 41% 7% 2% 100% 81% 19% 100% 88% 12% 100% 49% 43% 6% 2% 100% 78% 22% 100% 87% 13% 100% 54% 37% 7% 2% 100% 77% 23% 100% The Company’s approximate percentage of net sales by geographic region was as follows: United States Asia Europe Canada Mexico Other Year Ended December 31, 2015 2014 2013 72% 8% 7% 6% 6% 1% 74% 6% 6% 7% 5% 2% 74% 6% 5% 8% 5% 2% 100% 100% 100% The basis for attributing revenue to individual geographic regions is final shipping destination. At December 31, 2015, 2014 and 2013, approximately 71%, 72% and 77%, respectively, of the Company’s assets were maintained in the United States. NOTE 3 — Acquisitions In December 2014, the Company acquired all the outstanding capital stock of Saet S.p.A. (“Saet”) for $22.1 million in cash. Saet is a leader in the design, manufacturing and testing of induction heating equipment and heat treat solutions through its locations in Italy, China, India and Tennessee. The financial results of Saet are included in the Company’s Engineered Products segment from the date of acquisition. The acquisition of Saet was accounted for under the acquisition method of accounting. At December 31, 2014, the fair values of the assets acquired and liabilities assumed were preliminarily estimated based on their carrying values and the excess consideration of $23.2 million was preliminarily recorded as goodwill due to the proximity of the acquisition to 62 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) the year-end date and pending finalization of the fair value. These preliminary estimates were revised during the measurement period in 2015 as all pertinent information regarding finalization of the third-party valuations for inventories, intangible assets, goodwill, tangible assets, other liabilities and deferred income tax assets and liabilities acquired were fully evaluated by the Company. Based on the final purchase price allocation, goodwill of $16.9 million and intangible assets of $13.4 million was recorded. In October 2014, the Company acquired all the outstanding capital stock of Autoform Tool and 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. Autoform is a supplier of high pressure fuel lines and fuel rails 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 from the date of acquisition. In June 2014, the Company acquired all the outstanding capital stock of Apollo Aerospace Group (“Apollo”) for $6.5 million, net of cash acquired. Apollo is a supply chain management services company providing Class C production components and supply chain solutions to aerospace customers worldwide. The financial results of Apollo are included in the Company’s Supply Technologies segment from the date of acquisition. The acquisitions of Autoform and Apollo were accounted for under the acquisition method of accounting. The purchase price allocations were preliminary as of December 31, 2014. The Apollo purchase agreement provides payment of contingent consideration of up to $2.4 million based on achievement of certain EBITDA targets over two years. The fair value of the earn-out, valued using level 3 inputs, was approximately $1.1 million at the date of the acquisition for a total purchase consideration of $6.5 million and as of December 31, 2015, the fair value of the earn-out was approximately $2.1 million. The contingent consideration, if earned, would be paid in the third quarter of 2016. Based on the purchase price allocation for these acquisitions, goodwill of $5.7 million and was recorded. Intangible assets of $3.0 million were recorded for Apollo and $25.5 million were recorded for Autoform. In November 2013, the Company acquired all the outstanding capital stock of QEF Global Limited (“QEF”). QEF is a provider of supply chain management solutions with four locations throughout Ireland, Scotland and England. In October 2013, the Company acquired all of the outstanding capital stock of Henry Halstead Ltd. (“Henry Halstead”). Henry Halstead is a provider of supply chain management solutions throughout the United Kingdom and Ireland. The Company paid $24.2 million (net of cash acquired) in the aggregate for QEF and Henry Halstead. QEF and Henry Halstead are included in our Supply Technologies segment from their respective dates of acquisition. Based on the final purchase price allocations for these acquisitions, goodwill of $7.9 million and intangible assets of $12.7 million was recorded. During August 2013, the Company acquired certain assets and liabilities of a small business, which resulted in a pre-tax gain of $0.6 million during the third quarter of 2013. The small business is engaged in the business of designing, manufacturing, selling, distributing and installing various tube bending machines and related tooling, spare and replacement parts and ancillary services for commercial applications. The small business is included in our Engineered Products segment from the date of acquisition. The purchase price was not significant to the results of operations, financial condition or liquidity. In April 2013, the Company acquired certain assets and assumed specific liabilities relating to Bates Rubber Inc. (“Bates”) for a total purchase price of $20.8 million in cash. The acquisition was funded from borrowings under the revolving credit facility provided by the Credit Agreement. Bates is a leading manufacturer of extruded, formed and molded products and assemblies for the transportation and industrial markets. Bates’ 63 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) production facilities are located in Tennessee. The financial results of Bates are included in the Company’s Assembly Components segment and had insignificant revenues and net income from the date acquired. The acquisition was accounted for under the acquisition method of accounting. Based on the final purchase price allocation, goodwill of $5.0 million and intangible assets of $5.9 million was recorded. NOTE 4 — Dispositions On September 3, 2013, the Company sold all of the outstanding equity interests of a non-core business unit in the Supply Technologies segment for $8.5 million in cash. This business unit is a provider of high-quality machine to machine information technology solutions, products and services. As a result of the sale, this business unit has been removed from the Supply Technologies segment and presented as a discontinued operation for all of the periods presented. Select financial information included in discontinued operations were as follows: Net sales Loss from discontinued operations before tax Income tax benefit from operations Net loss from discontinued operations Gain on sale of business before tax Income tax expense from gain on sale of business Net gain on sale of business Income from discontinued operations, net of taxes Year Ended December 31, 2013 $ $ $ 5.2 (1.3) 0.5 (0.8) 5.3 (1.5) 3.8 3.0 On August 1, 2013, the Company sold 25% of its Southwest Steel Processing LLC (“SSP”) business to Arkansas Steel Associates, LLC for $5.0 million in cash. SSP is included in our Engineered Products segment. This transaction facilitates the Company’s capacity expansion in one of its growing product lines. NOTE 5 — Goodwill The changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2015, 2014 and 2013 were as follows: Supply Technologies Assembly Components Engineered Products Total Balance at January 1, 2013 $ Acquisitions Foreign currency translation Balance at December 31, 2013 Acquisitions Foreign currency translation Balance at December 31, 2014 Acquisitions Foreign currency translation — $ 6.2 0.2 6.4 0.7 0.5 7.6 — (0.4) $ (In millions) 44.8 4.2 — 49.0 5.0 — 54.0 0.1 — $ 4.9 — 0.1 5.0 23.2 (0.3) 27.9 (6.3) (0.9) Balance at December 31, 2015 $ 7.2 $ 54.1 $ 20.7 $ 49.7 10.4 0.3 60.4 28.9 0.2 89.5 (6.2) (1.3) 82.0 64 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The decrease in goodwill from December 31, 2014 is primarily due to measurement period adjustments to the valuation of the Saet acquisition from 2014. The 2014 consolidated financial statements have not been retroactively adjusted as these measurement period adjustments did not have a material impact on such statements. The increase in goodwill from December 31, 2013 is due to the acquisitions of Apollo in the second quarter of 2014 and Autoform and Saet in the fourth quarter of 2014. Apollo is included in the Supply Technologies reportable segment, Autoform is included in the Assembly Components reportable segment and Saet is included in the Engineered Products reportable segment. The goodwill associated with the Autoform transaction is deductible for income tax purposes. The goodwill associated with the Apollo and Saet transactions is not deductible for income tax purposes. The increase in goodwill from January 1, 2013 to December 31, 2013 is due to the acquisitions of Bates in the second quarter of 2013 and Henry Halstead and QEF in the fourth quarter of 2013. Bates is included in the Assembly Components reportable segment and Henry Halstead and QEF are included in the Supply Technologies reportable segment. The goodwill associated with the Bates transaction is deductible for income tax purposes. The goodwill associated with the Henry Halstead and QEF transactions is not deductible for income tax purposes. NOTE 6 — Other Intangible Assets Information regarding other intangible assets as of December 31, 2015 and December 31, 2014 follows: Weighted Average Useful Life (Years) December 31, 2015 December 31, 2014 Acquisition Costs Accumulated Amortization Net Acquisition Costs Accumulated Amortization Net (In millions) Non-contractual customer relationships 12.0 $ 76.0 $ 18.5 $ 57.5 $ 77.3 $ 13.2 $ 64.1 Indefinite-lived tradenames Technology Other Total * 18.9 8.7 18.7 15.9 4.1 * 0.9 2.5 18.7 15.0 1.6 14.0 8.2 4.1 * 0.1 2.2 $ 114.7 $ 21.9 $ 92.8 $ 103.6 $ 15.5 $ 14.0 8.1 1.9 88.1 * Not meaningful, tradenames have an indefinite life. Information regarding amortization expense of other intangible assets follows: Amortization expense Year Ended December 31, 2015 2014 2013 $ 6.4 (In millions) 4.8 $ $ 3.5 65 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Amortization expense for the five years subsequent to December 31, 2015 follows: 2016 2017 2018 2019 2020 NOTE 7 — Other Long-Term Assets Other assets consist of the following: Pension assets Deferred financing costs, net Other Total NOTE 8 — Accrued Expenses Accrued expenses and other current liabilities consist of the following: Accrued salaries, wages and benefits Advance billings Current portion of long-term debt Warranty accrual Interest payable Current portion of other post-retirement liabilities Other (In millions) 6.3 6.2 6.1 5.6 5.5 $ $ $ $ $ $ $ $ December 31, 2015 2014 $ (In millions) 58.9 4.5 7.5 70.9 $ 64.6 5.1 3.6 73.3 December 31, 2015 2014 (In millions) $ 26.1 16.8 17.8 6.1 5.7 1.4 21.6 25.4 28.4 9.4 6.9 5.2 1.6 26.7 Total $ 95.5 $ 103.6 Substantially all advance billings relate to the Company’s industrial equipment business unit. Warranty liabilities are primarily associated with the Company’s industrial equipment business unit and the fluid routing solutions business. 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 66 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) based on product performance. The following table presents the changes in the Company’s product warranty liability for the years ended December 31, 2015, 2014 and 2013: Year Ended December 31, 2015 2014 (In millions) 2013 $ $ $ 6.9 (4.7) 4.0 (0.1) $ 5.4 (2.9) 4.0 0.4 6.1 $ 6.9 $ 6.9 (6.4) 4.9 — 5.4 Balance at January 1, Claims paid during the year Warranty expense Acquired warranty liabilities Balance at December 31, NOTE 9 — Financing Arrangements Long-term debt consists of the following: Issuance Date Maturity Date Interest Rate at December 31, 2015 December 31, 2015 December 31, 2014 Carrying Value at Senior Notes Revolving credit Term loan Other, including capital leases April 1, 2011 April 1, 2021 — July 31, 2019 — July 31, 2019 Various Various 8.125% 2.09% 2.38% Various $ (In millions) $ 250.0 169.0 27.9 21.2 468.1 17.8 250.0 162.0 28.8 3.0 443.8 9.4 $ 450.3 $ 434.4 Total debt Less current maturities Total long-term debt, net of current portion On August 13, 2015, the Company entered into a capital lease agreement (the “Lease Agreement”). The Lease Agreement provides the Company up to $50.0 million for capital leases. See Note 12 for additional disclosure. On July 31, 2014, the Company entered into a sixth amendment and restatement of the credit agreement (the “Amended Credit Agreement”). The Amended Credit Agreement, among other things, increases the revolving credit facility to $230.0 million, provides a term loan for $16.1 million and extends the maturity date of the borrowings under the Amended Credit Agreement to July 31, 2019. The revolving credit facility includes a Canadian sub-limit of $15.0 million and a European sub-limit of $10.0 million (which may be increased to $25.0 million) for borrowings in those locations. The Amended Credit Agreement was further amended in accordance with Amendments No. 1, 2 and 3 to the Amended Credit Agreement, dated October 24, 2014, January 20, 2015 and March 12, 2015, respectively (the “Amendments”). The Amendments: • • increases the revolving credit facility from $230.0 million to $275.0 million; increases the inventory advance rate from 50% to 60%, reducing back to 50% on a pro-rata quarterly basis over 36 months commencing April 1, 2015; 67 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) • • • • reloads the term loan up to $35.0 million from $15.5 million, of which $27.9 million has been borrowed and is outstanding as of December 31, 2015; increases the Canadian sub-limit up to $25.0 million from $15.0 million; increases the European sub-limit up to $25.0 million from $10.0 million; and provides minor pricing adjustments including pricing the first $22.0 million drawn on the revolver at LIBOR + 3.50%, reducing automatically on a pro-rata quarterly basis over 36 months commencing April 1, 2015. At the Company’s election, domestic amounts borrowed under the revolving credit facility may be borrowed at either: • • LIBOR plus 1.5% to 2.5%; or the bank’s prime lending rate minus 0.25% to 1.25%. At the Company’s election, amounts borrowed under the term loan may be borrowed at either: • • LIBOR plus 2.0% to 3.0%; or the bank’s prime lending rate minus 0.75% to plus 0.25%. The LIBOR-based interest rate is dependent on the Company’s debt service coverage ratio, as defined in the Amended Credit Agreement. Amounts borrowed under the Canadian revolving credit facility provided by the Amended Credit Agreement may be borrowed at either: • • • the Canadian deposit offered rate plus 1.5% to 2.5%; the Canadian prime lending rate plus 0.0% to 1.0%; or the US base rate plus 0.0% to 1.0%. Under the Amended Credit Agreement, a detailed borrowing base formula provides borrowing availability to the Company based on percentages of eligible accounts receivable and inventory. The term loan is amortized based on a seven-year schedule with the balance due at maturity (July 31, 2019). The Amended Credit Agreement also reduced the commitment fee for the revolving credit facility. Additionally, the Company has the option, pursuant to the Amended Credit Agreement, to increase the availability under the revolving credit facility by $25.0 million. On April 7, 2011, the Company completed the sale of $250.0 million 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. The Notes mature on April 1, 2021. At December 31, 2015, in addition to amounts borrowed under the revolving credit facility, there was $21.4 million outstanding for standby letters of credit. At December 31, 2015, the Company had approximately $69.3 million of unused borrowing capacity under the revolving credit facility. 68 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table represents fair value information of the Notes, classified as Level 1, at December 31, 2015 and December 31, 2014. The fair value was estimated using quoted market prices. Carrying amount Fair value December 31, 2015 December 31, 2014 $ $ (In millions) 250.0 263.4 $ $ 250.0 266.3 Maturities of long-term debt, excluding capital leases, during each of the five years subsequent to December 31, 2015 are as follows: 2016 2017 2018 2019 2020 (In millions) 13.4 12.7 7.0 167.2 — $ $ $ $ $ Foreign subsidiaries of the Company had $0.8 million of borrowings at December 31, 2015 and zero at December 31, 2014 and outstanding bank guarantees of approximately $3.9 million and $5.2 million at December 31, 2015 and 2014, respectively, under their credit arrangements. 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 100% owned 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, 2015, the Company was in compliance with all financial covenants of the Credit Agreement. The weighted average interest rate on all debt was 5.47% at December 31, 2015 and 5.62% at December 31, 2014. On October 21, 2015, the Company, through its Southwest Steel Processing LLC subsidiary, entered into a financing agreement with the Arkansas Development Finance Authority. The agreement provides the Company the ability to borrow up to $11.0 million for expansion of its manufacturing facility in Arkansas. The loan matures in September 2025. The Company has no borrowings under this agreement as of December 31, 2015. NOTE 10 — Income Taxes Income from continuing operations before income tax expense consists of the following: United States Outside the United States Year Ended December 31, 2015 2014 (In millions) 2013 $ $ 44.0 26.0 70.0 $ $ 53.1 18.7 71.8 $ $ 48.4 11.9 60.3 69 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Income taxes consisted of the following: Current expense: Federal State Foreign Deferred expense (benefit): Federal State Foreign Year Ended December 31, 2015 2014 (In millions) 2013 $ $ 11.7 0.7 6.0 18.4 2.7 0.6 (0.4) 2.9 $ 17.4 0.8 6.2 24.4 1.0 (0.8) 0.3 0.5 Income tax expense $ 21.3 $ 24.9 $ 16.0 1.5 4.2 21.7 1.2 (2.6) (0.9) (2.3) 19.4 The reasons for the difference between income tax expense and the amount computed by applying the statutory federal income tax rate to income from continuing operations before income taxes for the years ended December 31, 2015, 2014 and 2013 are as follows: Rate Reconciliation Tax at statutory rate Effect of state income taxes, net Effect of foreign operations Valuation allowance Non-deductible items Manufacturer’s deduction Other, net Total Year Ended December 31, 2015 2014 (In millions) 2013 $ $ $ 24.5 0.6 (1.6) (0.7) 1.7 (1.1) (2.1) $ 25.1 1.4 (0.9) (1.1) 1.8 (1.4) — 21.3 $ 24.9 $ 21.1 1.1 (0.2) (1.6) 0.7 (1.4) (0.3) 19.4 70 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Significant components of the Company’s net deferred tax assets and liabilities are as follows: Deferred tax assets: Postretirement benefit obligation Inventory Net operating loss and credit carryforwards Warranty reserve Accrued litigation Compensation Other Total deferred tax assets Deferred tax liabilities: Depreciation and amortization Pension Goodwill Intangible assets Other Total deferred tax liabilities Net deferred tax liabilities prior to valuation allowances Valuation allowances Year Ended December 31, 2015 2014 (In millions) $ $ 4.8 12.0 6.1 1.9 2.9 6.0 11.0 44.7 15.2 21.0 2.5 16.8 1.6 57.1 (12.4) (4.8) Net deferred tax liability $ (17.2) $ 6.2 13.7 6.3 2.5 1.9 6.0 10.6 47.2 13.2 23.3 2.7 14.5 1.4 55.1 (7.9) (7.1) (15.0) At December 31, 2015, the Company has U.S., state and foreign net operating loss carryforwards for income tax purposes. The foreign net operating loss carryforward is $18.1 million, of which $4.6 million expires between 2016 and 2035 and the remainder has no expiration date. The Company has a tax benefit from a state net operating loss carryforward of $2.2 million that expires between 2016 and 2035. The Company also has a tax benefit from a non-consolidated U.S. net operating loss carryforward of $0.7 million that expires in 2035. As of December 31, 2015 and 2014, 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, 2014, the Company reversed a valuation allowance of $1.3 million against its state net operating loss carryforward. As of December 31, 2015 and 2014, the Company recorded valuation allowances of $4.2 million and $6.9 million, 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. 71 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Unrecognized Tax Benefit — January 1, Gross Increases — Tax Positions in Prior Period Gross Decreases — Tax Positions in Prior Period Lapse of Statute of Limitations Unrecognized Tax Benefit — December 31, 2015 2014 (In millions) 2013 $ 6.5 0.3 (0.1) (0.4) $ 5.9 0.8 (0.2) — 6.3 $ 6.5 $ 6.1 0.4 (0.6) — 5.9 $ $ The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $5.5 million at December 31, 2015 and $5.4 million at December 31, 2014. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the year ended December 31, 2015 and 2014, the Company recognized approximately $0.2 million and $0.3 million, respectively, in net interest and penalties. The Company had approximately $1.9 million and $1.7 million for the payment of interest and penalties accrued at December 31, 2015 and 2014, respectively. It is reasonably possible that within the next twelve months the amount of gross unrecognized tax benefits could be reduced by approximately $3.0 million as a result of the revaluation of expiring uncertain tax positions arising from the closure of tax statutes. The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. The Company’s tax years for 2012 through 2015 remain open for examination by the Internal Revenue Service and 2011 through 2015 remain open for examination by various state and foreign taxing authorities. Deferred taxes have not been provided on approximately $91.2 million 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 11 — Share-Based Compensation A summary of stock option activity as of December 31, 2015 and changes during the year then ended is presented below: Outstanding — beginning of year Granted Exercised Canceled or expired Outstanding — end of year Options exercisable 2015 Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (In millions) 16.76 — 14.86 — 19.41 19.41 1.9 1.9 $ $ 1.0 1.0 Number of Shares (In whole shares) 143,500 — (83,500) — 60,000 60,000 $ $ $ 72 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Exercise prices for options outstanding as of December 31, 2015 range from $15.61 to $24.92. The number of options outstanding and exercisable at December 31, 2015, which correspond with this range is 60,000. The total intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was $3.3 million, $0.1 million and $1.1 million, respectively. Net cash proceeds from the exercise of stock options were $1.2 million, $0.0 million and $0.4 million, respectively. There were no stock options awarded in 2015, 2014 and 2013. A summary of restricted share and performance share activity for the year ended December 31, 2015 is as follows: 2015 Time-Based Performance-Based Number of Shares (In whole shares) 344,932 72,500 (179,167) (29,836) $ 208,429 $ Weighted Average Grant Date Fair Value 33.55 44.26 32.93 41.92 36.61 Number of Shares (In whole shares) 28,000 120,000 (14,000) (14,000) $ 120,000 $ Weighted Average Grant Date Fair Value 20.30 48.72 20.30 20.30 48.72 Outstanding — beginning of year Granted Vested Canceled or expired Outstanding — end of year The Company recognized compensation expense of $7.3 million, $5.8 million and $4.7 million for the years ended December 31, 2015, 2014 and 2013, respectively, relating to restricted shares and performance shares. The total fair value of restricted stock units vested during the years ended December 31, 2015, 2014 and 2013 was $9.0 million, $11.5 million and $6.1 million, respectively. For awards that vest based on a service condition only, the Company recognizes compensation cost of share- based awards as expense on a straight-line basis over the vesting period of the awards. Compensation cost of the performance-based awards is recognized as expense using the accelerated attribution method over the vesting periods of the awards. As of December 31, 2015, the Company had unrecognized compensation expense of $10.5 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 1.7 years. The number of shares available for future grants for all plans at December 31, 2015 is 590,033. NOTE 12 — Commitments, Contingencies and Litigation Judgment The Company is subject to various pending and threatened legal proceedings arising in the ordinary course of business. Although the Company cannot precisely predict the amount of any liability that may ultimately arise with respect to any of these matters, the Company records provisions when it considers the liability probable and reasonably estimable. Our provisions are based on historical experience and legal advice, reviewed quarterly and adjusted according to developments. Estimating probable losses requires the analysis of multiple forecasted 73 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) factors that often depend on judgments about potential actions by third parties, such as regulators, courts, and state and federal legislatures. Changes in the amounts of our loss provisions, which can be material, affect our financial condition. Due to the inherent uncertainties in the process undertaken to estimate potential losses, we are unable to estimate an additional range of loss in excess of our accruals. While it is reasonably possible that such excess liabilities, if they were to occur, could be material to operating results in any given quarter or year of their recognition, we do not believe that it is reasonably possible that such excess liabilities would have a material adverse effect on our long-term results of operations, liquidity or consolidated financial position. Our subsidiaries are involved in a number of contractual and warranty related disputes. At this time, we cannot reasonably determine the probability of a loss, and the timing and amount of loss, if any, cannot be reasonably estimated. We believe that appropriate liabilities for these contingencies have been recorded; however, actual results may differ materially from our estimates. IPSCO Tubulars Inc. d/b/a TMK IPSCO sued Ajax Tocco Magnethermic Corporation (“ATM”), a subsidiary of Park-Ohio Holdings Corporation, in the United States District Court for the Eastern District of 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 alleged causes of action for breach of contract, gross negligence and constructive fraud. IPSCO sought approximately $10 million in damages plus an unspecified amount of punitive damages. ATM denied the allegations. ATM subsequently obtained summary judgment on the constructive fraud claim, which was dismissed by the district court 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, which the Company recognized and accrued for at that time. 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 claim 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 claim 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 could be decreased, but could not be increased, on remand. On remand, the district court entered an order once again awarding IPSCO $5.2 million in damages. In December 2015, ATM filed a second appeal with the Eighth Circuit seeking reversal of the damages award. In March 2016, the district court issued an order granting, in part, IPSCO’s motion for fees and costs and awarding $2.2 million to IPSCO. ATM expects to appeal that decision. In August 2013, the Company received a subpoena from the staff of the SEC in connection with the staff’s investigation of a third party. At that time, the Company also learned that the Department of Justice (“DOJ”) is conducting a criminal investigation of the third party. In connection with its initial response to the staff’s subpoena, the Company disclosed to the staff of the SEC that, in November 2007, the third party participated in a payment on behalf of the Company to a foreign tax official that implicates the Foreign Corrupt Practices Act (“FCPA”). The Board of Directors of the Company has formed a special committee to review the Company’s transactions with the third party and to make any recommendations to the Board of Directors with respect thereto. 74 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company intends to cooperate fully with the SEC and the DOJ in connection with their investigations of the third party and with the SEC in light of the Company’s disclosure. The Company is unable to predict the outcome or impact of the special committee’s investigation or the length, scope or results of the SEC’s review or the impact on its results of operations. Leases Future minimum lease commitments during each of the five years following December 31, 2015 and thereafter are as follows: 2016 2017 2018 2019 2020 Thereafter Total minimum lease payments Amounts representing interest Present value of minimum lease payments Current maturities Long-term capital lease obligation Capital Leases Operating leases (In millions) 4.9 $ 3.7 3.6 3.6 3.0 — 18.8 $ 14.5 11.0 7.6 4.4 2.9 5.1 45.5 1.1 17.7 4.4 13.3 $ $ Rental expense for 2015, 2014 and 2013 was $19.7 million, $18.6 million and $17.6 million, respectively. Certain of the Company’s leases are with related parties at an annual rental expense of approximately $2.4 million. Transactions with related parties are not material to the Company’s financial position, results of operations or cash flows. During the year ended December 31, 2013, we entered into sales leaseback transactions for certain equipment. No gains or losses resulted from these transactions and the leases are being accounted for as operating leases. Assets recorded under capital leases are included in property, plant and equipment and consist of the following: Machinery and equipment Less accumulated depreciation December 31, 2015 $ $ 16.2 0.5 15.7 Amortization of machinery and equipment under capital leases is included in depreciation expense. Capital lease obligations of $17.7 million were borrowed from the $50.0 million Lease Agreement to acquire machinery and equipment during 2015. 75 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) NOTE 13 — Pensions and Postretirement Benefits The Company and its subsidiaries have pension plans, principally noncontributory defined benefit or noncontributory defined contribution plans, covering substantially all employees. In addition, the Company has an unfunded postretirement benefit plan. In April 2011, the Company amended one of its plans to cover most U.S. employees not covered by collective bargaining agreements using a cash balance formula. 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. The Company’s objective for the pension plan is to monitor the funded ratio, create general investment goals in regards to acceptable risk and liquidity needs ensuring the long-term interests of participants and beneficiaries are considered and manage risk by minimizing the short-term and long-term risk of actual expenses and contribution requirements. The following tables set forth the change in benefit obligation, plan assets, funded status and amounts recognized in the consolidated balance sheet for the defined benefit pension and postretirement benefit plans as of December 31, 2015 and 2014: Change in benefit obligation Benefit obligation at beginning of year Service cost Interest cost Actuarial (gains) losses Plan amendment 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 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 $ $ $ $ $ Pension Benefits Postretirement Benefits 2015 2014 2015 2014 (In millions) 61.1 2.6 2.3 (3.0) — (4.6) 58.4 125.7 (2.9) — (0.9) (4.6) 117.3 58.9 $ $ $ $ $ 52.1 2.2 2.2 8.8 0.4 (4.6) 61.1 125.4 5.8 — (0.9) (4.6) 125.7 64.6 $ $ $ $ $ $ 17.0 — 0.5 (2.7) — (1.3) 13.5 $ — $ — 1.3 — (1.3) — $ 16.2 — 0.6 1.9 — (1.7) 17.0 — — 1.7 — (1.7) — (13.5) $ (17.0) 76 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Amounts recognized in the consolidated balance sheets consist of: Noncurrent assets Noncurrent liabilities Current liabilities Amounts recognized in accumulated other comprehensive loss Net actuarial loss Net prior service cost (credit) Accumulated other comprehensive loss Pension Benefits 2015 2014 Postretirement Benefits 2015 2014 $ $ $ $ 58.9 — — 58.9 25.2 0.3 25.5 $ $ $ $ $ (In millions) 64.6 — — 64.6 $ 15.3 0.4 15.7 $ $ — $ 12.1 1.4 13.5 4.4 (0.3) 4.1 $ $ $ — 15.4 1.6 17.0 7.6 (0.4) 7.2 As of December 31, 2015 and 2014, the Company’s defined benefit pension plans did not hold a material amount of shares of the Company’s common stock. The pension plan weighted-average asset allocation at December 31, 2015 and 2014 and target allocation for 2016 are as follows: Asset Category Equity securities Debt securities Other Plan Assets Target 2016 2015 2014 45-75% 20-40 0-20 100% 62.7% 25.4% 11.9% 100% 64.6% 27.9% 7.5% 100% The following table sets forth, by level within the fair value hierarchy, the pension plans assets: 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 2015 2014 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total (In millions) $ 38.3 $ 29.1 5.7 7.4 14.6 6.8 1.2 — 1.5 $ — $ — — — — — — — — — — — — — 12.7 39.8 $ 29.1 5.7 7.4 14.6 6.8 1.2 12.7 45.6 $ 29.0 5.4 7.0 19.6 7.5 1.8 — 2.2 $ — $ — — — — — — — — — — — — — 7.6 47.8 29.0 5.4 7.0 19.6 7.5 1.8 7.6 $ 103.1 $ 1.5 $ 12.7 $ 117.3 $ 115.9 $ 2.2 $ 7.6 $ 125.7 77 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table presents a reconciliation of Level 3 assets, as defined in Note 1, held during the years ended December 31, 2015 and 2014. Hedge Funds: 2015 2014 Balance at Beginning of Year Net Unrealized Gain Purchases Balance at End of Year $ $ 7.6 7.3 $ $ (In millions) 0.1 0.3 $ $ 5.0 $ — $ 12.7 7.6 The following tables summarize the assumptions used in the valuation of pension and postretirement benefit obligations at December 31, and to measure the net periodic benefit cost in the following year. Discount rate Expected return on plan assets Rate of compensation increase Medical health care benefits rate increase Medical drug benefits rate increase Ultimate health care cost trend rate Year of ultimate trend rate Weighted-Average assumptions as of December 31, Pension Benefits Postretirement Benefits 2015 2014 2013 2015 2014 2013 4.13% 8.25% 3.00% N/A N/A N/A N/A 3.82% 8.25% 3.00% N/A N/A N/A N/A 4.51% 3.80% N/A 8.25% N/A 2.00% N/A 6.75% N/A 6.75% N/A 5.00% 2022 N/A 3.60% N/A N/A 7.00% 7.00% 5.00% 2022 4.21% N/A N/A 6.50% 6.50% 5.00% 2042 In determining its expected return on plan assets assumption for the year ended December 31, 2015, 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, 2015 of 8.25%. This assumption was supported by the asset return generation model, which projected future asset returns using simulation and asset class correlation. 78 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Pension Benefits Postretirement Benefits 2015 2014 2013 2015 2014 2013 (In millions) Components of net periodic benefit cost Service costs Interest costs Expected return on plan assets Amortization of prior service cost (credit) Recognized net actuarial loss $ $ 2.6 2.3 (10.2) 2.2 2.2 (10.1) $ — 0.3 0.1 — 2.6 2.0 (8.9) — 0.8 $ — $ 0.6 — — $ 0.6 — (0.1) 0.5 (0.1) 0.5 Benefit (income) costs $ (5.0) $ (5.6) $ (3.5) $ 1.0 $ 1.0 $ 0.1 0.6 — (0.1) 0.7 1.3 Other changes in plan assets and benefit obligations recognized in accumulated other comprehensive (income) loss AOCI at beginning of year Net loss (gain) arising during the year Recognition of prior service credit Recognition of actuarial loss Total recognized in accumulated other comprehensive loss at end of year $ $ 15.7 10.1 — (0.3) 2.2 13.1 — 0.4 $ $ 20.3 (17.3) — (0.8) $ 7.2 (2.7) 0.1 (0.5) $ 5.8 1.8 0.1 (0.5) 7.6 (1.2) 0.1 (0.7) $ 25.5 $ 15.7 $ 2.2 $ 4.1 $ 7.2 $ 5.8 The estimated net loss, prior service cost and net transition obligation for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the year ending December 31, 2016 is $1.1 million. The estimated net loss and prior service cost for the postretirement plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the year ending December 31, 2016 is $0.3 million. Below is a table summarizing the Company’s expected future benefit payments and the expected payments due to Medicare subsidy over the next ten years: Pension Benefits Gross Postretirement Benefits Expected Medicare Subsidy Net including Medicare Subsidy 2016 2017 2018 2019 2020 2021 to 2025 $ (In millions) 1.6 1.5 1.4 1.3 1.2 5.2 $ 0.1 0.1 0.1 0.1 0.1 0.5 1.5 1.4 1.3 1.2 1.1 4.7 $ $ 4.2 4.5 4.3 4.3 4.5 22.9 79 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company has a postretirement benefit plan. Under the plan, health care benefits are provided on both a contributory and noncontributory basis. The assumed health care cost trend rate has a significant effect on the amounts reported. A one-percentage-point change in the assumed health care cost trend rate would have the following effects: Effect on total of service and interest cost components in 2015 Effect on postretirement benefit obligation as of December 31, 2015 1-Percentage Point Increase 1-Percentage Point Decrease $ $ (In millions) — $ $ 1.0 — (0.9) The Company expects to make no contributions to its defined benefit plans in 2016. In January 2008, a Supplemental Executive Retirement Plan (“SERP”) for the Company’s Chairman of the Board of Directors and Chief Executive Officer (“CEO”) was approved by the Compensation Committee of the Board of Directors of the Company. The SERP provides an annual supplemental retirement benefit for up to $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 $0.6 million in 2015, $0.5 million in 2014 and $0.5 million in 2013 related to the SERP. Additionally, a non-qualified defined contribution retirement benefit was also approved in which the Company will credit $0.1 million quarterly ($0.4 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. 80 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) NOTE 14 — Accumulated Other Comprehensive Income (Loss) The components of and changes in accumulated other comprehensive income (loss) for the years ended December 31, 2015, 2014, and 2013 were as follows: Cumulative Translation Adjustment Pension and Postretirement Benefits Total Balance at January 1, 2013 Foreign currency translation adjustments (a) $ Pension and OPEB activity, net Tax adjustment (b) Pension and OPEB activity, net of taxes Balance at December 31, 2013 Foreign currency translation adjustments (a) Pension and OPEB activity, net Tax adjustment (b) Pension and OPEB activity, net of taxes Balance at December 31, 2014 Foreign currency translation adjustments (a) Pension and OPEB activity, net Tax adjustment (b) Pension and OPEB activity, net of taxes 5.4 (2.6) — — — 2.8 (7.9) — — — (5.1) (11.8) — — — $ (In millions) $ (12.2) — 19.9 (7.1) 12.8 0.6 — (14.9) 5.4 (9.5) (8.9) — (6.7) 2.5 (4.2) Balance at December 31, 2015 $ (16.9) $ (13.1) $ (a) No income taxes are provided on foreign currency translation adjustments as foreign earnings are considered permanently invested. (b) The tax adjustments are reclassified out of accumulated other comprehensive income and included in income tax expense. NOTE 15 — Subsequent Events (6.8) (2.6) 19.9 (7.1) 12.8 3.4 (7.9) (14.9) 5.4 (9.5) (14.0) (11.8) (6.7) 2.5 (4.2) (30.0) On February 1, 2016, the Company’s Board of Directors declared a quarterly dividend of $0.125 per common share. The dividend was paid on February 29, 2016, to shareholders of record as of the close of business on February 15, 2016 and resulted in a cash outlay of approximately $1.5 million. As discussed in Note 12, on March 7, 2016 the United States District Court for the Eastern District of Arkansas issued an order granting, in part, IPSCO’s motion for fees and costs and awarding $2.2 million to IPSCO, which the Company accrued for as of December 31, 2015. ATM expects to appeal that decision. 81 PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) NOTE 16 — Selected Quarterly Financial Data (Unaudited) 2015 Net sales Gross profit Net income Net income attributable to noncontrolling interest Net income attributable to ParkOhio common shareholders Earnings per common share attributable to ParkOhio common shareholders: Basic Diluted Cash dividends per common share 2014 Net sales Gross profit Net income Net income attributable to noncontrolling interest Net income attributable to ParkOhio common shareholders Earnings per common share attributable to ParkOhio common shareholders: Basic Diluted Cash dividends per common share Quarter Ended Mar. 31, Jun. 30, Sept. 30, Dec. 31, (Dollars in millions, except per share data) $ $ $ $ $ $ $ $ $ $ 374.7 58.4 11.1 (0.3) 10.8 0.89 0.87 0.125 317.8 56.0 10.3 — 10.1 0.84 0.82 $ $ $ $ $ $ $ $ $ 377.3 60.4 12.6 (0.2) 12.4 1.02 1.00 0.125 343.3 61.0 12.9 (0.5) 12.4 1.02 1.00 — $ 0.125 $ $ $ $ $ $ $ $ $ $ 364.4 62.3 13.2 — 13.2 1.07 1.06 0.125 344.6 60.6 12.5 (0.1) 12.4 1.02 1.00 0.125 $ $ $ $ $ $ $ $ $ $ 347.4 54.1 11.8 (0.1) 11.7 0.96 0.95 0.125 373.0 56.9 11.2 (0.5) 10.7 0.88 0.86 0.125 Note A — On March 7, 2016 the United States District Court for the Eastern District of Arkansas issued an order granting, in part, IPSCO’s motion for fees and costs and awarding $2.2 million to IPSCO, which the Company accrued for as of December 31, 2015. Note B — On June 10, 2014, the Company completed the acquisition of Apollo, a supply chain management services company providing Class C production components and supply chain solutions to aerospace customers worldwide and is included in our Supply Technologies segment. Note C — 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 D — 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. 82 Supplementary Financial Data Schedule II PARK-OHIO HOLDINGS CORP. SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Description Year Ended December 31, 2015: Allowances deducted from assets: Trade receivable allowances Inventory obsolescence reserve Tax valuation allowances Year Ended December 31, 2014: Allowances deducted from assets: Trade receivable allowances Inventory obsolescence reserve Tax valuation allowances Year Ended December 31, 2013: Allowances deducted from assets: Trade receivable allowances Inventory obsolescence reserve Tax valuation allowances Balance at Beginning of Period Charged to Costs and Expenses Deductions and Other Balance at End of Period $ $ $ $ $ $ 4.1 29.9 7.1 3.7 28.4 2.6 3.5 27.2 4.2 (In millions) $ $ $ 0.4 4.2 (0.7) 0.3 8.4 (1.1) 1.8 9.4 (1.6) $ $ $ (1.2) (A) (5.1) (B) (1.6) (C) 0.1 (A) (6.9) (B) 5.6 (C) (1.6) (A) (8.2) (B) — 3.3 29.0 4.8 4.1 29.9 7.1 3.7 28.4 2.6 Note (A)- Uncollectable accounts written off, net of recoveries. Note (B)- Amounts written off, net of acquired reserves. Note (C)- Amounts accounted for under the acquisition method of accounting. 83 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with our independent auditors on accounting and financial disclosure matters within the two-year period ended December 31, 2015. Item 9A. Controls and Procedures Evaluation of disclosure controls and procedures As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chairman and Chief Executive Officer and our Vice President and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d- 15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Based upon this evaluation, our Chairman and Chief Executive Officer and Vice President and Chief Financial Officer concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were effective. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. As required by Rule 13a-15(c) under the Exchange Act, management carried out an evaluation, with participation of our Chairman and Chief Executive Officer and Vice President and Chief Financial Officer, of the effectiveness of our internal control over financial reporting as of December 31, 2015. 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”). 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, 2015. Ernst & Young LLP, our independent registered public accounting firm, who audited the consolidated financial statements of the Company for the year ended December 31, 2015, also audited the effectiveness of the Company’s internal control over financial reporting under Auditing Standard No. 5 of the Public Company Accounting Oversight Board. Their report is set forth on page 47 of this Annual Report on Form 10-K and is incorporated by reference into this Item 9A. Changes in internal control over financial reporting There have been no changes in our internal control over financial reporting that occurred during the fourth quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 84 Part III Item 10. Directors, Executive Officers and Corporate Governance The information concerning directors, the identification of the audit committee and the audit committee financial expert and our code of ethics required under this item is incorporated herein by reference from the material contained under the captions “Election of Directors” and “Corporate Governance,” as applicable, in our definitive proxy statement for the 2016 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 Report on Form 10-K. Item 11. Executive Compensation The information relating to executive officer and director compensation and the compensation committee report contained under the heading “Executive Compensation” in the Proxy Statement is incorporated herein by reference. The information relating to compensation committee interlocks contained under the heading “Corporate Governance — Compensation Committee Interlocks and Insider Participation” in the Proxy Statement is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required under this item is incorporated herein by reference from the material contained under the caption “Principal Shareholders” in the Proxy Statement, except that information required by Item 201(d) of Regulation S-K can be found below. The following table provides information about our common stock that may be issued under our equity compensation plan as of December 31, 2015. Equity Compensation Plan Information Plan Category Equity compensation plans approved by security holders (1) Equity compensation plans not approved by security holders Total 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) 60,000 — 60,000 $ $ 19.40 — 19.40 590,033 — 590,033 (1) Includes our 2015 Equity and Incentive Compensation Plan. 85 Item 13. Certain Relationships and Related Transactions, and Director Independence The information required under this item is incorporated herein by reference to the material contained under the captions “Corporate Governance Director Independence” and “Transactions With Related Persons” in the Proxy Statement. Item 14. Principal Accountant Fees and Services The information required under this item is incorporated herein by reference to the material contained under the caption “Audit Committee — Independent Auditor Fee Information” in the Proxy Statement. 86 Part IV Item 15. Exhibits and Financial Statement Schedules (a)(1) The following financial statements are included in Part II, Item 8 of this annual report on Form 10-K: Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets — December 31, 2015 and 2014 Consolidated Statements of Income — Years Ended December 31, 2015, 2014 and 2013 Consolidated Statements of Comprehensive Income — Years Ended December 31, 2015, 2014 and 2013 Consolidated Statements of Shareholders’ Equity — Years Ended December 31, 2015, 2014 and 2013 Consolidated Statements of Cash Flows — Years Ended December 31, 2015, 2014 and 2013 Notes to Consolidated Financial Statements Selected Quarterly Financial Data (Unaudited) — Years Ended December 31, 2015 and 2014 (2) Financial Statement Schedules The following consolidated financial statement schedule of Park-Ohio Holdings Corp. is included in Item 8: Schedule II — Valuation and Qualifying accounts Page 46 47 48 49 50 51 52 53 82 83 All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are not applicable and, therefore, have been omitted. (3) Exhibits: The exhibits filed as part of this Annual Report on Form 10-K are listed on the Exhibit Index immediately preceding such exhibits and are incorporated herein by reference. 87 Pursuant to the requirements 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. SIGNATURES PARK-OHIO HOLDINGS CORP. (Registrant) /s/ Patrick W. Fogarty By: Name: Patrick W. Fogarty Title: Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Date: March 14, 2016 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated. * Edward F. Crawford * Patrick W. Fogarty * Chairman, Chief Executive Officer and Director (Principal Executive Officer) Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Matthew V. Crawford President, Chief Operating Officer and Director * Patrick V. Auletta Director * John D. Grampa Director * A. Malachi Mixon, III Director * Dan T. Moore, III Director * Ronna Romney * Director Steven H. Rosen Director * James W. Wert Director March 14, 2016 * 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 14, 2016 By: /s/ ROBERT D. VILSACK Robert D. Vilsack, Attorney-in-Fact 88 Exhibit 2.1 3.1 3.2 4.1 4.2 4.3 EXHIBIT INDEX ANNUAL REPORT ON FORM 10-K PARK-OHIO HOLDINGS CORP. For the Year Ended December 31, 2015 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 Form 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) 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) 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) Sixth Amended and Restated Credit Agreement, dated July 31, 2014, among Industries, 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, KeyBank National Association and First National Bank of Pennsylvania, as Co-Documentation 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 10.1 to the Form 10-Q of Park-Ohio Holdings Corp., filed on November 10, 2014, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 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 (filed as Exhibit 4.2 to the Form 10-K of Park-Ohio Holdings Corp., filed on March 16, 2015, SEC File No. 000-03134 and incorporated by reference and made a part hereof) Amendment No. 2 to Sixth Amended and Restated Credit Agreement, dated January 11, 2015, 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 (filed as Exhibit 10.1 to the Form 10-Q of Park-Ohio Holdings Corp., filed on May 11, 2015, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 89 Exhibit 4.4 4.5 10.1 10.2* 10.3* 10.4* 10.5* 10.6* 10.7* 10.8* 10.9* 10.10* Amendment No. 3 to Sixth Amended and Restated Credit Agreement, dated March 12, 2015, 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 (filed as Exhibit 10.2 to the Form 10-Q of Park-Ohio Holdings Corp., filed on May 11, 2015, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 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) 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) 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) 2015 Equity and Incentive Compensation Plan (filed as Exhibit 4.4 to Form S-8 of Park-Ohio Holdings Corp., filed on June 4, 2015, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 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) 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) 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) 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) Park-Ohio Industries, Inc. Annual Cash Bonus Plan (filed as Exhibit 10.2 to the Form 10-Q for Park-Ohio Holdings Corp, filed August 10, 2015, SEC File No. 000-03134 and incorporated by reference and made a part hereof) Form of Performance Based Restricted Share Agreement (filed as Exhibit 10.1 to Form 10-Q of Park-Ohio Holdings Corp. filed August 10, 2015, SEC File No. 000-03134 and incorporated by reference and made a part hereof) 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) 90 Exhibit 10.11* 10.12* 10.13 21.1 23.1 24.1 31.1 31.2 32.1 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE 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) 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 May 10, 2011, SEC File No. 000-03134 and incorporated by reference and made a part hereof) Confidential Seperation Agreement and General Release between Park-Ohio Industries, Inc. and Park-Ohio Holdings Corp. and W. Scott Emerick (filed as Exhibit 10.1 to the Form 10-Q of Park-Ohio Holdings Corp., filed on November 9, 2015, SEC File No. 000-03134 and incorporated by reference and made a part hereof) List of Subsidiaries of Park-Ohio Holdings Corp. Consent of Independent Registered Public Accounting Firm Power of Attorney Principal Executive Officer’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Principal Financial Officer’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certification requirement under Section 906 of the Sarbanes-Oxley Act of 2002 XBRL Instance Document XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document 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. 91 PRINCIPAL EXECUTIVE OFFICER’S CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 31.1 I, Edward F. Crawford, certify that: 1. I have reviewed this annual report on Form 10-K of Park-Ohio Holdings Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. /s/ Edward F. Crawford By: Name: Edward F. Crawford Title: Chairman and Chief Executive Officer Dated: March 14, 2016 PRINCIPAL EXECUTIVE OFFICER’S CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 31.2 I, Patrick W. Fogarty, certify that: 1. I have reviewed this annual report on Form 10-K of Park-Ohio Holdings Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. /s/ Patrick W. Fogarty By: Name: Patrick W. Fogarty Title: Vice President and Chief Financial Officer Dated: March 14, 2016 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32.1 In connection with the Annual Report of Park-Ohio Holdings Corp. (the “Company”) on Form 10-K for the period ended December 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report. By: /s/ Edward F. Crawford Name: Edward F. Crawford Title: Chairman and Chief Executive Officer By: /s/ Patrick W. Fogarty Name: Patrick W. Fogarty Title: Vice President and Chief Financial Officer Dated: March 14, 2016 The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document. THIS PAGE IS NOT PART OF PARKOHIO’S FORM 10-K FILING ParkOhio Performance Graph The following graph compares the cumulative total return of ParkOhio’s common stock for the five-year period ending December 31, 2014, against the cumulative total return of the S&P 500 SmallCap 600 Index (broad market comparison) and the NASDAQ Stock Market (US Companies) (line of business comparison). The graph and table assume $100 was invested on December 31, 2009, and that all dividends were reinvested. Comparison of Five Year Cumulative Total Returns $350 $300 $250 $200 $150 $100 $50 $0 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 Legend Symbol CRSP Total Returns Index For: 12/2010 12/2011 12/2012 12/2013 12/2014 12/2015 Park-Ohio Holdings Corp S&P Smallcap 600 Index NASDAQ Stock Market (US Companies) 100 100 100 85.32 101.02 100.51 101.91 117.51 118.87 280.6 166.05 165.68 303.56 175.61 191.04 179.23 172.15 205.76 / Š (cid:2) Notes: A. B. C. D. The lines represent monthly index levels derived from compounded daily returns that include all dividends. The indexes are reweighted daily, using the market capitalization on the previous trading day. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used. The index level for all series was set to $100.00 on 12/31/2009. Board of Directors Edward F. Crawford (a)(d) Chairman and Chief Executive Officer Matthew V. Crawford (a)(d) President and Chief Operating Officer Patrick V. Auletta (a) President Emeritus KeyBank National Association John D. Grampa (b) Retired Chief Financial Officer Materion Corporation A. Malachi Mixon III (d) Retired Chairman and Chief Executive Officer Invacare Corporation Officers Dan T. Moore III (c)(d)(e) Chief Executive Officer Dan T. Moore Co. Ronna Romney (c)(e) Director Molina Healthcare, Inc. Steven H. Rosen (b)(c) Co-Chief Executive Officer Resilience Capital Partners James W. Wert (b)(e) Chief Executive Officer and President CM Wealth Advisors, Inc. (a) Executive Committee (b) Audit Committee (c) Compensation Committee (d) Long-Range Planning Committee (e) Nominating and Corporate Governance Committee Edward F. Crawford Chairman and Chief Executive Officer Patrick W. Fogarty Vice President and Chief Financial Officer Matthew V. Crawford President and Chief Operating Officer Robert D. Vilsack Secretary and Chief Legal Officer Shareholder Information and Press Releases ParkOhio files Forms 10-K and 10-Q with the Securities and Exchange Commission. Shareholders may obtain copies of these reports, including ParkOhio’s Annual Report on Form 10-K for 2015, and copies of ParkOhio’s Annual Report to Shareholders, without charge, by accessing the Company’s website at www.pkoh.com or by writing or calling: Corporate Secretary Park-Ohio Holdings Corp. 6065 Parkland Boulevard Cleveland, Ohio 44124 (440) 947-2000 www.pkoh.com ParkOhio’s recent news releases may also be accessed through its website. ParkOhio World Headquarters Park-Ohio World Headquarters Please send your suggestions or recommendations to investor@pkoh.com or mail them to our headquarters. ecommendations to investor@pkoh.com Please send your suggestions or r or mail them to us at our headquarters . Park-Ohio Holdings Corp. ~ 6065 Parkland Boulevard ~ Cleveland, OH 44124 ~ 440-947-2000 ~ www.pkoh.com Park-Ohio Holdings Corp. ~ 6065 Parkland Boulevar w.pkoh.com d ~ Cleveland, OH 44124 ~ 440-947-2000 ~ ww