Park-Ohio Holdings Corporation

05/07/2026 | Press release | Distributed by Public on 05/07/2026 08:11

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Our condensed consolidated financial statements include the accounts of Park-Ohio Holdings Corp. and its subsidiaries (collectively, "we," "our," or the "Company"). All significant intercompany transactions have been eliminated in consolidation.
EXECUTIVE OVERVIEW
We are a diversified international company providing world-class customers with a supply chain management outsourcing service, capital equipment used on their production lines, and manufactured components used to assemble their products. We operate through three reportable segments: Supply Technologies, Assembly Components and Engineered Products.
Supply Technologies 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; power sports and recreational equipment; aerospace and defense; semiconductor equipment; electrical distribution and controls; consumer electronics; bus and coaches; automotive; agricultural and industrial equipment; HVAC; lawn and garden; plumbing; and medical devices.
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 route fuel from the gas cap to the gas tank; flexible multi-layer plastic and rubber assemblies used to transport fuel from the vehicle's gas tank and then, at extreme high pressure, to the engine's fuel injector nozzles. Our product offerings include gasoline direct injection systems and fuel filler assemblies, and industrial hose and injected molded rubber and plastic components. Our products are primarily used in the following industries: including automotive and light-vehicle; agricultural equipment; construction equipment; heavy-duty truck; and bus.
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, inverters 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 following industries: ferrous and non-ferrous metals; coatings; forging; foundry; heavy-duty truck; construction equipment; automotive; oil and gas; rail; aerospace and defense; and power generation.
Sales and operating income for these three segments are provided in Note 4 to the condensed consolidated financial statements, included elsewhere herein.
As part of its ongoing portfolio optimization strategy, the Company is engaging in a formal review of strategic alternatives for its Southwest Steel Processing ("SSP") business, including a potential sale or other transaction. SSP is part of our Forged and Machined Products group within the Engineered Products segment. This review reflects our continued focus on aligning capital and resources toward higher-growth, higher-margin opportunities across our portfolio. The Company has not set a deadline or definitive timetable for the completion of the strategic alternatives review process, and there can be no assurance that this review process will result in any transaction or particular outcome.
RESULTS OF CONTINUING OPERATIONS
Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025
Three Months Ended March 31,
2026 2025 $ Change % Change
(Dollars in millions, except per share data)
Net sales $ 421.0 $ 405.4 $ 15.6 3.8 %
Cost of sales 348.3 337.3 11.0 3.3 %
Selling, general and administrative ("SG&A") expenses 51.7 48.2 3.5 7.3 %
SG&A expenses as a percentage of net sales 12.3 % 11.9 %
Restructuring and other special charges 1.3 1.0 0.3 30.0 %
Operating income 19.7 18.9 0.8 4.2 %
Other components of pension and other postretirement benefits income, net
2.1 1.8 0.3 16.7 %
Interest expense, net (12.3) (11.0) (1.3) 11.8 %
Income from continuing operations before income taxes 9.5 9.7 (0.2) (2.1) %
Income tax expense (1.6) (1.9) 0.3 (15.8) %
Income from continuing operations 7.9 7.8 0.1 1.3 %
Loss attributable to noncontrolling interests 0.3 0.7 (0.4) (57.1) %
Income from continuing operations attributable to Park-Ohio Holdings Corp. common shareholders $ 8.2 $ 8.5 $ (0.3) (3.5) %
Earnings from continuing operations per common share attributable to Park-Ohio Holdings Corp. common shareholders:
Basic:
Continuing operations $ 0.59 $ 0.63 $ (0.04) (6.3) %
Diluted:
Continuing operations $ 0.58 $ 0.61 $ (0.03) (4.9) %
Net Sales
Net sales increased 3.8% to $421.0 million in the first three months of 2026 compared to $405.4 million in the same period in 2025. This increase was primarily due to higher customer demand in each of our business segments.
The factors explaining the changes in segment net sales for the three months ended March 31, 2026 compared to the corresponding 2025 period are contained in the "Segment Results" section below.
Cost of Sales and Gross Margin
Cost of sales increased to $348.3 million in the first three months of 2026 compared to $337.3 million in the same period in 2025, driven by the increase in net sales described above. Gross margin was 17.3% in the 2026 period compared to 16.8% in the corresponding 2025 period. The year-over-year gross margin increase was driven by the increase in net sales described above and ongoing profit-enhancement activities throughout the company.
SG&A Expenses
SG&A expenses were $51.7 million in the first three months of 2026, compared to $48.2 million in the same period in 2025. As a percentage of net sales, SG&A expenses were 12.3% in the first three months of 2026 compared to 11.9% in the comparable period in 2025. The increases were driven by ongoing inflation and higher employee costs.
Restructuring and Other Special Charges
During the first three months of 2026, the Company recorded $1.3 million in connection with restructuring and other special charges, which included $0.4 million in our Assembly Components segment, $0.5 million in our Engineered Products segment and $0.4 million at Corporate.
During the first three months of 2025, the Company recorded $1.0 million in connection with restructuring and other special charges, primarily in our Engineered Products segment.
Other Components of Pension and OPEB Income, Net
Other components of pension and OPEB income, net was $2.1 million in the first three months of 2026 compared to $1.8 million in the corresponding period in 2025. This increase was due to higher return on plan assets in 2026 compared to 2025.
Interest Expense, Net
Interest expense, net was $12.3 million in the first three months of 2026 compared to $11.0 million in the 2025 period. The increase was due primarily to the higher rate of 8.500% on our 2030 Notes compared to the 6.625% Senior Notes due 2027 (the "2027 Notes") and higher average outstanding debt balances in the 2026 period compared to the same period a year ago, partially offset by lower rates on our revolving credit facility.
Income Tax Expense
In the three months ended March 31, 2026, income tax expense was $1.6 million on pre-tax income from continuing operations of $9.5 million, representing an effective income tax rate of 17%. In the three months ended March 31, 2025, income tax expense was $1.9 million on pre-tax income of $9.7 million, representing an effective income tax rate of 20%. The rate for the three months ended March 31, 2026 is lower than the statutory rate and the corresponding 2025 rate due primarily to increased federal research and development tax credit benefit.
SEGMENT RESULTS
For purposes of measuring business segment performance, the chief operating decision maker utilizes segment operating income, which is defined as revenues less expenses identifiable to the product lines within each segment. The Company does not allocate items that are non-operating; unusual in nature; or corporate costs, which include but are not limited to executive compensation and corporate office costs. Segment operating income reconciles to consolidated income before income taxes by adjusting for corporate costs; other components of pension and other postretirement benefits income, net; and interest expense, net.
Supply Technologies Segment
Three Months Ended March 31,
2026 2025
(Dollars in millions)
Net sales $ 195.1 $ 187.8
Segment operating income $ 17.5 $ 17.8
Segment operating income margin 9.0 % 9.5 %
Net sales increased 3.9% in the three months ended March 31, 2026 compared to the 2025 period driven by higher demand in the power sports, semiconductor, aerospace and defense, electrical and agriculture end markets, as well as higher tariffs in the 2026 first quarter compared to last year's quarter.
Segment operating income was steady year-over-year, finishing at $17.5 million in the three months ended March, 31 2026 compared to $17.8 million in the 2025 period. Segment operating income margin was 50 basis points lower in the 2026 period compared to the same period a year ago due primarily to higher tariffs in the 2026 period, which impacted gross margins.
Assembly Components Segment
Three Months Ended March 31,
2026 2025
(Dollars in millions)
Net sales $ 100.2 $ 96.9
Segment operating income $ 4.9 $ 5.3
Segment operating income margin 4.9 % 5.5 %
Net sales increased 3.4% in the three months ended March 31, 2026 compared to the 2025 period, due primarily to increased unit volumes on new business launched throughout 2025.
The decrease in operating income and margin in the 2026 period was due to higher restructuring and other special charges, which increased by $0.2 million in the 2026 period compared to the 2025 period. Excluding these charges, operating income was steady year-over-year.
Engineered Products Segment
Three Months Ended March 31,
2026 2025
(Dollars in millions)
Net sales $ 125.7 $ 120.7
Segment operating income $ 5.7 $ 3.8
Segment operating income margin 4.5 % 3.1 %
Net sales increased 4.1% in the 2026 period compared to the 2025 period. The increase was driven by higher customer demand in the defense, steel production, mining, power generation and electrification-related end markets.
Segment operating income in the 2026 period increased by $1.9 million compared to the corresponding 2025 period, and operating margins in the 2026 first quarter were up 140 basis points compared to the corresponding 2025 quarter, driven by the higher sales and operational improvement in both our capital equipment and forged and machined products groups.
Liquidity and Capital Resources
The following table summarizes the major components of cash flow:
Three Months Ended March 31,
2026 2025 $ Change
Net cash (used in) provided by: (In millions)
Operating activities $ (7.8) $ (10.0) $ 2.2
Investing activities (12.5) (9.5) (3.0)
Financing activities 22.5 20.3 2.2
Discontinued operations (0.1) (0.2) 0.1
Effect of exchange rate changes on cash (0.2) 0.8 (1.0)
Increase in cash and cash equivalents $ 1.9 $ 1.4 $ 0.5
Operating Activities
In the three months ended March 31, 2026, we utilized cash of $7.8 million compared to $10.0 million in the same period of 2025. Cash flow from operating activities improved in 2026 due to lower working capital needs.
Investing Activities
Capital expenditures of $12.5 million and $9.5 million in the three months ended March 31, 2026 and 2025, respectively, were primarily to provide increased capacity and automation for future growth, to maintain existing operations and for information system implementations.
Financing Activities
During the three months ended March 31, 2026, we had net debt borrowings of $24.3 million to fund capital expenditures and working capital needs. In addition, the Company made cash dividend payments to shareholders totaling $1.8 million.
During the three months ended March 31, 2025, we had net debt borrowings of $22.1 million to fund capital expenditures and working capital needs. In addition, the Company made cash dividend payments to shareholders totaling $1.8 million.
We do not have off-balance sheet arrangements, financing or other relationships with unconsolidated entities or other persons, other than the letters of credits disclosed in Note 8 to the condensed consolidated financial statements, included elsewhere herein.
Liquidity
Our liquidity needs are primarily for working capital, capital expenditures, dividends and acquisitions. Our primary sources of liquidity have been funds provided by operations, funds available from existing bank credit arrangements and the sale of our debt securities. Our existing financial resources (working capital, available bank borrowing arrangements and our at-the-market program) and anticipated cash flow from operations are expected to be adequate to meet anticipated cash requirements for at least the next twelve months and the foreseeable future thereafter, including but not limited to our ability to maintain current operations and fund capital expenditure requirements, service our debt, pursue acquisitions, pay dividends and repurchase common shares. For more information about our at the market program and other sales of common stock, see Note 13, "Weighted-Average Number of Shares Used in Computing Earnings Per Share," to the condensed consolidated financial statements, included elsewhere herein.
As of March 31, 2026, we had total liquidity of $199.0 million, which included $46.7 million of cash and cash equivalents and $152.3 million of unused borrowing availability under our credit agreements, which includes $8.8 million of suppressed availability.
The Company had cash and cash equivalents held by foreign subsidiaries of $36.6 million at March 31, 2026 and $34.1 million at December 31, 2025. We do not expect restrictions on repatriation of cash held outside the U.S. to have a material effect on our overall liquidity, financial condition or results of operations for the foreseeable future.
The Company has two components to its assertion regarding reinvestment of foreign earnings outside of the United States. First, for all foreign subsidiaries except RB&W Corporation of Canada ("RB&W"), all earnings are permanently reinvested outside of the United States. Second, for RB&W, dividend distributions may be made, but only to the extent of current earnings in excess of cash required to fund its business operations; all accumulated earnings are permanently reinvested.
Senior Notes
In July 2025, Park-Ohio completed the sale, in a private offering, of $350.0 million aggregate principal amount of the 2030 Notes bearing interest 8.500%. The net proceeds from the offering of the 2030 Notes, along with cash on hand, were used to redeem in full the 2027 Notes and pay related fees and expenses. Interest on the Notes is payable semi-annually in arrears on January 31 and July 31 of each year.
Credit Agreement
In July 2025, Park-Ohio amended its Seventh Amended and Restated Credit Agreement (the "Credit Agreement"), in order to, among other things, (a) extend the maturity date to the fifth anniversary from the closing of the revolving credit facility amendment, (b) permit the issuance of the 2030 Notes and (c) permit the 2030 Notes to be secured by (i) a first-priority lien on the substantially all of the U.S. equipment (including machinery) of the Park-Ohio and the Park-Ohio's existing and future domestic subsidiaries (the "Guarantors") that guarantee debt under the Credit Agreement (the "Notes Priority Collateral") and (ii) a second-priority lien (junior to the Credit Agreement) on substantially all of the U.S. assets of Park-Ohio and the Guarantors (including the 65% pledge of the foreign equity owned by the Guarantors), other than assets constituting Notes Priority Collateral, securing the revolving credit facility (the "ABL Priority Collateral"). The Credit Agreement provides for a revolving credit facility in the amount of $405.0 million, including a $40.0 million Canadian revolving subcommitment and a European revolving subcommitment in the amount of $30.0 million. Pursuant to the Credit Agreement, Park-Ohio has the option to increase the availability under the revolving credit facility.
Finance Leases
As of March 31, 2026, the Company had finance leases totaling $16.0 million.
Covenants
The future availability of bank borrowings under the revolving credit facility provided by the Credit Agreement is based on (1) our calculated availability under the Credit Agreement and (2) if such calculated availability decreases below $50.625 million, our ability to meet a debt service ratio covenant. If our calculated availability is less than $50.625 million, our debt service coverage ratio must be greater than 1.0. At March 31, 2026, our calculated availability under the Credit Agreement was $108.4 million; therefore, the debt service ratio covenant did not apply.
Failure to maintain calculated availability of at least $50.625 million and meet the debt service ratio covenant could materially impact the availability and interest rate of future borrowings. Our debt service coverage ratio could be materially impacted by negative economic trends. To make certain permitted payments as defined under the Credit Agreement, including but not limited to acquisitions and dividends, we must meet defined availability thresholds ranging from $37.5 million to $50.625 million, and a defined debt service coverage ratio of 1.15.
As our calculated availability under the Credit Agreement was above $50.625 million, we were also in compliance with the other covenants contained in the revolving credit facility as of March 31, 2026. While we expect to remain in compliance throughout 2026, declines in sales volumes in the future, including due to the current macroeconomic conditions, 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 be unable to pay their accounts payable to us on a timely basis or at all, which could make our accounts receivable ineligible for purposes of the revolving credit facility and could reduce our borrowing base and our ability to borrow under such facility.
Dividends
The Company declared and paid dividends to shareholders of $1.8 million during the three months ended March 31, 2026. On April 17, 2026, the Company's Board of Directors declared a quarterly dividend of $0.125 per common share. The dividend will be paid on May 14, 2026 to shareholders of record as of the close of business on May 1, 2026 and will result in a cash outlay of approximately $1.8 million. Although we currently intend to pay a quarterly dividend on an ongoing basis, all future dividend declarations will be at the discretion of our Board of Directors and dependent upon then-existing conditions, including our operating results and financial condition, capital requirements, contractual restrictions, business prospects and other factors that our Board of Directors may deem relevant.
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 businesses. Such variability is particularly evident in our capital equipment business, included in the Engineered Products segment, which typically ships large systems at a relatively lower pace than our other businesses.
Critical Accounting Policies
Our critical accounting policies are described in "Item. 7 Management's Discussion and Analysis of Financial Condition and Results of Operations," and in the notes to our consolidated financial statements for the year ended December 31, 2025, both contained in our Annual Report on Form 10-K for the year ended December 31, 2025. There were no new critical accounting policies or updates to existing critical accounting policies as a result of new accounting pronouncements in this Quarterly Report on Form 10-Q.
The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the condensed consolidated financial statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.
Forward-Looking Statements
This Quarterly Report on Form 10-Q 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, including statements regarding future performance of the Company, that are subject to 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 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: the outcome of our strategic review of the SSP business; the impact supply chain and logistic issues have on our business, results of operations, financial position and liquidity; 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; the impact of labor disturbances affecting our customers; raw material availability and pricing; fluctuations in energy costs; component part availability and pricing; changes in our relationships with customers and suppliers; the financial condition of our customers, including the impact of any bankruptcies; our ability to successfully integrate recent and future acquisitions into existing operations; the amounts and timing, if any, of purchases of our common stock; changes in general economic conditions such as inflation rates, interest rates, tax rates, unemployment rates, higher labor and healthcare costs, recessions and changing government policies, laws and regulations, including those related to the current global uncertainties and crises, such as tariffs and surcharges; adverse impacts to us, our suppliers and customers from acts of terrorism or hostilities, or geopolitical unrest; public health issues, including the outbreak of infectious diseases and any impact on our facilities and operations and our customers and suppliers; 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 or import and export controls and other trade barriers; 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; 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 timing and amount of any such dividends; and the other factors we describe under "Item 1A. Risk Factors" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025. 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.
Park-Ohio Holdings Corporation published this content on May 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 07, 2026 at 14:12 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]