Park-Ohio Industries Inc.

03/05/2026 | Press release | Distributed by Public on 03/05/2026 14:09

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Our consolidated financial statements include the accounts of Park-Ohio and its subsidiaries. All intercompany transactions have been eliminated in consolidation.
EXECUTIVE OVERVIEW
General
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. Refer to Part 1, Item 1. Business for descriptions of our business segments.
On December 29, 2023, the Company completed the sale of its Aluminum Products business, which has been classified as a discontinued operation for all periods presented.
RESULTS FROM CONTINUING OPERATIONS
This section of this Annual Report on Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-over-year comparisons between 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024. The amounts below exclude discontinued operations.
2025 Compared with 2024 and 2024 Compared with 2023
2025 vs. 2024 2024 vs. 2023
2025 2024 2023 $ Change % Change $ Change % Change
(Dollars in millions, except per share data)
Net sales $ 1,599.1 $ 1,656.2 $ 1,659.7 $ (57.1) (3) % $ (3.5) - %
Cost of sales 1,327.9 1,374.8 1,388.3 (46.9) (3) % (13.5) (1) %
Gross margin 17.0 % 17.0 % 16.4 %
Selling, general and administrative ("SG&A") expenses 188.9 186.6 181.4 2.3 1 % 5.2 3 %
SG&A expenses as a percentage of net sales 11.8 % 11.3 % 10.9 %
Restructuring and other special charges 6.4 4.9 6.6 1.5 31 % (1.7) (26) %
Asset impairment charges 8.9 - - 8.9 * - *
Gains on sales of assets, net - (2.5) - 2.5 * (2.5) *
Other expense - 5.0 - (5.0) * 5.0 *
Operating income 67.0 87.4 83.4 (20.4) (23) % 4.0 5 %
Other components of pension and other postretirement benefits income, net 7.0 5.2 2.5 1.8 35 % 2.7 108 %
Interest expense, net (47.9) (47.9) (45.6) - - % (2.3) 5 %
Loss on extinguishment of debt (2.0) - - (2.0) * - *
Income from continuing operations before income taxes 24.1 44.7 40.3 (20.6) (46) % 4.4 11 %
Income tax expense (2.8) (4.9) (7.9) 2.1 (43) % 3.0 38 %
Income from continuing operations 21.3 39.8 32.4 (18.5) (46) % 7.4 23 %
Loss attributable to noncontrolling interests 3.8 2.7 1.0 1.1 41 % 1.7 (170) %
Income from continuing operations attributable to ParkOhio common shareholder $ 25.1 $ 42.5 $ 33.4 $ (17.4) (41) % $ 9.1 27 %
* Calculation not meaningful
2025 Compared with 2024
Net Sales
Net sales were $1,599.1 million in 2025 compared to $1,656.2 million in 2024, a decrease of 3.4%. The decrease was primarily due to lower customer demand in each of our business segments.
The factors explaining the changes in segment net sales for the year ended December 31, 2025 compared to the year ended December 31, 2024 are contained in the "Segment Results" section below.
Cost of Sales and Gross Margin
Cost of sales decreased 3.4% to $1,327.9 million in 2025 compared to $1,374.8 million in 2024. The decrease was primarily due to the decrease in net sales in for 2025 compared to 2024 and the impact of ongoing profit improvement initiatives. Gross margin was 17.0% in both periods.
SG&A Expenses
SG&A expenses increased to $188.9 million, or 11.8% of net sales, in 2025 from $186.6 million, or 11.3% of net sales, in 2024. The increases were driven by ongoing inflation, higher employee costs and fixed SG&A costs over lower sales levels.
Restructuring and Other Special Charges
During 2025, the Company recorded restructuring and other special charges of $6.4 million compared to $4.9 million in 2024. The charges in both years relate primarily to plant closure and consolidation activities and other initiatives in each of our business segments.
Asset Impairment Charges
During 2025, the Company recorded non-cash asset impairment charges in its Engineered Products segment totaling $8.9 millionto write-down the carrying value of certain assets, primarily at its forging operations in Arkansas.
Gains on Sales of Assets, net
During 2024, the Company sold real estate and other assets within its Engineered Products segment for cash proceeds of $9.3 million, resulting in a net gain of $0.8 million. The Company also sold real estate within its Assembly Components segment for cash proceeds of $2.2 million, resulting in a net gain of $1.7 million. The total net gain of $2.5 million is recorded on a separate line in the Consolidated Statements of Income and is excluded from segment income.
Other Components of Pension and Other Postretirement Benefits ("OPEB") Income, Net
Other components of pension and OPEB income, net was $7.0 million in 2025 compared to $5.2 million in 2024. The increase in 2025 was due to lower net actuarial losses impacting 2025 compared to 2024.
Interest Expense, Net
Interest expense, net increased to $47.9 in both 2025 and 2024. The Company had higher interest related to our 8.500% Senior Secured Notes due 2030 (the "2030 Notes") that were issued in July 2025 compared to the 6.625% Senior Notes due 2027 (the "2027 Notes"), offset by lower average outstanding debt balances in 2025 compared to a year ago and lower borrowing rates in 2025 compared to 2024 on its Seventh Amended and Restated Credit Agreement (the "Credit Agreement").
Loss on Extinguishment of Debt
During 2025, we issued the 2030 Notes and used the net proceeds, along with cash on hand, to redeem all of the outstanding 2027 Notes. In connection with this transaction, the Company recorded a $2.0 million loss on extinguishment of debt.
Income Tax Expense
Income tax expense in 2025 was $2.8 million on pre-tax income of $24.1 million, for an effective tax rate of 11.6%, which was less than the U.S. statutory rate of 21% primarily as a result of the tax benefit of the research and development tax credit.
Income tax expense in 2024 was $4.9 million on pre-tax income of $44.7 million, for an effective tax rate of 11.0%, which was less than the U.S. statutory rate of 21%, primarily as a result of the tax benefit of the research and development tax credit and the release of certain valuation allowances.
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 expenses, which include but are not limited to executive compensation and corporate office expenses. Segment operating income reconciles to consolidated income before income taxes by adjusting for corporate expenses; loss on extinguishment of debt; gains on sales of assets; other unallocated expenses; other components of pension and other postretirement benefits income, net; and interest expense, net.
Supply Technologies Segment
Year Ended December 31,
2025 2024 2023
(Dollars in millions)
Net sales $ 747.5 $ 775.8 $ 763.4
Segment operating income $ 72.3 $ 75.0 $ 59.0
Segment operating income margin 9.7 % 9.7 % 7.7 %
2025 Compared to 2024
Net sales decreased 3.6% in 2025 compared to 2024 due primarily to lower customer demand in certain end markets in our supply chain business, including power sports, heavy-duty truck and bus, industrial and agricultural equipment and aerospace and defense, partially offset by increases in the electrical and semiconductor end markets. Sales in our fastener manufacturing business were down 9.7% year-over-year, driven by overall market softness.
Segment operating income was $72.3 million in 2025 compared to $75.0 million in 2024. Segment operating income margin was 9.7% in both 2025 and 2024. In 2025, profit-improvement actions, including alignment of variable costs to lower demand levels, partially offset the impact of lower sales levels on profitability. In 2025 and 2024, charges related to restructuring and other special charges were $1.4 million and $0.2 million, respectively.
Assembly Components Segment
Year Ended December 31,
2025 2024 2023
(Dollars in millions)
Net sales $ 380.6 $ 398.7 $ 427.8
Segment operating income $ 19.1 $ 25.4 $ 33.4
Segment operating income margin 5.0 % 6.4 % 7.8 %
2025 Compared to 2024
Net sales decreased 4.5% in 2025 compared to 2024 due primarily to lower unit volumes in our fuel rail and extruded rubber products, customer production delays on new business launches, and favorable pricing that ended in 2024 on certain legacy programs.
Segment operating income was $19.1 million in 2025 compared to $25.4 million in 2024, and segment operating income margin decreased 140 basis points in 2025 compared to a year ago. The decreases were due to lower unit sales volumes. During 2025 and 2024, we incurred $2.8 million and $1.1 million, respectively, of charges related to restructuring activities.
Engineered Products Segment
Year Ended December 31,
2025 2024 2023
(Dollars in millions)
Net sales $ 471.0 $ 481.7 $ 468.5
Segment operating income $ 6.6 $ 17.7 $ 18.7
Segment operating income margin 1.4 % 3.7 % 4.0 %
2025 Compared to 2024
Net sales decreased 2.2% in 2025 compared to 2024 driven by lower sales in our forged and machined products business, driven by lower orders, order delays and closure of a small manufacturing operation in 2024, partially offset by a $5.8 million increase in sales in our industrial equipment business.
Segment operating income was $6.6 million in 2025 compared to $17.7 million 2024, and segment operating margin decreased 230 basis points in 2025 compared to 2024, driven by lower sales. In addition, restructuring and other special charges were $1.9 million in 2025 and $3.6 million in 2024. During 2025, an $8.9 million non-cash asset impairment charge was recorded to write-down the carrying value of certain assets, primarily at its forging operations in Arkansas.
Off-Balance Sheet Arrangements
We do not have off-balance sheet arrangements, financing or other relationships with unconsolidated entities or other persons, other than the letters of credit disclosed in Note 9 to the consolidated financial statements, included elsewhere herein.
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 our obligations under the contact terms are satisfied and control transfers to the customer, typically upon shipment. Revenue from certain long-term contracts is accounted for over time, when products are manufactured or services are performed, as control transfers under these
arrangements. We follow the input method since reasonably reliable estimates of revenue and costs of a contract can be made. See Note 2 of the consolidated financial statements included elsewhere herein for additional disclosures on revenue.
Allowance for Obsolete and Slow-Moving Inventory:Inventories are valued using first-in, first-out or the weighted-average inventory method; stated at the lower of cost or net realizable 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 allowances required.
Business Combinations:Business combinations are accounted for using the purchase method of accounting under Accounting Standards Codification ("ASC") 805, "Business Combinations." 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 including discount rates, rates of return on assets, long-term sales growth rates, and royalty rates.
Goodwill and Indefinite-Lived Intangible Assets: 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. 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. For 2025, 2024 and 2023, we performed quantitative testing for each reporting unit with a goodwill balance.
Our annual goodwill impairment analysis utilizes a quantitative approach comparing 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, an impairment charge is recorded. In applying the quantitative approach, we use the discounted cash flow method, a form of income approach, and the guideline public company method, a form of the market approach to estimate the fair value of the reporting unit. The income approach uses a number of factors, including future business plans, actual and forecasted operating results, and market data. The significant assumptions employed under this method include the weighted average cost of capital ("WACC"); revenue growth rates; and operating margins used to project future cash flows for a reporting unit. The WACCs 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. We validate our estimates of fair value under the income approach by considering the implied control premium and conclude whether that premium is reasonable based on recent market transactions.
The results of testing as of October 1, 2025, 2024 and 2023 for all reporting units confirmed that the estimated fair values exceeded carrying values, and no impairment existed as of those dates. Based on our 2025 annual impairment test, we determined that the fair value of our Forged and Machined Products Group reporting unit, which is included in our Engineered Products segment, exceeded its carrying value by approximately 15% as of the testing date. As such, we concluded that the goodwill of this reporting unit of $8.2 million as of that date was not impaired. This reporting unit was negatively impacted by equipment downtime and labor challenges, and while we believe that the current assumptions and estimates used in our goodwill testing are reasonable, supportable and appropriate, there can be no assurance that such assumptions and estimates will prove to be accurate predictions of future performance.
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. In 2025, 2024 and 2023, we utilized a quantitative approach using the royalty
relief method. The significant assumptions employed under this method include discount rates, revenue growth rates, including assumed terminal growth rates, and royalty rates. 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 intangible impairment testing, such that actual experience would need to be materially out of the range of expected assumptions in order for an impairment to remain undetected.
The results of testing as of October 1, 2025, 2024 and 2023 for all indefinite-lived intangible assets confirmed that the estimated fair value exceeded carrying values, and no impairment existed as of those dates.
See Notes 8 and 9 of the consolidated financial statements included elsewhere herein 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 if it is more likely than not that all or some portion of a deferred tax asset will be realized, we consider the following factors: future reversals of existing taxable temporary differences; taxable income in prior years if carryback is permitted under the tax law; tax planning strategies that could accelerate taxable income; and future taxable income. Based on these factors, when we have determined that the realizability of certain domestic and foreign deferred tax assets is more likely than not to not be realized, a valuation allowance has been established.
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 annual effective income tax rates and related income tax liabilities may differ materially from our interim estimated effective tax rates and related income tax liabilities. Any resulting differences are recorded in the period they become known.
Pension Plans:We and our subsidiaries have pension plans, principally noncontributory defined benefit or noncontributory defined contribution 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 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 5.24% for 2025, compared with 5.55% in 2024. For the other postretirement benefit plan, the rate is 4.87% for 2025 and 5.43% for 2024. 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 7.50% for both 2025 and 2024, respectively. 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.
Legal Contingencies:We are involved in a variety of claims, suits, investigations and administrative proceedings with respect to commercial, premises liability, product liability, employment, personal injury and environmental matters arising from the ordinary course of business. 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 no amount within the range is a better estimate than any other amount, we accrue the minimum amount in 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.
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, 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, 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 in 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, 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 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, 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, including the conflicts between Russia and Ukraine and in the Middle East, or political unrest, including the rising tension between China and the United States; 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; and the other factors we describe under "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.
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