##### 



SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2003

OR

o

| |                                                         
| | --------------------------------------------------------
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the transition period
from
to

Commission file number 0-3134

PARK-OHIO INDUSTRIES, INC.

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                     
|------------------------------------------------------------------ |  | ------------------------------------
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Ohio                                                               |  | 34-6520107                          
|                                                                   |  |                                     
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                                  
|23000 Euclid Avenue                                                |  |                                     
|Cleveland, Ohio                                                    |  | 44117                               
|                                                                   |  |                                     
|(Address of principal executive
    offices)                       |  | (Zip Code)                          

Registrants telephone number, including area code:
(216) 692-7200

Securities registered pursuant to Section 12(b) of the
Act:

None

Securities registered pursuant to Section 12(g) of the
Act:

None

Pursuant to a corporate reorganization effective
June 15, 1998, Park-Ohio Industries, Inc. became a
wholly-owned subsidiary of Park-Ohio Holdings Corp.

The registrant meets the
conditions set forth in General Instructions I 1(a) and (b)
of Form 10-K and is therefore filing this form with the
reduced disclosure format.

Indicate by check mark whether the
registrant (1) has filed 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
x  No
o

Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K 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.  x

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2).  Yes
o  No
x

All of the outstanding stock of
the registrant is held by Park-Ohio Holdings Corp. As of
March 25, 2004, 100 shares of the registrants common
stock $1 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None



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Part I

Item 1. Business

The Company

Park-Ohio Industries, Inc. (Park-Ohio) a
wholly-owned subsidiary of Park-Ohio Holdings Corp.
(Holdings) was incorporated as an Ohio corporation
in 1998. Park-Ohio primarily through the subsidiaries is a
leading provider of supply chain logistics services and a
manufacturer of highly engineered products. Reference herein to
the Company includes, where applicable, Holdings,
Park-Ohio and its direct and indirect subsidiaries.

The Company operates through three segments, Integrated
Logistics Solutions (ILS), Aluminum Products and
Manufactured Products. ILS is a leading supply chain logistics
provider of production components to large, multinational
manufacturers. In connection with the supply of such production
components, ILS provides a variety of value-added,
cost-effective supply chain management services. The principal
customers of ILS are in the heavy-duty truck, semiconductor
equipment, industrial equipment, aerospace and defense,
electrical controls, heating, ventilating and air-conditioning
(HVAC), vehicle parts and accessories, appliances
and lawn and garden equipment industries. Aluminum Products
manufactures cast aluminum components for automotive,
agricultural equipment, heavy-duty truck and construction
equipment manufacturers. Aluminum Products also provides
value-added services such as design and engineering, machining
and assembly. Manufactured Products operates a diverse group of
niche manufacturing businesses that design and manufacture a
broad range of high quality products engineered for specific
customer applications. The principal customers of Manufactured
Products are original equipment manufacturers (OEMs)
and end-users in the aerospace, automotive, steel, forging,
railroad, truck, oil, food processing and consumer appliance
industries. As of December 31, 2003, the Company employed
approximately 2,500 persons.

Operations

The following chart highlights the Companys three business
segments, the primary industries they serve and the key products
they sell.

|                               |  |                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                              |  |            |       | 
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | ----- | 
|                               |  |                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                              |  | Net Sales 
|                               |  |                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                              |  | for the   
|                               |  |                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                              |  | Year Ended
|                               |  |                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                              |  | Dec. 31,  
|Segment                        |  | Primary Industries Served                                                                                                                                                                                          |  | Selected Products/Services                                                                                                                                                                                                   |  | 2003      
|                               |  |                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                              |  |           
|                               |  |                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                              |  | (millions)
|INTEGRATED LOGISTICS SOLUTIONS |  | Heavy-duty truck, semiconductor equipment,
    industrial equipment, aerospace and defense, electrical
    controls, HVAC, vehicle parts and accessories, appliances, lawn
    and garden equipment and automotive |  | Cross-industry supply chain management services;
    planning, implementing and managing the physical flow of
    production components to the plant floor point of use for large
    multi-national manufacturing companies |  | $          | 377.6 | 
|ALUMINUM PRODUCTS              |  | Automotive, agricultural equipment, heavy-duty
    truck and construction equipment                                                                                                                                |  | Engineering, casting and machining of aluminum
    components                                                                                                                                                                |  | $          | 90.1  | 

1



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|                      |  |                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                        |  |            |       | 
|--------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | ----- | 
|                      |  |                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                        |  | Net Sales 
|                      |  |                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                        |  | for the   
|                      |  |                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                        |  | Year Ended
|                      |  |                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                        |  | Dec. 31,  
|Segment               |  | Primary Industries Served                                                                                                                               |  | Selected Products/Services                                                                                                                                                                                                                                                             |  | 2003      
|                      |  |                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                        |  |           
|                      |  |                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                        |  | (millions)
|MANUFACTURED PRODUCTS |  | Aerospace, automotive, steel, forging, foundry, railroad,
    construction equipment, truck, oil, coatings, food processing,
    and consumer appliance |  | Engineering and manufacturing of the following: forged and
    machined products such as aircraft landing gears, locomotive
    crankshafts and camshafts; induction heating and melting
    systems; industrial rubber products; oil pipe threading systems;
    and industrial ovens |  | $          | 156.6 | 

Integrated Logistics Solutions

ILS is a leading provider of cross-industry supply chain
management services and specializes in the process of planning,
implementing, and managing the physical flow of production
components to large multinational manufacturing companies from
the point of manufacturing to the point of use. ILS generated
net sales of $377.6 million, or 61% of the Companys
net sales, for the year ended December 31, 2003. ILS
operates facilities, throughout the United States, Asia, Canada,
Puerto Rico, Mexico and Europe. ILS continues to consolidate its
network of branches to reduce costs and serve its customers more
efficiently.

Large, multinational manufacturing companies continue to make it
a priority to reduce their total cost of production components.
Administrative and overhead costs to source, plan, purchase,
quality-assure, inventory and handle production components
comprise a large portion of total cost. ILS has the size,
experience, highly-customized computer system and focus to
reduce these costs substantially while providing reliable
just-in-time delivery directly to the point of use.

Products and Services.Supply chain management services,
which is ILS primary focus for future growth, involves
offering customers comprehensive, on-site management for most of
their production component needs. 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, ILS delivers an increasingly broad range of higher
cost production components including valves, fittings, steering
components and many others. Supply chain management customers
receive various value-added services, such as part usage and
cost analysis, supplier selection, quality assurance, bar
coding, product packaging and tracking, just-in-time delivery,
electronic billing services and ongoing technical support. ILS
also provides engineering and design services to its customers.
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. Recently, ILS also provides
as an additional service, spare parts and aftermarket products
to the final end user of its customers products.

Supply chain management services are typically provided to
customers pursuant to sole-source supply chain services
contracts. These agreements enable ILS customers to both
reduce procurement costs and better focus on their core
manufacturing competencies by: (i) significantly reducing
the cost of production component procurement by outsourcing many
internal purchasing, quality assurance and inventory fulfillment
responsibilities; (ii) reducing the amount of working
capital invested in inventory; (iii) achieving purchasing
efficiencies and cost reductions as a result of supplier
consolidation; and

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ILS 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. ILS
produces both standard items and specialty products to customer
specifications, which are used in large volumes by customers in
the automotive, truck and railroad industries.

Markets and Customers.In 2003, approximately 88% of
ILS net sales were to domestic customers. Remaining sales
were primarily to manufacturing facilities of large,
multinational customers located in Asia, Canada, Mexico and
Europe. Supply chain 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.

ILS markets and sells its services to over 7,500 customers
domestically and internationally. The principal markets served
by ILS are heavy-duty truck, semiconductor equipment, industrial
equipment, aerospace and defense, electrical controls, HVAC,
vehicle parts and accessories, appliances, and lawn and garden
equipment industries. The five largest customers, within which
ILS sells through sole-source contracts to multiple operating
divisions or locations, accounted for approximately 32% of sales
of ILS in 2003, with Navistar International Corp.
(Navistar) representing 15% of segment sales. Two of
the five largest customers are in the heavy-duty truck industry.
The loss of the Navistar account or any two of the remaining top
five customers could have a material adverse effect on this
segment.

Competition.There are a limited number of companies who
compete with ILS for supply chain service contracts. ILS
competes primarily on the basis of its value-added services,
which includes sourcing, engineering and delivery capabilities,
geographic reach, extensive product selection, price and
reputation for high service levels with primarily domestic
competitors who are capable of providing supply chain logistics
services.

Aluminum Products

The Aluminum Products segment generated net sales of
$90.1 million, or 14% of the Companys net sales, for
the year ended December 31, 2003. Management believes
Aluminum Products is one of the few part suppliers that has the
capability to provide a wide range of high volume, high quality
permanent mold, sand-cast, die-cast and lost-foam products.
Aluminum Products casts and machines these products at three
plants in two states. During the past two years, Aluminum
Products substantially improved its operating efficiency by
consolidating manufacturing facilities.

Aluminum Products cast aluminum parts are manufactured for
automotive, agricultural equipment, heavy-duty truck and
construction equipment OEMs primarily located in North America.
Aluminum Products principal products include: transmission
pump housings, intake manifolds, planetary pinion carriers, oil
filter adapters, clutch retainers, bearing cups, brackets, oil
pans and flywheel spacers. Aluminum Products also provides
value-added services such as machining, drilling, tapping and
part assembly. Although these parts are lightweight, they
possess high durability and integrity characteristics even under
extreme pressure and temperature conditions. Demand by OEMs for
aluminum castings has increased in recent years as OEMs have
sought lighter alternatives to heavier steel and iron
components. Lighter aluminum cast components increase an
automobiles fuel efficiency without decreasing structural
integrity. Management believes this replacement trend will
continue as end-users and government standards regarding
automotive fuel efficiency become increasingly stringent. The
five largest customers, of which Aluminum Products sells to
multiple operating divisions through sole source

3



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Manufactured Products

The Manufactured Products segment includes businesses involved
in the manufacturing of induction systems and other capital
equipment, rubber products, and forged and machined products.
Manufactured Products generated net sales of
$156.6 million, or 25% of the Companys net sales, for
the year ended December 31, 2003. The five largest
customers, within which Manufactured Products sells primarily
through sole-source contracts to multiple operating divisions,
accounted for approximately 17% of Manufactured Products sales
in 2003. The loss of business from any one of these customers
would not have a material adverse effect on this segment.

The Companys induction heating and melting business, Ajax
Tocco Magnethermic (Ajax Tocco), specializes in the
engineering, construction, service, and repair of induction
systems primarily for the steel, coatings, forging, foundry,
automotive and construction equipment industries. Ajax
Toccos induction 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 half of Ajax Toccos revenue is derived from
the sale of replacement parts and provision of field service,
primarily for the installed base of its own products. The
Company also produces other capital equipment including pipe
threading equipment and related parts for the oil drilling
industry, and complete oven systems that combine heat processing
and curing technologies with material handling and conveying
methods. The Company also engineers and installs mechanical
forging presses for the automotive and truck manufacturing
industries, and sells spare parts and provides field service for
the large existing base of mechanical forging presses and
hammers in North America. These capital equipment units 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.

The Company manufactures injection molded rubber and silicone
products for use in automotive and industrial applications. The
rubber products facilities manufacture products for customers in
the automotive, food processing and consumer appliance
industries. Their products include wire harnesses, shock and
vibration mounts, spark plug boots and nipples and general
sealing gaskets. During 2002, the Company reduced rubber
products costs and discontinued underperforming products
by selling one business unit and closing one other manufacturing
plant. The rubber products operating units compete primarily on
the basis of price and product quality with other domestic
small- to medium-sized manufacturers of injection molded rubber
and silicone products.

The Company manufactures forged and machined products produced
from closed-die metal forgings of up to 6,000 pounds. These
products include crankshafts, aircraft structural components
such as landing gears and rail products such as railcar center
plates. Aerospace forgings are sold primarily to machining
companies, and sub-assemblers who finish the products for sale
to OEMs. The Company also machines, induction hardens and
surface finishes crankshafts and camshafts used primarily in
locomotives. In fourth quarter 2003, the Company decided to shut
down its locomotive crankshaft forging plant, and entered into a
long-term supply contract to purchase these forgings at a more
favorable price from a third-party supplier. The 2003
restructuring is expected to increase both profitability and
cash flow by approximately $15.0 million over the next five
years. Forged rail products are sold primarily to railcar
builders and maintenance providers. Forged and machined products
are sold to a wide variety of

4



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Sales and Marketing

ILS markets its products and services in the United States,
Mexico, Canada and Europe, 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. Aluminum Products primarily markets and sells
its products in North America through internal sales personnel.
Manufactured 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 Asia, Latin
America and North 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

ILS purchases substantially all of its production components
from third-party suppliers. Aluminum Products and Manufactured
Products purchase substantially all of their raw materials,
principally metals and certain component parts incorporated into
their products, from third-party suppliers and manufacturers.
Management believes that raw materials and component parts other
than certain specialty products are available from alternative
sources. ILS has multiple sources of supply for its products.
Approximately 25% of ILS delivered components are
purchased from suppliers in foreign countries, primarily Taiwan,
South Korea and China. The Company is dependent upon the ability
of such suppliers to meet stringent quality and performance
standards and to conform to delivery schedules. Most raw
materials required by Aluminum Products and Manufactured
Products are commodity products available from several domestic
suppliers.

Customer Dependence

The Company has thousands of customers who demand quality,
delivery and service. Numerous customers have recognized our
performance by awarding the Company with supplier quality
awards. Navistar is the only customer accounting for more than
10% of consolidated sales within the past three years (only in
the year 2003).

Backlog

Management believes that backlog is not a meaningful measure for
ILS, as a majority of ILS customers require just-in-time
delivery of production components. Management believes that
Aluminum Products and Manufactured Products 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.

Environmental Regulations

The Company is subject to numerous federal, state and local laws
and regulations designed to protect public health and the
environment (Environmental Laws), particularly with
regard to discharges and emissions, as well as handling,
storage, treatment and disposal, of various substances and
wastes. 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

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In general, the Company has not experienced difficulty in
complying with Environmental Laws in the past, and compliance
with Environmental Laws has not had a material adverse effect on
the Companys financial condition, liquidity and results of
operations. The Companys capital expenditures on
environmental control facilities were not material during the
past five years and such expenditures are not expected to be
material to the Company in the foreseeable future.

The Company has 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. The Company
is 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, the Companys share
of such costs has not been material and, based on available
information, the Company does not expect its exposure at any of
these locations to have a material adverse effect on its results
of operations, liquidity or financial condition.

Information as to Industry Segment Reporting and Geographic
Areas

The information contained under the heading of Note
LIndustry Segments of notes to consolidated
financial statements included herein, relating to (i) net
sales, income (loss) before income taxes and change in
accounting principles, identifiable assets and other information
by industry segment and (ii) net sales and assets by
geographic region for the years ended December 31, 2003,
2002, and 2001 is incorporated herein by reference.

Recent Developments

The information contained under the heading of Note
DAcquisitions and Dispositions and Note
NRestructuring and Unusual Charges of notes to
consolidated financial statements included herein, is
incorporated by reference.

Available Information

The Company files annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and other
information with the Securities and Exchange Commission
(SEC). The public can obtain copies of these
materials by visiting the SECs Public Reference Room at
450 Fifth Street, NW, 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, the Company makes copies available to the public, free
of charge.

Item 2. Properties

The Companys operations include numerous manufacturing and
supply chain logistics services facilities located in
twenty-three states in the United States, and in Puerto Rico, as
well as in Asia, Canada, Europe and Mexico. Approximately 91% of
the available square footage is located in the United States.
Approximately 49% of the available square footage is owned. In
2003, approximately 32% of the available domestic square footage
was used by the ILS segment, 51% was used by the Manufactured
Products segment and 17% by the Aluminum Products segment.
Approximately 33% of the available foreign square footage was
used by the ILS segment and 67% was used by the Manufactured
Products segment. In the opinion of management, Park-Ohios
facilities are generally well maintained and are suitable and
adequate for their intended uses.

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The following table provides information relative to the
principal facilities of Park-Ohio and its subsidiaries.

|                 |  |                                                                                                                                                             |  |          |        |                |  |     |         |   |  |                            
|---------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ------ | -------------- |  | --- | ------- | - |  | ---------------------------
|Related Industry |  |                                                                                                                                                             |  | Owned or |        | Approximate    |  |    
|Segment          |  | Location                                                                                                                                                    |  | Leased   |        | Square Footage |  | Use
|                 |  |                                                                                                                                                             |  |          |        |                |  |    
|ILS SEGMENT      |  | Cleveland, OH                                                                                                                                               |  |          | Leased |                |  |     | 41,000  | * |  | ILS Corporate Office       
|                 |  | Dayton, OH                                                                                                                                                  |  |          | Leased |                |  |     | 84,700  |   |  | Logistics                  
|                 |  | Lawrence, PA                                                                                                                                                |  |          | Leased |                |  |     | 116,000 |   |  | Logistics and Manufacturing
|                 |  | St. Paul, MN                                                                                                                                                |  |          | Leased |                |  |     | 74,425  |   |  | Logistics                  
|                 |  | Atlanta, GA                                                                                                                                                 |  |          | Leased |                |  |     | 56,000  |   |  | Logistics                  
|                 |  | Dallas, TX                                                                                                                                                  |  |          | Leased |                |  |     | 49,985  |   |  | Logistics                  
|                 |  | Nashville, TN                                                                                                                                               |  |          | Leased |                |  |     | 44,900  |   |  | Logistics                  
|                 |  | Charlotte, NC                                                                                                                                               |  |          | Leased |                |  |     | 36,800  |   |  | Logistics                  
|                 |  | Kent, OH                                                                                                                                                    |  |          | Leased |                |  |     | 225,000 |   |  | Manufacturing              
|                 |  | Mississauga, Ontario, Canada                                                                                                                                |  |          | Leased |                |  |     | 56,000  |   |  | Manufacturing              
|                 |  | Solon, OH                                                                                                                                                   |  |          | Leased |                |  |     | 42,600  |   |  | Logistics                  
|                 |  | Cleveland, OH                                                                                                                                               |  |          | Leased |                |  |     | 40,000  |   |  | Manufacturing              
|                 |  | Delaware, OH                                                                                                                                                |  |          | Owned  |                |  |     | 45,000  |   |  | Manufacturing              
|                 |  | The ILS Segment has thirty-one other facilities,
    none of which is deemed to be a principal facility of the
    Company.                                
|                
|ALUMINUM         |  | Conneaut, OH                                                                                                                                                |  |          | Leased |                |  |     | 82,300  |   |  | Manufacturing              
|PRODUCTS         |  | Conneaut, OH                                                                                                                                                |  |          | Leased |                |  |     | 64,000  |   |  | Manufacturing              
|SEGMENT          |  | Conneaut, OH                                                                                                                                                |  |          | Leased |                |  |     | 45,700  |   |  | Manufacturing              
|                 |  | Conneaut, OH                                                                                                                                                |  |          | Owned  |                |  |     | 91,800  |   |  | Manufacturing              
|                 |  | Huntington, IN                                                                                                                                              |  |          | Leased |                |  |     | 132,000 |   |  | Manufacturing              
|                 |  | Fremont, IN                                                                                                                                                 |  |          | Owned  |                |  |     | 108,000 |   |  | Manufacturing              
|                
|MANUFACTURED     |  | Cuyahoga Hts, OH                                                                                                                                            |  |          | Owned  |                |  |     | 427,000 |   |  | Manufacturing              
|PRODUCTS         |  | Le Roeulx, Belgium                                                                                                                                          |  |          | Owned  |                |  |     | 120,000 |   |  | Manufacturing              
|SEGMENT          |  | Euclid, OH                                                                                                                                                  |  |          | Owned  |                |  |     | 154,000 |   |  | Manufacturing              
|                 |  | Wickliffe, OH                                                                                                                                               |  |          | Owned  |                |  |     | 110,000 |   |  | Manufacturing              
|                 |  | Boaz, AL                                                                                                                                                    |  |          | Owned  |                |  |     | 100,000 |   |  | Manufacturing              
|                 |  | Warren, OH                                                                                                                                                  |  |          | Owned  |                |  |     | 195,000 |   |  | Manufacturing              
|                 |  | Oxted, England                                                                                                                                              |  |          | Owned  |                |  |     | 135,000 |   |  | Manufacturing              
|                 |  | Cicero, IL                                                                                                                                                  |  |          | Owned  |                |  |     | 450,000 |   |  | Manufacturing              
|                 |  | Cleveland, OH                                                                                                                                               |  |          | Leased |                |  |     | 150,000 |   |  | Manufacturing              
|                 |  | Shanghai, China                                                                                                                                             |  |          | Leased |                |  |     | 40,000  |   |  | Manufacturing              
|                 |  | The Manufactured Products Segment has sixteen
    other owned and leased facilities, none of which is deemed to be
    a principal facility of the Company.
|                
|*                |  | Includes 10,000 square feet used by Park-Ohio
    Corporate Office.                                                                                        

Item 3. Legal Proceedings

The Company is 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 will not have a material adverse effect on
the Companys financial condition, liquidity or results of
operations. The Company has been named as one of many defendants
in asbestos-related personal injury lawsuits. The Companys
cost of defending such lawsuits has not been material to date
and based upon available information, management of the Company
does not expect the Companys future costs for
asbestos-related lawsuits to have a material adverse effect on
its results of operations, liquidity or financial condition.

Item 4. Submission of Matters to a Vote of Security
Holders

Information required by this item has been omitted pursuant to
General Instruction I of Form 10-K.

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Part II



|        |                                                                                 
|------- | --------------------------------------------------------------------------------
|Item 5. | Market for the Registrants Common Stock and Related
    Security Holder Matters

The registrant is a wholly-owned subsidiary of Park-Ohio
Holdings Corp. and has no equity securities that trade.



|        |                                     
|------- | ------------------------------------
|Item 6. | Selected Consolidated Financial Data

Information required by this item has been omitted pursuant to
General Instruction I of Form 10-K.



|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

The consolidated financial statements of the Company include the
accounts of Park-Ohio Industries, Inc. and its subsidiaries. All
significant intercompany transactions have been eliminated in
consolidation. The historical financial information is not
directly comparable on a year-to-year basis, primarily due to
restructuring and unusual charges in all three years, a goodwill
impairment charge in 2002 to reflect the cumulative effect of an
accounting change, the elimination of goodwill amortization
starting in 2002, divestitures and acquisitions.

Executive Overview

The Company operates through three segments, ILS, Aluminum
Products and Manufactured Products. ILS is a leading supply
chain logistics provider of production components to large,
multinational manufacturers. In connection with the supply of
such production components, ILS provides a variety of
value-added, cost-effective supply chain management services.
The principal customers of ILS are in the heavy-duty truck,
semiconductor equipment, industrial equipment, aerospace and
defense, electrical controls, HVAC, vehicle parts and
accessories, appliances, and lawn and garden equipment
industries. Aluminum Products manufactures cast aluminum
components primarily for automotive manufactures, and also
provides value-added services such as design and engineering,
machining and assembly. Manufactured Products operates a diverse
group of niche manufacturing businesses that design and
manufacture a broad range of high quality products engineered
for specific customer applications. The principal customers of
Manufactured Products are OEMs and end-users in the aerospace,
automotive, steel, forging, railroad, truck, oil, food
processing and consumer appliance industries. Sales, earnings
and other relevant financial data for these three segments are
provided in Note L to the consolidated financial statements.

The Company is positioned for increased sales and profitability
in 2004 and beyond, as the manufacturing economy stabilizes and
returns to growth, particularly in two of the Companys
significant customer segments, heavy-duty truck and
semiconductor equipment. The Company grew strongly from 1993
through the first half of 2000 (see table below), through both
internal growth and acquisition. Starting in the second half of
2000, both sales and profitability declined due to overall
weakness in the manufacturing economy, and particularly to
contraction in the heavy-duty truck and automotive industries.
Despite these sales declines, the Company retained or gained
market share in most major markets served. The Companys
sales stabilized in 2002 and declined only slightly in 2003, and
pretax income began to recover.

|                                                                                 |  |      |      |      |  |      |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|-------------------------------------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | - | ----- | - |  | - | ----- | - |  | - | ----- | -
|                                                                                 |  | 1993 |      | 1999 |  | 2000 |       | 2001 |  | 2002 |       | 2003
|                                                                                 |  |      |      |      |  |      |       |      |  |      |       |     
|Net sales                                                                        |  | $    | 94.5 |      |  | $    | 717.2 |      |  | $    | 754.7 |      |  | $ | 636.4 |   |  | $ | 634.5 |   |  | $ | 624.3 |  
|                                                                                 |  |      |      |      |  |      |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|Restructuring and impairment charges                                             |  |      |      |      |  |      |       |      |  |      |       |      |  |   | 28.5  |   |  |   | 19.2  |   |  |   | 19.4  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Non-recurring gains / losses (pretax)                                            |  |      |      |      |  |      |       |      |  |      | 10.1  |      |  |   | 1.8   |   |  |   |       |   |  |   |       |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Income (loss) before income taxes and
    cumulative effect of accounting change |  | $    | 3.9  |      |  | $    | 28.4  |      |  | $    | 7.7   |      |  | $ | (37.4 | ) |  | $ | (11.5 | ) |  | $ | (10.9 | )

8



---



##### 



The Company responded to the economic downturn by reducing
costs, increasing prices on targeted products, restructuring
many of its businesses and selling non-core manufacturing
assets. During 2001 through 2003, the Company consolidated
28 supply chain logistics facilities, and closed or sold
11 manufacturing plants. With regard to these actions, the
Company recorded restructuring and impairment charges in 2001,
2002 and 2003 (see table above and Note N to the
consolidated financial statements). Managements actions
aimed to increase operational earnings during the economic
downturn and position the Company for increased profitability
when the manufacturing economy stabilizes and returns to growth.
These actions resulted in increased income (as adjusted) in 2002
and 2003 despite flat to declining sales.

The Companys 2003 non-cash restructuring and impairment
charges totaled $19.4 million, of which 90% related to
restructuring of the Forge Group, primarily impairment of
property and equipment idled when the Company began purchasing
crankshaft forgings instead of manufacturing them internally.
Charges outside the Forge Group, totaling $1.9 million,
consisted primarily of pension withdrawal charges for
manufacturing units executing previously announced
restructuring. The 2003 restructuring is expected to increase
both profitability and cash flow by approximately
$15.0 million over the next five years.

In July 2003, the Company entered into a four-year bank
revolving credit agreement under which it may borrow up to
$165.0 million subject to an asset based formula. The
credit agreement is secured by substantially all the assets of
the Company. The Company has paid down its revolving bank
borrowings by $53.0 million, or 34%, from
$154.0 million at June 30, 2001 to $101.0 million
at December 31, 2003, when it had approximately
$47.0 million of excess borrowing availability. The
Companys $199.9 million of outstanding Senior
Subordinated Notes mature in November, 2007. Funds provided by
operations plus available borrowings under the bank credit
facility are expected to be adequate to meet the Companys
cash requirements until 2007, by which time management expects
to have entered into replacement financing agreements.

The Company sold substantially all the assets of St. Louis Screw
and Green Bearing in first quarter 2003, for cash totaling
approximately $7.3 million, and Castle Rubber Company in
second quarter 2002, for cash of approximately
$2.5 million. The Company purchased substantially all the
assets of Ajax Magnethermic Corp. in third quarter 2002, for
cash of approximately $5.5 million. The Company sold
substantially all the assets of Cleveland City Forge in fourth
quarter 2001, for cash of approximately $6.1 million.
During 2001, the Company expensed $1.9 million of
non-recurring business interruption costs, caused by the June
2000 fire that destroyed the Cicero Flexible Products plant,
which were not covered by insurance.

Accounting Changes and Goodwill

On January 1, 2002, the Company adopted Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets (FAS 142). Under FAS
142, the Company reviewed its goodwill and other intangible
assets and recorded a non-cash goodwill impairment charge of
$48.8 million, which was recorded as the cumulative effect
of a change in accounting principle effective January 1,
2002. Circumstances which led to this goodwill impairment
included reduced sales, profitability and growth rates of the
units with goodwill (see Note C to the consolidated financial
statements), and reduced transaction prices for comparable
businesses, which were themselves results of the downturn in the
manufacturing economy. The effects of these circumstances on the
Companys operations, financial condition and liquidity are
reflected in 2002 and 2003 results. The goodwill impairment
itself did not have any effect on operations. Under FAS 142,
goodwill was not amortized in 2003 or 2002, compared to
$3.7 million in 2001.

In accordance with FAS 142, goodwill is now reviewed annually
for potential impairment. This review was performed as of
October 1, 2003 and 2002, using forecasted discounted cash
flows, and it was determined that no further impairment is
required. At December 31, 2003, the balance sheet reflected
$82.3 million of goodwill in the ILS and Aluminum Products
segments. In 2003, discount rates

9



---



##### 





The Company changed its method of accounting for the 15% of its
inventories utilizing the LIFO method to the FIFO method. As
required by accounting principles generally accepted in the
United States, the Company has restated its balance sheet as of
December 31, 2002 to increase inventories by the recorded
LIFO reserve ($4.4 million), increase deferred tax
liabilities ($1.7 million), and increase shareholders
equity ($2.7 million). Previously reported results of
operations have not been restated because the impact of
utilizing the LIFO method had an insignificant impact on the
Companys reported amounts for consolidated net income
(loss). See also Note B to the consolidated financial statements.

Results of Operations

2003 versus 2002



| |                      
| | ---------------------
| | Net Sales by Segment:

|                       |  |      |       |      |  |        |       |         |  |   |       |   |  |  |     |  
|---------------------- |  | ---- | ----- | ---- |  | ------ | ----- | ------- |  | - | ----- | - |  |  | --- | -
|                       |  |      |       |      |  |        |       | Percent
|                       |  | 2003 |       | 2002 |  | Change |       | Change 
|                       |  |      |       |      |  |        |       |        
|ILS                    |  | $    | 377.6 |      |  | $      | 398.1 |         |  | $ | (20.5 | ) |  |  | -5  | %
|                      
|                      
|                      
|                      
|Aluminum products      |  |      | 90.1  |      |  |        | 106.1 |         |  |   | (16.0 | ) |  |  | -15 | %
|                      
|                      
|                      
|                      
|Manufactured products  |  |      | 156.6 |      |  |        | 130.2 |         |  |   | 26.4  |   |  |  | 20  | %
|                       |  |      |       |      |  |        |       |         |  |   |       |   |  |  |     |  
|Consolidated Net Sales |  | $    | 624.3 |      |  | $      | 634.4 |         |  | $ | (10.1 | ) |  |  | -2  | %
|                       |  |      |       |      |  |        |       |         |  |   |       |   |  |  |     |  

Net sales declined by 2% in 2003. $10.4 million of the ILS
sales decline related to the sale of Green Bearing and the
termination of the pharmaceutical contract, while the remainder
reflected general economic weakness. Aluminum Products net sales
were lower primarily due to the ending of $10.0 million of
sales contracts, the majority of which relate to the closure of
the Tupelo and Hudson plants. Manufactured Products net sales
increased $26.4 million primarily in the induction
business. The acquisition of Ajax Magnethermic increased 2003
net sales by $29.6 million and the divestiture of Castle
Rubber and St. Louis Screw decreased 2003 net sales by
$6.8 million.

Cost of Products Sold & Gross Profit:

|                                                                              |  |      |       |      |  |        |       |         |  |        |       |        |  |  |    |   |  |  |      |   |  |  |      |  
|----------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ------ | ----- | ------- |  | ------ | ----- | ------ |  |  | -- | - |  |  | ---- | - |  |  | ---- | -
|                                                                              |  |      |       |      |  |        |       |         |  | 2003   |       | 2002  
|                                                                              |  |      |       |      |  |        |       | Percent |  | Gross  |       | Gross 
|                                                                              |  | 2003 |       | 2002 |  | Change |       | Change  |  | Margin |       | Margin
|                                                                              |  |      |       |      |  |        |       |         |  |        |       |       
|Consolidated cost of products sold                                            |  | $    | 527.6 |      |  | $      | 546.9 |         |  | $      | (19.3 | )      |  |  | -4 | % |  |  |      |   |  |  |      |  
|                                                                              |  |      |       |      |  |        |       |         |  |        |       |        |  |  |    |   |  |  |      |   |  |  |      |  
|Inventory writedowns from restructuring included
    in Cost of Products Sold |  |      | 0.6   |      |  |        | 5.6   |         |  |        | (5.0  | )      |  |  |    |   |  |  |      |   |  |  |      |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Net gross profit impact of acquisition &
    divestitures                     |  |      | (4.4  | )    |  |        |       |         |  |        | (4.4  | )      |  |  |    |   |  |  |      |   |  |  |      |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Consolidated gross profit                                                     |  | $    | 96.7  |      |  | $      | 87.6  |         |  | $      | 9.1   |        |  |  | 10 | % |  |  | 15.5 | % |  |  | 13.8 | %

Note: 25% of increase in Induction gross profit attributed to
non-acquisition actions.

Cost of products sold declined 4% in 2003, and gross profit
increased 10%, while gross margin increased to 15.5% in 2003,
from 13.8% in 2002. ILS gross margin decreased primarily due to
reduced absorption of fixed overhead over a smaller sales base
and the positive effect on 2002 of the early termination of a
high margin pharmaceutical sales contract, partially offset by
lower inventory costs, facility costs and other cost reductions.
Aluminum Products gross margin increased significantly,
primarily as a result of restructuring and cost reductions and
higher margins on new contracts. Gross margin in the
Manufactured Products segment increased, primarily as a result
of increased sales and overhead efficiencies achieved in the
induction business.

10



---



##### 



Selling, General & Administrative
(SG&A) Expenses:

|                                                          |  |      |      |      |  |        |      |         |  |         |      |         |  |  |   |   |  |  |      |   |  |  |     |  
|--------------------------------------------------------- |  | ---- | ---- | ---- |  | ------ | ---- | ------- |  | ------- | ---- | ------- |  |  | - | - |  |  | ---- | - |  |  | --- | -
|                                                          |  |      |      |      |  |        |      |         |  | 2003    |      | 2002   
|                                                          |  |      |      |      |  |        |      | Percent |  | SG&A    |      | SG&A   
|                                                          |  | 2003 |      | 2002 |  | Change |      | Change  |  | Percent |      | Percent
|                                                          |  |      |      |      |  |        |      |         |  |         |      |        
|Consolidated SG&A expenses                                |  | $    | 62.4 |      |  | $      | 57.4 |         |  | $       | 5.0  |         |  |  | 9 | % |  |  | 10.0 | % |  |  | 9.1 | %
|                                                         
|                                                         
|                                                         
|                                                         
|Net SG&A expense impact of acquisition &
    divestitures |  |      | (3.9 | )    |  |        |      |         |  |         | (3.9 | )       |  |  |   |   |  |  |      |   |  |  |     |  

Consolidated SG&A expenses increased by 9% in 2003, while
SG&A expenses as a percentage of net sales increased to
10.0% for 2003 compared to 9.1% for 2002. This increase was due
primarily to the net impact of acquisitions and divestitures,
and the $2.6 million reduction of net pension credits
reflecting less favorable returns on pension plan assets,
partially offset by reductions in other SG&A costs in all
three segments.

Interest Expense:

|                               |  |      |       |      |  |        |       |         |  |  |                   |   |  |  |     | 
|------------------------------ |  | ---- | ----- | ---- |  | ------ | ----- | ------- |  |  | ----------------- | - |  |  | --- | 
|                               |  | 2003 |       | 2002 |  | Change |       | Percent
|                               |  |      |       |      |  |        |       |        
|Interest expense               |  | $    | 26.2  |      |  | $      | 27.6  |         |  |  | $ (1.4            | ) |  |  | -5% | 
|                              
|                              
|                              
|                              
|Average outstanding borrowings |  | $    | 320.8 |      |  | $      | 333.6 |         |  |  | $(12.8            | ) |  |  | -4% | 
|                              
|                              
|                              
|                              
|Average borrowing rate         |  |      | 8.15  | %    |  |        | 8.28  | %       |  |  | (13) basis points |   |  |  |     | 

Interest expense decreased by 5% due to lower average debt
outstanding and lower average interest rates during 2003. The
decrease in average borrowings resulted primarily from the sale
of two manufacturing units and lower working capital
requirements. The lower average borrowing rate in 2003 was due
primarily to decreased rates on the Companys new revolving
credit facility, beginning in August, 2003.

In accordance with the provision of Statement of Financial
Accounting Standards No. 109 (FAS 109),
Accounting for Income Taxes, the Company recorded no
tax benefit for the 2003 or 2002 net losses, because in both
years it had incurred three years of cumulative losses. Income
taxes of $.9 million were provided in 2003 and 2002,
primarily for state and foreign taxes on profitable operations.
At December 31, 2003, subsidiaries of the Company had
$35.7 million of net operating loss carryforwards for
federal tax purposes. The Company has not recognized any tax
benefit for these loss carryforwards.

2002 versus 2001

Net Sales by Segment:

|                       |  |      |       |      |  |        |       |         |  |   |       |   |  |  |    |  
|---------------------- |  | ---- | ----- | ---- |  | ------ | ----- | ------- |  | - | ----- | - |  |  | -- | -
|                       |  |      |       |      |  |        |       | Percent
|                       |  | 2002 |       | 2001 |  | Change |       | Change 
|                       |  |      |       |      |  |        |       |        
|ILS                    |  | $    | 398.1 |      |  | $      | 416.9 |         |  | $ | (18.8 | ) |  |  | -5 | %
|                      
|                      
|                      
|                      
|Aluminum products      |  |      | 106.1 |      |  |        | 84.9  |         |  |   | 21.2  |   |  |  | 25 | %
|                      
|                      
|                      
|                      
|Manufactured products  |  |      | 130.2 |      |  |        | 134.6 |         |  |   | (4.4  | ) |  |  | -3 | %
|                       |  |      |       |      |  |        |       |         |  |   |       |   |  |  |    |  
|Consolidated Net Sales |  | $    | 634.4 |      |  | $      | 636.4 |         |  | $ | (2.0  | ) |  |  | 0  | %
|                       |  |      |       |      |  |        |       |         |  |   |       |   |  |  |    |  

Net sales declined less than 1% in 2002. The ILS net sales
decline of 5% was due primarily to the sales volume reductions
in heavy truck and other customer industries. The Aluminum
Products net sales increase of 25% was due primarily to the
initiation or ramp-up of new production contracts. The
Manufactured Products net sales decline of 3% or
$4.4 million was due primarily to divestitures. The
divestitures of Castle Rubber and Cleveland City Forge decreased
2002 net sales by $13.0 million and the acquisition of Ajax
Magnethermic increased 2002 net sales by $6.1 million.

11



---



##### 



Cost of Products Sold & Gross Profit:

|                                                                              |  |      |       |      |  |        |       |         |  |        |      |        |  |  |    |   |  |  |      |   |  |  |      |  
|----------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ------ | ----- | ------- |  | ------ | ---- | ------ |  |  | -- | - |  |  | ---- | - |  |  | ---- | -
|                                                                              |  |      |       |      |  |        |       |         |  | 2002   |      | 2001  
|                                                                              |  |      |       |      |  |        |       | Percent |  | Gross  |      | Gross 
|                                                                              |  | 2002 |       | 2001 |  | Change |       | Change  |  | Margin |      | Margin
|                                                                              |  |      |       |      |  |        |       |         |  |        |      |       
|Consolidated cost of products sold                                            |  | $    | 546.9 |      |  | $      | 552.3 |         |  | $      | (5.4 | )      |  |  | -1 | % |  |  |      |   |  |  |      |  
|                                                                              |  |      |       |      |  |        |       |         |  |        |      |        |  |  |    |   |  |  |      |   |  |  |      |  
|Inventory writedowns from restructuring included
    in Cost of Products Sold |  |      | 5.6   |      |  |        | 10.3  |         |  |        | (4.7 | )      |  |  |    |   |  |  |      |   |  |  |      |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Net gross profit impact of acquisition &
    divestitures                     |  |      | 1.7   |      |  |        |       |         |  |        | 1.7  |        |  |  |    |   |  |  |      |   |  |  |      |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Consolidated gross profit                                                     |  | $    | 87.6  |      |  | $      | 84.1  |         |  | $      | 3.5  |        |  |  | 4  | % |  |  | 13.8 | % |  |  | 13.2 | %

Cost of products sold declined 1% in 2002. Inventory write-downs
included in cost of products sold primarily related to
discontinued product lines. Gross profit increased 4% in 2002,
while gross margin increased to 13.8% in 2002, from 13.2% in
2001. This increase reflected increased margins in Aluminum
Products, partially offset by decreased margins in the ILS and
Manufactured Products segments. Declines in ILS and Manufactured
Products gross margins related primarily to reduced volumes
resulting in the absorption of fixed operational overheads over
a smaller sales or production base. The increase in Aluminum
Products gross margin related to new, higher-margin contracts,
discontinuation of low margin contracts, cost reductions, plant
closures and the absorption of fixed manufacturing overheads
over a larger production base.

Selling, General & Administrative
(SG&A) Expenses:

|                           |  |      |      |      |  |        |      |         |  |         |      |         |  |  |     |   |  |  |     |   |  |  |      |  
|-------------------------- |  | ---- | ---- | ---- |  | ------ | ---- | ------- |  | ------- | ---- | ------- |  |  | --- | - |  |  | --- | - |  |  | ---- | -
|                           |  |      |      |      |  |        |      |         |  | 2002    |      | 2001   
|                           |  |      |      |      |  |        |      | Percent |  | SG&A    |      | SG&A   
|                           |  | 2002 |      | 2001 |  | Change |      | Change  |  | Percent |      | Percent
|                           |  |      |      |      |  |        |      |         |  |         |      |        
|Consolidated SG&A expenses |  | $    | 57.4 |      |  | $      | 66.1 |         |  | $       | (8.7 | )       |  |  | -13 | % |  |  | 9.1 | % |  |  | 10.4 | %

Consolidated SG&A expenses decreased by 13% in 2002, while
SG&A expenses as a percentage of net sales decreased to 9.1%
during 2002 as compared to 10.4% for 2001. This decrease was
primarily due to cost reductions in all three segments resulting
from business restructuring initiatives implemented by the
Company. During 2003, SG&A expenses were negatively affected
by a decrease in net pension credits of $.8 million,
reflecting less favorable investment returns on pension plan
assets.

Interest Expense:

|                               |  |      |       |      |  |        |       |         |  |                   |        |   |  |  |     |  
|------------------------------ |  | ---- | ----- | ---- |  | ------ | ----- | ------- |  | ----------------- | ------ | - |  |  | --- | -
|                               |  | 2002 |       | 2001 |  | Change |       | Percent
|                               |  |      |       |      |  |        |       |        
|Interest expense               |  | $    | 27.6  |      |  | $      | 31.1  |         |  |                   | $ (3.5 | ) |  |  | -11 | %
|                              
|                              
|                              
|                              
|Average outstanding borrowings |  | $    | 333.6 |      |  | $      | 353.4 |         |  |                   | $(19.8 | ) |  |  | -6  | %
|                              
|                              
|                              
|                              
|Average borrowing rate         |  |      | 8.28  | %    |  |        | 8.80  | %       |  | (52) basis points |        |   |  | 

Interest expense decreased by 11% in 2002 due to lower average
debt outstanding and lower average interest rates. The decrease
in borrowings related primarily to working capital reductions in
the course of 2001, which were retained in 2002. The lower
average borrowing rate in 2002 was due primarily to decreased
rates on the Companys revolving credit facility.

In accordance with the provision of Statement of Financial
Accounting Standards No. 109 (FAS 109),
Accounting for Income Taxes, the Company recorded no
tax benefit for the 2003 net loss, because it had incurred three
years of cumulative losses. Income taxes of $.9 million
were provided in 2003, primarily for state and foreign taxes on
profitable operations. The effective tax rate for 2001 was
30.5%, which was less than the statutory rate due to the
amortization of non-deductible goodwill and other non-deductible
items. At December 31, 2003, subsidiaries of the Company
had $25.6 million of net operating loss carryforwards for
federal tax purposes. The Company has not recognized any tax
benefit for these loss carryforwards.

12



---



##### 



Critical Accounting Policies

Preparation of financial statements in conformity with
accounting principles generally accepted in the United States
(GAAP) requires management to make certain estimates
and assumptions which affect amounts reported in the
Companys consolidated financial statements. Management has
made their best estimates and judgments of certain amounts
included in the financial statements, giving due consideration
to materiality. The Company does 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.

Revenue Recognition:The Company recognizes more than 95%
of its revenue when title is transferred to unaffiliated
customers, typically upon shipment. The Companys remaining
revenue, from long-term contracts, is recognized using the
percentage of completion method of accounting. Selling prices
are fixed based on purchase orders or contractual arrangements.
The Companys revenue recognition policies are in
accordance with the SECs Staff Accounting Bulletin
(SAB) No. 101, Revenue Recognition.

Allowance for Uncollectible Accounts Receivable:Accounts
receivable have been reduced by an allowance for amounts that
may become uncollectible in the future. Allowances are developed
by the individual operating units based on historical losses,
adjusting for economic conditions. The Companys policy is
to identify and reserve for specific collectibility concerns
based on customers financial condition and payment
history. The establishment of reserves requires the use of
judgment and assumptions regarding the potential for losses on
receivable balances. Writeoffs of accounts receivable have
historically been low.

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 over the past twelve months, 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 the Company
considers these allowances adequate and proper, changes in
economic conditions in specific markets in which the Company
operates could have a material effect on reserve allowances
required.

Impairment of Long-Lived Assets:Long-lived assets are
reviewed by management for impairment whenever events or changes
in circumstances indicate the carrying amount may not be
recoverable. During 2003, 2002 and 2001, the Company decided to
exit certain under-performing product lines and to close or
consolidate certain operating facilities and, accordingly,
recorded restructuring and impairment charges as discussed above
and in Note N to the consolidated financial statements.

Restructuring:The Company recognizes costs in accordance
with Emerging Issues Task Force Issue No. 94-3
Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain
Costs incurred in a Restructuring) (EITF 94-3)
and the SEC Staff Accounting Bulletin No. 100,
Restructuring and Impairment Charges for charges
prior to 2003. Detailed contemporaneous documentation is
maintained and updated on a quarterly basis to ensure that
accruals are properly supported. If management determines that
there is a change in the estimate, the accruals are adjusted to
reflect the changes.

In 2003, the Company adopted Statement of Financial Accounting
Standards No. 146, Accounting for Costs Associated
with Exit or Disposal Activities (FAS 146),
which nullified EITF 94-3 and requires that a liability for a
cost associated with an exit or disposal activity be recognized
and measured initially at the fair value only when the liability
is incurred. FAS 146 has no effect on charges recorded for exit
activities begun prior to 2002.

13



---



##### 



Goodwill:Through December 31, 2001, the Company
amortized goodwill primarily over forty years using the
straight-line method. The Company adopted Financial Accounting
Standard (FAS) No. 142 Goodwill and Other
Intangible Assets as of January 1, 2002. Under FAS
142, the Company no longer amortizes goodwill, but is required
to review goodwill for impairment annually, or more frequently
if impairment indicators arise.

The Company, with assistance of an outside consultant, completed
the transitional impairment review of goodwill during the fourth
quarter of 2002 and recorded a non-cash charge of
$48.8 million. The charge has been reported as a cumulative
effect of a change in accounting principle. The Company has also
completed the annual impairment test as of October 1, 2003
and 2002, and has determined that no additional goodwill
impairment existed as of those dates.

Deferred Income Tax Assets and Liabilities:The Company
accounts for income taxes under the 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. In determining these amounts,
management determined the probability of realizing deferred tax
assets, taking into consideration factors including historical
operating results, expectations of future earnings and taxable
income and the extended period of time over which the
postretirement benefits will be paid.

At December 31, 2003, the Company has net operating loss
carryforwards for income tax purposes of approximately
$35.7 million, which will expire in 2021 or 2023 In
accordance with the provisions of FAS 109 Accounting for
Income Taxes, the tax benefits related to these
carryforwards have been fully reserved as of December 31,
2003 since the Company is in a three year cumulative loss
position.

Pension and Other Postretirement Benefit Plans:The
Company and its 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 net income of the Company. The Company has
evaluated its pension and other postretirement benefit
assumptions, considering current trends in interest rates and
market conditions and believes its assumptions are appropriate.

Seasonality; Variability of Operating Results

The Companys results of operations are typically stronger
in the first six months rather than the last six months of each
calendar year due to scheduled plant maintenance in the third
quarter to coincide with customer plant shutdowns and to
holidays in the fourth quarter.

The timing of orders placed by the Companys 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 the Companys business units. Such
variability is particularly evident at the capital equipment
businesses, included in the Manufactured Products segment, which
typically ship 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. Certain statements in this
Managements Discussion and Analysis of Financial Condition
and Results of Operations contain forward-looking statements,
including without limitation, discussion regarding the
Companys anticipated amounts of restructuring charges and
its expected impact on profitability and cash flow, credit
availability, levels and funding of capital expenditures and
trends for 2004. Forward-looking statements are necessarily
subject to risks, uncertainties and other factors, many of which
are

14



---



##### 





15



---



##### 





|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

Index to Consolidated Financial Statements and Supplementary
Financial Data

|                                                                                                        |  |      |    | 
|------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                        |  | Page
|                                                                                                        |  |     
|Report of Ernst & Young LLP, Independent
    Auditors                                                   |  |      | 17 | 
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Consolidated Balance Sheets 
    December 31, 2003 and 2002.                                           |  |      | 18 | 
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Consolidated Statements of Operations 
    Years Ended December 31, 2003, 2002 and 2001                |  |      | 19 | 
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Consolidated Statements of Shareholders
    Equity  Years Ended December 31, 2003, 2002 and
    2001. |  |      | 20 | 
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Consolidated Statements of Cash Flows 
    Years Ended December 31, 2003, 2002 and 2001                |  |      | 21 | 
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Notes to Consolidated Financial Statements                                                              |  |      | 22 | 

16



---



##### 



REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors and Shareholder



We have audited the accompanying consolidated balance sheets of
Park-Ohio Industries, Inc. and subsidiaries (a wholly-owned
subsidiary of Park-Ohio Holdings Corp.) as of December 31,
2003 and 2002, and the related consolidated statements of
operations, shareholders equity and cash flows for each of
the three years in the period ended December 31, 2003.
These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the 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 Industries, Inc. and
subsidiaries at December 31, 2003 and 2002 and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended
December 31, 2003 in conformity with accounting principles
generally accepted in the United States.

As discussed in Note B to the consolidated financial statements,
effective June 30, 2003, the Company changed its method of
accounting for inventories at certain subsidiaries. As discussed
in Note C to the consolidated financial statements, in 2002 the
Company changed its method of accounting for goodwill.



| |                      
| | ---------------------
| | -s- Ernst & Young LLP

Cleveland, Ohio



17



---



##### 



Park-Ohio Industries, Inc. and Subsidiaries

Consolidated Balance Sheets

|                                            |                                                                                                      |                                          |         |         |         |   |         |         |         | 
|------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ---------------------------------------- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                            |                                                                                                      |                                         
|                                            |                                                                                                      | December 31                             
|                                            |                                                                                                      |                                         
|                                            |                                                                                                      | 2003                                     |         | 2002   
|                                            |                                                                                                      |                                          |         |        
|                                            |                                                                                                      |                                         
|                                            |                                                                                                      | (Dollars in thousands)                  
|                                           
|                                           
|                                           
|                                           
|ASSETS                                      |                                                                                                      |                                          |         |         |         |   |         |        
|Current Assets                              |                                                                                                      |                                          |         |         |         |   |         |        
|                                           
|                                           
|                                           
|                                           
|                                            | Cash and cash equivalents                                                                            |                                          | $       | 2,191   |         |   | $       | 8,800   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accounts receivable, less allowances for doubtful
    accounts of $3,271 in 2003 and $3,313 in 2002. |                                          |         | 100,938 |         |   |         | 101,477 |        
|                                           
|                                           
|                                           
|                                           
|                                            | Inventories                                                                                          |                                          |         | 149,075 |         |   |         | 156,067 |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other current assets                                                                                 |                                          |         | 16,155  |         |   |         | 12,181  |        
|                                            |                                                                                                      |                                          |         |         |         |   |         |        
|                                            |                                                                                                      | Total Current Assets                     |         |         | 268,359 |   |         |         | 278,525 | 
|Property, Plant and Equipment               |                                                                                                      |                                          |         |         |         |   |         |        
|                                           
|                                           
|                                           
|                                           
|                                            | Land and land improvements                                                                           |                                          |         | 2,891   |         |   |         | 2,416   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Buildings                                                                                            |                                          |         | 40,774  |         |   |         | 36,809  |        
|                                           
|                                           
|                                           
|                                           
|                                            | Machinery and equipment                                                                              |                                          |         | 181,045 |         |   |         | 187,201 |        
|                                            |                                                                                                      |                                          |         |         |         |   |         |        
|                                            |                                                                                                      |                                          | 224,710 |         |         |   | 226,426 |        
|                                           
|                                           
|                                           
|                                           
|                                            | Less accumulated depreciation                                                                        |                                          |         | 129,434 |         |   |         | 114,260 |        
|                                            |                                                                                                      |                                          |         |         |         |   |         |        
|                                            |                                                                                                      |                                          | 95,276  |         |         |   | 112,166 |        
|Other Assets                                |                                                                                                      |                                          |         |         |         |   |         |        
|                                           
|                                           
|                                           
|                                           
|                                            | Goodwill                                                                                             |                                          |         | 82,278  |         |   |         | 81,464  |        
|                                           
|                                           
|                                           
|                                           
|                                            | Net assets held for sale                                                                             |                                          |         | 2,321   |         |   |         | 19,205  |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other                                                                                                |                                          |         | 61,310  |         |   |         | 51,583  |        
|                                            |                                                                                                      |                                          |         |         |         |   |         |        
|                                            |                                                                                                      | $                                        | 509,544 |         |         | $ | 542,943 |        
|                                            |                                                                                                      |                                          |         |         |         |   |         |        
|                                            |                                                                                                      | LIABILITIES and SHAREHOLDERS
    EQUITY |         |         |         |   |         |         |         | 
|Current Liabilities                         |                                                                                                      |                                          |         |         |         |   |         |        
|                                           
|                                           
|                                           
|                                           
|                                            | Trade accounts payable                                                                               |                                          | $       | 66,153  |         |   | $       | 74,868  |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accrued expenses                                                                                     |                                          |         | 46,384  |         |   |         | 48,839  |        
|                                           
|                                           
|                                           
|                                           
|                                            | Current portion of long-term liabilities                                                             |                                          |         | 2,811   |         |   |         | 3,056   |        
|                                            |                                                                                                      |                                          |         |         |         |   |         |        
|                                            |                                                                                                      | Total Current Liabilities                |         |         | 115,348 |   |         |         | 126,763 | 
|Long-Term Liabilities, less current portion |                                                                                                      |                                          |         |         |         |   |         |        
|                                           
|                                           
|                                           
|                                           
|                                            | 9.25% Senior Subordinated Notes due 2007.                                                            |                                          |         | 199,930 |         |   |         | 199,930 |        
|                                           
|                                           
|                                           
|                                           
|                                            | Revolving credit                                                                                     |                                          |         | 101,000 |         |   |         | 114,000 |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other long-term debt                                                                                 |                                          |         | 8,234   |         |   |         | 9,886   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other postretirement benefits and other long-term
    liabilities                                    |                                          |         | 26,671  |         |   |         | 27,312  |        
|                                            |                                                                                                      |                                          |         |         |         |   |         |        
|                                            |                                                                                                      |                                          | 335,835 |         |         |   | 351,128 |        
|Shareholders Equity                        |                                                                                                      |                                          |         |         |         |   |         |        
|                                           
|                                           
|                                           
|                                           
|                                            | Common stock, par value $1 a share                                                                   |                                          |         | -0-     |         |   |         | -0-     |        
|                                           
|                                           
|                                           
|                                           
|                                            | Additional paid-in capital                                                                           |                                          |         | 64,844  |         |   |         | 64,844  |        
|                                           
|                                           
|                                           
|                                           
|                                            | Retained earnings                                                                                    |                                          |         | (3,219  | )       |   |         | 8,304   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accumulated other comprehensive loss                                                                 |                                          |         | (3,264  | )       |   |         | (8,096  | )      
|                                            |                                                                                                      |                                          |         |         |         |   |         |        
|                                            |                                                                                                      |                                          | 58,361  |         |         |   | 65,052  |        
|                                            |                                                                                                      |                                          |         |         |         |   |         |        
|                                            |                                                                                                      | $                                        | 509,544 |         |         | $ | 542,943 |        
|                                            |                                                                                                      |                                          |         |         |         |   |         |        

See notes to consolidated financial statements.

18



---



##### 



Park-Ohio Industries, Inc. and Subsidiaries

Consolidated Statements of Operations

|                                             |                         |                                                                         |         |        |         |      |         |        |         |   |         |        |         |  
|-------------------------------------------- | ----------------------- | ----------------------------------------------------------------------- | ------- | ------ | ------- | ---- | ------- | ------ | ------- | - | ------- | ------ | ------- | -
|                                             |                         |                                                                        
|                                             |                         | Year Ended December 31                                                 
|                                             |                         |                                                                        
|                                             |                         | 2003                                                                    |         | 2002   |         | 2001
|                                             |                         |                                                                         |         |        |         |     
|                                             |                         |                                                                        
|                                             |                         | (Dollars in thousands)                                                 
|                                            
|                                            
|                                            
|                                            
|Net sales                                    |                         | $                                                                       | 624,295 |        |         | $    | 634,455 |        |         | $ | 636,417 |       
|                                            
|                                            
|                                            
|                                            
|Cost of products sold                        |                         |                                                                         | 527,586 |        |         |      | 546,857 |        |         |   | 552,293 |       
|                                             |                         |                                                                         |         |        |         |      |         |        |         |   |         |       
|                                             | Gross profit            |                                                                         |         | 96,709 |         |      |         | 87,598 |         |   |         | 84,124 |        
|                                            
|                                            
|                                            
|                                            
|Selling, general and administrative expenses |                         |                                                                         | 62,369  |        |         |      | 57,418  |        |         |   | 66,114  |       
|                                            
|                                            
|                                            
|                                            
|Amortization of goodwill                     |                         |                                                                         | -0-     |        |         |      | -0-     |        |         |   | 3,733   |       
|                                            
|                                            
|                                            
|                                            
|Restructuring and impairment charges         |                         |                                                                         | 18,808  |        |         |      | 13,601  |        |         |   | 18,163  |       
|                                             |                         |                                                                         |         |        |         |      |         |        |         |   |         |       
|                                             | Operating income (loss) |                                                                         |         | 15,532 |         |      |         | 16,579 |         |   |         | (3,886 | )      
|                                            
|                                            
|                                            
|                                            
|Non-operating items, net                     |                         |                                                                         | -0-     |        |         |      | -0-     |        |         |   | 1,850   |       
|                                            
|                                            
|                                            
|                                            
|Interest expense                             |                         |                                                                         | 26,151  |        |         |      | 27,623  |        |         |   | 31,108  |       
|                                             |                         |                                                                         |         |        |         |      |         |        |         |   |         |       
|                                             |                         | Loss before income taxes and cumulative effect of
    accounting change |         |        | (10,619 | )    |         |        | (11,044 | ) |         |        | (36,844 | )
|                                            
|                                            
|                                            
|                                            
|Income taxes (benefit)                       |                         |                                                                         | 904     |        |         |      | 897     |        |         |   | (11,400 | )     
|                                             |                         |                                                                         |         |        |         |      |         |        |         |   |         |       
|                                             |                         | Loss before cumulative effect of accounting change                      |         |        | (11,523 | )    |         |        | (11,941 | ) |         |        | (25,444 | )
|                                            
|                                            
|                                            
|                                            
|Cumulative effect of accounting change       |                         |                                                                         | -0-     |        |         |      | (48,799 | )      |         |   | -0-     |       
|                                             |                         |                                                                         |         |        |         |      |         |        |         |   |         |       
|                                             |                         | Net loss                                                                |         | $      | (11,523 | )    |         | $      | (60,740 | ) |         | $      | (25,444 | )
|                                             |                         |                                                                         |         |        |         |      |         |        |         |   |         |       

See notes to consolidated financial statements.

19



---



##### 



Park-Ohio Industries, Inc. and Subsidiaries

Consolidated Statements of Shareholders Equity

|                                                                                                                                                              |                                         |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | ---------------------- | --- | ---------- |  | -------- | ------ | ------------- |  | ----- | ------ | ------- | - | - | ------ | ------ | - | - | ------- | ------- | -
|                                                                                                                                                              |                                         |                        |     |            |  |          |        | Accumulated   |  |      
|                                                                                                                                                              |                                         |                        |     | Additional |  |          |        | Other         |  |      
|                                                                                                                                                              |                                         | Common                 |     | Paid-In    |  | Retained |        | Comprehensive |  |      
|                                                                                                                                                              |                                         | Stock                  |     | Capital    |  | Earnings |        | Income (Loss) |  | Total
|                                                                                                                                                              |                                         |                        |     |            |  |          |        |               |  |      
|                                                                                                                                                              |                                         |                       
|                                                                                                                                                              |                                         | (Dollars in thousands)
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|Balance at January 1, 2001, as previously
    stated                                                                                                          |                                         | $                      | -0- |            |  | $        | 64,844 |               |  | $     | 91,747 |         |   | $ | (2,858 | )      |   | $ | 153,733 |        
|Adjustment for the cumulative effect on the prior
    years of applying retroactively the change in the method of
    accounting for inventories (see Note B) |                                         |                        |     |            |  |          |        |               |  |       | 2,741  |         |   |   |        |        |   |   | 2,741   |        
|                                                                                                                                                              |                                         |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         |        
|Balance January 1, 2001, as restated                                                                                                                          |                                         |                        | -0- |            |  |          | 64,844 |               |  |       | 94,488 |         |   |   | (2,858 | )      |   |   | 156,474 |        
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|Comprehensive (loss):                                                                                                                                         |                                         |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         |        
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Net loss                                |                        |     |            |  |          |        |               |  |       |        | (25,444 | ) |   |        |        |   |   |         | (25,444 | )
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Foreign currency translation adjustment |                        |     |            |  |          |        |               |  |       |        |         |   |   |        | (1,394 | ) |   |         | (1,394  | )
|                                                                                                                                                              |                                         |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         |        
|                                                                                                                                                              | Comprehensive (loss)                    |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         | (26,838 | )
|                                                                                                                                                              |                                         |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         |        
|Balance at December 31, 2001                                                                                                                                  |                                         |                        | -0- |            |  |          | 64,844 |               |  |       | 69,044 |         |   |   | (4,252 | )      |   |   | 129,636 |        
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|Comprehensive (loss):                                                                                                                                         |                                         |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         |        
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Net loss                                |                        |     |            |  |          |        |               |  |       |        | (60,740 | ) |   |        |        |   |   |         | (60,740 | )
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Foreign currency translation adjustment |                        |     |            |  |          |        |               |  |       |        |         |   |   |        | 1,711  |   |   |         | 1,711   |  
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Minimum pension liability               |                        |     |            |  |          |        |               |  |       |        |         |   |   |        | (5,555 | ) |   |         | (5,555  | )
|                                                                                                                                                              |                                         |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         |        
|                                                                                                                                                              | Comprehensive (loss)                    |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         | (64,584 | )
|                                                                                                                                                              |                                         |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         |        
|Balance at December 31, 2002                                                                                                                                  |                                         | $                      | -0- |            |  | $        | 64,844 |               |  | $     | 8,304  |         |   | $ | (8,096 | )      |   | $ | 65,052  |        
|                                                                                                                                                              |                                         |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         |        
|Comprehensive (loss):                                                                                                                                         |                                         |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         |        
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Net Loss                                |                        |     |            |  |          |        |               |  |       |        | (11,523 | ) |   |        |        |   |   |         | (11,523 | )
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Foreign currency translation adjustment |                        |     |            |  |          |        |               |  |       |        |         |   |   |        | 3,632  |   |   |         | 3,632   |  
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                             
|                                                                                                                                                              | Minimum pension liability               |                        |     |            |  |          |        |               |  |       |        |         |   |   |        | 1,200  |   |   |         | 1,200   |  
|                                                                                                                                                              |                                         |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         |        
|                                                                                                                                                              | Comprehensive (loss)                    |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         | (6,691  | )
|                                                                                                                                                              |                                         |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         |        
|Balance at December 31, 2003                                                                                                                                  |                                         | $                      | -0- |            |  | $        | 64,844 |               |  | $     | (3,219 | )       |   | $ | (3,264 | )      |   | $ | 58,361  |        
|                                                                                                                                                              |                                         |                        |     |            |  |          |        |               |  |       |        |         |   |   |        |        |   |   |         |        

See notes to consolidated financial statements.

20



---



##### 



Park-Ohio Industries, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

|                                                                                       |                                                  |                        |          |         |   |      |         |         |   |   |         |         |  
|-------------------------------------------------------------------------------------- | ------------------------------------------------ | ---------------------- | -------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|                                                                                       |                                                  |                       
|                                                                                       |                                                  | Year Ended December 31
|                                                                                       |                                                  |                       
|                                                                                       |                                                  | 2003                   |          | 2002    |   | 2001
|                                                                                       |                                                  |                        |          |         |   |     
|                                                                                       |                                                  |                       
|                                                                                       |                                                  | (Dollars in thousands)
|OPERATING ACTIVITIES                                                                   |                                                  |                        |          |         |   |      |         |         |   |   |         |        
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|Net income (loss)                                                                      |                                                  | $                      | (11,523  | )       |   | $    | (60,740 | )       |   | $ | (25,444 | )      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|Adjustments to reconcile net income
    (loss) to net cash provided by operations:     |                                                  |                        |          |         |   |      |         |         |   |   |         |        
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Cumulative effect of accounting change           |                        |          | -0-     |   |      |         | 48,799  |   |   |         | -0-     |  
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Depreciation and amortization                    |                        |          | 15,479  |   |      |         | 16,265  |   |   |         | 19,911  |  
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Restructuring and impairment charges             |                        |          | 18,641  |   |      |         | 10,399  |   |   |         | 16,362  |  
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Deferred income taxes                            |                        |          | -0-     |   |      |         | 1,951   |   |   |         | (6,473  | )
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|Changes in operating assets and liabilities
    excluding acquisitions of  businesses: |                                                  |                        |          |         |   |      |         |         |   |   |         |        
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Accounts receivable                              |                        |          | 539     |   |      |         | 4,652   |   |   |         | 16,257  |  
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Inventories                                      |                        |          | 6,991   |   |      |         | 4,682   |   |   |         | 34,327  |  
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Accounts payable and accrued expenses            |                        |          | (12,160 | ) |      |         | 15,856  |   |   |         | (23,911 | )
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Other                                            |                        |          | (6,149  | ) |      |         | (12,770 | ) |   |         | (8,731  | )
|                                                                                       |                                                  |                        |          |         |   |      |         |         |   |   |         |        
|                                                                                       | Net Cash Provided by Operating Activities        |                        |          | 11,818  |   |      |         | 29,094  |   |   |         | 22,298  |  
|                                                                                      
|INVESTING ACTIVITIES                                                                   |                                                  |                        |          |         |   |      |         |         |   |   |         |        
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|Purchases of property, plant and equipment, net                                        |                                                  |                        | (10,869  | )       |   |      | (13,731 | )       |   |   | (13,923 | )      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|Costs of acquisitions, net of cash acquired                                            |                                                  |                        | -0-      |         |   |      | (5,748  | )       |   |   | -0-     |        
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|Proceeds from the sale of business units                                               |                                                  |                        | 7,340    |         |   |      | 2,486   |         |   |   | 6,051   |        
|                                                                                       |                                                  |                        |          |         |   |      |         |         |   |   |         |        
|                                                                                       | Net Cash Used by Investing Activities            |                        |          | (3,529  | ) |      |         | (16,993 | ) |   |         | (7,872  | )
|                                                                                      
|FINANCING ACTIVITIES                                                                   |                                                  |                        |          |         |   |      |         |         |   |   |         |        
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|Proceeds from financing arrangements                                                   |                                                  |                        | 112,000  |         |   |      | 6,749   |         |   |   | 19,000  |        
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|Payments on long-term debt                                                             |                                                  |                        | (126,898 | )       |   |      | (12,394 | )       |   |   | (33,634 | )      
|                                                                                       |                                                  |                        |          |         |   |      |         |         |   |   |         |        
|                                                                                       | Net Cash Used by Financing Activities            |                        |          | (14,898 | ) |      |         | (5,645  | ) |   |         | (14,634 | )
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Increase (Decrease) in Cash and Cash Equivalents |                        |          | (6,609  | ) |      |         | 6,456   |   |   |         | (208    | )
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Cash and Cash Equivalents at Beginning of Year   |                        |          | 8,800   |   |      |         | 2,344   |   |   |         | 2,552   |  
|                                                                                       |                                                  |                        |          |         |   |      |         |         |   |   |         |        
|                                                                                       | Cash and Cash Equivalents at End of Year         |                        | $        | 2,191   |   |      | $       | 8,800   |   |   | $       | 2,344   |  
|                                                                                       |                                                  |                        |          |         |   |      |         |         |   |   |         |        
|Taxes paid (refunded)                                                                  |                                                  | $                      | (1,038   | )       |   | $    | (4,817  | )       |   | $ | (3,346  | )      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|Interest paid                                                                          |                                                  |                        | 25,213   |         |   |      | 25,880  |         |   |   | 28,554  |        

See notes to consolidated financial statements.

21



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


December 31, 2003, 2002 and 2001

(Dollars in thousands)


NOTE A  Summary of Significant Accounting
Policies

Consolidation:The consolidated financial statements
include the accounts of the Company and all of its subsidiaries.
All significant intercompany accounts and transactions have been
eliminated upon consolidation.

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 (See
Note B). Inventory reserves were $18,817 and $23,385 at
December 31, 2003 and 2002, respectively.

Major Classes of Inventories

|                              |  |             |         |      |  |   |         | 
|----------------------------- |  | ----------- | ------- | ---- |  | - | ------- | 
|                              |  |            
|                              |  | December 31
|                              |  |            
|                              |  | 2003        |         | 2002
|                              |  |             |         |     
|In-process and finished goods |  | $           | 121,154 |      |  | $ | 136,430 | 
|                             
|                             
|                             
|                             
|Raw materials and supplies    |  |             | 27,921  |      |  |   | 19,637  | 
|                              |  |             |         |      |  |   |         | 
|                              |  | $           | 149,075 |      |  | $ | 156,067 | 
|                              |  |             |         |      |  |   |         | 

Property, Plant and Equipment:Property, plant and
equipment are carried at cost. Major additions and associated
interest costs are capitalized and betterments are charged to
accumulated depreciation; expenditures for repairs and
maintenance are charged to operations. Depreciation of fixed
assets is computed principally by the straight-line method based
on the estimated useful lives of the assets ranging from
25-60 years for buildings, and 3-18 years for
machinery and equipment. The Company reviews long-lived assets
for impairment when events or changes in business conditions
indicate that their full carrying value may not be recoverable
(See Note P).

Goodwill:As discussed in Note C, the Company adopted
Statement of Financial Accounting Standards No. 142
(FAS 142) Goodwill and Other Intangible
Assets, as of January 1, 2002. Under FAS 142,
goodwill is no longer amortized but is subject to impairment
testing at least annually on October 1. Prior to 2002,
goodwill was amortized primarily over forty years using the
straight-line method.

Pensions and Other 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 two unfunded postretirement benefit
plans. For the defined benefit plans, benefits are based on the
employees years of service and the Companys policy
is to fund that amount recommended by its independent actuaries.
For the defined contribution plans, the costs charged to
operations and the amount funded are based upon a percentage of
the covered employees compensation.

Income Taxes:The Company accounts for income taxes under
the 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

22



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

rates. In determining these amounts, management determined the
probability of realizing deferred tax assets, taking into
consideration factors including historical operating results,
expectations of future earnings and taxable income and the
extended period of time over which the postretirement benefits
will be paid and accordingly records valuation allowances when
necessary (See Note H).

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 (less than 5% of consolidated revenue) is accounted
for under the percentage of completion method, and recognized on
the basis of the percentage each contracts cost to date
bears to the total estimated contract cost. Revenue earned on
contracts in process in excess of billings is classified in
other current assets in the accompanying consolidated balance
sheet. The Companys revenue recognition policies are in
accordance with the SECs Staff Accounting Bulletin
(SAB) No. 101, Revenue Recognition.

Accounts Receivable:Accounts receivable are recorded at
selling price which is fixed based on a purchase order or
contractual arrangement. Accounts receivable are reduced by an
allowance for amounts that may become uncollectible in the
future. The Companys policy is to identify and reserve for
specific collectibility concerns based on customers
financial condition and payment history.

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.
Write-offs of accounts receivable have historically been low. As
of December 31, 2003, the Company had uncollateralized
receivables with seven customers in the automotive and
heavy-duty truck industries, each with several locations,
aggregating $28,365, which represented approximately 27% of the
Companys trade accounts receivable. During 2003, sales to
these customers amounted to approximately $185,248, which
represented 30% of the Companys net sales.

Shipping and Handling Costs:All shipping and handling
costs are included in cost of products sold in the Consolidated
Statements of Operations.

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 which 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 discounted or reduced for possible recoveries from insurance
carriers.

Foreign Currency Translation:The functional currency for
all subsidiaries outside the United States is the local
currency. Financial statements for these subsidiaries are
translated into United States dollars at year-end exchange rates
as to assets and liabilities and weighted-average exchange rates
as to revenues and expenses. The resulting translation
adjustments are recorded in shareholders equity.

Impact of Other Recently Issued Accounting Pronouncements:In June 2002, the FASB issued Statement of Financial
Accounting Standards No. 146, Accounting for Costs
Associated with Exit or Disposal Activities,
(FAS 146), which addresses financial accounting
and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force
(EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). FAS 146 requires that a liability for
a cost associated with an exit or disposal activity be
recognized and measured initially at the fair value only when
the liability is incurred. Under EITF Issue 94-3, a
liability for an exit cost was recognized at the date of an
entitys commitment to an exit plan. FAS 146 is
effective for exit and disposal activities that are initiated
after December 31, 2002. FAS 146 has no effect on
charges recorded for exit activities

23



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

begun prior to 2003. The adoption of this statement did not have
a material effect on the Companys financial position or
results of operation.

In November 2002, the FASB issued Interpretation No. 45
(FIN 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. FIN 45
elaborates on required disclosures by a guarantor in its
financial statements about obligations under certain guarantees
that it has issued and requires a guarantor to recognize, at the
inception of certain guarantees, a liability for the fair value
of the obligation undertaken in issuing the guarantee. The
Company has adopted the provisions of FIN 45 relating to
initial recognition and measurements of guarantor liabilities,
which are effective for qualifying guarantees entered into or
modified after December 15, 2002. The adoption did not have
a material impact on the consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46
(FIN 46), Consolidation of Variable
Interest Entities, which clarifies the application of
Accounting Research Bulletin (ARB) No. 51,
Consolidated Financial Statements, relating to
consolidation of certain entities. First, FIN 46 will
require identification of the Companys participation in
variable interest entities (VIEs), which are defined
as entities with a level of invested equity that is not
sufficient to fund future activities to permit them to operate
on a stand alone basis, or whose equity holders lack certain
characteristics of a controlling financial interest. Then, for
entities identified as VIEs, FIN 46 sets forth a model to
evaluate potential consolidation based on an assessment of which
party to the VIE, if any, bears a majority of the exposure to
its expected losses, or stands to gain from a majority of its
expected returns. FIN 46 also sets forth certain
disclosures regarding interests in VIEs that are deemed
significant, even if consolidation is not required. The
Companys adoption of FIN 46 had no effect on its
financial position, results of operations and cash flows.

In April 2003, the FASB issued Statement of Financial Accounting
Standards No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities
(FAS 149). FAS 149 amends and clarifies
the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for
hedging activities under FAS 133, Accounting for
Derivative Instruments and Hedging Activities.
FAS 149 is generally effective for contracts entered into
or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The
Companys adoption of FAS 149 had no effect on its
financial position, results of operations and cash flows.

In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity
(FAS 150). FAS 150 requires that certain
financial instruments, which under previous guidance were
accounted for as equity, must now be accounted for as
liabilities. The financial instruments affected include
mandatorily redeemable stock, certain financial instruments that
require or may require the issuer to buy back some of its shares
in exchange for cash or other assets and certain obligations
that can be settled with shares of stock. FAS 150 is
effective for all financial instruments entered into or modified
after May 31, 2003 and must be applied to the
Companys existing financial instruments effective
July 1, 2003, the beginning of the first fiscal period
after June 15, 2003. The Company adopted FAS 150 on
June 1, 2003. The adoption of this statement had no effect
on the Companys financial position, results of operations
or cash flows.

In January 2004, the FASB issued FASB Staff Position
(FSP) 106-1, Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (the
Act). The FSP permits a sponsor of a postretirement health
care plan that provides a prescription drug benefit to make a
one-time election to defer accounting for the effects of the
Act. Regardless of whether a sponsor elects that deferral, the
FSP requires certain disclosures pending further consideration
of the underlying accounting issues. The Company has elected to
defer accounting for the effects of

24



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

the Act. The Company is currently evaluating the impact of the
Act on its financial position and results of operations.

Reclassification:Certain amounts in the prior
years financial statements have been reclassified to
conform to the current year presentation.

NOTE B  Accounting Change

Effective June 30, 2003, the Company changed the method of
accounting for the 15% of its inventories utilizing the LIFO
method to the FIFO method. The Company believes that this change
is preferable for the following reasons: 1) the change
conforms all of its inventories to one method of determining
cost, which is the FIFO method; 2) the costs of the
Companys inventories have remained fairly level during the
past several years, which has substantially negated the benefits
of the LIFO method (a better matching of current costs with
current revenue in periods of rising costs); 3) the impact
of utilizing the LIFO method has had an insignificant impact on
the Companys consolidated net income (loss) during the
past several years; and 4) the FIFO method results in the
valuation of inventories at current costs on the consolidated
balance sheet, which provides a more meaningful presentation for
investors and financial institutions.

As required under accounting principles generally accepted in
the United States, the Company has restated the consolidated
balance sheet as of December 31, 2002 to increase
inventories by the recorded LIFO reserve ($4.4 million),
increase deferred tax liabilities ($1.7 million), and
increase shareholders equity ($2.7 million).
Previously reported results of operations have not been restated
because the impact of utilizing the LIFO method had an
insignificant impact on the Companys reported amounts for
consolidated net income (loss).

NOTE C  Adoption of FAS 142, Goodwill
and Other Intangible Assets

Effective January 1, 2002, the Company adopted
FAS 142, Goodwill and Other Intangible Assets.
Under this standard, goodwill is no longer amortized, but is
subject to an impairment test at least annually. The Company has
selected October 1 as its annual testing date. In the year
of adoption, FAS 142 also requires the Company to perform a
transitional test to determine whether goodwill was impaired as
of the beginning of the year. Under FAS 142, the initial
step in testing for goodwill impairment is to compare the fair
value of each reporting unit to its book value. To the extent
the fair value of any reporting unit is less than its book
value, which would indicate that potential impairment of
goodwill exists, a second test is required to determine the
amount of impairment.

The Company, with assistance of an outside consultant, completed
the transitional impairment review of goodwill using a
discounted cash flow approach to determine the fair value of
each reporting unit. Based upon the results of these
calculations, the Company recorded a non-cash charge for
goodwill impairment which aggregated $48,799. In accordance with
the provisions of FAS 142, the charge has been accounted
for as a cumulative effect of a change in accounting principle,
effective January 1, 2002. The Company also completed the
annual impairment tests as of October 1, 2003 and 2002, and
has determined that no additional impairment of goodwill existed
as of those dates.

25



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

The following table summarizes the transitional goodwill
impairment charge by reporting segment as well as the carrying
amount of goodwill for the years ended December 31, 2002
and December 31, 2003.

|                      |  |                    |        |                   |  |                   |        |  |  |   |        | 
|--------------------- |  | ------------------ | ------ | ----------------- |  | ----------------- | ------ |  |  | - | ------ | 
|                      |  | Impairment Charge  |        |                   |  |                  
|Reporting             |  | recorded effective |        | Goodwill at       |  | Goodwill at      
|Segment               |  | January 1, 2002    |        | December 31, 2002 |  | December 31, 2003
|                      |  |                    |        |                   |  |                  
|ILS                   |  | $                  | 32,239 |                   |  | $                 | 64,949 |  |  | $ | 65,763 | 
|                     
|                     
|                     
|                     
|Aluminum Products     |  |                    | 9,700  |                   |  |                   | 16,515 |  |  |   | 16,515 | 
|                     
|                     
|                     
|                     
|Manufactured Products |  |                    | 6,860  |                   |  |                   | -0-    |  |  |   | -0-    | 
|                      |  |                    |        |                   |  |                   |        |  |  |   |        | 
|                      |  | $                  | 48,799 |                   |  | $                 | 81,464 |  |  | $ | 82,278 | 
|                      |  |                    |        |                   |  |                   |        |  |  |   |        | 

The increase in the goodwill in the ILS segment during 2003
results from foreign currency fluctuations.

In accordance with FAS 142, prior period amounts have not
been restated. The following table summarizes the reported
results for 2001, and the results that would have been reported
had the non-amortization provisions of FAS 142 been in effect
for that year.

|                                                |  |             |         |  
|----------------------------------------------- |  | ----------- | ------- | -
|                                                |  | December 31
|                                                |  | 2001       
|                                                |  |            
|Reported net loss                               |  | $           | (25,444 | )
|                                               
|                                               
|                                               
|                                               
|Amortization of goodwill adjustment, net of tax |  |             | 3,315   |  
|                                                |  |             |         |  
|Adjusted net loss                               |  | $           | (22,129 | )
|                                                |  |             |         |  

NOTE D  Acquisitions and Dispositions

During the first quarter of 2003, the Company completed the sale
of substantially all of the assets of Green Bearing
(Green) and St. Louis Screw and Bolt (St.
Louis Screw) for cash of approximately $7,300. No gain or
loss was recorded on the sale. Green and St. Louis Screw were
non-core businesses in the ILS Segment and Manufactured Products
Segment, respectively, and had been identified as businesses the
Company was selling as part of its restructuring activities
during 2002 and 2001.

On September 10, 2002, the Company acquired substantially
all of the assets of Ajax Magnethermic Corporation
(Ajax), a manufacturer of induction heating and
melting equipment. The purchase price of approximately $5,500
and the results of operations of Ajax prior to its date of
acquisition were not deemed significant as defined in
Regulation S-X.

On April 26, 2002, the Company completed the sale of
substantially all of the assets of Castle Rubber Company for
cash of approximately $2,500. Castle Rubber, a non-core business
in the Manufactured Products Segment, had been identified as a
business the Company was discontinuing as part of its
restructuring activities during 2001. No gain or loss was
recorded on the sale.

On December 21, 2001, the Company completed the sale of
substantially all of the assets of Cleveland City Forge for cash
of approximately $6,100 and recorded a gain of approximately
$100. Cleveland City Forge was a non-core business in the
Manufactured Products Segment, producing clevises and
turnbuckles for the construction industry.

26



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

NOTE E  Other Assets

Other assets consists of the following:

|                           |        |             |        |        |  |   |        |        | 
|-------------------------- | ------ | ----------- | ------ | ------ |  | - | ------ | ------ | 
|                           |        |            
|                           |        | December 31
|                           |        |            
|                           |        | 2003        |        | 2002  
|                           |        |             |        |       
|Pension assets             |        | $           | 36,186 |        |  | $ | 32,816 |       
|                          
|                          
|                          
|                          
|Idle assets                |        |             | 6,516  |        |  |   | -0-    |       
|                          
|                          
|                          
|                          
|Deferred financing costs   |        |             | 5,774  |        |  |   | 4,636  |       
|                          
|                          
|                          
|                          
|Tooling                    |        |             | 4,222  |        |  |   | 4,213  |       
|                          
|                          
|                          
|                          
|Software development costs |        |             | 3,947  |        |  |   | 4,118  |       
|                          
|                          
|                          
|                          
|Other                      |        |             | 4,665  |        |  |   | 5,800  |       
|                           |        |             |        |        |  |   |        |       
|                           | Totals |             | $      | 61,310 |  |   | $      | 51,583 | 
|                           |        |             |        |        |  |   |        |       

NOTE F  Accrued Expenses

Accrued expenses include the following:

|                                     |        |             |        |        |  |   |        |        | 
|------------------------------------ | ------ | ----------- | ------ | ------ |  | - | ------ | ------ | 
|                                     |        |            
|                                     |        | December 31
|                                     |        |            
|                                     |        | 2003        |        | 2002  
|                                     |        |             |        |       
|Accrued salaries, wages and benefits |        | $           | 9,484  |        |  | $ | 10,583 |       
|                                    
|                                    
|                                    
|                                    
|Advance billings                     |        |             | 8,496  |        |  |   | 6,594  |       
|                                    
|                                    
|                                    
|                                    
|Warranty and installation accruals   |        |             | 6,762  |        |  |   | 8,990  |       
|                                    
|                                    
|                                    
|                                    
|Severance and exit costs             |        |             | 2,535  |        |  |   | 4,045  |       
|                                    
|                                    
|                                    
|                                    
|Interest payable                     |        |             | 2,055  |        |  |   | 3,529  |       
|                                    
|                                    
|                                    
|                                    
|State and local taxes                |        |             | 3,809  |        |  |   | 3,206  |       
|                                    
|                                    
|                                    
|                                    
|Sundry                               |        |             | 13,243 |        |  |   | 11,892 |       
|                                     |        |             |        |        |  |   |        |       
|                                     | Totals |             | $      | 46,384 |  |   | $      | 48,839 | 
|                                     |        |             |        |        |  |   |        |       

Substantially all advance billings and warranty and installation
accruals relate to the Companys capital equipment
businesses.

The changes in the aggregate product warranty liability are as
follows for the year ended December 31, 2003 and 2002:

|                                         |  |             |        |      |  |   |        |  
|---------------------------------------- |  | ----------- | ------ | ---- |  | - | ------ | -
|                                         |  |            
|                                         |  | December 31
|                                         |  |            
|                                         |  | 2003        |        | 2002
|                                         |  |             |        |     
|Balance at beginning of year             |  | $           | 6,506  |      |  | $ | 997    |  
|                                        
|                                        
|                                        
|                                        
|Claims paid during the year              |  |             | (2,399 | )    |  |   | (1,430 | )
|                                        
|                                        
|                                        
|                                        
|Additional warranties issued during year |  |             | 1,139  |      |  |   | 1,858  |  
|                                        
|                                        
|                                        
|                                        
|Acquired warranty liabilities            |  |             | -0-    |      |  |   | 5,081  |  
|                                        
|                                        
|                                        
|                                        
|Other                                    |  |             | 368    |      |  |   | -0-    |  
|                                         |  |             |        |      |  |   |        |  
|Balance at end of year                   |  | $           | 5,614  |      |  | $ | 6,506  |  
|                                         |  |             |        |      |  |   |        |  

The acquired warranty liability during 2002 reflects the
warranty liability of Ajax, which was acquired in September,
2002.

27



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

NOTE G  Financing Arrangements

Long-term debt consists of the following:

|                                                                                                |       |             |         |         |  |   |         |         | 
|----------------------------------------------------------------------------------------------- | ----- | ----------- | ------- | ------- |  | - | ------- | ------- | 
|                                                                                                |       |            
|                                                                                                |       | December 31
|                                                                                                |       |            
|                                                                                                |       | 2003        |         | 2002   
|                                                                                                |       |             |         |        
|9.25% Senior Subordinated Notes due 2007.                                                       |       | $           | 199,930 |         |  | $ | 199,930 |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Revolving credit maturing on June 30, 2004.                                                     |       |             | -0-     |         |  |   | 114,000 |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Revolving credit maturing on July 30, 2007.                                                     |       |             | 101,000 |         |  |   | -0-     |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Industrial Development Revenue Bonds maturing in
    2012 at interest rates from 2.00% to 4.15% |       |             | 4,478   |         |  |   | 4,863   |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Other                                                                                           |       |             | 4,817   |         |  |   | 6,329   |        
|                                                                                                |       |             |         |         |  |   |         |        
|                                                                                                |       |             | 310,225 |         |  |   | 325,122 |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Less current maturities                                                                         |       |             | 1,061   |         |  |   | 1,306   |        
|                                                                                                |       |             |         |         |  |   |         |        
|                                                                                                | Total |             | $       | 309,164 |  |   | $       | 323,816 | 
|                                                                                                |       |             |         |         |  |   |         |        

Maturities of long-term debt during each of the five years
following December 31, 2003 are approximately $1,061 in
2004, $1,011 in 2005, $1,016 in 2006, $301,969 in 2007 and $804
in 2008.

The Company is a party to a credit and security agreement dated
November 5, 2003, as amended (Credit Agreement),
with a group of banks, under which it may borrow or issue
standby letters of credit or commercial letters of credit up to
$165,000. The Credit Agreement currently contains a detailed
borrowing base formula which provides borrowing capacity to the
Company based on negotiated percentages of eligible accounts
receivable, inventory and fixed assets. At December 31,
2003, the Company had approximately $47,500 of unused borrowing
capacity available under the Credit Agreement. Interest is
payable quarterly at either the banks prime lending rate
(4.00% at December 31, 2003) or, at Park-Ohios
election, at LIBOR plus 1.75%-2.50%. The Companys ability
to elect LIBOR-based interest as well as the overall interest
rate are dependent on the Companys Debt Service Coverage
Ratio, as defined in the Credit Agreement. Up to $20,000 in
standby letters of credit and commercial letters of credit may
be issued under the Credit Agreement. As of December 31,
2003, in addition to amounts borrowed under the Credit
Agreement, there is $7,900 outstanding primarily for standby
letters of credit. A fee of .25% is imposed by the bank on the
unused portion of available borrowings. The Credit Agreement
expires on July 30, 2007 and borrowings are secured by
substantially all of the Companys assets.

Provisions of the indenture governing the Senior Subordinated
Notes and the revolving 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,
2003, the Company was in compliance with all financial covenants
of the Credit Agreement.

The weighted average interest rate on all debt was 7.26% at
December 31, 2003.

The fair market value of the Senior Subordinated Notes based on
published market prices was approximately $201,429 and $129,955
at December 31, 2003 and 2002, respectively. The carrying
value of cash and cash equivalents, accounts receivable,
accounts payable, and borrowings under the credit agreement
approximate fair value at December 31, 2003 and 2002.

28



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

NOTE H  Income Taxes

Income taxes consisted of the following:

|                      |         |                        |     |      |  |      |        |        |   |   |         |        |  
|--------------------- | ------- | ---------------------- | --- | ---- |  | ---- | ------ | ------ | - | - | ------- | ------ | -
|                      |         |                       
|                      |         | Year Ended December 31
|                      |         |                       
|                      |         | 2003                   |     | 2002 |  | 2001
|                      |         |                        |     |      |  |     
|Current (refundable): |         |                        |     |      |  |      |        |        |   |   |         |       
|                     
|                     
|                     
|                     
|                      | Federal |                        | $   | -0-  |  |      | $      | (2,210 | ) |   | $       | (5,828 | )
|                     
|                     
|                     
|                     
|                      | State   |                        |     | 16   |  |      |        | 387    |   |   |         | 369    |  
|                     
|                     
|                     
|                     
|                      | Foreign |                        |     | 888  |  |      |        | 769    |   |   |         | 532    |  
|                      |         |                        |     |      |  |      |        |        |   |   |         |       
|                      |         |                        | 904 |      |  |      | (1,054 | )      |   |   | (4,927  | )     
|                     
|                     
|                     
|                     
|Deferred:             |         |                        |     |      |  |      |        |        |   |   |         |       
|                     
|                     
|                     
|                     
|                      | Federal |                        |     | -0-  |  |      |        | 1,951  |   |   |         | (6,135 | )
|                     
|                     
|                     
|                     
|                      | State   |                        |     | -0-  |  |      |        | -0-    |   |   |         | (338   | )
|                      |         |                        |     |      |  |      |        |        |   |   |         |       
|                      |         |                        | -0- |      |  |      | 1,951  |        |   |   | (6,473  | )     
|                      |         |                        |     |      |  |      |        |        |   |   |         |       
|Income taxes          |         | $                      | 904 |      |  | $    | 897    |        |   | $ | (11,400 | )     
|                      |         |                        |     |      |  |      |        |        |   |   |         |       

The reasons for the difference between income tax expense and
the amount computed by applying the statutory Federal income tax
rate to income before income taxes are as follows:

|                             |  |                        |        |      |  |      |        |   |  |   |         |  
|---------------------------- |  | ---------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------- | -
|                             |  |                       
|                             |  | Year Ended December 31
|                             |  |                       
|                             |  | 2003                   |        | 2002 |  | 2001
|                             |  |                        |        |      |  |     
|Computed statutory amount    |  | $                      | (3,712 | )    |  | $    | (3,895 | ) |  | $ | (12,700 | )
|                            
|                            
|                            
|                            
|Effect of state income taxes |  |                        | 11     |      |  |      | 411    |   |  |   | 20      |  
|                            
|                            
|                            
|                            
|Goodwill                     |  |                        | -0-    |      |  |      | -0-    |   |  |   | 668     |  
|                            
|                            
|                            
|                            
|Foreign rate differences     |  |                        | 815    |      |  |      | 599    |   |  |   | 275     |  
|                            
|                            
|                            
|                            
|Valuation allowance          |  |                        | 3,695  |      |  |      | 3,475  |   |  |   | -0-     |  
|                            
|                            
|                            
|                            
|Other, net                   |  |                        | 95     |      |  |      | 307    |   |  |   | 337     |  
|                             |  |                        |        |      |  |      |        |   |  |   |         |  
|Income taxes (benefit)       |  | $                      | 904    |      |  | $    | 897    |   |  | $ | (11,400 | )
|                             |  |                        |        |      |  |      |        |   |  |   |         |  

29



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

Significant components of the Companys net deferred tax
assets and liabilities are as follows:

|                          |                                                 |                                |         |        |        |   |         |        |        | 
|------------------------- | ----------------------------------------------- | ------------------------------ | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                          |                                                 |                               
|                          |                                                 | December 31                   
|                          |                                                 |                               
|                          |                                                 | 2003                           |         | 2002  
|                          |                                                 |                                |         |       
|Deferred tax assets:      |                                                 |                                |         |        |        |   |         |       
|                         
|                         
|                         
|                         
|                          | Postretirement benefit obligation               |                                | $       | 7,600  |        |   | $       | 8,100  |       
|                         
|                         
|                         
|                         
|                          | Inventory                                       |                                |         | 8,400  |        |   |         | 7,200  |       
|                         
|                         
|                         
|                         
|                          | Net operating loss and tax credit carryforwards |                                |         | 14,300 |        |   |         | 10,900 |       
|                         
|                         
|                         
|                         
|                          | Goodwill                                        |                                |         | 6,800  |        |   |         | 6,800  |       
|                         
|                         
|                         
|                         
|                          | Othernet                                       |                                |         | 8,400  |        |   |         | 2,600  |       
|                          |                                                 |                                |         |        |        |   |         |       
|                          |                                                 | Total deferred tax assets      |         |        | 45,500 |   |         |        | 35,600 | 
|                         
|                         
|                         
|                         
|Deferred tax liabilities: |                                                 |                                |         |        |        |   |         |       
|                         
|                         
|                         
|                         
|                          | Tax over book depreciation                      |                                |         | 13,900 |        |   |         | 12,800 |       
|                         
|                         
|                         
|                         
|                          | Pension                                         |                                |         | 11,400 |        |   |         | 10,500 |       
|                          |                                                 |                                |         |        |        |   |         |       
|                          |                                                 | Total deferred tax liabilities |         |        | 25,300 |   |         |        | 23,300 | 
|                          |                                                 |                                |         |        |        |   |         |       
|                          |                                                 |                                | 20,200  |        |        |   | 12,300  |       
|                         
|                         
|                         
|                         
|Valuation reserves        |                                                 |                                | (20,200 | )      |        |   | (12,300 | )     
|                          |                                                 |                                |         |        |        |   |         |       
|Net deferred tax assets   |                                                 | $                              | -0-     |        |        | $ | -0-     |       
|                          |                                                 |                                |         |        |        |   |         |       

At December 31, 2003, the Company has net operating loss
carryforwards for income tax purposes of approximately $35,700,
which will expire between 2021 and 2023. In accordance with the
provisions of FAS 109 Accounting for Income Taxes,
the tax benefits related to these carryforwards have been fully
reserved as of December 31, 2003 since the Company is in a
three year cumulative loss position.

NOTE I  Legal Proceedings

The Company is 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 will not have a material adverse effect on
the Companys financial condition, liquidity and results of
operations.

30



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

NOTE J  Pensions and Postretirement Benefits

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, 2003 and
2002:

|                                               |  |         |        |                |  |      |         |      |  |   |         |   |  |   |         |  
|---------------------------------------------- |  | ------- | ------ | -------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                               |  |         |        |                |  |     
|                                               |  |         |        | Postretirement
|                                               |  | Pension |        | Benefits      
|                                               |  |         |        |               
|                                               |  | 2003    |        | 2002           |  | 2003 |         | 2002
|                                               |  |         |        |                |  |      |         |     
|Change in benefit obligation                   |  |         |        |                |  |      |         |      |  |   |         |   |  |   |         |  
|                                              
|                                              
|                                              
|                                              
|Benefit obligation at beginning of year        |  | $       | 52,481 |                |  | $    | 50,564  |      |  | $ | 24,869  |   |  | $ | 23,403  |  
|                                              
|                                              
|                                              
|                                              
|Service cost                                   |  |         | 545    |                |  |      | 399     |      |  |   | 147     |   |  |   | 204     |  
|                                              
|                                              
|                                              
|                                              
|Curtailment and settlement                     |  |         | (208   | )              |  |      | 2,053   |      |  |   | -0-     |   |  |   | -0-     |  
|                                              
|                                              
|                                              
|                                              
|Interest cost                                  |  |         | 3,498  |                |  |      | 3,556   |      |  |   | 1,701   |   |  |   | 1,712   |  
|                                              
|                                              
|                                              
|                                              
|Plan participants contributions               |  |         | -0-    |                |  |      | -0-     |      |  |   | 247     |   |  |   | 135     |  
|                                              
|                                              
|                                              
|                                              
|Actuarial losses (gains)                       |  |         | 1,800  |                |  |      | 1,132   |      |  |   | 3,758   |   |  |   | 1,570   |  
|                                              
|                                              
|                                              
|                                              
|Benefits and expenses paid                     |  |         | (5,041 | )              |  |      | (5,223  | )    |  |   | (3,356  | ) |  |   | (2,155  | )
|                                               |  |         |        |                |  |      |         |      |  |   |         |   |  |   |         |  
|Benefit obligation at end of year              |  | $       | 53,075 |                |  | $    | 52,481  |      |  | $ | 27,366  |   |  | $ | 24,869  |  
|                                               |  |         |        |                |  |      |         |      |  |   |         |   |  |   |         |  
|Change in plan assets                          |  |         |        |                |  |      |         |      |  |   |         |   |  |   |         |  
|                                              
|                                              
|                                              
|                                              
|Fair value of plan assets at beginning of year |  | $       | 85,401 |                |  | $    | 100,498 |      |  | $ | -0-     |   |  | $ | -0-     |  
|                                              
|                                              
|                                              
|                                              
|Actual return on plan assets                   |  |         | 17,243 |                |  |      | (8,811  | )    |  |   | -0-     |   |  |   | -0-     |  
|                                              
|                                              
|                                              
|                                              
|Settlement accounting                          |  |         | -0-    |                |  |      | (1,063  | )    |  |   | -0-     |   |  |   | -0-     |  
|                                              
|                                              
|                                              
|                                              
|Company contributions                          |  |         | -0-    |                |  |      | -0-     |      |  |   | 3,109   |   |  |   | 2,020   |  
|                                              
|                                              
|                                              
|                                              
|Plan participants contributions               |  |         | -0-    |                |  |      | -0-     |      |  |   | 247     |   |  |   | 135     |  
|                                              
|                                              
|                                              
|                                              
|Benefits and expense paid                      |  |         | (5,041 | )              |  |      | (5,223  | )    |  |   | (3,356  | ) |  |   | (2,155  | )
|                                               |  |         |        |                |  |      |         |      |  |   |         |   |  |   |         |  
|Fair value of plan assets at end of year       |  | $       | 97,603 |                |  | $    | 85,401  |      |  | $ | -0-     |   |  | $ | -0-     |  
|                                               |  |         |        |                |  |      |         |      |  |   |         |   |  |   |         |  
|Funded (underfunded) status of the plan        |  | $       | 44,528 |                |  | $    | 32,920  |      |  | $ | (27,366 | ) |  | $ | (24,869 | )
|                                              
|                                              
|                                              
|                                              
|Unrecognized net transition obligation         |  |         | (487   | )              |  |      | (536    | )    |  |   | -0-     |   |  |   | -0-     |  
|                                              
|                                              
|                                              
|                                              
|Unrecognized net actuarial (gain) loss         |  |         | (7,235 | )              |  |      | 1,547   |      |  |   | 5,375   |   |  |   | (303    | )
|                                              
|                                              
|                                              
|                                              
|Unrecognized prior service cost (benefit)      |  |         | 773    |                |  |      | 1,198   |      |  |   | (327    | ) |  |   | (407    | )
|                                               |  |         |        |                |  |      |         |      |  |   |         |   |  |   |         |  
|Net amount recognized at year end              |  | $       | 37,579 |                |  | $    | 35,129  |      |  | $ | (22,318 | ) |  | $ | (25,579 | )
|                                               |  |         |        |                |  |      |         |      |  |   |         |   |  |   |         |  

Amounts recognized in the consolidated balance sheets consists
of:

|                                     |                                          |      |        |        |  |   |        |        | 
|------------------------------------ | ---------------------------------------- | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                     |                                          | 2003 |        | 2002  
|                                     |                                          |      |        |       
|Prepaid pension cost                 |                                          | $    | 36,186 |        |  | $ | 32,816 |       
|                                    
|                                    
|                                    
|                                    
|Accrued pension cost                 |                                          |      | (2,962 | )      |  |   | (3,526 | )     
|                                    
|                                    
|                                    
|                                    
|Intangible asset                     |                                          |      | -0-    |        |  |   | 284    |       
|                                    
|                                    
|                                    
|                                    
|Accumulated other comprehensive loss |                                          |      | 4,355  |        |  |   | 5,555  |       
|                                     |                                          |      |        |        |  |   |        |       
|                                     | Net amount recognized at the end of year |      | $      | 37,579 |  |   | $      | 35,129 | 
|                                     |                                          |      |        |        |  |   |        |       

31



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

The pension plan weighted-average asset allocation at year ended
2003 and 2002 and target allocation for 2004 are as follows:

|                  |  |             |       |             |  |      |      |   |  |  |      |  
|----------------- |  | ----------- | ----- | ----------- |  | ---- | ---- | - |  |  | ---- | -
|                  |  |             |       |            
|                  |  |             |       | Plan Assets
|                  |  |             |       |            
|                  |  | Target 2004 |       | 2003        |  | 2002
|                  |  |             |       |             |  |     
|Asset Category    |  |             |       |             |  |      |      |   |  |  |      |  
|                 
|                 
|                 
|                 
|Equity securities |  |             | 60-70 | %           |  |      | 64.8 | % |  |  | 62.7 | %
|                 
|                 
|                 
|                 
|Debt securities   |  |             | 25-30 |             |  |      | 26.0 |   |  |  | 28.7 |  
|                 
|                 
|                 
|                 
|Other             |  |             | 5-10  |             |  |      | 9.2  |   |  |  | 8.6  |  
|                  |  |             |       |             |  |      |      |   |  |  |      |  
|                  |  |             | 100   | %           |  |      | 100  | % |  |  | 100  | %
|                  |  |             |       |             |  |      |      |   |  |  |      |  

The Company recorded a minimum pension liability of $4,355 at
December 31, 2003 and $5,555 at December 31, 2002, as
required by Financial Accounting Standards Board Statement
No. 87. The adjustment is reflected in other comprehensive
income and long-term liabilities. The adjustment relates to two
of the Companys defined benefit plans, for which the
accumulated benefit obligations of $16,336 at December 31,
2003 ($15,573 at December 31, 2002), exceed the fair value
of the underlying pension assets of $13,374 at December 31,
2003 ($12,047 at December 31, 2002). Amounts were as
follows:

|                               |  |      |        |      |  |   |        | 
|------------------------------ |  | ---- | ------ | ---- |  | - | ------ | 
|                               |  | 2003 |        | 2002
|                               |  |      |        |     
|Projected benefit obligation   |  | $    | 16,336 |      |  | $ | 15,573 | 
|                               |  |      |        |      |  |   |        | 
|                              
|Accumulated benefit obligation |  | $    | 16,336 |      |  | $ | 15,573 | 
|                               |  |      |        |      |  |   |        | 
|                              
|Fair value of plan assets      |  | $    | 13,374 |      |  | $ | 12,047 | 
|                               |  |      |        |      |  |   |        | 

The following tables summarize the assumptions used by the
consulting actuary and the related cost information.

|                                                   |  |         |      |                |  |      |      |      |  |  |      |   |  |  |      |  
|-------------------------------------------------- |  | ------- | ---- | -------------- |  | ---- | ---- | ---- |  |  | ---- | - |  |  | ---- | -
|                                                   |  |         |      |                |  |     
|                                                   |  |         |      | Postretirement
|                                                   |  | Pension |      | Benefits      
|                                                   |  |         |      |               
|                                                   |  | 2003    |      | 2002           |  | 2003 |      | 2002
|                                                   |  |         |      |                |  |      |      |     
|Weighted-Average assumptions as of
    December 31 |  |         |      |                |  |      |      |      |  |  |      |   |  |  |      |  
|                                                  
|                                                  
|                                                  
|                                                  
|Discount rate                                      |  |         | 6.50 | %              |  |      | 7.00 | %    |  |  | 6.50 | % |  |  | 7.00 | %
|                                                  
|                                                  
|                                                  
|                                                  
|Expected return on plan assets                     |  |         | 8.75 | %              |  |      | 8.75 | %    |  |  | N/A  |   |  |  | N/A  |  
|                                                  
|                                                  
|                                                  
|                                                  
|Rate of compensation increase                      |  |         | 2.00 | %              |  |      | 2.00 | %    |  |  | N/A  |   |  |  | N/A  |  

In determining its expected return on plan assets assumption for
the year ended December 31, 2003, 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, 2003 of 8.75%. This assumption was
supported by the asset return generation model used by the
Companys independent actuaries, which projected future
asset returns using simulation and asset class correlation.

The Company has elected to defer recognition of the potential
effect of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 until authoritative guidance on the
accounting for the federal subsidy is issued.

For measurement purposes, a 10% percent annual rate of increase
in the per capita cost of covered health care benefits was
assumed for 2003. The rate was assumed to decrease gradually to
5% for 2009 and remain at that level thereafter.

32



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

|                                            |  |                  |        |                |  |      |        |      |  |      |        |      |  |   |       |   |  |   |       |   |  |   |       |  
|------------------------------------------- |  | ---------------- | ------ | -------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | - | ----- | - |  | - | ----- | - |  | - | ----- | -
|                                            |  |                  |        |               
|                                            |  | Pension Benefits |        | Other Benefits
|                                            |  |                  |        |               
|                                            |  | 2003             |        | 2002           |  | 2001 |        | 2003 |  | 2002 |        | 2001
|                                            |  |                  |        |                |  |      |        |      |  |      |        |     
|Components of net periodic benefit
    cost |  |                  |        |                |  |      |        |      |  |      |        |      |  |   |       |   |  |   |       |   |  |   |       |  
|                                           
|                                           
|                                           
|                                           
|Service costs                               |  | $                | 545    |                |  | $    | 399    |      |  | $    | 590    |      |  | $ | 147   |   |  | $ | 204   |   |  | $ | 179   |  
|                                           
|                                           
|                                           
|                                           
|Interest costs                              |  |                  | 3,498  |                |  |      | 3,556  |      |  |      | 3,506  |      |  |   | 1,701 |   |  |   | 1,712 |   |  |   | 1,663 |  
|                                           
|                                           
|                                           
|                                           
|Expected return on plan assets              |  |                  | (7,229 | )              |  |      | (8,394 | )    |  |      | (8,658 | )    |  |   | -0-   |   |  |   | -0-   |   |  |   | -0-   |  
|                                           
|                                           
|                                           
|                                           
|Transition obligation                       |  |                  | (49    | )              |  |      | (49    | )    |  |      | (56    | )    |  |   | -0-   |   |  |   | -0-   |   |  |   | -0-   |  
|                                           
|                                           
|                                           
|                                           
|Amortization of prior service cost          |  |                  | 257    |                |  |      | 319    |      |  |      | 363    |      |  |   | (80   | ) |  |   | (79   | ) |  |   | (79   | )
|                                           
|                                           
|                                           
|                                           
|Recognized net actuarial (gain) loss        |  |                  | 361    |                |  |      | (1,055 | )    |  |      | (1,720 | )    |  |   | 43    |   |  |   | 11    |   |  |   | (28   | )
|                                            |  |                  |        |                |  |      |        |      |  |      |        |      |  |   |       |   |  |   |       |   |  |   |       |  
|Benefit (income) costs                      |  | $                | (2,617 | )              |  | $    | (5,224 | )    |  | $    | (5,975 | )    |  | $ | 1,811 |   |  | $ | 1,848 |   |  | $ | 1,735 |  
|                                            |  |                  |        |                |  |      |        |      |  |      |        |      |  |   |       |   |  |   |       |   |  |   |       |  

The Company recorded $167 of non-cash pension curtailment
charges in 2003, $2,700 in 2002 and $200 in 2001 related to the
disposal or closure of three manufacturing facilities. These
were classified as restructuring charges in each year.

The Company has two postretirement benefit plans. Under both of
these plans, 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:

|                                                                         |  |              |       |              |  |   |       | 
|------------------------------------------------------------------------ |  | ------------ | ----- | ------------ |  | - | ----- | 
|                                                                         |  | 1-Percentage |       | 1-Percentage
|                                                                         |  | Point        |       | Point       
|                                                                         |  | Increase     |       | Decrease    
|                                                                         |  |              |       |             
|Effect on total of service and interest cost
    components in 2003      |  | $            | 138   |              |  | $ | 104   | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Effect on post retirement benefit obligation as
    of December 31, 2003 |  | $            | 1,767 |              |  | $ | 1,545 | 

The total contribution charged to pension expense for the
Companys defined contribution plans was $1,331 in 2003,
$1,273 in 2002 and $1,382 in 2001. The Company expects to have
no contribution to its defined benefit plans in 2004.

NOTE K  Leases

Rental expense for 2003, 2002 and 2001 was $10,263, $10,749 and
$12,638, respectively. Future minimum lease commitments during
each of the five years following December 31, 2003 are as
follows: $7,178 in 2004, $5,259 in 2005, $3,273 in 2006, $1,600
in 2007, $1,329 in 2008 and $1,856 thereafter.

NOTE L  Industry Segments

The Company operates through three segments: Integrated
Logistics Solutions (ILS), Aluminum Products and
Manufactured Products. ILS is a leading supply chain logistics
provider of production components to large, multinational
manufacturing companies, other manufacturers and distributors.
In connection with the supply of such production components, ILS
provides a variety of value-added, cost-effective supply chain
management services. The principal customers of ILS are in the
semiconductor equipment, heavy-duty truck, industrial equipment,
aerospace and defense, electrical controls, HVAC, vehicle parts
and accessories, appliances, and lawn and garden equipment
industries. Aluminum Products manufactures cast aluminum
components for automotive, agricultural equipment, heavy-duty
truck and construction equipment. Aluminum Products also
provides value-added services such as design and engineering,
machining and assembly. Manufactured Products operates a diverse
group of niche manu-

33



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

facturing businesses that design and manufacture a broad range
of high quality products engineered for specific customer
applications. The principal customers of Manufactured Products
are original equipment manufacturers and end-users in the
aerospace, automotive, railroad, truck and oil industries.

The Companys sales are made through its own sales
organization, distributors and representatives. Intersegment
sales are immaterial and eliminated in consolidation and are not
included in the figures presented. Intersegment sales are
accounted for at values based on market prices. Income allocated
to segments excludes certain corporate expenses and interest
expense. Identifiable assets by industry segment include assets
directly identified with those operations.

Corporate assets generally consist of cash and cash equivalents,
deferred tax assets, property and equipment, and other assets.

|                                                                          |                          |                        |         |         |   |      |         |         |   |   |         |         |  
|------------------------------------------------------------------------- | ------------------------ | ---------------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|                                                                          |                          |                       
|                                                                          |                          | Year Ended December 31
|                                                                          |                          |                       
|                                                                          |                          | 2003                   |         | 2002    |   | 2001
|                                                                          |                          |                        |         |         |   |     
|Net sales:                                                                |                          |                        |         |         |   |      |         |         |   |   |         |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | ILS                      |                        | $       | 377,645 |   |      | $       | 398,141 |   |   | $       | 416,962 |  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Aluminum products        |                        |         | 90,080  |   |      |         | 106,148 |   |   |         | 84,846  |  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Manufactured products    |                        |         | 156,570 |   |      |         | 130,166 |   |   |         | 134,609 |  
|                                                                          |                          |                        |         |         |   |      |         |         |   |   |         |        
|                                                                          |                          | $                      | 624,295 |         |   | $    | 634,455 |         |   | $ | 636,417 |        
|                                                                          |                          |                        |         |         |   |      |         |         |   |   |         |        
|Income (loss) before income taxes and
    amortization of goodwill:       |                          |                        |         |         |   |      |         |         |   |   |         |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | ILS                      |                        | $       | 24,893  |   |      | $       | 17,467  |   |   | $       | 22,944  |  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Aluminum products        |                        |         | 10,201  |   |      |         | 4,739   |   |   |         | (2,327  | )
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Manufactured products    |                        |         | (13,759 | ) |      |         | (1,342  | ) |   |         | (14,287 | )
|                                                                          |                          |                        |         |         |   |      |         |         |   |   |         |        
|                                                                          |                          | $                      | 21,335  |         |   | $    | 20,864  |         |   | $ | 6,330   |        
|                                                                          |                          |                        |         |         |   |      |         |         |   |   |         |        
|Amortization of goodwill:                                                 |                          |                        |         |         |   |      |         |         |   |   |         |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | ILS                      |                        | $       | -0-     |   |      | $       | -0-     |   |   | $       | 2,702   |  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Aluminum products        |                        |         | -0-     |   |      |         | -0-     |   |   |         | 745     |  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Manufactured products    |                        |         | -0-     |   |      |         | -0-     |   |   |         | 286     |  
|                                                                          |                          |                        |         |         |   |      |         |         |   |   |         |        
|                                                                          |                          | $                      | -0-     |         |   | $    | -0-     |         |   | $ | 3,733   |        
|                                                                          |                          |                        |         |         |   |      |         |         |   |   |         |        
|Income (loss) before income taxes and change
    in accounting principle: |                          |                        |         |         |   |      |         |         |   |   |         |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | ILS                      |                        | $       | 24,893  |   |      | $       | 17,467  |   |   | $       | 20,242  |  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Aluminum products        |                        |         | 10,201  |   |      |         | 4,739   |   |   |         | (3,072  | )
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Manufactured products    |                        |         | (13,759 | ) |      |         | (1,342  | ) |   |         | (14,573 | )
|                                                                          |                          |                        |         |         |   |      |         |         |   |   |         |        
|                                                                          |                          |                        | 21,335  |         |   |      | 20,864  |         |   |   | 2,597   |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Corporate costs          |                        |         | (5,803  | ) |      |         | (4,285  | ) |   |         | (6,483  | )
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Interest expense         |                        |         | (26,151 | ) |      |         | (27,623 | ) |   |         | (31,108 | )
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Non-operating items, net |                        |         | -0-     |   |      |         | -0-     |   |   |         | (1,850  | )
|                                                                          |                          |                        |         |         |   |      |         |         |   |   |         |        
|                                                                          |                          | $                      | (10,619 | )       |   | $    | (11,044 | )       |   | $ | (36,844 | )      
|                                                                          |                          |                        |         |         |   |      |         |         |   |   |         |        

34



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

|                                       |                       |                        |         |         |  |      |         |         |  |   |         |         | 
|-------------------------------------- | --------------------- | ---------------------- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|                                       |                       |                       
|                                       |                       | Year Ended December 31
|                                       |                       |                       
|                                       |                       | 2003                   |         | 2002    |  | 2001
|                                       |                       |                        |         |         |  |     
|Identifiable assets:                   |                       |                        |         |         |  |      |         |         |  |   |         |        
|                                      
|                                      
|                                      
|                                      
|                                       | ILS                   |                        | $       | 267,361 |  |      | $       | 273,442 |  |   | $       | 312,288 | 
|                                      
|                                      
|                                      
|                                      
|                                       | Aluminum products     |                        |         | 88,031  |  |      |         | 79,797  |  |   |         | 95,033  | 
|                                      
|                                      
|                                      
|                                      
|                                       | Manufactured products |                        |         | 121,331 |  |      |         | 151,880 |  |   |         | 141,774 | 
|                                      
|                                      
|                                      
|                                      
|                                       | General corporate     |                        |         | 32,821  |  |      |         | 37,824  |  |   |         | 45,813  | 
|                                       |                       |                        |         |         |  |      |         |         |  |   |         |        
|                                       |                       | $                      | 509,544 |         |  | $    | 542,943 |         |  | $ | 594,908 |        
|                                       |                       |                        |         |         |  |      |         |         |  |   |         |        
|Depreciation and amortization expense: |                       |                        |         |         |  |      |         |         |  |   |         |        
|                                      
|                                      
|                                      
|                                      
|                                       | ILS                   |                        | $       | 4,868   |  |      | $       | 5,206   |  |   | $       | 8,441   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Aluminum products     |                        |         | 5,342   |  |      |         | 6,432   |  |   |         | 5,532   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Manufactured products |                        |         | 5,050   |  |      |         | 4,307   |  |   |         | 5,632   | 
|                                      
|                                      
|                                      
|                                      
|                                       | General corporate     |                        |         | 219     |  |      |         | 320     |  |   |         | 306     | 
|                                       |                       |                        |         |         |  |      |         |         |  |   |         |        
|                                       |                       | $                      | 15,479  |         |  | $    | 16,265  |         |  | $ | 19,911  |        
|                                       |                       |                        |         |         |  |      |         |         |  |   |         |        
|Capital expenditures:                  |                       |                        |         |         |  |      |         |         |  |   |         |        
|                                      
|                                      
|                                      
|                                      
|                                       | ILS                   |                        | $       | 3,017   |  |      | $       | 1,603   |  |   | $       | 1,972   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Aluminum products     |                        |         | 1,878   |  |      |         | 5,927   |  |   |         | 3,160   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Manufactured products |                        |         | 5,867   |  |      |         | 6,201   |  |   |         | 8,352   | 
|                                      
|                                      
|                                      
|                                      
|                                       | General corporate     |                        |         | 107     |  |      |         | -0-     |  |   |         | 439     | 
|                                       |                       |                        |         |         |  |      |         |         |  |   |         |        
|                                       |                       | $                      | 10,869  |         |  | $    | 13,731  |         |  | $ | 13,923  |        
|                                       |                       |                        |         |         |  |      |         |         |  |   |         |        

The Company had sales of $68,238 in 2003 to Navistar which
represented approximately 11% of consolidated net sales. For
2002 and 2001, sales to no single customer were greater than 10%
of consolidated net sales.

The Companys approximate percentage of net sales by
geographic region were as follows:

|              |  |             |     |      |  |      |     |   |  |  |     |  
|------------- |  | ----------- | --- | ---- |  | ---- | --- | - |  |  | --- | -
|              |  |            
|              |  | Year Ended 
|              |  | December 31
|              |  |            
|              |  | 2003        |     | 2002 |  | 2001
|              |  |             |     |      |  |     
|United States |  |             | 83  | %    |  |      | 80  | % |  |  | 88  | %
|             
|             
|             
|             
|Canada        |  |             | 8   | %    |  |      | 13  | % |  |  | 7   | %
|             
|             
|             
|             
|Other         |  |             | 9   | %    |  |      | 7   | % |  |  | 5   | %
|              |  |             |     |      |  |      |     |   |  |  |     |  
|              |  |             | 100 | %    |  |      | 100 | % |  |  | 100 | %
|              |  |             |     |      |  |      |     |   |  |  |     |  

At December 31, 2003, approximately 88% of the
Companys assets are maintained in the United States.

35



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

NOTE M  Accumulated Comprehensive Loss

The components of accumulated comprehensive loss at
December 31, 2003 and 2002 are as follows:

|                                        |       |             |        |       |  |   |       |       | 
|--------------------------------------- | ----- | ----------- | ------ | ----- |  | - | ----- | ----- | 
|                                        |       |            
|                                        |       | December 31
|                                        |       |            
|                                        |       | 2003        |        | 2002 
|                                        |       |             |        |      
|Foreign currency translation adjustment |       | $           | (1,091 | )     |  | $ | 2,541 |      
|                                       
|                                       
|                                       
|                                       
|Minimum pension liability               |       |             | 4,355  |       |  |   | 5,555 |      
|                                        |       |             |        |       |  |   |       |      
|                                        | Total |             | $      | 3,264 |  |   | $     | 8,096 | 
|                                        |       |             |        |       |  |   |       |      

NOTE N  Restructuring and Unusual Charges

Since 2001, the Company has responded to the economic downturn
by reducing costs in a variety of ways, including restructuring
businesses and selling non-core manufacturing assets. These
activities generated restructuring and asset impairment charges
in 2001, 2002 and 2003, as the Companys restructuring
efforts continued and evolved.

During 2001, the Company recorded restructuring and asset
impairment charges aggregating $28,462, primarily related to
managements decision to exit certain under-performing
product lines and to close or consolidate certain operating
facilities in 2002. The Companys actions included
1) selling or discontinuing the businesses of Castle Rubber
and Ajax Manufacturing, 2) closing the Cicero Flexible
Products manufacturing facility and discontinue certain
product lines, 3) inventory write-downs and other
restructuring activities at St. Louis Screw and Bolt and Tocco,
4) closing twenty ILS supply chain logistics facilities and
two ILS manufacturing plants, 5) closing an Aluminum
Products machining facility, and 6) write-down of certain
Corporate assets to current value. The charges were composed of
$11,280 for the impairment of property and equipment and other
long-term assets; $10,299 million of cost of goods sold,
primarily to write down inventory of discontinued businesses and
product lines to current market value; and $6,883 for severance
(525 employees) and exit costs. Below is a summary of these
charges by segment.

|                      |  |          |        |            |  |               |        |       |  |   |       |  |  |   |        | 
|--------------------- |  | -------- | ------ | ---------- |  | ------------- | ------ | ----- |  | - | ----- |  |  | - | ------ | 
|                      |  | Cost of  |        |            |  |               |        |      
|                      |  | Products |        | Asset      |  | Restructuring |        |      
|                      |  | Sold     |        | Impairment |  | & Severance   |        | Total
|                      |  |          |        |            |  |               |        |      
|Manufactured Products |  | $        | 8,599  |            |  | $             | 10,080 |       |  | $ | 2,030 |  |  | $ | 20,709 | 
|                     
|                     
|                     
|                     
|ILS                   |  |          | 1,700  |            |  |               | 600    |       |  |   | 4,070 |  |  |   | 6,370  | 
|                     
|                     
|                     
|                     
|Aluminum Products     |  |          | -0-    |            |  |               | -0-    |       |  |   | 783   |  |  |   | 783    | 
|                     
|                     
|                     
|                     
|Corporate             |  |          | -0-    |            |  |               | 600    |       |  |   | -0-   |  |  |   | 600    | 
|                      |  |          |        |            |  |               |        |       |  |   |       |  |  |   |        | 
|                      |  | $        | 10,299 |            |  | $             | 11,280 |       |  | $ | 6,883 |  |  | $ | 28,462 | 
|                      |  |          |        |            |  |               |        |       |  |   |       |  |  |   |        | 

During 2002, the Company recorded further restructuring and
asset impairment charges aggregating $19,190, primarily related
to management decisions to exit additional product lines and
consolidate additional facilities. The Companys planned
actions included 1) selling or discontinuing the businesses
of St. Louis Screw and Bolt and Green Bearing, 2) closing
five additional supply chain logistics facilities and
3) closing or selling two Aluminum Products manufacturing
plants (one of which was closed as of December 31, 2002).
The charges were composed of $5,599 for severance (490
employees) and exit costs, $2,700 for pension curtailment costs;
$5,628 of costs of goods sold, primarily to write down inventory
of discontinued businesses and product lines to current market
value; and $5,263 for impairment of property and equipment and
other long-term assets. Below is a summary of these charges by
segment.

36



---



##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

|                      |  |          |       |            |  |               |       |             |  |       |       |  |  |   |       |  |  |   |        | 
|--------------------- |  | -------- | ----- | ---------- |  | ------------- | ----- | ----------- |  | ----- | ----- |  |  | - | ----- |  |  | - | ------ | 
|                      |  | Cost of  |       |            |  |               |       |             |  |      
|                      |  | Products |       | Asset      |  | Restructuring |       | Pension     |  |      
|                      |  | Sold     |       | Impairment |  | & Severance   |       | Curtailment |  | Total
|                      |  |          |       |            |  |               |       |             |  |      
|ILS                   |  | $        | 4,500 |            |  | $             | -0-   |             |  | $     | 2,534 |  |  | $ | 2,000 |  |  | $ | 9,034  | 
|                     
|                     
|                     
|                     
|Manufactured Products |  |          | 1,128 |            |  |               | 2,103 |             |  |       | 2,628 |  |  |   | 700   |  |  |   | 6,559  | 
|                     
|                     
|                     
|                     
|Aluminum Products     |  |          | -0-   |            |  |               | 3,160 |             |  |       | 437   |  |  |   | -0-   |  |  |   | 3,597  | 
|                      |  |          |       |            |  |               |       |             |  |       |       |  |  |   |       |  |  |   |        | 
|                      |  | $        | 5,628 |            |  | $             | 5,263 |             |  | $     | 5,599 |  |  | $ | 2,700 |  |  | $ | 19,190 | 
|                      |  |          |       |            |  |               |       |             |  |       |       |  |  |   |       |  |  |   |        | 

During the fourth quarter of 2003, the Company continued its
multi-year efforts to position the Company for renewed, more
profitable growth and recorded restructuring and asset
impairment charges aggregating $19,446. The action primarily
related to restructuring at the Companys Forge Group
resulting from a decision to shut down its locomotive crankshaft
forging plant after entering into a long-term supply contract to
purchase these forgings from a third party. The charges were
composed of $990 for exit costs; $638 of cost of goods sold
primarily to write down inventory of discontinued product lines
to current market value; $1,767 for pension curtailment and
multi-employer pension plan withdrawal costs resulting primarily
from the termination of union representation at the locomotive
crankshaft forging plant and another Manufactured Products
manufacturing facility and the closure of an Aluminum Products
manufacturing plant; and $16,051 for impairment of property and
equipment and other long-term assets. Below is a summary of
these charges by segment.

|                      |  |          |     |            |  |               |        |             |  |       |     |  |  |   |       |  |  |   |        | 
|--------------------- |  | -------- | --- | ---------- |  | ------------- | ------ | ----------- |  | ----- | --- |  |  | - | ----- |  |  | - | ------ | 
|                      |  | Cost of  |     |            |  |               |        |             |  |      
|                      |  | Products |     | Asset      |  | Restructuring |        | Pension     |  |      
|                      |  | Sold     |     | Impairment |  | & Severance   |        | Curtailment |  | Total
|                      |  |          |     |            |  |               |        |             |  |      
|Manufactured Products |  | $        | 638 |            |  | $             | 16,051 |             |  | $     | 990 |  |  | $ | 1,600 |  |  | $ | 19,279 | 
|                     
|                     
|                     
|                     
|Aluminum Products     |  |          | -0- |            |  |               | -0-    |             |  |       | -0- |  |  |   | 167   |  |  |   | 167    | 
|                      |  |          |     |            |  |               |        |             |  |       |     |  |  |   |       |  |  |   |        | 
|                      |  | $        | 638 |            |  | $             | 16,051 |             |  | $     | 990 |  |  | $ | 1,767 |  |  | $ | 19,446 | 
|                      |  |          |     |            |  |               |        |             |  |       |     |  |  |   |       |  |  |   |        | 

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

|                                            |  |   |        |  
|------------------------------------------- |  | - | ------ | -
|                                           
|                                           
|                                           
|                                           
|Severance and exit charges recorded in 2001 |  | $ | 6,883  |  
|                                           
|                                           
|                                           
|                                           
|Cash payments made in 2001                  |  |   | (2,731 | )
|                                            |  |   |        |  
|Balance at December 31, 2001                |  |   | 4,152  |  
|                                           
|                                           
|                                           
|                                           
|Severance and exit charges recorded in 2002 |  |   | 5,599  |  
|                                           
|                                           
|                                           
|                                           
|Cash payments made in 2002                  |  |   | (5,706 | )
|                                            |  |   |        |  
|Balance at December 31, 2002                |  |   | 4,045  |  
|                                           
|                                           
|                                           
|                                           
|Severance and exit charges recorded in 2003 |  |   | 990    |  
|                                           
|                                           
|                                           
|                                           
|Cash payments made in 2003                  |  |   | (2,500 | )
|                                            |  |   |        |  
|Balance at December 31, 2003                |  | $ | 2,535  |  
|                                            |  |   |        |  

As of December 31, 2003, all of the 525 employees
identified in 2001 and all but 5 of the 490 employees identified
in 2002 had been terminated. The workforce reductions under the
restructuring plan consisted of hourly and salary employees at
various operating facilities due to either closure or
consolidation. As of December 31, 2003, the Company had an
accrued liability of $2,535 for future estimated employee
severance and plant closing payments.

Idle fixed assets of $6,516 were included in other assets as of
December 31, 2003. These consisted primarily of property,
plant and equipment of two idled aluminum casting plants, for
which the Com-

37



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##### 



PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Continued

pany is evaluating new products and technologies. These assets
may either be reclassified to property, plant and equipment if
placed in service, or sold. They are currently carried at
estimated fair value.

At December 31, 2003, the Companys balance sheet
reflected assets held for sale at their estimated current value
of $2,321 for inventory, property, plant and equipment and other
long-term assets. Net sales for the businesses that were
included in net assets held for sale were $1,139 in 2003,
$19,159 in 2002, and $25,356 in 2001. Operating income (loss),
excluding restructuring and unusual charges for these entities
were $(32) in 2003, $(334) in 2002, and $703 in 2001.

38



---



##### 





|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on Accounting
    and Financial Disclosure

There were no changes in nor disagreements with Park-Ohios
independent auditors on accounting and financial disclosure
matters within the two-year period ended December 31, 2003.



|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

As of December 31, 2003, management, including our chief
executive officer and chief financial officer, evaluated the
effectiveness of the design and operation of the Companys
disclosure controls and procedures. Based upon, and as of the
date of, that evaluation, our chief executive officer and chief
financial officer concluded that the disclosure controls and
procedures were effective, in all material respects, to ensure
that information required to be disclosed in the reports we file
and submit under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported as and
when required.

There have been no changes in the Companys internal
control over financial reporting that occurred during the fourth
quarter of 2003 that has materially affected, or is reasonably
likely to materially affect, the Companys internal control
over financial reporting.

Part III



|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant

Information required by this item has been omitted pursuant to
General Instruction I of Form 10-K.



|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Information required by this item has been omitted pursuant to
General Instruction I of Form 10-K.



|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters

Information required by this item has been omitted pursuant to
General Instruction I of Form 10-K.



|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions

Information required by this item has been omitted pursuant to
General Instruction I of Form 10-K.



|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services

The following table presents fees for professional audit
services rendered by Ernst & Young LLP for the audit of
the Companys and its parents annual financial
statements for the years ended December 31, 2003 and 2002:

|                   |  |      |         |      |  |   |         | 
|------------------ |  | ---- | ------- | ---- |  | - | ------- | 
|                   |  | 2003 |         | 2002
|                   |  |      |         |     
|Audit fees         |  | $    | 401,000 |      |  | $ | 427,000 | 
|                  
|                  
|                  
|                  
|Tax fees           |  |      | 67,250  |      |  |   | 71,000  | 
|                  
|                  
|                  
|                  
|Audit-related fees |  |      | 215,500 |      |  |   | 204,000 | 

Fees for audit services include fees associated with the annual
audit, the reviews of the Companys quarterly reports
on Form 10-Q, and statutory audits required
internationally. Audit-related fees principally included fees in
connection with pension plan audits and accounting consultation.
Tax fees included tax compliance, tax advice and tax planning.
Park-Ohio is a wholly-owned subsidiary of Holdings and does not
have a separate audit committee. Holdings audit committee
has adopted a pre-approval policy for audit and non-audit
related services. For a description of Holdings
pre-approval policies for audit and non-audit related services,
see Holdings proxy statement.

39



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##### 



Part IV



|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and Reports on
    Form 8-K

(a)(1) The following financial statements are included in Part
II, Item 8:

|                                                       |                                                                                                        |      |    |    | 
|------------------------------------------------------ | ------------------------------------------------------------------------------------------------------ | ---- | -- | -- | 
|                                                       |                                                                                                        | Page
|                                                       |                                                                                                        |     
|Report of Ernst & Young, LLP, Independent
    Auditors |                                                                                                        |      | 17 |   
|Financial Statements                                   |                                                                                                        |      |    |   
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Consolidated balance
    sheets  December 31, 2003 and 2002                                           |      |    | 18 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Consolidated statements of
    operations  years ended December 31, 2003,
    2002 and 2001           |      |    | 19 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Consolidated statements of shareholders
    equity  years ended December 31, 2003, 2002
    and 2001 |      |    | 20 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Consolidated statements of cash
    flows  years ended December 31, 2003, 2002
    and 2001           |      |    | 21 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Notes to consolidated financial statements                                                             |      |    | 22 | 

(2) Financial Statement Schedules



| |                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | All Schedules for which provision is made in the applicable
    accounting regulations of the Securities and Exchange Commission
    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 Form 10-K are listed on
    the Exhibit Index immediately preceding such exhibits,
    incorporated herein by reference.



|    |                                                                  
|--- | -----------------------------------------------------------------
|(b) | Reports on Form 8-K filed in the fourth quarter of 2003:
    None

Supplemental Information to be furnished with reports filed
pursuant to Section 15(d) of the Act by registrants which
have not registered securities pursuant to Section 12 of
the Act.

No annual report or proxy statement covering the Companys
last fiscal year has been or will be circulated to security
holders.

40



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##### 



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |                                        
| | ---------------------------------------
| | PARK-OHIO INDUSTRIES, INC. (Registrant)



| |     |                       
| | --- | ----------------------
| | By: | /s/ RICHARD P. ELLIOTT

| |                                                                     
| | --------------------------------------------------------------------
| | Richard P. Elliott, Vice President 
     and Chief Financial Officer

Date: March 29, 2004

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   |  | Chairman, Chief Executive Officer and Director                                                |  |               
|*Richard P. Elliott   |  | Vice President  and Chief Financial
    Officer (Principal Financial and Accounting Officer) |  |               
|*Matthew V. Crawford  |  | President and Director                                                                        |  |               
|*Kevin R. Greene      |  | Director                                                                                      |  |               
|*Lewis E. Hatch, Jr.  |  | Director                                                                                      |  | March 29, 2004
|*Daniel T. Moore      |  | Director                                                                                      |  |               
|*Lawrence O. Selhorst |  | Director                                                                                      |  |               
|*Ronna Romney         |  | Director                                                                                      |  |               
|*James W. Wert        |  | Director                                                                                      |  |               

* The undersigned, pursuant to a Power of Attorney executed
by each of the Directors and officers identified above and filed
with the Securities and Exchange Commission, by signing his name
hereto, does hereby sign and execute this report on behalf of
each of the persons noted above, in the capacities indicated.

March 29, 2004

| |     |                      
| | --- | ---------------------
| | By: | /s/ ROBERT D. VILSACK

| |                                    
| | -----------------------------------
| | Robert D. Vilsack, Attorney-in-Fact

41



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##### 



ANNUAL REPORT ON FORM 10-K

PARK-OHIO INDUSTRIES, INC.


For the Year Ended December 31, 2003

EXHIBIT INDEX

|        |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | ----- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       | 
|        |       | 
|        | 3.1   |  |  | Amended and Restated Articles of Incorporation of
    Park-Ohio Holdings Corp. (filed as Exhibit 3.1 to the
    Form 10-K of Park-Ohio Holdings Corp. for the year ended
    December 31, 1998, SEC File No. 000-03134 and incorporated
    by reference and made a part hereof)                                                                                                                                                    
|        | 3.2   |  |  | Code of Regulations of Park-Ohio Holdings Corp.
    (filed as Exhibit 3.2 to the Form 10-K of Park-Ohio
    Holdings Corp. for the year ended December 31, 1998, SEC
    File No. 000-03134 and incorporated by reference and made a
    part hereof)                                                                                                                                                                               
|        | 4.1   |  |  | Indenture, dated June 3, 1999 by and among
    Park-Ohio Industries, Inc. and Norwest Bank Minnesota, N.A., as
    trustee (filed as Exhibit 4.2 of the Companys
    Registration Statement on Form S-4, filed on July 23,
    1999, SEC File No. 333-83117 and incorporated by reference
    and made a part hereof)                                                                                                              
|        | 4.2   |  |  | Credit and Security Agreement among Park-Ohio
    Industries, Inc., and various financial institutions dated
    December 22, 2000 (filed as Exhibit 4.2 to the
    Form 10-K of Park-Ohio Holdings Corp. for the year ended
    December 31, 2000, SEC File No. 000-03134 and
    incorporated by reference and made a part hereof)                                                                                                
|        | 4.3   |  |  | First amendment, dated March 12, 2001, to
    the Credit and Security Agreement among Park-Ohio Industries,
    Inc. and various financial institutions (filed as
    Exhibit 4.2 to the Form 10-K of Park-Ohio Holdings
    Corp. for the year ended December 31, 2000, SEC File
    No. 000-03134 and incorporated by reference and made a part
    hereof)                                                                       
|        | 4.4   |  |  | Second amendment, dated June 30, 2001, to
    the Credit and Security Agreement among Park-Ohio Industries,
    Inc. and various financial institutions (filed as Exhibit 4
    to the Form 10-Q of Park-Ohio Holdings Corp. for the
    quarter ended June 30, 2001, SEC File No. 000-03134
    and incorporated by reference and made a part hereof)                                                                              
|        | 4.5   |  |  | Third amendment, dated November 14, 2001, to
    the Credit and Security Agreement among Park-Ohio Industries,
    Inc. and various financial institutions (filed as Exhibit 4
    to the Form 8-K of Park-Ohio Holdings Corp. dated
    December 14, 2001, SEC File No. 000-03134 and
    incorporated by reference and made a part hereof)                                                                                        
|        | 4.6   |  |  | Fourth amendment, dated as of December 31,
    2001, to the Credit and Security Agreement among Park-Ohio
    Industries, Inc. and various financial institutions (filed as
    Exhibit 4.6 to the Form 10-K of Park-Ohio Holdings,
    Corp. for the year ended December 31, 2001, SEC File
    No. 000-03134 and incorporated by reference and made a part
    hereof)                                                            
|        | 4.7   |  |  | Fifth amendment, dated as of September 30,
    2002, to the Credit and Security Agreement among Park-Ohio
    Industries, Inc. and various financial institutions (filed as
    Exhibit 4 to the Form 10-Q of Park-Ohio Holdings Corp.
    for the quarter ended September 30, 2002, SEC File
    No. 000-03134 and incorporated by reference and made a part
    of hereof.)                                                       
|        | 4.8   |  |  | Amended and Restated Credit Agreement, dated
    November 5, 2003, among Park-Ohio Industries, Inc., the
    other loan parties party thereto, the lenders party thereto,
    Bank One, NA and Banc One Capital Markets Inc. (filed as
    Exhibit 4 to the Form 10-Q of Park-Ohio Holdings Corp.
    for the quarter ended September 30, 2003, SEC File
    No. 000-03134 and incorporated by reference and made a part
    hereof)
|        | 10.1  |  |  | Form of Indemnification Agreement entered into
    between Park-Ohio Holdings Corp. and each of its directors and
    certain officers (filed as Exhibit 10.1 to the
    Form 10-K of Park-Ohio Holdings Corp. for the year ended
    December 31, 1998, SEC File No. 000-03134 and
    incorporated by reference and made a part hereof)                                                                                           
|        | 10.2* |  |  | Amended and Restated 1998 Long-Term Incentive
    Plan (filed as Appendix A to the Definitive Proxy Statement
    of Park-Ohio Holdings Corp., filed on April 23, 2001, SEC
    File No. 000-03134 and incorporated by reference and made a
    part hereof)                                                                                                                                                                        
|        | 12.1  |  |  | Computation of Ratios                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 21.1  |  |  | List of Subsidiaries of Park-Ohio Industries, Inc.                                                                                                                                                                                                                                                                                                                                                                                  
|        | 23.1  |  |  | Consent of Ernst & Young LLP                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 24.1  |  |  | Power of Attorney                                                                                                                                                                                                                                                                                                                                                                                                                   



---



##### 



|        |      |  |  |                                                                                                          
|------- | ---- |  |  | ---------------------------------------------------------------------------------------------------------
|Exhibit |      | 
|        |      | 
|        | 31.1 |  |  | Principal Executive Officers Certification
    Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|        | 31.2 |  |  | Principal Financial Officers Certification
    Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|        | 32   |  |  | Certification requirement under Section 906
    of the Sarbanes-Oxley Act of 2002