Our consolidated financial statements include the accounts of Park-Ohio Holdings Corp. and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation.

Executive Overview

We are an industrial Total Supply Managementtm and diversified manufacturing business, operating in three segments: Supply Technologies, Aluminum Products and Manufactured Products. In November 2007, our Integrated Logistics Solutions (ILS) business changed its name to Supply Technologies to better reflect its breadth of services and focus on driving efficiencies throughout the total supply management process. Our Supply Technologies business provides our customers with Total Supply Managementtm, a proactive solutions approach that manages the efficiencies of every aspect of supplying production parts and materials to our customers' manufacturing floor, from strategic planning to program implementation. Total Supply Managementtm includes such services as engineering and design support, part usage and cost analysis, supplier selection, quality assurance, bar coding, product packaging and tracking, just-in-time and point-of-use delivery, electronic billing services and ongoing technical support. The principal customers of Supply Technologies are in the heavy-duty truck, automotive and vehicle parts, electrical distribution and controls, consumer electronics, power sports/fitness equipment, HVAC, agricultural and construction equipment, semiconductor equipment, plumbing, aerospace and defense, and appliance industries. Aluminum Products casts and machines aluminum engine, transmission, brake, suspension and other components such as pump housings, clutch retainers/pistons, control arms, knuckles, master cylinders, pinion housings, brake calipers, oil pans and flywheel spacers for automotive, agricultural equipment, construction equipment, heavy-duty truck and marine equipment original equipment manufacturers ("OEMs"), primarily on a sole-source basis. Aluminum Products also provides value-added services such as design and engineering and assembly. Manufactured Products operates a diverse group of niche manufacturing businesses that design and manufacture a broad range of highly-engineered products including induction heating and melting systems, pipe threading systems, industrial oven systems, injection molded rubber components, and forged and machined products. Manufactured Products also produces and provides services and spare parts for the equipment it manufactures. The principal customers of Manufactured Products are OEMs, sub-assemblers and end users in the steel, coatings, forging, foundry, heavy-duty truck, construction equipment, bottling, automotive, oil and gas, rail and locomotive manufacturing and aerospace and defense industries. Sales, earnings and other relevant financial data for these three segments are provided in Note B to the consolidated financial statements.

During the years 2004 through 2007, we reinforced our long-term availability and attractive pricing of funds by refinancing both of our major sources of borrowed funds: senior subordinated notes and our revolving credit facility. In November 2004, we sold $210.0 million of 8.375% senior subordinated notes due 2014. We have amended our revolving credit facility, most recently in June 2007, to extend its maturity to December 2010, increase the credit limit to $270.0 million subject to an asset-based formula, and provide lower interest rate levels.

Accounting Changes

In March 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133" ("FAS 161"). FAS 161 modifies existing requirements to include qualitative disclosures regarding the objectives and strategies for using derivatives, fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements. The pronouncement also requires the cross-referencing of derivative disclosures within the financial statements and notes thereto. The requirements of FAS 161 are effective for interim and annual periods beginning after November 15, 2008. The Company is currently evaluating the impact of FAS 161 on its financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51" ("FAS 160"). FAS 160 modifies the reporting for noncontrolling interests in the balance sheet and minority interest income (expense) in the income statement. The pronouncement also requires that increases and decreases in the noncontrolling ownership interest amount be accounted for as equity transactions. FAS 160 is required to be adopted prospectively, with limited

exceptions, effective for fiscal years beginning on or after December 15, 2008. The Company is currently evaluating the effect the adoption of FAS 160 will have on its financial position, results of operations and related disclosures.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141R, "Business Combinations" ("FAS 141R"). FAS 141R modifies the accounting for business combinations by requiring that acquired assets and assumed liabilities be recorded at fair value, contingent consideration arrangements be recorded at fair value on the date of the acquisition and preacquisition contingencies will generally be accounted for in purchase accounting at fair value. The pronouncement also requires that transaction costs be expensed as incurred, acquired research and development be capitalized as an indefinite-lived intangible asset and the requirements of Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," be met at the acquisition date in order to accrue for a restructuring plan in purchase accounting. FAS 141R is required to be adopted prospectively effective for fiscal years beginning after December 15, 2008.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("FAS 159"). FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The pronouncement also establishes presentation and disclosure requirements to facilitate comparison between entities that choose different measurement attributes for similar types of assets and liabilities. FAS 159 is effective for fiscal years beginning after November 15, 2007. The Company did not elect to measure its financial instruments or any other items at fair value as permitted by FAS 159.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). FAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. The provisions of FAS 157 apply under other accounting pronouncements that require or permit fair value measurements. FAS 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years for financial assets and liabilities, and for fiscal years beginning after November 15, 2008 for non-financial assets and liabilities. The adoption of FAS 157 for financial assets and liabilities did not have a material effect on the Company's financial position or results of operations.

As of June 30, 2008, the Company's financial assets subject to FAS 157 consisted of marketable equity securities and other investments totaling $1,553 and $6,524, respectively. The marketable securities are classified as having Level 1 inputs, as the fair value is based on quoted prices in active markets. The other investments are classified as having Level 2 inputs, as the fair value is based on inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly, including quoted prices for similar assets in active markets; quoted prices for identical or similar assets in markets that are not active; inputs other than quoted prices that are observable for the asset; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Results of Operations

Six Months 2008 versus Six Months 2007

Net Sales by Segment:


                                        Six Months
                                           Ended
                                         June 30,                        Percent
                                     2008        2007       Change       Change

           Supply Technologies      $ 267.8     $ 269.9     $  (2.1 )          (1 )%
           Aluminum products           84.5        90.6        (6.1 )          (7 )%
           Manufactured products      200.7       194.0         6.7             3 %

           Consolidated Net Sales   $ 553.0     $ 554.5     $  (1.5 )           0 %

Consolidated net sales were essentially flat in the first six months of 2008 compared to the same period in 2007 as growth in the Manufactured Products segment and new customers in the Supply Technologies and Aluminum Products segments offset declines in Supply Technologies sales to the heavy-duty truck market caused by the introduction of

new environmental standards at the beginning of 2007 and reduced automotive sales. Supply Technologies sales decreased 1% primarily due to volume reductions in the heavy-duty truck industry, partially offset by the addition of new customers and increases in product range to existing customers. Aluminum Products sales decreased 7% as the general decline in auto industry sales volumes exceeded additional sales from new contracts starting production ramp-up. Manufactured Products sales increased 3% primarily in the induction, pipe threading equipment and forging businesses, due largely to worldwide strength in the steel, oil & gas, aerospace and rail industries.

Cost of Products Sold & Gross Profit:


                                              Six Months
                                                 Ended
                                               June 30,                        Percent
                                           2008        2007       Change       Change

     Consolidated cost of products sold   $ 470.6     $ 473.5     $  (2.9 )          (1 )%

     Consolidated gross profit            $  82.4     $  81.0     $   1.4             2 %

     Gross Margin                            14.9 %      14.6 %

Cost of products sold were essentially flat in the first six months of 2008 compared to the same period in 2007, while gross margin increased to 14.9% in the first six months of 2008 from 14.6% in the same period of 2007.

Supply Technologies gross margin decreased slightly, as the effect of reduced heavy-duty truck sales volume outweighed the margin benefit from new sales. Aluminum Products gross margin decreased primarily due to both the costs associated with starting up new contracts and reduced volume. Gross margin in the Manufactured Products segment was essentially the same in the first six months of 2008 compared to the comparable period in 2007.

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


                                          Six Months
                                             Ended
                                           June 30,                        Percent
                                        2008       2007       Change       Change

          Consolidated SG&A expenses   $ 54.0     $ 50.3     $    3.7             7 %
          SG&A percent                    9.8 %      9.1 %

Consolidated SG&A expenses increased 7% in the first six months of 2008 compared to the same period in 2007, representing a .7 percentage point increase in SG&A expenses as a percent of sales. SG&A expenses increased in the first six months of 2008 compared to the same period in 2007 primarily due to increased sales volume in the Manufactured Products Segment, which has a higher SG&A percentage of sales than the other segments, expenses related to the new office building and other corporate expenses, partially offset by a $.4 million increase in net pension credits.

Interest Expense:


                                           Six Months
                                              Ended
                                            June 30,                         Percent
                                        2008        2007       Change         Change

      Interest expense                 $  13.9     $  16.3     $  (2.4 )      (15)%
      Average outstanding borrowings   $ 384.0     $ 389.5     $  (5.5 )       (1)%
      Average borrowing rate              7.24 %      8.37 %       113     basis points

Interest expense decreased $2.4 million in the first six months of 2008 compared to the same period of 2007, primarily due to lower average outstanding borrowings and a lower average borrowing rate during the first six months of 2008. The decrease in average borrowings in the first six months of 2008 resulted primarily from earnings, partially offset by increased working capital. The lower average borrowing rate in the first six months of 2008 was due primarily to decreased interest rates under our revolving credit facility compared to the same period in 2007.

Income Tax:

The provision for income taxes was $5.4 million in the first half of 2008, a 37% effective income tax rate, compared to income taxes of $5.6 million provided in the corresponding period of 2007, an effective 34% income tax rate. We estimate that the effective tax rate for full-year 2008 will be approximately 36%.

Results of Operations

Second Quarter 2008 versus Second Quarter 2007

Net Sales by Segment:


                                       Three Months
                                           Ended
                                         June 30,                        Percent
                                     2008        2007       Change       Change

           Supply Technologies      $ 138.5     $ 131.1     $   7.4             6 %
           Aluminum Products           44.0        48.6        (4.6 )          (9 )%
           Manufactured Products      103.4       106.9        (3.5 )          (3 )%

           Consolidated Net Sales   $ 285.9     $ 286.6     $   (.7 )           0 %

Consolidated net sales were essentially the same in the second quarter of 2008 compared to the same quarter in 2007 as growth in the Supply Technologies segment offset declines in the Aluminum Products and Manufactured Products Segments. Supply Technologies sales increased 6% primarily due to the addition of new customers and increases in product range to existing customers. Aluminum Products sales decreased 9% as the sales volume from new contracts starting production ramp-up was offset by the end of production of other parts and the general decline in auto industry sales volumes. Manufactured Products sales decreased 3% primarily in the induction equipment business but was offset by growth in the pipe threading equipment and forging businesses, due largely to worldwide strength in the steel, oil & gas, aerospace and rail industries.

Cost of Products Sold & Gross Profit:


                                             Three Months
                                                 Ended
                                               June 30,                        Percent
                                           2008        2007       Change       Change

     Consolidated cost of products sold   $ 242.2     $ 244.3     $  (2.1 )          (1 )%

     Consolidated gross profit            $  43.7     $  42.4     $   1.3             3 %

     Gross Margin                            15.3 %      14.8 %

Cost of products sold decreased 1% in the second quarter of 2008 compared to the same quarter in 2007, while gross margin increased to 15.3% in the second quarter of 2008 from 14.8% in the same quarter of 2007.

Supply Technologies gross margin increased from sales volume from new customers. Aluminum Products gross margin decreased primarily due to the costs associated with starting up new contracts and delays in new contract volume ramp-ups. Gross margin in the Manufactured Products segment increased primarily due to product mix.

SG&A Expenses:


                                         Three Months
                                             Ended
                                           June 30,                        Percent
                                        2008       2007       Change       Change

          Consolidated SG&A expenses   $ 28.0     $ 24.9     $    3.1            12 %
          SG&A percent                    9.8 %      8.7 %

Consolidated SG&A expenses increased 12% in the second quarter of 2008 compared to the same quarter in 2007, representing an increase in SG&A expenses as a percent of sales of 1.1% from 8.7% to 9.8%. SG&A increased in the second quarter of 2008 compared to the same quarter in 2007 primarily due to increased expenses associated with the Manufactured Products Segment, which has a higher SG&A percentage of sales than other businesses, and expenses related to the new office building and other corporate expenses, partially offset by a $.2 million increase in net pension credits.

Interest Expense:


                                          Three Months
                                              Ended
                                            June 30,                         Percent
                                        2008        2007       Change         Change

      Interest expense                 $   6.6     $   8.3     $  (1.7 )      (20)%
      Average outstanding borrowings   $ 390.2     $ 392.3     $  (2.1 )       (1)%
      Average borrowing rate              6.80 %      8.46 %       166     basis points

Interest expense decreased $1.7 million in the second quarter of 2008 compared to the same period of 2007, primarily due to lower average outstanding borrowings and a lower average borrowing rate during the second quarter of 2008. The decrease in average borrowings in the second quarter of 2008 resulted primarily from earnings, partially offset by increased working capital. The lower average borrowing rate in the second quarter of 2008 was due primarily to decreased interest rates under our revolving credit facility compared to the same period in 2007.

Income Tax:

The provision for income taxes was $3.4 million in the second quarter of 2008, a 37% effective income tax rate, compared to income taxes of $3.4 million provided in the corresponding quarter of 2007, an effective 37% income tax rate.

Liquidity and Sources of Capital

Our liquidity needs are primarily for working capital and capital expenditures. Our primary sources of liquidity have been funds provided by operations and funds available from existing bank credit arrangements and the sale of our senior subordinated notes. In 2003, we entered into a revolving credit facility with a group of banks which, as subsequently amended, matures at December 31, 2010 and provides for availability of up to $270 million subject to an asset-based formula. The revolving credit facility is secured by substantially all our assets in the United States, Canada and the United Kingdom. Borrowings from this revolving credit facility will be used for general corporate purposes.

Amounts borrowed under the revolving credit facility may be borrowed at the Company's election at either (i) LIBOR plus .75% to 1.75% or (ii) the bank's prime lending rate. The LIBOR-based interest rate is dependent on the Company's debt service coverage ratio, as defined in the revolving credit facility. Under the revolving credit facility, a detailed borrowing base formula provides borrowing availability to the Company based on percentages of eligible accounts receivable, inventory and fixed assets. As of June 30, 2008, the Company had $164.4 million outstanding under the revolving credit facility, and approximately $71.2 million of unused borrowing availability.

Current financial resources (working capital and available bank borrowing arrangements) and anticipated funds from operations are expected to be adequate to meet current cash requirements. The future availability of bank borrowings under the revolving credit facility is based on the Company's ability to meet a debt service ratio covenant, which could be materially impacted by negative economic trends. Failure to meet the debt service ratio could materially impact the availability and interest rate of future borrowings.

At June 30, 2008, the Company was in compliance with the debt service coverage ratio covenant and other covenants contained in the revolving credit facility.

The ratio of current assets to current liabilities was 2.27 at June 30, 2008 versus 2.40 at December 31, 2007. Working capital increased by $21.0 million to $291.1 million at June 30, 2008 from $270.1 million at December 31, 2007.

During the first six months of 2008, the Company provided $2.7 million from operating activities compared to using $10.3 million in the same period of 2007. The increase in operating cash provision of $13.0 million was primarily the result of a larger increase in accounts payable and accrued expenses in the first six months of 2008 compared to the same period of 2007 (an increase of $29.2 million compared to a decrease of $28.9 million, respectively), primarily due to an increase in advance billings in the first six months of 2008 of $8.8 million versus a reduction in advance billings in the first six months of 2007 of $13.2 million and to improvements in the timing of payments of accounts payable. This difference, plus a decrease in net income of $1.9 million, was offset by a larger increase in accounts receivable, inventories and other current assets in the first six months of 2008 compared to the same period of 2007 (an increase of $39.2 million compared to an increase of $5.2 million, respectively), due to an inventory increase in the Manufactured Products Segment and a receivable increase at the Supply Technologies and Aluminum Products Segments reflecting higher sales in the current quarter versus the prior quarter. In the first six months of 2008, the Company also used cash of $9.0 million for capital expenditures. These activities, plus cash interest and taxes payments of $17.3 million, $3.0 million of cash paid to purchase the Company's common stock, and a net increase in borrowing of $25.3 million, resulted in an increase in cash of $18.2 million in the first six months of 2008.

We do not have off-balance sheet arrangements, financing or other relationships with unconsolidated entities or other persons. There are occasions whereupon we enter into forward contracts on foreign currencies, primarily the euro, purely for the purpose of hedging exposure to changes in the value of accounts receivable in those currencies against the U.S. dollar. At June 30, 2008, none were outstanding. We currently have no other derivative instruments.

Seasonality; Variability of Operating Results

Our results of operations are typically stronger in the first six months 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 due to holidays in the fourth quarter.

The timing of orders placed by our customers has varied with, among other factors, orders for customers' finished goods, customer production schedules, competitive conditions and general economic conditions. The variability of the level and timing of orders has, from time to time, resulted in significant periodic and quarterly fluctuations in the operations of our business units. Such variability is particularly evident at the capital equipment businesses, included in the Manufactured Products segment, which typically ship a few large systems per year.

Forward-Looking Statements

This Form 10-Q contains certain statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The words "will", "believes", "anticipates", "plans", "expects", "intends", "estimates" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These uncertainties and other factors include such things as: general business conditions and competitive factors, including pricing pressures and product innovation; demand for our products and services; raw material availability and pricing; changes in our relationships with customers and suppliers; the financial condition of our customers, including the impact of any bankruptcies; our ability to successfully integrate recent and future acquisitions into existing operations; changes in general domestic economic conditions such as inflation rates, interest rates, tax rates and adverse impacts to us, our suppliers and customers from acts of terrorism or hostilities; our ability to meet various covenants, including financial covenants, contained in our revolving credit agreement and the indenture governing our senior subordinated notes; increasingly stringent domestic and foreign governmental regulations, including those affecting the environment; inherent uncertainties involved in assessing our potential liability for environmental remediation-related

activities; the outcome of pending and future litigation and other claims; dependence on the automotive and heavy-duty truck industries, which are highly cyclical; dependence on key management; and dependence on information systems. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. In light of these and other uncertainties, the inclusion of a forward-looking statement herein should not be regarded as a representation by us that our plans and objectives will be achieved.

Review By Independent Registered Public Accounting Firm

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