PARK OHIO HOLDINGS CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

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

EXECUTIVE OVERVIEW

General

We are a diversified international company providing world-class customers with
a supply chain management outsourcing service, capital equipment used on their
production lines, and manufactured components used to assemble their products.
We operate through three reportable segments: Supply Technologies, Assembly
Components and Engineered Products. Refer to Part 1, Item 1. Business for
descriptions of our business segments.

Covid-19 pandemic

In March 2020, the World Health Organization categorized the novel coronavirus
("COVID-19") as a pandemic, and it spread throughout the United States and other
countries around the world.  The pandemic has negatively impacted several of the
markets we serve, as well as contributed to a global semiconductor micro-chip
shortage, raw material price inflation, higher labor costs and various supply
chain constraints, including supplier delays that caused extended lead times and
increasing freight costs. In response to the ongoing COVID-19 pandemic, we
continue to manage our operating costs, including through actions to reduce
costs, including plant closure and consolidation, severance, and discretionary
spending cuts, and we are taking aggressive actions to improve results in
response to these macroeconomic conditions. We also continue to manage both
working capital and capital spending. Although there continues to be uncertainty
related to the anticipated impact and duration of the COVID-19 pandemic on our
future results, we believe our diversified portfolio of global businesses, our
liquidity position of $202.6 million as of December 31, 2021, and the steps we
have taken in both 2020 and 2021 to reduce costs leave us well-positioned to
manage our business through this crisis as it continues to unfold.

Subsequent event

On January 28, 2022, the Company's Board of Directors declared a quarterly
dividend of $0.125 per common share. The dividend was paid on February 25, 2022,
to shareholders of record as of the close of business on February 11, 2022 and
resulted in cash payments of $1.6 million.

RESULTS OF OPERATIONS

This section of this Annual Report on Form 10-K generally discusses 2021 and
2020 items and year-to-year comparisons between 2021 and 2020. Discussions of
2019 items and year-over-year comparisons between 2020 and 2019 that are not
included in this Annual Report on Form 10-K can be found in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended
December 31, 2020.
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2021 Compared to 2020 and 2020 Compared to 2019

                                                                                                     2021 vs. 2020                               2020 vs. 2019
                                    2021               2020               2019              $ Change              % Change               $ Change              % Change
                                                                               (Dollars in millions, except per share data)
Net sales                       $ 1,438.0          $ 1,295.2          $ 1,618.3          $      142.8                    11  %       $      (323.1)                 (20) %
Cost of sales                     1,281.9            1,126.6            1,358.0                 155.3                    14  %              (231.4)                 (17) %
Gross profit                        156.1              168.6              260.3                 (12.5)                   (7) %               (91.7)                 (35) %
Gross profit as a percentage of
net sales                            10.9  %            13.0  %            16.1  %
Selling, general and
administrative ("SG&A")
expenses                            178.3              152.9              177.2                  25.4                    17  %               (24.3)                 (14) %
SG&A expenses as a percentage
of net sales                         12.4  %            11.8  %            10.9  %
Gain on sale of assets              (14.7)                 -                  -                 (14.7)                       *                   -                       *

Goodwill impairment                   4.6                  -                  -                   4.6                        *                   -                       *
Operating (loss) income             (12.1)              15.7               83.1                 (27.8)                 (177) %               (67.4)                 (81) %

Other components of pension
income and other postretirement
benefits expense, net                 9.7                7.3                5.6                   2.4                    33  %                 1.7                   30  %
Interest expense, net               (30.1)             (30.3)             (33.8)                  0.2                    (1) %                 3.5                  (10) %

(Loss) income before income
taxes                               (32.5)              (7.3)              54.9                 (25.2)                  345  %               (62.2)                (113) %
Income tax benefit (expense)          6.5                2.5              (15.2)                  4.0                   160  %                17.7                 (116) %

Net (loss) income                   (26.0)              (4.8)              39.7                 (21.2)                  442  %               (44.5)                (112) %
Net loss (income) attributable
to noncontrolling interest            1.2                0.3               (1.1)                  0.9                   300  %                 1.4                 (127) %

Net income (loss) attributable to common stockholders of ParkOhio $(24.8) $(4.5) $38.6 $(20.3)

                  451  %       $       (43.1)                (112) %
(Loss) earnings per common
share attributable to ParkOhio
common shareholders
Basic                           $   (2.07)         $   (0.37)         $    3.16          $      (1.70)                  459  %       $       (3.53)                (112) %

Diluted                         $   (2.07)         $   (0.37)         $    3.12          $      (1.70)                  459  %       $       (3.49)                (112) %


* Calculation not meaningful

2021 Compared with 2020

Net Sales

Net sales increased 11% to $1,438.0 million in 2021 compared to $1,295.2 million
in 2020. This increase was primarily due to higher customer demand in our Supply
Technologies and Assembly Components business segments, partially offset by
lower demand in our Engineered Products segment.

The factors explaining the evolution of the segment’s turnover for the financial year ended
December 31, 2021 compared to the year ended December 31, 2020 are contained in the “Segment Results” section below.

Cost of sales and gross profit

Cost of sales increased 14% to $1,281.9 million in 2021 compared to $1,126.6
million in 2020. Gross margin decreased to 10.9% in 2021 compared to 13.0% in
2020. The increase in cost of sales and decrease in gross margin were due to the
increase in net sales described above and to expenses of $15.7 million in 2021
related to plant closure and consolidation,
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severance and other actions to reduce costs. 2020 included expenses of $5.1
million related to plant closure and consolidation, severance and other actions
to reduce costs.

SG&A Expenses

SG&A expenses increased to $178.3 million, or 12.4% of net sales, in 2020 from
$152.9 million, or 11.8% of net sales, in 2020. In response to significantly
lower demand levels caused by the COVID-19 pandemic in 2020, the Company took
immediate actions in many of its operations to reduce costs, including workforce
furloughs, permanent headcount reductions, salary and incentive compensation
reductions, and cuts in discretionary spending. As demand levels increased in
2021, a portion of the SG&A expense reduction from 2020 was restored to meet the
increasing demand. SG&A expenses in 2021 included $5.8 million of expenses
related to plant closure and consolidation, severance and other costs, $1.9
million of legal settlement expense and $1.0 million of acquisition-related
expenses.

Gain on sale of assets

During 2021, in connection with the plant closure and consolidation initiatives,
the Company sold real estate within the Engineered Products segment for cash
proceeds of $19.6 million, resulting in a gain of $14.2 million. In addition, in
2021, the Company sold real estate within the Assembly Components segment for
cash proceeds of $0.7 million, resulting in a gain of $0.5 million.

Good will deficiency

The Company recognized an impairment loss of $4.6 million in the fourth quarter of 2021 to write off the entire amount of goodwill of the Aluminum Products business unit, which is part of the Assembly Components segment.

Other components of retirement income and other post-employment benefit expenses (“AAPE”), net

Other components of pension income and OPEB expense, net was $9.7 million in
2021 compared to $7.3 million in 2020. The increase in 2021 was driven by higher
returns on plan assets in 2021 compared to 2020.

Interest expense, net

Net interest expense decreased to $30.1 million in 2021 compared to $30.3 million in 2020. The decrease is due to lower average interest rates offset by an increase in average outstanding borrowings in 2021 compared to 2020. Our average effective borrowing rate was 5.2% in 2021, compared to 5.4% in 2020.

Tax benefit (expense)

The provision for income taxes was a benefit of $6.5 million in 2021 (an
effective rate of 20%) compared to $2.5 million in 2020 (an effective rate of
34%). The 2020 rate is higher due to U.S. tax loss planning and related net
operating loss carrybacks to prior years under the Coronavirus Aid, Relief, and
Economic Security ("CARES") Act, which was enacted on March 27, 2020.

SECTOR RESULTS

For purposes of measuring business segment performance, the Company utilizes
segment operating income, which is defined as revenues less expenses
identifiable to the product lines within each segment. The Company does not
allocate items that are non-operating or unusual in nature or are corporate
costs, which include but are not limited to executive and share-based
compensation and corporate office costs. Segment operating income reconciles to
consolidated income before income taxes by deducting corporate costs; certain
non-cash and/or non-operating items; Other components of pension income and OPEB
expense, net; and interest expense, net.

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Supply Technologies Segment
                                           Year Ended December 31,
                                       2021          2020          2019
                                            (Dollars in millions)
Net sales                           $ 619.5       $ 510.1       $ 611.5
Segment operating income            $  42.8       $  30.2       $  42.0

Segment operating margin 6.9% 5.9% 6.9%

2021 Compared to 2020

Net sales increased 21% in 2021 compared to 2020 due primarily to higher
customer demand in most of the Company's end markets, with the biggest increases
in heavy-duty truck, powersports, semiconductor, and agricultural and industrial
equipment. As a result of the COVID-19 pandemic, customer demand in 2020 was
down significantly in most of our key end markets.

Segment operating income increased by $12.6 million and segment operating income
margin was up 100 basis points in 2021 compared to a year ago. These net
increases were driven by the profit flow-through on higher sales, the impact of
pricing initiatives and the impact of cost reduction actions. These positive
factors were partially offset by higher freight costs in 2021 as a result of
global supply chain constraints and a labor strike at a major truck assembly
plant.

Assembly Components Segment

                                                         Year Ended December 31,
                                                     2021          2020          2019
                                                          (Dollars in millions)
        Net sales                                 $ 482.5       $ 441.5       $ 539.5
        Segment operating (loss) income           $ (26.4)      $   8.1       $  36.2
        Segment operating (loss) income margin       (5.5) %        1.8  %        6.7  %



2021 Compared to 2020

Net sales increased 9% in 2021 compared to 2020, mainly due to the North American automotive production shutdown in the second quarter of 2020 due to the COVID-19 pandemic, which partially offset the impact of the global shortage of semiconductor microchips, which negatively impacted net sales in 2021.

Segment operating income in 2021 period decreased by $34.5 million, and segment
operating income margin decreased 730 basis points compared to 2020. The loss in
2021 was driven by the negative impacts of the global semiconductor micro-chip
shortage; raw material price inflation; higher labor costs; production
inefficiencies; and various supply chain constraints, including supplier delays
that caused extended lead times and increasing freight costs. In 2021, expenses
incurred in connection with plant closure and consolidation, severance, a legal
settlement and other costs were $9.7 million. The 2020 income included expenses
related to plant closure and consolidation of $4.1 million.

Engineered Products Segment

                                                         Year Ended December 31,
                                                     2021          2020          2019
                                                          (Dollars in millions)
        Net sales                                 $ 336.0       $ 343.6       $ 467.3
        Segment operating (loss) income           $ (12.2)      $   3.5       $  37.7
        Segment operating (loss) income margin       (3.6) %        1.0  %        8.1  %


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2021 Compared to 2020

Net sales were 2% lower in 2021 compared to 2020. The decrease was due to lower
demand in certain end markets in our forged and machined products business which
continue to be slow to recover from the COVID-19 pandemic, partially offset by
stronger demand in 2021 for our capital equipment products

Segment operating loss was $12.2 million in 2021 compared to segment operating
income of $3.5 million in 2020. This decrease in profitability was due to
expenses of $12.7 million related to plant closure and consolidation activities
in 2021, lower sales levels, and manufacturing under-absorption of fixed costs
at certain plants. Expenses related to plant closure and consolidation in 2020
were $2.2 million.

Cash and capital resources

The following table summarizes the main components of cash flows:

                                                           2021         

2020 2019

      Cash (used) provided by:                                     (In millions)
      Operating activities                               $ (43.3)     $ 69.3      $ 63.7
      Investing activities                                 (16.2)      (24.9)      (48.2)
      Financing activities                                  59.9       (47.3)      (15.3)
      Effect of exchange rate on cash                       (1.3)        

1.9 0.1

(Decrease) increase in cash and cash equivalents $(0.9) $(1.0) $0.3



Operating Activities

Cash generated by operating activities in 2021 was lower than in the prior year
driven by higher working capital levels in the year ended December 31, 2021
compared to 2020. In 2021, working capital usage was $34.0 million, compared to
working capital reduction in 2020 of $27.1 million. Higher inventories were the
main driver of our higher working capital in 2021. In 2021, inventories
increased by $71.2 million; this increase was driven by higher raw material
prices, increased inventory levels in certain businesses and locations in
response to global supply chain constraints, and inventory builds in connection
with various facility consolidations.

Investing activities

Capital expenditures were $31.1 million in 2021 and $26.3 million in 2020. These
capital expenditures were primarily for growth initiatives, with the majority in
our Assembly Components and Engineered Products segments. Capital expenditures
in 2020 were lower than in the prior year, as we curtailed non-critical capital
spending in response to the COVID-19 pandemic.

In 2021, we sold assets and received aggregate proceeds of $20.3 million. See
Note 4 to the consolidated financial statements included elsewhere herein for
additional information. Additionally, we spent $5.4 million on the acquisition
of NYK Component Solutions Limited. See Note 5 to the consolidated financial
statements included elsewhere herein for additional information.

Fundraising activities

Cash flow from financing activities in 2021 included borrowings from $72.4 milliondividends from $7.0 millionwithholding tax payments on share awards $3.0 million and buybacks of own shares of $2.5 million.

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Cash used by financing activities in 2020 included debt repayments of $35.4
million, treasury share repurchases of $7.5 million, dividends of $3.2 million
and payments of withholding taxes on share awards of $1.2 million. In the second
and third quarter of 2020, we temporarily suspended our quarterly cash dividend
to preserve capital in response to challenging market conditions and uncertainty
caused by the COVID-19 pandemic. Our Board of Directors once again declared a
dividend in the fourth quarter of 2020.

Liquidity

Overall, we utilized our revolving credit facility to fund our higher working
capital levels, our capital expenditures and our other financing activities
described above. See Note 8 to the consolidated financial statements included
elsewhere herein for further discussion of our financing arrangements.

The following table summarizes our liquidity indicators:

                                                              2021                 2020
                                                               (Dollars in millions)
Cash and cash equivalents                                $     54.1             $  55.0
Gross debt (excluding unamortized debt issuance costs)   $    606.1             $ 534.7
Working capital (excluding cash)                         $    372.4         

$344.3

Net debt as a % of capitalization                                60   %     

54%



Our liquidity needs are primarily for working capital and capital expenditures.
Our primary sources of liquidity have been cash provided by operations, funds
available from existing bank credit arrangements and the sale of our debt
securities. Our existing financial resources, including working capital and
available bank borrowing arrangements, and anticipated cash from operations are
expected to be adequate to meet anticipated cash requirements for at least the
next twelve months and for the foreseeable future thereafter, including but not
limited to our ability to maintain current operations and fund capital
expenditure requirements, service our debt and pay dividends.

As of December 31, 2021, we had $221.1 million outstanding under the revolving
credit facility, and total liquidity of $202.6 million, which included cash and
cash equivalents of $54.1 million and $148.5 million of unused borrowing
availability and excluded $10.9 million of suppressed availability.

The Company had cash and cash equivalents held by foreign subsidiaries of $44.2
million at December 31, 2021 and $44.7 million at December 31, 2020. We do not
expect restrictions on repatriation of cash held outside the U.S. to have a
material effect on our overall liquidity, financial condition or results of
operations for the foreseeable future.

Senior Notes

In April 2017, Park-Ohio Industries, Inc. ("Park-Ohio"), the operating
subsidiary of Park-Ohio Holdings Corp., completed the sale, in a private
placement, of $350.0 million aggregate principal amount of 6.625% Senior Notes
due 2027 (the "Notes"). The net proceeds from the issuance of the Notes were
used to repay in full our previously outstanding 8.125% Senior Notes due 2021
and our outstanding term loan, and to repay a portion of the borrowings then
outstanding under our revolving credit facility.

credit agreement

Park-Ohio's Seventh Amended and Restated Credit Agreement (as amended, the
"Credit Agreement") provides for a revolving credit facility in the amount of
$375.0 million, including a $40.0 million Canadian revolving subcommitment and a
European revolving subcommitment in the amount of $30.0 million. Pursuant to the
Credit Agreement, the Company has the option to increase the availability under
the revolving credit facility by an aggregate incremental amount up to $100.0
million. The Credit Agreement matures on November 16, 2024.

Finance leases

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On August 13, 2015, the Company entered into a Finance Lease Agreement (the
"Lease Agreement"). The Lease Agreement provides the Company up to $50.0 million
for finance leases. Finance lease obligations of $17.5 million were borrowed
under the Lease Agreement to acquire machinery and equipment as of December 31,
2021.

Covenants

The future availability of bank borrowings under the revolving credit facility
provided by the Credit Agreement is based on (1) our calculated availability
under the Credit Agreement and (2) if such calculated availability decreases
below $46.875 million, our ability to meet a debt service ratio covenant. If our
calculated availability is less than $46.875 million, our debt service coverage
ratio must be greater than 1.0. At December 31, 2021, our calculated
availability under the Credit Agreement was $138.8 million; therefore, the debt
service ratio covenant did not apply.

Failure to maintain calculated availability of at least $46.875 million and meet
the debt service ratio covenant could materially impact the availability and
interest rate of future borrowings. Our debt service coverage ratio could be
materially impacted by negative economic trends, including the negative trends
caused by the COVID-19 pandemic. To make certain permitted payments as defined
under the Credit Agreement, including but not limited to acquisitions and
dividends, we must meet defined availability thresholds ranging from $37.5
million to $46.875 million, and a defined debt service coverage ratio of 1.15.

As our calculated availability under the Credit Agreement was above $46.875
million, we were also in compliance with the other covenants contained in the
revolving credit facility as of December 31, 2021. While we expect to remain in
compliance throughout 2022, declines in sales volumes in the future, including
any declines caused by the COVID-19 pandemic, could adversely impact our ability
to remain in compliance with certain of these financial covenants. Additionally,
to the extent our customers are adversely affected by declines in the economy in
general, including the decline caused by the COVID-19 pandemic, they may be
unable to pay their accounts payable to us on a timely basis or at all, which
could make our accounts receivable ineligible for purposes of the revolving
credit facility and could reduce our borrowing base and our ability to borrow
under such facility.

Dividends

The Company paid dividends to shareholders of $6.3 million during 2021. On
January 28, 2022, the Company's Board of Directors declared a quarterly dividend
of $0.125 per common share. The dividend was paid on February 25, 2022, to
shareholders of record as of the close of business on February 11, 2022 and
resulted in cash payments of $1.6 million. Although we currently intend to pay a
quarterly dividend on an ongoing basis, all future dividend declarations will be
at the discretion of our Board of Directors and dependent upon then-existing
conditions, including our operating results and financial condition, capital
requirements, contractual restrictions, business prospects and other factors
that our Board of Directors may deem relevant.

Contractual obligations and commitments

Our material cash commitments from known contractual and other obligations
primarily consist of obligations for long-term debt and related interest, leases
for properties and equipment and purchase obligations as part of normal
operations. See Note 8 - Financing Arrangements, in Part II, Item 8 of this
Annual Report, for more information regarding scheduled maturities of our
long-term debt. See Note 12 - Lease Arrangements, in Part II, Item 8 of this
Annual Report for additional information on leases. See Note 13 - Pension and
Postretirement Benefits for additional information of future pension and
postretirement benefit obligations.

Interest payable on our 6.625% Senior Notes due 2027 has been $23.2 million payable within twelve months of December 31, 2021 and $99.5 million
subsequently due.

From December 31, 2021our undiscounted purchase obligations were $234.3 million due within the next twelve months and $5.9 million subsequently payable under purchase orders and take-it-or-pay arrangements. These purchase obligations include all

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enforceable, legally binding agreements to purchase goods or services that
specify all significant terms, regardless of the duration of the agreement, and
exclude agreements with variable terms for which we are unable to estimate the
minimum amounts.


Off-balance sheet arrangements

We do not have off-balance sheet arrangements, financing or other relationships
with unconsolidated entities or other persons, other than the letters of credits
disclosed in Note 8 to the consolidated financial statements, included elsewhere
herein.

Significant Accounting Policies and Estimates

Preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make certain estimates and
assumptions which affect amounts reported in our consolidated financial
statements. On an ongoing basis, we evaluate the accounting policies and
estimates that are used to prepare financial statements. Management has made
their best estimates and judgments of certain amounts included in the financial
statements, giving due consideration to materiality. We do not believe that
there is great likelihood that materially different amounts would be reported
under different conditions or using different assumptions related to the
accounting policies described below. However, application of these accounting
policies involves the exercise of judgment and use of assumptions as to future
uncertainties and, as a result, actual results could differ from these
estimates.

Certain accounting policies that require significant management estimates and
are deemed critical to our results of operations or financial position are
discussed below. On a regular basis, critical accounting policies are reviewed
with the Audit Committee of the Board of Directors.

Revenue Recognition: We recognize revenue, other than from long-term contracts,
when our obligations under the contact terms are satisfied and control transfers
to the customer, typically upon shipment. Revenue from certain long-term
contracts is accounted for over time, when products are manufactured or services
are performed, as control transfers under these arrangements. We follow the
input method since reasonably reliable estimates of revenue and costs of a
contract can be made. See Note 2 of the consolidated financial statements
included elsewhere herein for additional disclosures on revenue.

Allowance for Obsolete and Slow-Moving Inventory: Inventories are valued using
first-in, first-out ("FIFO") or the weighted-average inventory method; stated at
the lower of cost or net realizable value; and have been reduced by an allowance
for obsolete and slow-moving inventories. The estimated allowance is based on
management's review of inventories on hand with minimal sales activity, which is
compared to estimated future usage and sales. Inventories identified by
management as slow-moving or obsolete are reserved for based on estimated
selling prices less disposal costs. Though we consider these allowances adequate
and proper, changes in economic conditions in specific markets in which we
operate could have a material effect on allowances required.

Business Combinations: Business combinations are accounted for using the
purchase method of accounting under ASC 805, "Business Combinations." This
method requires the Company to record assets and liabilities of the business
acquired at their estimated fair values as of the acquisition date. Any excess
of the cost of the acquisition over the fair value of the net assets acquired is
recorded as goodwill. The Company uses valuation specialists to perform
appraisals and assist in the determination of the fair values of the assets
acquired and liabilities assumed. These valuations require management to make
estimates and assumptions including discount rates, rates of return on assets,
long-term sales growth rates, and royalty rates.

Goodwill and Indefinite-Lived Intangible Assets: As required by ASC 350,
"Intangibles - Goodwill and Other" ("ASC 350"), management performs impairment
testing of goodwill at least annually, as of October 1 of each year, or more
frequently if impairment indicators arise. Management tests goodwill for
impairment at the reporting unit level. A reporting unit is an operating segment
pursuant to ASC 280, "Segment Reporting", or one level below the operating
segment (component level) as determined by the availability of discrete
financial information that is regularly reviewed by operating segment
management. Our reporting units have been identified at the component level. For
2021, 2020 and 2019, we performed quantitative testing for each reporting unit
with a goodwill balance.
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Our annual goodwill impairment analysis utilizes a quantitative approach
comparing carrying amount of the reporting unit to its estimated fair value. To
the extent that the carrying value of the reporting unit exceeds its estimated
fair value, an impairment charge is recorded. In applying the quantitative
approach, we use an income approach to estimate the fair value of the reporting
unit. The income approach uses a number of factors, including future business
plans, actual and forecasted operating results, and market data. The significant
assumptions employed under this method include discount rates; revenue growth
rates, including assumed terminal growth rates; and operating margins used to
project future cash flows for a reporting unit. The discount rates utilized
reflect market-based estimates of capital costs and discount rates adjusted for
management's assessment of a market participant's view with respect to other
risks associated with the projected cash flows of the individual reporting unit.
Our estimates are based upon assumptions we believe to be reasonable, but which
by nature are uncertain and unpredictable. We believe we incorporate ample
sensitivity ranges into our analysis of goodwill impairment testing for a
reporting unit, such that actual experience would need to be materially out of
the range of expected assumptions in order for an impairment to remain
undetected. We validate our estimates of fair value under the income approach by
considering the implied control premium and conclude whether that premium is
reasonable based on recent market transactions.

The results of testing as of October 1, 2021, 2020 and 2019 for all reporting
units confirmed that the estimated fair values exceeded carrying values, and no
impairment existed as of those dates, except for our Aluminum Products reporting
unit as described below. Based on our 2021 annual impairment test, we determined
that the fair value of our Aluminum Products reporting unit, which is included
in our Assembly Components segment, did not exceed its carrying value as of the
October 1, 2021 testing date. As such, we concluded that the full amount of
goodwill of this reporting unit of $4.6 million was impaired as of that date.
The Company's other reporting units with goodwill balances had fair values in
excess of their carrying amounts by at least 15%.

Additionally, we test all indefinite-lived intangible assets for impairment at
least annually, as of October 1 of each year, or more frequently if impairment
indicators arise. In 2021, 2020 and 2019, we utilized a quantitative approach
using the royalty relief method. The significant assumptions employed under this
method include discount rates, revenue growth rates, including assumed terminal
growth rates, and royalty rates. The discount rates utilized reflect
market-based estimates of capital costs and discount rates adjusted for
management's assessment of a market participant's view with respect to other
risks associated with the projected cash flows of the individual reporting unit.
Our estimates are based upon assumptions we believe to be reasonable, but which
by nature are uncertain and unpredictable. We believe we incorporate ample
sensitivity ranges into our analysis of intangible impairment testing, such that
actual experience would need to be materially out of the range of expected
assumptions in order for an impairment to remain undetected.

The results of testing as of October 1, 2021, 2020 and 2019 for all reporting
units confirmed that the estimated fair value exceeded carrying values, and no
impairment existed as of those dates.

See Notes 6 and 7 to the consolidated financial statements included elsewhere in this document for additional information on goodwill and indefinite life intangible assets.

Income Taxes: In accordance with ASC 740, "Income Taxes" ("ASC 740"), we account
for income taxes under the asset and liability method, whereby deferred tax
assets and liabilities are determined based on temporary differences between the
financial reporting and the tax bases of assets and liabilities and are measured
using the currently enacted tax rates. Specifically, we measure gross deferred
tax assets for deductible temporary differences and carryforwards, such as
operating losses and tax credits, using the applicable enacted tax rates and
apply the more likely than not measurement criterion.

In determining if it is more likely than not that all or some portion of a
deferred tax asset will be realized, we consider the following factors: future
reversals of existing taxable temporary differences; taxable income in prior
years if carryback is permitted under the tax law; tax planning strategies that
could accelerate taxable income; and future taxable income. Based on these
factors, when we have determined that the realizability of certain domestic and
foreign deferred tax assets is more likely than not to not be realized, a
valuation allowance has been established.

Further, at each interim reporting period, we estimate an effective income tax
rate that is expected to be applicable for the full year. Significant judgment
is involved regarding the application of global income tax laws and regulations
and when projecting the jurisdictional mix of income. Additionally,
interpretation of tax laws, court decisions or other guidance provided by taxing
authorities influences our estimate of the effective income tax rates. As a
result, our actual annual effective income
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tax rates and related tax liabilities may differ materially from our estimated interim effective tax rates and related tax liabilities. The resulting differences are recorded in the period in which they become known.

Pension and Other Postretirement Benefit Plans: We and our subsidiaries have
pension plans, principally noncontributory defined benefit or noncontributory
defined contribution plans and postretirement benefit plans covering
substantially all employees. The measurement of liabilities related to these
plans is based on management's assumptions related to future events, including
interest rates, return on pension plan assets, rate of compensation increases,
and health care cost trends. Pension plan asset performance in the future will
directly impact our net income. We have evaluated our pension and other
postretirement benefit assumptions, considering current trends in interest rates
and market conditions and believe our assumptions are appropriate.

We consult with our actuaries at least annually when reviewing and selecting the
discount rates to be used. The discount rates used by the Company are based on
yields of various corporate and governmental bond indices with actual maturity
dates that approximate the estimated benefit payment streams of the related
pension plans. The discount rates are also reviewed in comparison with current
benchmark indices, economic market conditions and the movement in the benchmark
yield since the previous fiscal year. The liability weighted-average discount
rate for the defined benefit pension plan is 2.80% for 2021, compared with 2.40%
in 2020. For the other postretirement benefit plan, the rate is 2.49% for 2021
and 1.95% for 2020. This rate represents the interest rates generally available
in the United States, which is the Company's only country with other
postretirement benefit liabilities. Another assumption that affects the
Company's pension expense is the expected long-term rate of return on assets.
The Company's pension plans are funded. The weighted-average expected long-term
rate of return on assets assumption is 7.75% for 2021. In determining the
expected return on plan assets, we consider both historical performance and an
estimate of future long-term rates of return on assets similar to those in our
plan. We consult with and consider opinions of financial and actuarial experts
in developing appropriate return assumptions.

Legal Contingencies: We are involved in a variety of claims, suits,
investigations and administrative proceedings with respect to commercial,
premises liability, product liability, employment, personal injury and
environmental matters arising from the ordinary course of business. We accrue
reserves for legal contingencies, on an undiscounted basis, when it is probable
that we have incurred a liability and we can reasonably estimate an amount. When
a single amount cannot be reasonably estimated, but the cost can be estimated
within a range and no amount within the range is a better estimate than any
other amount, we accrue the minimum amount in the range. Based upon facts and
information currently available, we believe the amounts reserved are adequate
for such pending matters. We monitor the development of legal proceedings on a
regular basis and will adjust our reserves when, and to the extent, additional
information becomes available.

Environment

We have been identified as a potentially responsible party at third-party sites
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or comparable state laws, which provide for strict and,
under certain circumstances, joint and several liability. We are participating
in the cost of certain clean-up efforts at several of these sites. However, our
share of such costs has not been material and based on available information,
management does not expect our exposure at any of these locations to have a
material adverse effect on our results of operations, liquidity or financial
condition.

We have been named as one of many defendants in a number of asbestos-related
personal injury lawsuits. Our cost of defending such lawsuits has not been
material to date and, based upon available information, management does not
expect our future costs for asbestos-related lawsuits to have a material adverse
effect on our results of operations, liquidity or financial condition. We
caution, however, that inherent in management's estimates of our exposure are
expected trends in claims severity, frequency and other factors that may
materially vary as claims are filed and settled or otherwise resolved.

Seasonality; Variability of operating results

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

This Annual Report on Form 10-K contains certain statements that are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. The words "believes", "anticipates",
"plans", "expects", "intends", "estimates" and similar expressions are intended
to identify forward-looking statements.

These forward-looking statements, including statements regarding future
performance of the Company, that are subject to known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
and achievements, or industry results, to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. These factors that could cause actual results to
differ materially from expectations include, but are not limited to, the
following: the ultimate impact the COVID-19 pandemic has on our business,
results of operations, financial position and liquidity, including, without
limitation, supply chain issues such as the global semiconductor micro-chip
shortage and logistic issues; our substantial indebtedness; the uncertainty of
the global economic environment; general business conditions and competitive
factors, including pricing pressures and product innovation; demand for our
products and services; the impact of labor disturbances affecting our customers;
raw material availability and pricing; fluctuations in energy costs; component
part availability and pricing; changes in our relationships with customers and
suppliers; the financial condition of our customers, including the impact of any
bankruptcies; our ability to successfully integrate recent and future
acquisitions into existing operations; the amounts and timing, if any, of
purchases of our common stock; changes in general economic conditions such as
inflation rates, interest rates, tax rates, unemployment rates, higher labor and
healthcare costs, recessions and changing government policies, laws and
regulations, including those related to the current global uncertainties and
crises, such as tariffs and surcharges; adverse impacts to us, our suppliers and
customers from acts of terrorism or hostilities, including the evolving
situation with Russia and Ukraine; public health issues, including the outbreak
of COVID-19 and its impact on our facilities and operations and our customers
and suppliers; our ability to meet various covenants, including financial
covenants, contained in the agreements governing our indebtedness; disruptions,
uncertainties or volatility in the credit markets that may limit our access to
capital; potential disruption due to a partial or complete reconfiguration of
the European Union; increasingly stringent domestic and foreign governmental
regulations, including those affecting the environment or import and export
controls and other trade barriers; inherent uncertainties involved in assessing
our potential liability for environmental remediation-related activities; the
outcome of pending and future litigation and other claims and disputes with
customers; our dependence on the automotive and heavy-duty truck industries,
which are highly cyclical; the dependence of the automotive industry on consumer
spending; our ability to negotiate contracts with labor unions; our dependence
on key management; our dependence on information systems; our ability to
continue to pay cash dividends, and the timing and amount of any such dividends;
and the other factors we describe under "Item 1A. Risk Factors" included in this
Annual Report on Form 10-K. Any forward-looking statement speaks only as of the
date on which such statement is made, and we undertake no obligation to update
any forward-looking statement, whether as a result of new information, future
events or otherwise, except as required by law. In light of these and other
uncertainties, the inclusion of a forward-looking statement herein should not be
regarded as a representation by us that our plans and objectives will be
achieved. The Company assumes no obligation to update the information in this
Annual Report on Form 10-K, except to the extent required by law.
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