What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-03-03 compared with 2022-03-04 · 496 added, 401 removed, 965 unchanged (48% of the section changed)

Market for Registrant’s Common Equity, Related Sha reholder Matters and Issuer Purchases of Equity Securities

Market and dividend information

The Company’s common shares are traded on NASDAQ under the trading symbol “PLPC”.

As of March 1, 2022, the Company had approximately 2,900 shareholders of record.

The following table sets forth for the periods indicated (i) the high and low closing sale prices per share of the Company’s common shares as reported by the NASDAQ and (ii) the amount per share of cash dividends paid by the Company.

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Therefore, there can be no assurance that the Company will continue to make such dividend payments in the future.

Number of common shareholders

As of March 1, 2023, the Company had approximately 4,779 shareholders of record.

Repurchase of equity securities

There were no equity compensation plans not approved by security holders during the year ended December 31, 2022.

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Accordingly, such shares were not included in the weighted average exercise price.

For further detail, refer to Note H, “Share-Based Compensation.”

For further detail, refer to Note 10, “Share-Based Compensation.”

(2) The Company’s Long-Term Incentive Plan of 2008 was replaced in May 2016 by the 2016 Incentive Plan.

Up to 900,000 of the 1,000,000 shares initially authorized may be issued in the form of restricted shares or units under the new plan.

See Note H in the Notes to Consolidated Financial Statements for information relating to the Company’s 2016 Incentive Plan.

See Note 10 in the Notes to Consolidated Financial Statements for information relating to the Company’s 2016 Incentive Plan.

Performance Graph

Set forth below is a line graph comparing the cumulative total return of a hypothetical investment in the Company’s common shares with the cumulative total return of hypothetical investments in the NASDAQ Composite Index and the Peer Group Index based on the respective market price of each investment at December 31, 2016, December 31, 2017, December 31, 2018, December 31, 2019, December 31, 2020, and December 31, 2021, assuming in each case an initial investment of $100 on December 31, 2016, and reinvestment of dividends.

Historical share price performance should not be relied upon as an indication of future share price performance.

The following graph compares the cumulative total return to holders of PLP's common shares against the cumulative total return of the NASDAQ Composite Index and the Hemscott Industry Group 627 (Industrial Electrical Equipment) (the “Peer Group Index”) for the five-year period ended December 31, 2022.

The comparison of the cumulative total returns for each investment assumes that $100 was invested in PLP's common shares and the respective indices on December 31, 2017 through December 31, 2022 and assumes the reinvestment of dividends.

PREFORMED LINE PRODUCTS CO

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On July 28, 2021, the Board of Directors authorized a plan to repurchase up to an additional 191,163 of Preformed Line Products Company common shares, resulting in a total of 250,000 shares available for repurchase with no expiration date.

There were no repurchases under this plan for the three months ended December 31, 2021.

There were 17,174 shares repurchased under this plan for the three months ended December 31, 2022.

There were 169,417 shares remaining to be purchased as of December 31, 2022.

Selecte d Financial Data

Total Number of

Shares Purchased as

Part of Publicly

Announced Plans or

Maximum Number

of Shares that may

yet be Purchased

under the Plans or

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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The MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and related notes included elsewhere in this report.

The MD&A is organized as follows:

Market Overview

Results of Operations

Working Capital, Liquidity and Capital Resources

Critical Accounting Policies and Estimates

Recently Adopted Accounting Pronouncements

New Accounting Standards to be Adopted

Preformed Line Products Company (the “Company”, “PLPC”, “we”, “us”, or “our”) was incorporated in Ohio in 1947.

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Our primary products support, protect, connect, terminate, and secure cables and wires.

We also provide solar hardware systems, mounting hardware for a variety of solar power applications, and fiber optic and copper splice closures.

PLPC is respected around the world for quality, dependability and market-leading customer service.

We provide helical solutions, connectors, fiber optic and copper splice closures, solar hardware mounting applications, and electric vehicle charging station foundations.

We also provide aerial drone inspection services for utility assets including transmission and distribution power lines, substations, and generation facilities .

We are respected around the world for quality, dependability and market-leading customer service.

Our goal is to continue to achieve profitable growth as a leader in the research, innovation, development, manufacture, and marketing of technically advanced products and services related to energy, communications and cable systems and to take advantage of this leadership position to sell additional quality products in familiar markets.

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Our PLP-USA segment is comprised of our U.S.

operations manufacturing our traditional products primarily supporting our domestic energy, telecommunications and solar products.

Our other three segments, The Americas, EMEA and Asia-Pacific, support our energy, telecommunications, data communication and solar products in each respective geographical region.

operations manufacturing our traditional products primarily supporting our domestic energy, telecommunications, solar framing products and inspection services.

Our other three segments, The Americas, EMEA and Asia-Pacific, support our energy, telecommunications, data communication, solar and other products in each respective geographical region.

The segment managers responsible for each region report directly to the Company’s Chief Executive Officer, who is the chief operating decision maker, and are accountable for the financial results and performance of their entire segment for which they are responsible.

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There has also been a historical lack of commitment by developed countries to upgrade and strengthen their electrical grids and communication networks despite the growing need.

More recently, increasing commodity prices, transportation costs, and foreign currency fluctuations coupled with the varying degrees of recovery from the COVID-19 pandemic throughout the global economy has led to a challenging operating environment.

More recently, increasing commodity prices, inflation, rising interest rates, transportation costs, and foreign currency fluctuations coupled with the varying degrees of recovery from the COVID-19 pandemic throughout the global economy has led to a challenging operating environment.

While these factors are likely to continue to provide inherent uncertainty going forward, the COVID-19 pandemic and other large scale environmental events have placed a renewed focus on key infrastructure priorities around the world, including bolstering grid reliability, strengthening grid resilience to climate events, upgrading aging infrastructure, enhancing communication networks and transitioning to renewable energy.

Our focused portfolio is well-positioned to respond to these priorities.

In 2021, sales in the energy market continued to remain strong while sales in the communications market increased due to the number and scale of projects in North America and globally.

We believe that our leadership position in these and other markets and the ability to deliver reliable products quickly will position us for continued growth as transmission grids are enhanced and extended.

As communication networks continue to be upgraded and expanded, our product offering positions us well to participate in the expansion.

Our international business is mostly concentrated in the energy and communications markets, which is where we experienced our most significant top line growth in 2021.

Strong domestic demand in 2022 drove record net sales, in both of our core energy and communications markets.

Our international business is mainly concentrated in the energy and communications markets.

Historically, our international sales were primarily related to the medium voltage distribution segment of the energy market but have grown through acquisition and new product development to include a significant contribution from the transmission and telecommunications markets.

We expect growth in our communications business from opportunities where deployment of fixed line and wireless telecommunications services and broadband penetration rates remain low as a percentage of the total population.

We believe that we are well positioned to supply the needs of the world’s diverse energy and communication markets as a result of our focused portfolio, strategic operational footprint and product designs and technologies.

We expect growth in our communications business from opportunities with low deployment of fixed line and wireless telecommunications services and those areas with low broadband penetration rates as a percentage of the total population.

The following discussion describes our results of operations for the years ended December 31, 2022, 2021 and 2020.

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Our discussions of the financial results include non-GAAP measures (e.g., foreign currency impact) to provide additional information concerning our financial results and provide information that we believe is useful to the readers of our financial statements in the assessment of our performance and operating trends.

While the ongoing COVID-19 pandemic has not had a material effect on our overall results, it has continued to create challenges for us in countries that have significant outbreak mitigation strategies, namely, countries in our Asia-Pacific business segment, which led to temporary project postponements and continued to impact results in this segment.

We are continuing to actively monitor the impact of COVID-19 on current and future periods and actively manage costs and our liquidity position to provide additional flexibility while still supporting our customers and their specific needs.

We cannot predict the duration or scope of the COVID-19 pandemic or the magnitude of its impact on our business and results of operations.

In addition, the impact of COVID-19 could potentially exacerbate other risks discussed, any of which could have a material adverse effect on the Company.

We continue to assess all challenges related to COVID-19 and plan accordingly.

Overall customer demand remained strong and contributed to record net sales revenue of $637.0 million for the year ended December 31, 2022.

However, we also experienced significant commodity and transportation cost inflation that negatively affected our earnings.

To mitigate the ongoing inflationary pressures, we implemented several price increases in the U.S.

and internationally in 2021 .

Due to the large volume in our order backlog, we expect tailwinds from these increases into 2022, however, continued cost inflation in these areas may require further price adjustments going forward to maintain profit margin, and any price increases may have a negative effect on demand.

However, we have also experienced some inflationary pressures that has impacted our profit margins.

Raw material price increases, specifically for plastic resins, aluminum, petroleum and sand (grit), coupled with increased freight costs were the primary contributing inflationary pressures.

For PLP-USA, our largest business segment, the impacts of inflation on raw materials and transportation costs impacted cost of sales by approximately $23.2 million for the year ended December 31, 2022.

To mitigate the ongoing inflationary pressures, we implemented price increases in the U.S.

and internationally.

Due to the large volume in our order backlog, we expect tailwinds from these increases into 2023;

however, continued cost inflation in these areas may require further price adjustments to maintain profit margin and any price increases may have a negative effect on demand.

Due to the ongoing conflict in Ukraine and overt hostilities shown by Russia in the conflict, the Company determined to wind down its Russian operations in 2022.

As a result of the decision to wind-down operations, charges of $1.0 million were recorded, mainly as a result of asset impairments, one-time termination benefits and other impacts during the twelve-month period ending December 31, 2022.

Our financial statements are subject to fluctuations in the exchange rates of foreign currencies in relation to the U.S.

Foreign currencies strengthened against the U.S.

dollar in 2021 as opposed weakening in 2020.

The fluctuations of foreign currencies during the year ended December 31, 2021 had a favorable impact on net sales of $9.3 million and an unfavorable impact of $16.9 million during the year ended December 31, 2020.

The effect of currency translation had a favorable impact on net income in the year ended December 31, 2021 of $0.4 million and an unfavorable impact of $1.3 million in the year ended December 31, 2020.

PLP’s foreign currency exchange losses were primarily related to translating into U.S.

dollars its foreign currency denominated loans, trade receivables and royalty receivables from its foreign subsidiaries at the December 2022 year-end exchange rates.

The fluctuations of foreign currencies during the year ended December 31, 2022 had an unfavorable impact on net sales of $24.2 million and a favorable impact of $9.3 million during the year ended December 31, 2021.

The effect of currency translation had a favorable impact on net income in the year ended December 31, 2022 of $0.3 million and a favorable impact of $0.4 million in the year ended December 31, 2021.

On a reportable segment basis, the impact of foreign currency translation on net sales and net income for the years ended December 31, 2022 and 2021, respectively, was as follows:

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(Thousands of dollars)

Loss on foreign currency translation on operating income for the year ended December 31, 2021 was $0.7 million.

There were transaction losses of $0.3 million that were combined with losses on forward currency contracts of $0.7 million in the year ended

December 31, 2021 and $1.5 million of transaction losses in the year ended December 31, 2020 which were partially mitigated by forward currency contract gains of $0.4 million as summarized in the following table:

Loss on foreign currency translation on operating income for the years ended December 31, 2022 and 2021 was $0.5 million and $0.7 million, respectively.

There were transaction losses of $0.3 million that were combined with losses on forward currency contracts of $0.1 million for the year ended December 31, 2022 and $0.3 million of transaction losses combined with losses on forward currency contracts of $0.7 million for the year ended December 31, 2021 as summarized in the following table:

Foreign Currency Translation Impact

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Transaction loss

Net loss (gain) on forward currency contracts

Net loss on forward currency contracts

Operating income excluding currency impact

Despite the continued challenges in the global economy, we believe our business portfolio and our financial position are sound and strategically well-positioned.

Despite the challenges noted in our operating environment, we believe our business portfolio and our financial position are sound and strategically well-positioned.

We remain focused on assessing our global market opportunities and overall manufacturing capacity in conjunction with the requirements of local manufacturing in the markets that we serve.

If necessary, we will utilize our global manufacturing network to manage costs, while driving sales and delivering value to our customers.

We have continued to invest in our business to expand our market footprint, improve efficiency, develop new products, increase our capacity and become an even stronger supplier to our current and new customers.

Our liquidity remains strong and we currently have a bank debt to equity ratio of 18.8%.

We can borrow needed funds at a competitive interest rate under our credit facility.

A consolidated increase in debt of $3.6 million as of December 31, 2021 was partially a result of current year funding needs for the purchase of a new corporate aircraft to replace the former aircraft which was substantially offset by decreases in debt levels globally, most notably in variable debt instruments.

See Note E "Debt and Credit Arrangements" in the Notes to Consolidated Financial Statements for more information related to our debt position.

The growth in PLP-USA net sales required additional investment within our PLP-USA facilities, both in the form of operational capacity as well as increased warehouse space.

These investments in our U.S.

operations will allow us to further enhance the service we provide to our U.S.

customers in 2023.

If necessary, we will modify redundant processes and further utilize our global manufacturing network to manage costs, increase sales volume and deliver value to our customers.

We have continued to invest in the business to expand into new markets for the Company, evaluate strategic mergers and acquisitions, improve efficiency, develop new products and increase our capacity.

Our liquidity remains strong and we currently have a bank debt to equity percentage of 25.0%.

We can borrow needed funds at a competitive interest rate

under our credit facility.

A consolidated increase in debt of $30.0 million as of December 31, 2022 was primarily a result of current year funding needs for capital expenditures and business acquisitions.

See Note 7 "Debt and Credit Arrangements" in the Notes to Consolidated Financial Statements for more information related to our debt position.

While the ongoing COVID-19 pandemic has not had a material effect on our overall results, it has continued to create challenges in countries that have significant or changing outbreak mitigation strategies, namely, countries in our Asia-Pacific business segment, which led to project postponements and continued to impact results in this segment.

This, in part, led to the $6.5 million goodwill impairment charge recorded in the period ended September 30, 2022.

While the COVID-19 pandemic has waned, we cannot predict the impact that new variants may have and the related impact on our business and results of operations.

In addition, the impact of COVID-19 and new variants could potentially exacerbate other risks discussed, including inflationary impacts and supply chain disruptions, any of which could have a material adverse effect on the Company.

We continue to assess all challenges related to COVID-19 and related variants and plan accordingly.

The following table sets forth a summary of the Company’s Statements of Consolidated Income and the percentage of net sales for the years ended December 31, 2022 and 2021.

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INCOME BEFORE INCOME TAXES

Net loss attributable to noncontrolling interests

Net (income) loss attributable to noncontrolling interests

NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS

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In 2022, net sales were 637.0 million, an increase of $119.6 million, or 23%, compared to 2021.

Excluding the favorable effect of currency translation, net sales increased 9% as summarized in the following table:

Excluding the effect of currency translation, net sales increased 28% as summarized in the following table:

Year Ended December 31,

(Thousands of dollars)

The increase in PLP-USA net sales of $56.3 million, or 28%, was primarily due to a volume increase in communication and energy product sales, combined with benefits resulting from price increases in June and October of 2021.

International net sales for the year ended December 31, 2021 were favorably affected by $9.3 million when local currencies were converted to U.S.

The increase in PLP-USA net sales of $82.7 million, or 32%, was primarily due to a volume increase in energy product and communication sales, combined with the tailwinds from previous price increases.

International net sales for the year ended December 31, 2022 were unfavorably affected by $24.2 million when local currencies were converted to U.S.

The following discussion of changes in net sales excludes the effect of currency translation.

The Americas net sales of $70.7 million decreased $2.6 million, or 3%, primarily due to decreased volume in energy product sales, partially offset by an in increase in communication product sales.

EMEA net sales of $95.9 million decreased $0.5 million, or 1%, primarily due to volume decreases in communication products in the region.

The Asia-Pacific net sales of $93.2 million decreased $11.6 million, or 12%, compared to 2020 primarily due to the continued volume decreases from the postponement of large-scale projects caused by the ongoing COVID-19 pandemic.

The Americas net sales of $85.2 million increased $16.8 million, or 24%, primarily due to contributions from the 2022 Maxxweld and Delta acquisitions.

EMEA net sales of $122.7 million increased $41.9 million, or 44%, primarily due to volume increases in communication product sales in the region.

Asia-Pacific net sales of $88.9 million increased $2.4 million, or 3%, compared to 2021.

Asia-Pacific volume was generally flat due to the continued effects of changing COVID-19 mitigation strategies, primarily in China, as well as China’s continued buy local policies.

Gross Profit.

Gross profit of $215.2 million for 2022 increased $48.9 million, or 29%, compared to 2021.

Excluding the favorable effect of currency translation, gross profit increased $9.2 million, or 6%, as summarized in the following table:

Excluding the effect of currency translation, gross profit increased $54.6 million, or 33%, as summarized in the following table:

Year Ended December 31,

(Thousands of dollars)

PLP-USA gross profit of $87.7 million increased by $12.6 million, or 17%, compared to 2020 mostly due to an increase in sales of $56.3 million and a shift in mix toward higher margin products, most notably in the communications market, partially offset by the negative impact of rising commodity prices, freight costs, inflation and an increase in warranty costs.

Incremental price increases were enacted in the PLP-USA region in 2021 to further mitigate the ongoing inflation and commodity price increases.

International gross profit for the year ended December 31, 2021 was favorably impacted by $3.1 million when local currencies were translated to U.S.

PLP-USA gross profit of $129.2 million increased by $41.4 million, or 47%, compared to 2021, primarily due to increased sales volume of $82.7 million within communications and energy markets and operational efficiencies, which were partially offset by the negative impact of inflationary pressures impacting raw materials and transportation costs.

International gross profit for the year ended December 31, 2022 was unfavorably impacted by $5.7 million when local currencies were translated to U.S.

The following discussion of gross profit changes excludes the effects of currency translation.

The Americas gross profit decreased $.4 million, or 2%, which was primarily the result of the year-over-year decrease in net sales.

EMEA gross profit decreased $2.0 million year-over-year, partially as a result of decreased sales of $0.5 million combined with increased expenses in the region, largely due to higher freight and raw material costs.

Asia-Pacific’s gross profit decreased $1.0 million when compared to the year ended December 31, 2020, largely as a result of the year-over-year decrease in sales of $11.6 million, partially offset by manufacturing cost savings.

The Americas gross profit increased $8.6 million, or 37%, which was primarily the result of the year-over-year increase in net sales volume of $16.8 million, generally as a result of the 2022 acquisitions in the region.

EMEA gross profit remained relatively flat, increasing by $2.0 million or 7% year-over-year, primarily due to increased sales volume of $41.9 million, partially offset by higher operating costs and the impacts from the exit of our Russia operations.

Asia-Pacific’s gross profit increased $2.6 million, or 11% when compared to the year ended December 31, 2021, primarily due to cost containment measures.

Costs and expenses.

Costs and expenses of $145.8 million for the year ended December 31, 2022 increased $27.1 million, or 23%, when compared to 2021.

Excluding the unfavorable effect of currency translation, costs and expenses increased $2.5 million, or 2%, as summarized in the following table:

Excluding the effect of currency translation, costs and expenses increased $33.3 million, or 28%, as summarized in the following table:

Year Ended December 31,

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PLP-USA costs and expenses of $73.9 million increased $18.8 million, or 34% year-over-year.

PLP-USA’s increase was mainly attributable to increased commissions of $2.1 million, a year-over-year incremental loss on foreign currency exchange of $1.3 million, partially offset by the prior year loss on sale of capital assets of $1.0 million combined with miscellaneous net decreases of $0.1 million.

PLP’s foreign currency exchange losses were primarily related to translating into U.S.

dollars its foreign currency denominated loans, trade receivables and royalty receivables from its foreign subsidiaries at the December 2021 year-end exchange rates.

PLP’s costs and expenses for the year ended December 31, 2020 were unfavorably impacted by $2.3 million when local currencies were translated to U.S.

PLP-USA’s increase was primarily attributable to increased sales and personnel-related expenses as well as professional services costs.

PLP’s costs and expenses for the year ended December 31, 2022 were favorably impacted by $6.2 million when local currencies were translated to U.S.

The following discussions of costs and expenses exclude the effect of currency translation.

The Americas costs and expenses decrease of $1.9 million was primarily due to a prior year litigation reserve of $2.2 million, partially offset by miscellaneous

net decreases of $0.3 million.

EMEA costs and expenses of $25.5 million increased $1.5 million mainly due to higher personnel related costs of $1.8 million, partially offset by a decrease in bad-debt expense of $0.3 million.

Asia-Pacific costs and expenses of $24.3 million increased $0.5 million primarily due to an increase in personnel related costs.

The Americas costs and expenses of $16.8 million increased $3.7 million primarily due to personnel-related expenses, purchase price accounting charges, and sales-related expenses.

EMEA costs and expenses of $25.9 million increased by $3.4 million primarily due sales-related expenses, offset by decreases in personnel costs.

Asia-Pacific costs and expenses of $29.2 million increased $7.4 million primarily due to the effect of a $6.5 million goodwill impairment charge.

Other income, net.

Other income, net of $4.3 million for the year ended December 31, 2022 was favorable by $3.0 million when compared to Other income, net for the twelve months ended December 31, 2021 of $1.3 million.

Other income, net for year ended December 31, 2021 includes a pre-tax recovery of approximately $2.1 million related to a recent Brazilian Supreme Court decision that granted the Company the right to recover, through offset of federal tax liabilities, certain tax overpayments collected by the Brazilian government.

During the year ended December 31, 2020, the Asia-Pacific segment recorded $1.1 million of income for COVID-19 related government subsidies which did not recur in 2021 which partially offset the current year income realized in Brazil.

Other income, net for the year ended December 31, 2022 includes a gain of $4.4 million related to a settlement of a Company-owned life insurance policy, partially offset by an increase in interest expense.

Income taxes.

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federal income tax rate of 21.0%:

A $0.8 million, or 1.6%, net increase resulting from higher U.S.

permanent items primarily related to limitations on the deductibility of executive compensation, plus credits.

A $1.0 million, or 2.0%, net increase resulting from earnings in jurisdictions with higher tax rates than the U.S.

A $2.1 million, or 2.9%, net increase resulting from a valuation allowance recorded in certain international jurisdictions.

A $2.0 million, or 2.7%, net increase resulting from a goodwill impairment charge as discussed in Note 12 of the Notes to the Consolidated Financial Statements.

A $1.8 million, or 2.4%, net decrease resulting from earnings in jurisdictions with lower tax rates than the U.S.

federal statutory rate where such earnings are permanently reinvested.

A $0.7 million, or 1.4%, net increase resulting from state and local taxes, net of federal benefit.

A $0.7 million, or 1.7%, net increase resulting from higher U.S.

permanent items primarily related to limitations on the deductibility of executive compensation, plus credits.

A $0.2 million, or 0.6%, net decrease resulting from losses in certain jurisdictions where no tax benefit was previously recognized.

A $1.6 million, or 2.2%, net decrease resulting from non-taxable Company-owned life insurance policy.

A $2.9 million, or 6.0%, net increase resulting from earnings in jurisdictions with higher tax rates than the U.S.

federal statutory rate where such earnings are permanently reinvested.

A $0.9 million, or 2.2%, net increase resulting from state and local taxes, net of federal benefit.

A $1.2 million, or 2.5 %, net decrease resulting from foreign tax credits.

A $0.8 million, or 1.7%, net decrease resulting from other tax credits such as the Research and Development Tax Credit.

A $0.8 million, or 1.6%, net increase resulting from Global Intangible Low-Taxed Income.

A $0.8 million, or 1.6%, net increase resulting from higher U.S.

permanent items primarily related to limitations on the deductibility of executive compensation.

As a result of the preceding items, net income for the year ended December 31, 2022 was $54.4 million, compared to $35.7 million for 2021.

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PLP-USA’s net income of $44.7 million increased $20.3 million year-over-year, mainly due to an increase in operating income of $22.4 million, partially offset by an increase in income tax expense of $7.1 million.

PLP-USA’s net income also included approximately $1.6 million related to employee retention tax credits claimed under the U.S.

CARES Act for fiscal year 2020.

The credits were recorded as an offset to related employee expenses in both operating, selling, general and administrative expenses.

International net income for the year ended December 31, 2022 was favorably affected by approximately $0.3 million when local currencies were converted to U.S.

The following discussion of net income excludes the effect of currency translation.

The Americas net income of $8.4 million increased $3.2 million mainly as a result of a $1.5 million increase in operating income combined with an increase in other income (expense) of $2.5

million, partially offset by an increase in income tax expense of $0.7 million.

EMEA net income decreased $3.3 million as a result of a $3.5 million decrease in operating income, partially offset by a decrease in income tax expense.

Asia-Pacific net income decreased $2.3 million mainly as a result of a $1.6 million decrease in operating income, a decrease in other income, net of $0.9 million, partially offset by a decrease in income tax expense for the region of $0.2 million.

The Americas net income of $11.4 million increased mainly as a result of an increase in operating income.

EMEA net income decreased $1.1 million mainly as a result of a decrease in operating income.

Asia-Pacific net income decreased $3.6 million mainly as a result of a goodwill impairment charge partially offset by cost containment measures.

WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES

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We currently have not identified any potential material impact on our liquidity from customer credit issues.

Our credit facility (the "Facility") contains, among other provisions, requirements for maintaining levels of net worth and profitability.

At December 31, 2022, the Company was in compliance with these covenants.

Our financial position remains strong and our current ratio at December 31, 2022 and 2021 was 2.8 to 1 and 2.6 to 1, respectively.

Total debt, including Notes payable, at December 31, 2021 was $59.6 million.

On April 17, 2020, we extended the term on its $65.0 million Credit Facility (the "Facility") from June 30, 2021 to June 30, 2024 and added its Austrian subsidiary as a borrower on the Facility.

All other terms remained the same, including the interest rate at LIBOR plus 1.125% unless the Company’s funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 2.25 to 1, at which point the LIBOR spread becomes 1.500%.

At December 31, 2021, we had the following borrowings on the $65.0 million Facility;

borrowed $3.4 million at 1.205%, our Polish subsidiary borrowed $6.1 million at 2.455%, our Australian subsidiary borrowed $2.4 million at 2.980% and our Austrian subsidiary borrowed $1.4 million at 1.216%.

Under the Facility, at December 31, 2021, we had utilized $13.3 million with $51.7 million available, net of long-term outstanding letters of credit of $0.1 million.

Our bank debt to equity percentage was 18.8%.

The Facility agreement contains, among other provisions, requirements for maintaining levels of net worth and profitability.

At December 31, 2021, we were in compliance with these covenants.

On March 2, 2022, the we entered into an amendment to the Facility to increase the borrowing capacity from $65.0 million to $90.0 million.

As part of this amendment, the index used to determine the interest rate changed from LIBOR to the Bloomberg Short Term Bank Yield Index ("BSBY").

The interest rate will now be defined as BSBY plus 1.125% unless the funded debt to Earnings before Interest, Taxes and Depreciation ration exceeds 2.25 to 1, at which point the BSBY spread becomes 1.500%.

The amendment also allows us to change our rate from BSBY to the Second Overnight Financing Rate ("SOFR") at the its discretion.

Total debt, including Notes payable to banks, at December 31, 2022 was $89.5 million.

At December 31, 2022, our unused availability under the Facility was $43.3 million and our bank debt to equity percentage was 25.0%.

On March 2, 2022, the Company amended the Facility to increase the capacity from $65.0 million to $90.0 million.

As part of this amendment, the index used to determine the interest rate changed from LIBOR to the Bloomberg Short Term Bank Yield Index (“BSBY”).

The interest rate is defined as BSBY plus 1.125% unless the Company’s funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 2.25 to 1, at which point the BSBY spread becomes 1.500%.

The amendment also allows the Company to change its rate from BSBY to the Secured Overnight Financing Rate (“SOFR”) at the Company’s discretion.

The amendment extended the maturity from June 30, 2024 to March 2, 2026.

On August 31, 2022, the Company amended the Facility and elected to change its rate from BSBY to SOFR, and added its New Zealand subsidiary as a co-borrower.

All other terms remain the same.

Our Asia-Pacific segment had $0.2 million and $0.6 million in restricted cash at December 31, 2021 and 2020, respectively.

The restricted cash was used to secure bank debt and is included in Cash and Other assets for the years ended December 31, 2021 and 2020, respectively, on the balance sheet.

Our Asia-Pacific segment had $0.2 million in restricted cash for both years ended December 31, 2022 and 2021.

The restricted cash was used to secure bank debt and is included in Cash, cash equivalents and restricted cash on the balance sheet.

We sold our corporate aircraft in December of 2020, thereby eliminating the balance due on the previous loan which was secured by the corporate aircraft.

The proceeds of the sale were used to pay off the debt associated with the former aircraft.

On January 19, 2021, the Company received funding for a term loan in the amount of $20.5 million to fund the purchase of a new corporate aircraft.

On January 19, 2021, the Company received funding for a term loan in the amount of $20.5 million to fund the purchase of a new corporate aircraft, which replaces the Company's previously-owned aircraft that was sold in December 2020.

At December 31, 2022, the outstanding balance on the term loan was $16.7 million, of which $2.1 million was classified as current.

See Note E in the Notes to Consolidated Financial Statements for more information.

We expect that our major source of funding for 2022 and beyond will be our operating cash flows, our existing cash and cash equivalents as well as our Credit Facility agreement.

We earn a significant amount of our operating income outside the United States, which, except for current earnings in certain jurisdictions, is deemed to be indefinitely reinvested in foreign jurisdictions.

See Note 7 in the Notes to Consolidated Financial Statements for more information.

We expect that our major source of funding for 2023 and beyond will be our operating cash flows, our existing cash and cash equivalents as well as our Facility agreement.

Except for current earnings in certain jurisdictions, our operating income is deemed to be indefinitely reinvested in foreign jurisdictions.

We currently do not intend nor foresee a need to repatriate these funds.

We believe our future operating cash flows will be more than sufficient to cover debt repayments, other contractual obligations, capital expenditures and dividends for the next 12 months and thereafter for the

foreseeable future.

In addition, we believe our borrowing capacity provides substantial financial resources, if needed, to supplement funding of capital expenditures and/or acquisitions.

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Sources and Uses of Cash

Cash at December 31, 2021 decreased $8.8 million when compared to December 31, 2020.

Cash at December 31, 2022 increased $0.8 million when compared to December 31, 2021.

Net Cash provided by operating activities was $26.2 million.

The most significant net investing and financing uses of Cash were net payments of debt of $14.2 million, capital expenditures of $18.4 million, share repurchases of $5.3 million and dividends paid of $4.1 million.

The most significant net investing uses of Cash were capital expenditures of $40.6 million and acquisitions of businesses of $16.2 million, partially offset by life insurance proceeds of $6.9 million.

The most significant contribution from financing activities included net debt proceeds of $29.1 million partially offset by share repurchases of $5.5 million and dividends paid of $4.1 million.

Currency had an unfavorable impact of $1.1 million on Cash when translating foreign denominated financial statements to U.S.

Net Cash provided by operating activities for the years ended December 31, 2022 and 2021 was $26.2 million and $33.6 million, respectively.

The $8.0 million decrease was primarily a result of an increase in cash used to fund working capital of $26.9, partially offset by miscellaneous net favorable movements in non-cash items of $12.9 million and an increase in net income of $6.0 million.

The $7.5 million decrease was primarily a result of an increase in cash used to fund working capital of $21.2 and miscellaneous net unfavorable movements in non-cash items of $4.9 million offset by an increase in net income of $18.7 million.

Net Cash used in investing activities of $46.8 million for the year ended December 31, 2022 represents an increase of $28.5 million when compared to Cash used in investing activities for the year ended December 31, 2021.

The increased use of Cash was primarily related to the prior year Cash proceeds from the sale of property and equipment of $10.5 million, primarily from the sale of the corporate aircraft, partially offset by a decrease in capital expenditures of $6.2 million.

Cash used in financing activities for both years ended December 31, 2021 and 2020 was $23.2 million.

The year-over-year change in cash usage was due to an increase in net debt payments of $4.5 million, partially offset by a year-over-year decrease in cash used in capital stock transactions of $4.4 million.

The increased use of Cash was primarily related to an increase in capital expenditures and acquisitions of businesses.

Net Cash provided by financing activities for the year ended December 31, 2022 was $22.5 million compared to a use of cash of $23.2 million for the year ended December 31, 2021.

The year-over-year change in cash was mainly due to proceeds from long-term debt.

We have commitments under operating leases primarily for office and manufacturing space, transportation equipment, office and computer equipment and capital leases, primarily for equipment.

See Note F in the Notes to Consolidated Financial Statements for more information.

See Note 8 in the Notes to Consolidated Financial Statements for more information.

As of December 31, 2022, the Company had total outstanding guarantees of $13.0 million.

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The estimates of fair value represent the best estimate based on industry trends and reference to market rates and transactions.

Our measurement date for our annual impairment test is October 1 of each year.

We did not have any impairment for goodwill for the years ended December 31, 2021 or 2020.

See Note J for additional information.

Goodwill is reviewed for impairment annually on October 1 or more frequently when changes in circumstances indicate the carrying amount may be impaired.

We may use both quantitative and qualitative approaches when testing goodwill for impairment.

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We believe the assumptions used in recording obligations under the plans are reasonable based on prior experience, market conditions and the advice of plan actuaries.

However, an increase in the discount rate would decrease the plan obligations and the net periodic benefit cost, while a decrease in the discount rate would increase the plan obligations and the net

periodic benefit cost.

However, an increase in the discount rate would decrease the plan obligations and the net periodic benefit cost, while a decrease in the discount rate would increase the plan obligations and the net periodic benefit cost.

In addition, an increase in the expected long-term return on plan assets would decrease the net periodic pension cost, while a decrease in expected long-term return on plan assets would increase the net periodic pension cost.

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As such, beginning July 1, 2018, the functional currency for the Company’s Argentina subsidiary became the U.S.

Revenue from operations in Argentina represented less than 1% of total consolidated net sales for the year ended December 31, 2021 and less than 2% of consolidated net sales for the years ended December 31, 2020 and 2019.

As of December 31, 2021, the Company had $0.5 million in foreign currency forward exchange contracts outstanding.

Revenue from operations in Argentina represented less than 1% of total consolidated net sales for the years ended December 31, 2022, 2021 and 2020.

As of December 31, 2022, the Company had $0.5 million in foreign currency forward exchange assets and $0.1 million in foreign currency forward exchange liabilities outstanding.

The Company does not hold derivatives for trading purposes.

The Company's primary currency rate exposures are related to foreign denominated debt, intercompany debt, forward exchange contracts, foreign denominated receivables and payables and cash and short-term investments.

A hypothetical 10% change in currency rates would have a favorable/unfavorable impact on fair values on such instruments of $5.3 million and on income before tax of $1.6 million.

A hypothetical 10% change in currency rates would have a favorable/unfavorable impact on fair values on such instruments of approximately $5.9 million and on income before tax of $2.0 million.

The Company is exposed to market risk, including changes in interest rates.

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The Company developed the expected return on Plan assets by considering various factors which include targeted asset allocation percentages, historical returns, and expected future returns.

The Company assumed an expected rate of return of 6.50% and 7.00% for the years ended December 31, 2021 and 2020, respectively.

The Company assumed an expected rate of return of 6.50% for both years ended December 31, 2022 and 2021.

A 50 basis point change in the expected rate of return would have a $0.1 million effect on the Plan’s subsequent year’s net periodic pension cost.

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Since we cannot predict the duration or scope of the COVID-19 pandemic or the possibility or severity of new variants, the potential negative financial impact to the Company’s results cannot be reasonably estimated but could be material.

Although the recent deployment of vaccinations is expected to mitigate potential future adverse impact, the impact cannot be predicted with certainty.

Financial Statemen ts and Supplementary Data

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

of Preformed Line Products Company

To the Shareholders and the Board of Directors of Preformed Line Products Company

Opinion on the Financial Statements

We have audited the accompanying Consolidated Balance Sheets of Preformed Line Products (the Company) as of December 31, 2021 and 2020, the related Statements of Consolidated Income, Comprehensive Income, Cash Flows, and Shareholders' Equity for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

We have audited the accompanying Consolidated Balance Sheets of Preformed Line Products Company (the Company) as of December 31, 2022 and 2021, the related Statements of Consolidated Income, Comprehensive Income, Cash Flows and Shareholders' Equity for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Quantitative Impairment Assessment of Goodwill

Description of the matter

How we addressed the matter

of the Matter

At December 31, 2022, the Company’s goodwill was $28.0 million.

As discussed in Note J to the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level or more frequently if impairment indicators arise using either a qualitative or quantitative assessment.

As discussed in Note 12 to the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level or more frequently if impairment indicators arise.

The Company identified an interim indicator of impairment for the Asia-Pacific reporting unit and performed an interim impairment assessment as of September 30, 2022 which resulted in an impairment charge of $6.5 million.

The Company performed a quantitative impairment assessment for the Asia-Pacific reporting unit.

Under the quantitative assessment, goodwill is tested for impairment utilizing a combination of the income approach, which uses a discounted cash flow methodology, and the market approach, which uses comparable company market multiples, to estimate the fair value of each reporting unit.

Auditing management’s quantitative goodwill impairment assessment for one reporting unit was complex and highly judgmental due to the significant estimation required to determine the fair value of the reporting unit.

In particular, the fair value estimate was sensitive to significant assumptions, such as revenue growth rates, operating margins, weighted average cost of capital (WACC), and estimated market multiples, which are affected by expectations of future market or economic conditions.

Auditing management’s quantitative goodwill impairment assessment for the Asia-Pacific reporting unit was complex due to the use of valuation methodologies in the determination of the

How We Addressed the Matter in Our

estimated fair value of the reporting unit.

The fair value estimate was impacted by assumptions such as revenue growth rates, operating margins, weighted average cost of capital (WACC), and estimated market multiples, which are affected by expectations of future market or economic conditions.

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment process.

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To test the estimated fair value of the Company’s reporting unit, we performed audit procedures that included, among others, assessing the methodologies used, testing the significant assumptions described above, and testing the underlying data used by the Company in its analysis.

For example, we compared the significant assumptions used by management to current industry and economic trends and to historical results.

We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting unit that would result from changes in the assumptions.

We also utilized our specialists to review the methodology, and certain assumptions such as the WACC and market multiples.

We also utilized our internal valuation specialists to review the methodology, and certain assumptions such as the WACC and market multiples.

/s/ Ernst & Young LLP

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Deferred income taxes

Pension asset

LIABILITIES AND SHAREHOLDERS' EQUITY

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SHAREHOLDERS' EQUITY

Shareholders' equity:

Common shares - $ 2 par value per share, 15,000,000 shares authorized, 4,907,143

and 4,902,233 issued and outstanding, at December 31, 2021 and December 31,

2020, respectively

Common shares issued to rabbi trust, 243,138 and 265,508 shares at December 31,

2021 and December 31, 2020, respectively

Common shares –

$ 2 par value per share, 15,000,000 shares authorized, 4,917,020 and 4,907,143 issued and outstanding, at December 31, 2022 and December 31, 2021, respectively

Common shares issued to rabbi trust, 245,386 and 243,138 shares at December 31, 2022 and December 31, 2021, respectively

Deferred compensation liability

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Retained earnings

Treasury shares, at cost, 1,685,387 and 1,611,927 shares at December 31 and

December 31, 2020, respectively

Treasury shares, at cost, 1,758,901 and 1,685,387 shares at December 31, 2022 and December 31, 2021, respectively

Accumulated other comprehensive loss

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Research and engineering

Other operating expenses - net

Goodwill impairment

Other operating expense, net

OPERATING INCOME

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Income tax expense

Net loss (income) attributable to noncontrolling interests

Net (income) loss attributable to noncontrolling interests

NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS

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Foreign currency translation adjustment

Recognized net actuarial gains

Recognized net actuarial gain

Gain (loss) on unfunded pension obligations

Other comprehensive (loss) income, net of tax

Comprehensive loss (income) attributable to noncontrolling interests

Comprehensive (income) loss attributable to noncontrolling interests

Comprehensive income attributable to Preformed Line Products Company shareholders

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Share-based compensation expense

Goodwill impairment

Gain from company owned life insurance policy

Loss on exit of business

(Gain) loss on sale of property and equipment

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Prepaid expenses

Trade accounts payables and accrued liabilities

Trade accounts payable and accrued liabilities

Accrued income and other taxes

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Proceeds from the sale of property and equipment

Purchase of marketable securities

Proceeds from sale of marketable securities

Purchase of company owned life insurance policies

Proceeds from company owned life insurance policy

Acquisition of businesses, net of cash

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FINANCING ACTIVITIES

Increase (decrease) in notes payable to banks

Increase in notes payable to banks

Proceeds from long-term debt

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Purchase of common shares for treasury from related parties

NET CASH (USED IN) PROVIDED BY FINANCING

Effects of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash, cash equivalents and restricted cash

NET CASH PROVIDED BY (USED IN) FINANCING

Effects of exchange rate changes on cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of year

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The Company purchased a new corporate aircraft during the year ended December 31, 2021 with a term loan in the principal amount of $ 20.5 million.

For further information regarding this transaction, refer to Note E, “Debt and Credit Arrangements.”

For further information regarding this transaction, refer to Note 7 of the Notes to the Consolidated Financial Statements.

See notes to consolidated financial statements.

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Balance at January 1, 2020

Foreign currency translation adjustment

Foreign currency translation

Recognized net actuarial gain, net

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Issuance of 88,377 common shares

Common shares distributed from rabbi trust of 1,989 , net

Cash dividends declared - $ 0.80 per share

Common shares distributed from rabbi

trust of 19,396 , net

Cash dividends declared - $ 0.80 per

Balance at December 31, 2020

Foreign currency translation adjustment

Foreign currency translation

Recognized net actuarial gain, net

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Issuance of 78,730 common shares

Common shares distributed from rabbi trust of 19,396 , net

Cash dividends declared - $ 0.80 per share

Common shares distributed from rabbi

trust of 22,370 , net

Cash dividends declared - $ 0.80 per

Balance at December 31, 2021

Foreign currency translation adjustment

Foreign currency translation

Recognized net actuarial gain, net

of tax provision of $ 105

Loss on unfunded pension obligations,

Gain on unfunded pension obligations,

net of tax benefit of $ 206

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Issuance of 83,391 common shares

Common shares distributed from rabbi trust of 22,370 , net

Cash dividends declared - $ 0.80 per share

Common shares contributed to rabbi

trust of 2,248 , net

Cash dividends declared - $ 0.80 per

Balance at December 31, 2022

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(Tables in thousands of dollars, except share and per share data, unless specifically noted)

Note A - Significant Accounting Policies

Note 1 –

Significant Accounting Policies

Nature of Operations

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The Company’s primary products support, protect, connect, terminate and secure cables and wires.

The Company also provides solar hardware systems and mounting hardware for a variety of solar power applications.

The Company provides helical solutions, connectors, fiber optic and copper splice closures, solar framing applications, and electric vehicle charging station foundations.

The Company’s customers include public and private energy utilities and communication companies, cable operators, governmental agencies, contractors and subcontractors, distributors and value-added resellers.

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Principles of Consolidation and Noncontrolling Interests

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries for which it has a controlling interest.

All intercompany accounts and transactions have been eliminated upon consolidation.

The accompanying consolidated financial statements, including the accounts of the Company and its wholly-owned subsidiaries for which it has a controlling interest, were prepared in accordance with accounting principles generally accepted in the United States of America ("U.S.

GAAP") and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which the Company exercises control.

Intercompany transactions and balances are eliminated in consolidation.

Noncontrolling interests are presented in the Company’s Consolidated Financial Statements as if parent company investors (controlling interests) and other minority investors (noncontrolling interests) in partially owned subsidiaries have similar economic interests in a single entity.

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Transactions between the parent company and noncontrolling interests are reported in equity as transactions between stockholders, provided that these transactions do not create a change in control.

Cash and Cash Equivalents

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash (“Cash”) are stated at fair value and consist of highly liquid investments with original maturities of three months or less at the time of acquisition.

Restricted cash is included on the Cash and cash equivalents on the Company’s Consolidated Balance Sheets.

Restricted cash, which is not material, is included in Cash, cash equivalents and restricted cash on the Company’s Consolidated Balance Sheets .

Accounts Receivable Allowances

The Company maintains an allowance for credit losses for estimated losses resulting from the inability of its customers to make required payments.

Prior to the adoption of Financial Accounting Standards Board (“FASB”) ASC 326 “Financial Instruments –

Credit Losses", the allowances for uncollectible accounts receivable were based upon the number of days the accounts are past due, the current business and macroeconomic environment, geographic considerations and specific information such as bankruptcy or liquidity issues of its customers.

Rather than recognizing losses when they are deemed to be probable, the Company now uses a current expected credit loss model in order to immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments, mainly trade receivables.

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Board ("ASC") 326 “Financial Instruments –

Credit Losses", the Company uses a current expected credit loss model in order to immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments, mainly trade receivables.

Additionally, the allowance is based upon identified delinquent accounts, customer payment patterns and other analyses of historical data trends.

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All other inventories are determined by the first-in, first-out (“FIFO”) or average cost methods.

Inventories are carried at net realizable value.

Inventories are carried at lower of cost or net realizable value.

Reserves are maintained for estimated obsolescence or excess inventory based on past usage and future demand.

Fair Value of Financial Instruments

Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 825, “Disclosures about Fair Value of Financial Instruments,”

FASB ASC 825, “Disclosures about Fair Value of Financial Instruments,”

requires disclosures of the fair value of financial instruments.

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Property, Plant and Equipment and Depreciation

Property, plant, and equipment is recorded at cost.

Depreciation is computed using the straight-line method over the estimated useful lives.

The estimated useful lives used, when purchased new, are:

Property, plant, and equipment is recorded at cost less accumulated depreciation or amortization.

Property under finance lease agreements is carried at the present value of lease payments over the lease term less accumulated amortization.

Depreciation is based on the estimated service lives of depreciable assets and is calculated using the straight-line method.

Fully depreciated assets are retained in property and accumulated depreciation accounts until they are removed from service.

The estimated useful lives for assets purchased new are:

land improvements, ten years ;

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The estimate of fair value represents the Company’s best estimate based on industry trends and reference to market rates and transactions.

The Company did not record any impairment to long-lived assets during the years ended December 31, 2021 and 2020.

The Company did not record any impairment to long-lived assets during the years ended December 31, 2022 other than in the divestiture of the Russian operations, which is disclosed in Note 18.

The Company did not record any impairment to long-lived assets in 2021.

Goodwill and Other Intangibles

Goodwill and other intangible assets are generally recoded as a result of a business acquisition.

In accordance with ASC 805, “Business Combinations,”

the Company uses the acquisition method of accounting to allocate costs of acquired businesses to the assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition.

The excess costs of acquired businesses over the fair values of the assets acquired and liabilities assumed are recognized as goodwill.

Goodwill and other intangible assets are generally recorded as a result of a business acquisition.

Goodwill represents the excess of purchase price over the fair value of the tangible and identifiable net assets acquired during a business combination and is not subject to amortization but is subject to annual impairment testing.

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Goodwill is assigned to each reporting unit, as this represents the lowest level that constitutes a business and is the level at which management regularly reviews the operating results.

The Other Americas reporting unit does not have any allocated goodwill.

Intangible assets with definite lives, consisting primarily of purchased customer relationships, patents, technology, customer backlogs, trademarks and land use rights, are generally amortized over periods from four years to eighty-two years .

Intangible assets with definite lives, consisting primarily of purchased cust omer relationships, patents, technology, customer backlogs, trademarks and land use rights, are generally amortized over periods from two years to sixty-eight years .

The Company has no indefinite lived intangible assets other than goodwill.

The Company’s intangible assets with finite lives are generally amortized over the period in which the economic benefits of the intangibles are consumed, using either a projected cash flow basis method or the straight-line method.

The straight-line method is used in circumstances in which it better reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise expire compared to using a projected cash flow basis method.

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The Company assesses intangible assets with a determinable life for impairment when the carrying amount may not be recoverable, consistent with its policy for assessing other long-lived assets.

Approximately $ 0.3 million of impairment charges were recorded in 2021 related to finite-lived intangible assets.

Impairment charges recorded for intangible assets with finite lives was zero and $ 0.3 million in 2022 and 2021, respectively.

The Company may use both quantitative and qualitative approaches when testing goodwill for impairment.

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The Company then compares the fair value of the reporting unit with its carrying value to assess if goodwill has been impaired.

The fair value estimates are subjective and sensitive to significant assumptions, such as future cash flows, revenue growth rates, operating margins, the weighted-average cost of capital ("WACC"), and estimated market multiples, of which are affected by expectations of future market or economic conditions.

The fair value estimates are subjective and sensitive to significant assumptions, such as future cash flows, revenue growth rates, operating

margins, the weighted-average cost of capital ("WACC"), and estimated market multiples, of which are affected by expectations of future market or economic conditions.

The future cash flows are based on the Company’s long-term operating plan and a terminal value was used to estimate the reporting unit’s cash flows beyond the period covered by the operating plan.

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Due to the multiple variables inherent in arriving at the estimates of the reporting unit's fair value, differences in assumptions could have an effect on the estimated fair value of a reporting unit and could result in goodwill impairment charges in a future period.

As a result of an interim impairment assessment performed as of September 30, 2022, the Company recognized a non-cash impairment charge of $ 6.5 million related to the Company’s Asia-Pacific reporting unit, as disclosed in Note 12.

No other goodwill impairment was recorded for the years ended December 31, 2022 or 2021.

Revenue Recognition

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In the Consolidated Financial Statements, the benefits of a consolidated return have been reflected where such returns have or could be filed based on the entities and jurisdictions included in the financial statements.

Uncertain tax positions are recorded in accordance with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than likely than not to be realized upon ultimate settlement with the related tax authority.

Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected in the Consolidated Financial Statements.

Deferred tax liabilities and assets are determined based on the differences between the book and tax basis of particular assets and liabilities and operating loss carryforwards using tax rates in effect for the years in which the differences are expected to reverse.

Deferred tax assets are recognized to the extent that the Company believes these assets are more likely than not to be realized.

In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations.

If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

Uncertain tax positions are recorded in accordance with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

Deferred Tax Assets

Deferred taxes are recognized at currently enacted tax rates for temporary differences between the financial reporting and income tax basis of assets and liabilities and operating loss and tax credit carryforwards.

The Company establishes a valuation allowance to record deferred tax assets at an amount that is more-likely-than-not to be realized.

In the event the Company were to determine that it would be able to realize our deferred tax assets in the future in excess of the recorded amount, an adjustment to the valuation allowance would increase income in the period such determination was made.

Likewise, should the Company determine that it would not be able to realize all or part of the net deferred tax assets in the future, an adjustment to the valuation allowance would be charged to expense in the period such determination was made.

We establish a valuation allowance to record our deferred tax assets at an amount that is more-likely-than-not to be realized.

In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of their recorded amount, an adjustment to the valuation allowance would increase income in the period such determination was made.

Likewise, should we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the valuation allowance would be charged to expense in the period such determination was made.

Uncertain Tax Positions

We identify tax positions taken on the federal, state, local and foreign income tax returns filed or to be filed.

A tax position can include:

a reduction in taxable income reported in a previously filed tax return or expected to be reported on a future tax return that impacts the measurement of current or deferred income tax assets or liabilities in the period being reported;

a decision not to file a tax return;

an allocation or a shift of income between jurisdictions;

the characterization of income or a decision to exclude reporting taxable income in a tax return;

or a decision to classify a transaction, entity or other position in a tax return as tax exempt.

We determine whether a tax position is an uncertain or a routine business transaction tax position that is more-likely-than-not to be sustained at the full amount upon examination.

Under FASB ASC 740 (“ASC 740”), “Tax Benefits from Uncertain Tax Positions”

that reduce our current or future income tax liability are reported in our financial statements only to the extent that each benefit is recognized and measured under a two-step approach.

The first step requires us to assess whether each tax position based on its technical merits and facts and circumstances as of the reporting date, is more-likely-than-not to be sustained upon examination.

The second step measures the amount of tax benefit that we would recognize in the financial statements based on a cumulative probability approach.

A tax position that meets the more-likely-than-not threshold that is not highly certain is measured based on the largest amount of benefit that is greater than 50 % likely of being realized upon ultimate settlement with the tax authority, assuming that the tax authority has examined the position and has full knowledge of all relevant information.

Advertising costs are expensed as incurred and totaled $ 2.7 million in 2022 , $ 1.5 million in 2021 and $ 0.3 million in 2020 .

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Revenues and expenses are translated at weighted average exchange rates in effect during the period.

Transaction gains and losses arising from exchange rate changes on transactions denominated in a currency other than the functional currency are included in income and expense as incurred.

Aggregate transaction losses, including hedge activity, for both years ended December 31, 2021 and 202 0 was $ 1.0 milli on and was $ 1.2 million for the year ended December 31, 2019.

Upon sale or substantially complete liquidation of an investment in a foreign entity, the cumulative translation adjustment for that entity is reclassified from Accumulated other comprehensive income (loss) to earnings.

Transaction gains and losses arising from exchange rate changes on transactions denominated in a currency other than the functional currency are included in income and expensed as incurred.

Aggregate transaction losses, including hedge activity, was $ 0.4 million for the year ended December 31, 2022 and $ 1.0 million for both years ended December 31, 2021 and 2020 .

Effective July 1, 2018, Argentina was designated as a highly inflationary economy as the projected three-year cumulative inflation rate exceeded 100 %.

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The impact to the Company’s consolidated financial statements for accounting of the Argentina subsidiary under highly inflationary economy rules is not material.

Revenue from operations in Argentina was less than 1 % of total consolidated net sales for both years ended December 31, 2021 and 2020 and less than 2 % of consolidated net sales for the year ended December 31, 2019.

Revenue from operations in Argentina was less than 1 % of total consolidated net sales for the years ended December 31, 2022 , 2021 and 2020.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S.

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 revenue and expenses during the reporting period.

The preparation of financial statements in accordance with U.S.

GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the 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.

The Company's consolidated financial statements include amounts that are based on management's best estimates and judgments.

Actual results could differ from these estimates.

Certain prior year amounts have been reclassified to conform to current year presentation.

Business Combinations

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Market participants are considered to be buyers and sellers unrelated to the Company in the principal or most advantageous market for the asset or liability.

In the event there is an earn-out associated with an acquisition, the Company uses a valuation model to measure the contingent consideration, which may include significant assumptions such as revenue projections and discount rates.

The Company uses a discounted cash flow model to measure the useful lives of intangible assets.

The Company uses a discounted cash flow model to measure the fair value of intangible assets.

The significant assumptions used to estimate the fair value of the intangible assets include discount rates and certain assumptions that form the basis of future cash flows (such as revenue growth rates, attrition rates, and royalty rates).

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Fair value estimates are based on a series of judgments about future events and uncertainties and rely heavily on estimates and assumptions.

Management values property, plant and equipment using the cost approach supported where available by observable market data, which includes consideration of obsolescence.

Management values property, plant and equipment using the cost approach supported where available by observable

market data, which includes consideration of obsolescence.

Acquired inventories are marked to fair value.

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The Company does not hold derivatives for trading purposes.

Recently Adopted Accounting Pronouncements

On January 1, 2021 , the Company adopted Account Standards Update (ASU) 2019-12 , Income Taxes (ASC 740) –

Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application.

The adoption of ASU 2019-12 did not have a material impact on the Consolidated financial statements.

No other recently issued or effective ASU's had, or are expected to have, a material impact on the Company's results of operations, financial condition or liquidity.

Note B - Other Financial Statement Information

Inventories –

Recently Issued Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates ("ASU").

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Liabilities from Contracts with Customers.”

This ASU requires an acquiring entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

The ASU is effective for fiscal years and interim periods beginning after December 15, 2022, with early adoption permitted.

The adoption of this new standard is not expected to have a material impact on the consolidated financial statements and related disclosures.

Note 2 –

Inventories, Net

Inventories, net

Raw materials

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Finished products

Inventories, gross

Excess of current cost over LIFO cost

Inventories, net

Costs for inventories of certain material, mainly in the U.S., are determined using the LIFO method and totaled approximately $ 68.3 million and $ 44.0 million at December 31, 2022 and 2021, respectively.

The Company’s reserves for slow-moving and obsolete inventory at December 31, 2022 and 2021 were $ 10.8 million and $ 10.6 million, respectively.

Property and equipment –

Note 3 –

Property and Equipment, Net

Major classes of property, plant and equipment are as follows:

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Construction in progress

Property, plant and equipment, gross

Less accumulated depreciation

Property, plant and equipment, net

Depreciation of property and equipment was $ 14.3 million in 2022 , $ 13.6 million in 2021 and $ 12.2 million in 2020 .

Machinery, equipment and aircraft includes $ 0.5 million and $ 0.6 million of financing leases at December 31, 2022 and 2021 , respectively.

Legal proceedings

Note 4 –

Contingent Liabilities

The Company can be party to a variety of pending legal proceedings and claims arising in the normal course of business, including, but not limited to, litigation relating to employment, workers’

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To the extent that there is a reasonable possibility the losses could exceed amounts already accrued, the Company will adjust the accrual in the period in which the determination is made, disclose an estimate of the additional loss or range of loss and if the amount of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made.

During the years ended December 31, 2021 and 2020, the Company maintained approximately $ 2.3 million and $ 2.2 million, respectively, representing its best estimate for losses to be incurred on global legal matters.

For the years ended December 31, 2022 and 2021, the Company maintained a reserve of approximately $ 1.8 million and $ 2.3 million, respectively, representing its best estimate for losses to be incurred on global legal matters.

The Company and its subsidiaries Helix Uniformed Ltd.

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The Company is not a party to any other pending legal proceedings that the Company believes would, individually or in the aggregate, have a material adverse effect on its financial condition, results of operations or cash flow.

Note C - Pension Plans

PLP-USA hourly employees of the Company who meet specific requirements as to age and length and date of service are covered by a defined benefit pension plan (“Plan”).

Note 5 –

Pension Plans

The Company maintains a noncontributory defined benefit pension plan ("Plan") covering eligible U.S.

employees and a defined contribution plan to provide retirement benefits for employees as well as other international defined benefit plans.

These plans are maintained and contributions are made in accordance with the Employee Retirement Income Security Act of 1974 ("ERISA"), local statutory law or as determined by the Board of Directors.

The plans generally provide benefits based upon years of service and compensation.

The Company also established arrangements for certain key employees, which provide for supplemental retirement benefits.

The Company's plans are funded except for a U.S.

non-qualified plan for certain key employees and certain foreign plans.

Within the U.S., hourly employees of the Company who meet specific requirements as to age and length and date of service are covered by a defined benefit pension plan.

On December 12, 2012, the Company approved a freeze on further benefit accruals under the Plan and notified the participants of the freeze on December 19, 2012.

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The Company uses a December 31 measurement date for its Plan.

Net periodic pension cost for the Plan consists of the following components for the year ended December 31:

A summary of the Plan follows for the year ended December 31:

Interest cost

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Recognized net actuarial loss

Net periodic pension (income) cost

The following tables set forth benefit obligations, plan assets and the accrued benefit cost of the Plan at December 31:

Net periodic pension income

Components of net pension benefit, other than service cost, are included in other income, net in the Consolidated Statement of Income.

The following tables set forth the changes in benefit obligations, the change in plan assets, the funded status, and amounts recognized in the consolidated financial statements for the Plan at December 31:

Projected benefit obligation at beginning of the year

Interest cost

Actuarial (gain) loss

Actuarial gain

Benefits paid

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Fair value of plan assets at end of the year

Unfunded pension obligation

Pension (asset) obligation

The actuarial gain in 2022 was primarily the result of an increase in the Plan discount rate from 2.92 % in 2021 to 5.55 % in 2022.

In accordance with ASC 715-20, the Company recognizes the underfunded status of the Plan as a liability.

In 2022, in accordance with ASC 715-20, the Company recognized the over-funded status of the Plan as a non-current asset.

The amount recognized in Accumulated other comprehensive loss related to the Plan at December 31 is comprised of the following:

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Reclassification adjustments:

Pre-tax amortized net actuarial gain

Pre-tax amortized net actuarial loss

Tax provision

Adjustment to recognize (gain) loss on unfunded

pension obligations:

Pre-tax gain (loss)

Tax (provision) / benefit

Adjustment to recognize gain on pension asset:

Tax provision

Balance at December 31

The 2021 pre-tax unfunded pension obligation gain of $ 1.0 million included a gain of $ 1.5 million due to a .23 % increase in the discount rate to 2.92 %, a loss of $ 0.1 million associated with the industry updates to the mortality table used and a loss of $ 0.3 million due to demographic changes.

Asset performance exceeding the 6.50 % rate of return assumption had a negligible effect on the unfunded obligation.

The 2022 pre-tax unfunded pension gain of $ 12.2 million included a gain of $ 12.0 million due to a 2.63 % increase in the discount rate to 5.55 %, and a loss of $ 0.2 million due to demographic changes.

There were no changes in the mortality rate used this year, and as a result, no mortality gain or loss whereas there was a loss of $ 0.3 million in the prior year.

Negative asset performance was below the expected 6.50 % rate of return assumption and resulted in an asset loss of $ 11.3 million.

There is no prior service cost to be amortized in the future.

The Plan had accumulated benefit obligations in excess of Plan assets as follows:

The Plan had assets in excess of accumulated benefit obligations as follows:

Accumulated benefit obligation

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These pooled assets are not quoted on an active exchange.

The fair value of the Plan assets at December 31, 2021 and 2020 was $ 37.8 million and $ 36.8 million, respectively.

The fair value of the Plan assets at December 31, 2022 and 2021 was $ 29.6 milli on and $ 37.8 million, respectively.

The Plan weighted-average asset allocations at December 31, 2022 and 2021, by asset category, are as follows:

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Pension Benefits

Other Benefit Plans

The Company also provides retirement benefits through various defined contribution plans including PLP-USA’s Profit Sharing Plan.

Expense for these defined contribution plans was $ 5.8 million in 2021, $ 5.9 million in 2020 and $ 4.9 million in 2019.

Further, the Company also provides retirement benefits through the Supplemental Profit Sharing Plan.

Expense for these defined contribution plans w as $ 6.3 million in 2022, $ 5.8 million in 2021 and $ 5.9 million in 2020.

The Company also provides retirement benefits through the Supplemental Profit Sharing Plan.

To the extent an employee’s award under PLP-USA’s Profit Sharing Plan exceeds the maximum allowable contribution permitted under existing tax laws, the excess is accrued for (but not funded) under a non-qualified Supplemental Profit Sharing Plan.

The Supplemental Profit Sharing Plan allows participants the ability to hypothetically invest their proportionate award into various investment options, which primarily includes mutual funds.

Expense for the Supplemental Profit Sharing Plan was $ 0.9 million for the year ended December 31, 2021 and $ 1.1 million for both years ended December 31, 2020 and 2019.

The Supplemental Profit Sharing Plan unfunded status for the years ended December 31, 2021 and 2020 was $ 8.0 million and $ 7.1 million, respectively, and is included in Other noncurrent liabilities.

Note D - Accumulated Other Comprehensive Income (“AOCI”)

The Supplemental Profit Sharing Plan allows participant s the ability to hypothetically invest their proportionate award into various investment options, which primarily includes mutual funds.

The benefit (expense) for the Supplemental Profit Sharing Plan for the year ended December 31, 2022, 2021 and 2020 was $ 1.3 million, ($ 0.9 ) million and $ 1.1 million, respectively.

The Supplemental Profit Sharing Plan unfunded status for the years ended Decem ber 31, 2022 and 2021 was $ 7.3 million and $ 8.6 million, respectively, and is included in Other noncurrent liabilities .

The Company also has established nonqualified foreign defined benefit plans, which provide post-employment benefits based on years of service.

For the periods ending December 31, 2022 and 2021, the Company's benefit obligations related to these unfunded programs were $ 2.1 million and $ 3.0 million, respectively.

During 2022, 2021 and 2020, the Company recorded benefit costs relating to these programs of $ 0.2 million, $ 0.3 million, and $ 0.1 million, respectively.

Note 6 –

Accumulated Other Comprehensive Income (“AOCI”)

The following tables set forth the total changes in AOCI by component, net of tax:

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Other comprehensive income before reclassifications:

(Loss) gain on foreign currency translation adjustment

Gain (loss) on unfunded pension obligations

Loss on foreign currency translation adjustment

Gain on unfunded pension obligations

Amounts reclassified from AOCI:

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Balance at December 31

(a) This AOCI component is included in the computation of net periodic pension costs as noted in Note C –

(a) This AOCI component is included in the computation of net periodic pension income (costs) as noted in Note 5 –

Pension Plans.

Note E - Debt and Credit Arrangements

Note 7 –

Debt and Credit Arrangements

Short-term debt

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Austria Euro denominated at 2.76 %

Argentina Peso denominated at 37.0 %

Vietnam Dong denominated at 4.50 %

Current portion of long-term debt

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Brazil Real denominated at 4.60 %

Czech Republic Koruna denominated at 3.69 %

Total short-term debt

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Austria Euro denominated at 3.00 % due 2025

Indonesia U.S.

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New Zealand Dollar denominated at 5.45 % due 2026

New Zealand Dollar denominated at 3.65 % due 2024

Czech Republic Koruna denominated at 3.69 % due 2031

Total long-term debt

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Total long-term debt, less current portion

On March 2, 2022, the Company amended its credit facility ("the Facility") to increase the capacity from $ 65.0 million to $ 90.0 million.

As part of this amendment, the index used to determine the interest rate changed from LIBOR to the Bloomberg Short Term Bank Yield Index (“BSBY”).

The interest rate is defined as BSBY plus 1.125 % unless the Company’s funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 2.25 to 1, at which point the BSBY spread becomes 1.500 %.

The amendment also allows the Company to change its rate from BSBY to the Secured Overnight Financing Rate (“SOFR”) at the Company’s discretion.

The amendment extended the maturity from June 30, 2024 to March 2, 2026 .

On August 31, 2022, the Company amended the Facility and elected to change its rate from BSBY to SOFR, and added its New Zealand subsidiary as a co borrower, all other terms remain the same.

At December 31, 2022, the Company had utilized $ 46.7 million with $ 43.3 million available on the Facility, net of long-term outstanding letters of credit of $ 0.1 million.

Our bank debt to equity percentage was 25.0 %.

The Facility contains, among other provisions, requirements for maintaining levels of net worth and profitability.

At December 31, 2022, the Company was in compliance with these covenants.

On January 19, 2021, the Company received funding for a term loan from PNC Equipment Finance, LLC in the principal amount of $ 20.5 million to fund the purchase of a corporate aircraft.

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The loan is secured by the aircraft.

On April 17, 2020, the Company extended the term on its $ 65.0 million Credit Facility ("the Facility") from June 30, 2021 to June 30, 2024 and added its Austrian subsidiary as a borrower on the Facility.

All other terms remain the same, including the interest rate at LIBOR plus 1.125 % unless the Company’s funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 2.25 to 1, at which point the LIBOR spread becomes 1.500 %.

At December 31, 2021, the Company had the following borrowings on the $ 65.0 million Facility;

borrowed $ 3.4 million at 1.205 %, the Company’s Polish subsidiary borrowed $ 6.1 million at 2.455 %, the

Company’s Australian subsidiary borrowed $ 2.4 million at 2.980 % and the Company’s Austrian subsidiary borrowed $ 1.4 million at 1.216 %.

Under the Facility, at December 31, 2021, the Company had utilized $ 13.3 million with $ 51.7 million available, net of long-term outstanding letters of credit of $ 0.1 million.

Our bank debt to equity percentage was 18.8 %.

The Facility agreement contains, among other provisions, requirements for maintaining levels of net worth and profitability.

At December 31, 2021, the Company was in compliance with these covenants.

On April 25, 2019, the Company borrowed $ 8.0 million U.S.

dollars on behalf of its Indonesian subsidiary at a rate of 3.501 % with a term expiring on April 30, 2024 .

At December 31, 2021, $ 5.9 million was outstanding on this debt facility, of which $ 0.8 million is classified as current.

On August 16, 2021, the Company's New Zealand subsidiary extended the term of its $ 3.8 million debt facility from August 26, 2021 to August 26, 2024 .

All other terms remain the same, including the interest rate of 3.650 %.

Of the $ 3.2 million outstanding on this debt facility at December 31, 2021, $ 0.2 million is classified as current.

This loan is secured by the Company's New Zealand subsidiary's land and building.

The Company’s Asia Pacific segment had $ 0.2 million and $ 0.6 million in restricted cash at December 31, 2021 and 2020, respectively.

The restricted cash was used to secure bank debt and is included in Cash and cash equivalents and Other current assets on the Company’s Consolidated Balance Sheets at December 31, 2021 and 2020, respectively.

Aggregate maturities of long-term debt during the next five years are as follows:

$ 3.1 million for 2022, $ 3.1 million for 2023, $ 16.3 million for 2024, $ 4.9 million for 2025 and $ 15.8 million thereafter.

Interest paid was $ 1.6 million in 2021, $ 1.9 million in 2020 and $ 2.0 million in 2019.

$ 3.0 million for 2023 and 2024, $ 5.0 million for 2025, $ 49.6 million for 2026, $ 2.9 million for 2027 and $ 7.9 million thereafter.

Interest paid was $ 3.1 million in 2022, $ 1.6 mil lion in 2021 and $ 1.9 million in 2020.

Guarantees and Letters of Credit

The Company has provided financial guarantees for uncompleted work and financial commitments.

The terms of these guarantees vary with end dates ranging from the current year through the completion of such transactions.

The terms of these guarantees v ary with end dates ranging from the current year through the completion of such transactions.

The guarantees would typically be triggered in the event of non-performance.

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As of December 31, 2022, the Company had total outstanding letters of credit of $ 6.7 million.

Note F - Leases

Note 8 –

The Company regularly enters into leases in the normal course of business.

As of December 31, 2022 , the leases in effect were related to land, buildings, vehicles, office equipment and other production equipment under operating leases with lease terms of up to 99 years .

The Company often has the option to renew lease terms for buildings and other assets.

The exercise of lease renewal options is generally at the Company’s sole discretion.

Some of the Company's leases include one or more renewal options, the exercise of which is generally at the Company's discretion.

In addition, certain lease arrangements may be terminated prior to their original expiration date at the Company’s discretion.

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The components of operating and finance lease costs are recognized in Costs and expenses and Interest expense, respectively, on the Company’s Consolidated Statements of Income .

The Company’s operating and finance lease costs for the years ended December 31, 2021 and 2020 were as follows:

The Company’s operating and finance lease costs for the years ended December 31 were as follows:

Year Ended December 31,

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Amounts recognized as finance lease obligations are reported in Accrued expense and other liabilities and Other noncurrent liabilities in the Consolidated Balance Sheets.

The Company received sublease income of $ 1.0 million for both years ended December 31, 2021 and 2020.

The Company received sublease income of $ 1.1 million and $ 1.0 million for the years ended December 31, 2022 and 2021 , respectively.

The total minimum sublease rentals under noncancelable subleases to be received through 2023 is $ 0.5 million.

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Financing cash flows from finance leases

Note G - Income Taxes

The Company recorded net tax provisions of $ 13.2 million, $ 10.8 million, and $ 8.1 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Cash taxes paid, net of refunds, were $ 16.9 million, $ 7.7 million, and $ 7.8 million for the years ending December 31, 2021, 2020, and 2019, respectively.

The 2021 payment includes a $ 5.0 million extension payment during the year ended December 31, 2021 which was related to the 2020 tax return.

Note 9 –

Income before income taxes was derived from the following sources:

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federal statutory rate and the tax shown in the Statements of Consolidated Income for the years ended December 31 are summarized as follows:

federal statutory tax rate

Federal tax at statutory rate

State and local taxes, net of federal benefit

Valuation allowance

Non-deductible Goodwill Impairment

tax rate variances

Foreign tax credits

Non-deductible officers' compensation

federal permanent items

Officer Life Insurance Proceeds

Global intangible low-taxed income

Foreign tax credits

tax rate variances

Valuation allowance

Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the tax basis of assets and liabilities and their carrying value for financial statement purposes.

The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities at December 31 are as follows:

Uncertain tax positions

federal permanent items

Effective income tax rate

Income tax expense for the periods ended December 31, 2022, 2021, and 2020 was $ 19.3 million, $ 13.2 million, and $ 10.8 million, respectively.

The decrease in the effective tax rate from 2021 to 2022 was primarily due to the mix of income earned in jurisdictions with a lower tax rate than the U.S.

and a non-taxable benefit related to the proceeds from a settlement of a Company-owned life insurance policy.

This was partially offset by a goodwill impairment charge as discussed in Note 12 as well as an increase in valuation allowances recorded in certain international jurisdictions in 2022.

Deferred Income Tax Assets and Liabilities

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of our deferred tax assets and liabilities were as follows:

Deferred tax assets:

Accrued compensation and benefits

Inventory valuation reserves

Allowance for credit losses

Benefit plan reserves

Net operating loss carryforwards

Foreign tax credit

Inventory valuation reserves

Other accrued expenses

Research and development capitalization

Foreign tax credit

Accrued compensation and benefits

Allowance for credit losses

Unrealized foreign exchange

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Change in net deferred tax assets:

Deferred income tax expense

Ordinary movement

Items of other comprehensive (loss) income

Deferred tax balances from business acquisitions (see Note 17)

Items of other comprehensive loss (see Note 6)

Currency translation

Total change in net deferred tax assets

Deferred taxes are recorded at a rate at which such items are expected to reverse based on currently enacted tax rates for temporary differences between the financial reporting and income tax basis of assets and liabilities and operating loss and tax credit carryforwards.

At December 31, 2021, the Company had $ 13.8 million of foreign net operating loss carryforwards of which $ 9.2 million has an indefinite carryforward and $ 4.6 million will expire between the years 2024 and 2030 .

The Company assesses the available positive and negative evidence to determine if it is more likely than not that sufficient future taxable income will be generated to utilize the existing deferred tax assets by jurisdiction.

Based on this evaluation, the Company has established a valuation allowance of $ 1.9 million at December 31, 2021 in order to measure only the portion of the deferred tax asset that is more likely than not to be realized.

The net decrease in the valuation allowance during the year was $ 1.0 million, of which $ 0.7 million impacts the income tax provision and the remainder relates to currency translation.

The Company considers the majority of the earnings in our non-U.S.

subsidiaries to be permanently reinvested and accordingly did not record any associated deferred income taxes on such earnings.

As of December 31, 2022, various international subsidiaries had gross net operating losses totaling $ 10.5 million, resulting in deferred tax assets of $ 2.7 million.

Of the international net operating losses, $ 0.6 million can be carried forward indefinitely, while the remainder, if not utilized, will expire between 2024 and 2033 .

It is more likely than not that certain net operating loss carryforwards will not be realized;

therefore, we have recorded a valuation allowance of $ 1.9 million against them.

The net operating loss carryforwards are subject to various annual limitations under the tax laws of the different jurisdictions.

The Company considers earnings in our non-U.S.

subsidiaries to be permanently reinvested and therefore did not record any associated deferred income taxes on such earnings.

Accordingly, the Company intends to continue to invest approximately $ 114.7 million of such earnings, as well as our capital in these subsidiaries, indefinitely outside of the U.S.

The Company is subject to taxation in the U.S.

and various state and foreign jurisdictions.

As of December 31, 2021, with few exceptions, the Company is no longer subject to U.S.

federal examinations by tax authorities for years before 2017 and state, local or foreign examinations by tax authorities for years before 2015.

Unrecognized Income Tax Benefits

In 2022, we recognized an increase of $ 0.5 million to reserves for uncertain tax positions.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits related to uncertain tax positions, excluding interest and penalties, for the year ended December 31:

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Balance at December 31

The Company records accrued interest as well as penalties related to unrecognized tax benefits as part of the provision for income taxes.

During the year ended December 31, 2021, the remaining portion of the Company’s uncertain tax position which was $ 0.1 million expired due to the statute of limitation taking effect.

The Company had no significant activity with regard to unrecognized tax benefits.

The Company had less than $ 0.1 million of accrued interest and penalties as of December 31, 2021.

Note H - Share-Based Compensation

The increase in unrecognized tax benefits was primarily related to a reversal of benefits recognized in previous tax years from foreign tax credits.

Additionally, the Company records accrued interest as well as penalties related to unrecognized tax benefits as part of the provision for income taxes.

The accrued interest and penalties related to the gross unrecognized tax benefits, excluded from above, was de minimis in all years presented.

Preformed Line Products Company and its subsidiaries file income tax return in the United States and various countries around the world.

With few exceptions, the Company is no longer subject to United States federal examinations by tax authorities for years before 2018 and foreign, state, and local examinations by authorities for years before 2016.

Note 10 –

Share-Based Compensation

Long Term Incentive Plan of 2008 and 2016 Incentive Plan

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Annual compensation expense related to the time-based RSUs for the years ended December 31, 2022, 2021 and 2020 was $ 0.7 million, $ 0.5 million and $ 0.4 million, respectively.

During the year ended December 31, 2021, a former Officer of the Company forfeited 1,286 time-based RSUs that were granted during 2020 and 2019.

As of December 31, 2022, there was $ 0.9 million of total unrecognized compensation cost related to time-based RSUs that is expected to be recognized over the weighted-average remaining period of approximately 1.7 years.

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Performance-based compensation expense for the years ended December 31, 2022, 2021 and 2020 was $ 3.6 million, $ 3.4 million and $ 3.5 million, respectively.

During the year ended December 31, 2021, a former Officer of the Company forfeited 5,145 performance-based RSUs that were granted during 2020 and 2019.

As of December 31, 2022, the remaining performance-based RSUs compensation expense of $ 3.8 million is expected to be recognized over a period of approximately 1.7 years.

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The Company recognizes the original amount of the deferred compensation (fair value of the deferred stock award at the date of grant) as the basis for recognition in common shares issued to the rabbi trust.

Changes in the fair value of amounts owed to certain employees or Directors

are not recognized as the Company’s deferred compensation plan does not permit diversification and must be settled by the delivery of a fixed number of the Company’s common shares.

As of December 31, 2021, 243,138 LTIP shares have been deferred and are being held by the rabbi trust.

Changes in the fair value of amounts owed to certain employees or Directors are not recognized as the Company’s deferred compensation plan does not permit diversification and must be settled by the delivery of a fixed number of the Company’s common shares.

As of December 31, 2022, 245,386 shares have been deferred and are being held by the rabbi trust.

Share Option Awards

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Outstanding at January 1, 2022

Outstanding (vested and expected to vest) at

December 31, 2021

Outstanding (vested and expected to vest) at December 31, 2022

Exercisable at December 31, 2022

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There were 13,150 , 7,000 , and 5,050 stock options exercised during the years ended December 31, 2022, 2021 and 2020, respectively.

The total intrinsic value of stock options exercised was $ 0.2 million, $ 0.1 million for both years ended December 31, 2021 and 2020 and less than $ 0.1 million for the year December 31, 2019.

Cash received for the exercise of stock options during the year ended December 31, 2021 was $ 0.3 million and $ 0.2 million during both years ended December 31, 2021 and 2020.

The Company recorded compensation expense related to the stock options currently vested of $ 0.2 million, $ 0.1 million and less than $ 0.1 million during the years ended December 31, 2021, 2020 and 2019, respectively.

The total intrinsic value of stock options exercised was $ 0.3 million, $ 0.2 million and $ 0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Cash received for the exercise of stock options during the year ended December 31, 2022 was $ 0.8 million and $ 0.3 million for the years ended December 31, 2022 and 2021.

The Company recorded compensation expense related to the stock options currently vested of $ 0.3 million, $ 0.2 million and $ 0.1 million during the years ended December 31, 2022, 2021 and 2020, respectively.

The total compensation cost related to nonvested awards not yet recognized at December 31, 2022 is expected to be $ 0.5 million over a weighted-average period of approximately 2.4 years.

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This represents the reduction in income taxes otherwise payable during the period attributable to the actual gross tax benefits in excess of the expected tax benefits for options exercised in the current period.

Note I - Computation of Earnings Per Share

Note 11 –

Computation of Earnings Per Share

Basic earnings per share were computed by dividing net income by the weighted-average number of common shares outstanding for each respective period.

Diluted earnings per share were calculated by dividing net income by the weighted-average of all potentially dilutive common shares that were outstanding during the years presented.

The calculation of basic and diluted earnings per share for the year ended December 31 was are as follows:

The calculation of basic and diluted earnings per share for the year ended December 31 was as follows:

Determination of shares (in thousands)

Weighted-average common shares outstanding

Dilutive effect - share-based awards

Dilutive effect –

share-based awards

Diluted weighted-average common shares outstanding

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For the year ended December 31, 2022, 2021 and 2020, 31,500 , 13,000 and 37,919 stock options, respectively, were excluded from the calculation of diluted earnings per share as the effect would have been anti-dilutive.

Note J - Goodwill and Other Intangibles

Note 12 –

Goodwill and Other Intangibles

The Company’s finite and indefinite-lived intangible assets consist of the following:

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The aggregate amortization expense for other intangibles with finite lives, ranging from 2 to 68 years, for the years ended December 31, 2022, 2021 and 2020 was $ 2.2 million, $ 1.9 million and $ 1.8 million, respectively.

Amortization expense is estimated to be $ 1.7 million for 2022, $ 1.6 million for 2023 and 2024, $ 1.4 million for 2025 and $ 1.3 million for 2026.

Amortization expense is estimated to be $ 1.8 million for 2023, $ 1.7 million for 2024, $ 1.6 million for 2025, and $ 1.5 million for 2026 and 2027.

The weighted-average remaining amortization period is approximately 12.0 years.

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technology, 8.1 years and customer relationships, 10.3 years.

Goodwill and other intangible assets are generally recoded as a result of a business acquisition.

Goodwill and other intangible assets are generally recorded as a result of a business acquisition.

Intangible assets with definite lives, consisting primarily of purchased customer relationships, patents, technology, customer backlog, trademarks and land use rights, are generally amortized over periods from 2 to 68 years .

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Such events or changes may include, but are not limited to, a significant deterioration in overall economic conditions, changes in the business climate of the Company's industry, overall performance indicators, a decline in the Company's market capitalization, business reorganization or restructuring or disposal of all or part of a reporting unit.

Impairment charges are recognized pursuant to FASB ASC 350-20, “Goodwill.”

Impairment charges are

recognized pursuant to FASB ASC 350-20, “Goodwill.”

The Company's goodwill is tested for impairment at a level referred to as the reporting unit.

The level at which goodwill is tested for impairment indicates whether the operations within the reporting unit constitute a self-sustaining business.

The Company may use both quantitative and qualitative approaches when testing goodwill for impairment.

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The Company then compares the fair value of the reporting unit with its carrying value to assess if goodwill has been impaired.

The fair value estimates are subjective and sensitive to significant assumptions, such as revenue growth rates, operating margins, the weighted-average cost of capital ("WACC"), and estimated market multiples, of which are affected by expectations of future market or economic conditions.

The fair value estimates are subjective and sensitive to significant assumptions, such as revenue growth rates, operating margins, the WACC, and estimated market multiples, of which are affected by expectations of future market or economic conditions.

The Company believes that the methodologies, significant assumptions, and weightings used are reasonable and result in appropriate fair values of the reporting units.

Given the continued decline in the Company’s results in the Asia-Pacific region and the uncertainty surrounding COVID-19, including the lingering impacts of the Delta variant, the Company concluded that an indicator of impairment was present and conducted an interim quantitative impairment review of its goodwill in the Asia-Pacific reporting unit as of September 30, 2021.

The Company reassessed its previous forecasts for this reporting unit which predicted increased sales levels in the second half of 2021.

However, actual results were lower than forecast due to extended lockdowns and the postponement of projects within the region.

Given the continued decline in the Company’s results in the Asia-Pacific region, the Company's reassessment of future forecasts and the rising interest rate environment, the Company concluded that an indicator of impairment was present and conducted an interim impairment review of its goodwill in the Asia-Pacific reporting unit as of September 30, 2022.

The Company reviewed current results and reassessed its previous forecasts for this reporting unit and determined the market headwinds faced in the region, particularly China, would linger for longer than previously expected as the region began to emerge from the COVID-19 pandemic.

The rising interest rate environment was also a factor in the decision to perform an interim impairment assessment, given the related impact to the discounted cash flow calculation.

The interim impairment assessment was performed utilizing the same methodologies as the annual assessments discussed above and included revised projections, which are subject to various risks and uncertainties, including forecasted revenues, expenses and cash flows.

Based on the interim impairment assessment and annual assessment at October 1, 2021, the Asia-Pacific reporting unit’s fair value exceeded its carrying value by approximately 10 % as compared to 15 % as of October 1, 2020.

No indicators of impairment were identified for the Company's other reporting units .

The Company re-evaluated the results of its Asia-Pacific region at December 31, 2021 and did not identify additional impairment indicators.

The Company will continue to evaluate the results of its Asia-Pacific region and conduct interim testing if additional impairment indicators are present in future quarters.

At December 31, 2021, the Asia-Pacific reporting unit's goodwill was $ 7.3 million.

The qualitative goodwill impairment test approach was used on the Company's remaining reporting units and there was no evidence that the fair value of each reporting unit would not exceed its carrying value at the October 1, 2021 measurement date.

As such, no impairment was recorded at the measurement date.

Based on the interim impairment assessment, the Asia-Pacific reporting unit’s carrying value exceeded its fair value by more than the carrying amount of goodwill, which was caused by both a reduction in forecasted results and an increase in the weighted average cost of capital due to rising interest rates.

As a result, the Company recognized a non-cash impairment charge of $ 6.5 million as of September 30, 2022.

This charge was identified separately in the consolidated income statement and impacted income from operations.

No other goodwill impairment charges have been recorded in recent periods.

No other indicators of impairment were identified for the Company’s other reporting units.

Total combined goodwill for the remaining reporting units was $ 28.0 million as shown in the following table:

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Balance at December 31, 2022

The 2022 additions to goodwill relate to the anticipated synergies of acquiring Maxxweld Conectores Eletricos Ltda.

and Holplast, s.r.o., while the reduction in goodwill in Asia-Pacific is due to the impairment discussed above.

See Note 17 for additional information about acquisitions of businesses.

Impairment assessments inherently involve management judgments regarding a number of assumptions such as those described above.

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The Company’s goodwill is not deductible for tax purposes.

Note K - Fair Value of Financial Assets and Liabilities

Note 13 –

Fair Value of Financial Assets and Liabilities

The Company measures and records certain assets and liabilities at fair value.

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The hierarchy consists of the following three levels:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2 Inputs other than Level 1 inputs that are either directly or indirectly observable, which may include:

Quoted prices for similar assets in active markets;

Quoted prices for identical or similar assets or liabilities in inactive markets;

Inputs other than quoted prices that are observable for the asset or liability;

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 Inputs to the valuation methodology are unobservable and developed using estimates and assumptions developed by the Company which reflect those that a market participant would use.

Level 1 Inputs –

Quoted market prices in active markets for identical assets or liabilities.

Level 2 Inputs –

Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 Inputs –

Unobservable inputs that are not corroborated by market data.

The following table summarizes the Company’s assets and liabilities, recorded and measured at fair value, in the consolidated balance sheets as of December 31, 2022 and 2021:

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Foreign currency forward contracts

Supplemental profit sharing plan

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Supplemental profit sharing plan

Foreign currency forward contracts

Total Liabilities

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on the Consolidated Statements of Income together with the transaction gain or loss from the related balance sheet position.

For the twelve months ended December 31, 2021 and 2020, the Company recognized a net loss of $ 0.7 million and gain of $ 0.4 million, respectively, on foreign currency forward contracts.

For the twelve months ended December 31, 2022 and 2021, the Company recognized net los ses of $ 0.1 million and $ 0.7 mi llion, respectively, on foreign currency forward contracts.

The gains and losses on foreign currency forward contracts are recorded in Other operating expense, net on the Company’s Statement of Consolidated Income.

The Company has a non-qualified Supplemental Profit Sharing Plan for its executives.

The Company has a non-q ualified Supplemental Profit Sharing Plan for its executives.

The liability for this unfunded Supplemental Profit Sharing Plan was $ 7.3 million at December 31, 2022 and $ 8.6 million at December 31, 2021.

These amounts are

recorded within Other noncurrent liabilities on the Company’s Consolidated Balance Sheets.

The Supplemental Profit Sharing Plan allows participants the ability to hypothetically invest their proportionate award into various investment options, which primarily includes mutual funds.

These amounts are recorded within Other noncurrent liabilities on the Company’s Consolidated Balance Sheets.

The Supplemental Profit Sharing Plan allows participants the ability to hypothetically inve st their proportionate award into various investment options, which primarily includes mutual funds.

The Company credits earnings, gains and losses to the participants’

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Long-term debt and related current maturities

Note L - Revenue

Note 14 –

Revenue recognition

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Sales commissions are expensed when the amortization period is less than a year and are generally not capitalized as they are typically earned at the completion of the contract when the customer is invoiced or when the customer pays PLP.

Sales of products and services varies by segment and are discussed in Note M, "Segment Information".

Sales of products and services varies by segment and are discussed in Note 15, "Segment Information".

Disaggregated revenue

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Additionally, the allowance is based upon identified delinquent accounts, customer payment patterns and other analyses of historical data trends.

Receivable balances are written off against an allowance for credit losses after a final determination has been made.

Receivable balances are

written off against an allowance for credit losses after a final determination has been made .

The change in the allowance for credit losses includes expense and net write-offs, which are identified in the following table:

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Allowance for credit losses, end of period

Note M - Segment Information

Note 15 –

Segment Information

The Company designs, manufactures and sells hardware employed in the construction and maintenance of telecommunication, energy and other utility networks, data communication products and mounting hardware for solar power applications.

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The Company reports its segments in four geographic regions:

PLP-USA, The Americas, EMEA (Europe, Middle East & Africa) and Asia-Pacific in accordance with accounting standards codified in Financial Accounting Standards Board “FASB”

Accounting Standards Codification “ASC”

280, “Segment Reporting”.

PLP-USA, The Americas, EMEA (Europe, Middle East & Africa) and Asia-Pacific in accordance with accounting standards codified in FASB ASC 280, “Segment Reporting”.

Each segment distributes a full range of the Company’s primary products.

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The Company evaluates segment performance and allocates resources based on several factors primarily based on sales and income from continuing operations, net of tax.

The accounting policies of the operating segments are the same as those described in Note A in the Notes to Consolidated Financial Statements.

No single customer accounts for more than ten percent of the Company’s consolidated revenue.

The accounting policies of the operating segments are the same as those described in Note 1.

We have one customer accounting for 12.5 % of the Company’s consolidated revenue.

net sales for the years ended December 31, 2022, 2021, and 2020 were $ 366.8 million, $ 257.6 million and $ 201.2 million, respectively.

long-lived assets as of December 31, 2022 and 2021 were $ 95.7 million and $ 71.7 million, respectively.

In certain circumstances, PLP-USA performs all manufacturing and shipping activity to US-based entities on behalf of EMEA, where the sales order is recorded.

These sales and related profits have been reclassified for segment purposes only from EMEA to PLP-USA.

The following table presents a summary of the Company’s reportable segments for the years ended December 31, 2022, 2021 and 2020.

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Total net income

Year Ended December 31

Expenditure for long-lived assets

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Identifiable assets

Total identifiable assets

Long-lived assets

Total long-lived assets

Note N - Related Party Transactions

The Company’s Australian subsidiary previously utilized copper extrusion services from Cast Alloy.

As of December 31, 2020, the Company’s Australian subsidiary no longer utilized the copper extrusion services from Cast Alloy, therefore, there was no expense recorded during that year or in the current year.

During the year ended December 31, 2019, PLP-Australia incurred a total of $ 0.1 million for these expenses.

Cast Alloy is owned by Simi Almasan, Continuous Improvement Engineer, a current PLP employee.

The Audit Committee of the Board of Directors approved these transactions.

Note 16 –

Related Party Transactions

The Company’s Austrian subsidiary currently has a loan due, carrying an interest rate of 3.0 %, to one if its current employees which is reflected on the Company’s balance sheet in the amount of $ 0.1 million.

Interest incurred on this loan during the year ended December 31, 2021 was negligible.

Interest incurred on this loan during the year ended December 31, 2022 was de minimis.

This loan is due in December of 2025 .

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The Company’s Czech Republic subsidiary leases a factory at its Prostějov, Czech Republic location from a company currently owned by two current employees.

During the year ended December 31, 2021, the Company paid $ 0.3 million in lease expenses and during each of the years ended December 31, 2020 and 2019, the Company paid $ 0.2 million in lease expenses.

During each of the years ended December 31, 2022 and 2021, the Company paid $ 0.3 million in lease expenses and during the year ended December 31, 2020, the Company paid $ 0.2 million in lease expense.

The lease term is for 5 years from its original effective date of April 1, 2019.

During each year of the years ended December 31, 2021, 2020 and 2019, the Company paid approximately $ 0.1 million in legal fees to Baker & Hostetler LLP, of which R.

Steven Kestner was the Chairman and the chair of its policy committee.

Kestner is a Director of the Company.

During each year of the years ended December 31, 2022, 2021 and 2020, the Company paid approximately $ 0.1 million in legal fees to Baker & Hostetler LLP, of which Steven Kestner, a member of our Board of Directors, is a Partner.

On October 28, 2020, the Board of the Directors of the Company approved the appointment of David C.

Sunkle to serve on its Board of Directors effective upon his retirement at December 31, 2020 for a term commencing January 1, 2021 and ending when his successor has been duly elected and qualified at the annual meeting of shareholders in 2022 or until his earlier resignation or removal.

Sunkle to serve on its Board of Directors effective upon his retirement at December 31, 2020 for a term commencing January 1, 2021 and ending in 2024.

In addition, Mr.

Sunkle has a consulting agreement with the Company that expires on December 31, 2025 .

Note O - Product Warranty Reserve

The Company records an accrual for estimated warranty costs to Costs of products sold in the Statements of Consolidated Income.

These amounts are recorded in Accrued expenses and other liabilities in the Consolidated Balance Sheets.

The Company records and accounts for its warranty reserve based on specific claim incidents.

Should the Company become aware of a specific potential warranty claim for which liability is probable and reasonably estimable, a specific charge is recorded and accounted for accordingly.

Adjustments are made quarterly to the accruals as claim information changes.

The following is a rollforward of the product warranty reserve:

Balance at January 1

Additions charged to costs and expenses

Warranty usage

Currency translation

Balance at December 31

Note P - Subsequent Events

On January 2, 2022, Director Emeritus Barbara P.

Ruhlman passed away at the age of 89.

Barbara was member of the Company’s Board of Directors from 1988 to 2016, at which time she elected to resign and was appointed as the Company’s Director Emeritus.

Barbara was the daughter of the Company’s founder, Thomas F.

Peterson, and was the mother of the Company’s current Chief Executive Officer, Robert G.

A Company-owned life insurance policy was maintained for Barbara until her death.

At December 31, 2021, the cash surrender value was recorded in Other assets on the Company’s Consolidated Balance Sheets.

The Company expects to receive cash proceeds from the life insurance policy of approximately $ 7.0 million during the first quarter of 2022 and will be recorded in the Company’s Consolidated Financial Statements upon receipt.

On January 4, 2022, the Company acquired all issued and outstanding shares of Maxxweld Conectores Eletricos Ltda.

Note 17 –

Acquisitions of Businesses

Acquisition of Maxxweld Conectores Electricos Ltda.

On January 4, 2022, the Company acquired Maxxweld Conectores Eletricos Ltda.

("Maxxweld"), a Brazilian entity headquartered in Curitiba, Brazil, from its shareholders.

Maxxweld designs and manufactures substation connector systems and accessory hardware for high voltage AC systems.

The acquisition of Maxxweld will expand and strengthen the Company's operational and technical capabilities in the region while supporting its overall substation strategy.

The acquisition of Maxxweld expands and strengthens the Company's operational and technical capabilities in the region while supporting its overall substation strategy.

The purchase price was approximately $ 11.2 million, net of cash received, as of the closing date.

The purchase price is subject to a holdback of approximately $ 1.8 million.

The acquisition of Maxxweld has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date.

The table below summarizes the fair values of the assets acquired and liabilities assumed on the acquisition date, as well as measurement period adjustments recorded as of December 31, 2022.

The final measurement period adjustments did not have a material impact to the Consolidated Statements of Income.

Preliminary Allocation

Measurement Period Adjustments

Final Allocation

Accounts receivable

Prepaid expenses and other current assets

Equipment and other assets

Other intangible assets

Accounts payable

Other current liabilities

Other non-current liabilities

Total identifiable net assets

Total consideration, net of cash received

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Maxxweld.

As a result of the acquisition, goodwill of $ 5.1 million recognized is not expected to be deductible for tax purposes.

Other intangible assets of $ 4.4 million include customer relationships, tradenames and backlog.

The preliminary estimated fair values of the customer relationships, trademarks and backlog were $ 4.0 million, $ 0.2 million and $ 0.2 million, respectively, were determined using either the relief-from-royalty model or the multi-period excess earnings model, which are discounted cash flow models that rely on the Company's estimates.

These estimates require judgment of future revenue growth rates, future margins, and the applicable weighted-average cost of capital used to discount those estimated cash flows.

The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise.

The estimated useful lives for customer relationships, trademarks and backlog were 15 years, 20 years, and 1 year, respectively.

See Note 12 for additional information about goodwill and other intangible assets.

From the date of the acquisition through December 31, 2022, the Company’s Consolidated Financial Statements included Maxxweld sales of approximately $ 11.8 million and is reported in The Americas segment.

Acquisition of Holplast, s.r.o.

On March 1, 2022, the Company acquired all issued and outstanding shares of Holplast, s.r.o (“Holplast”), an entity headquartered in Prostějov , Czech Republic, from its shareholder.

Holplast specializes in injection molding and expands the Company’s operational capabilities in the region and strengthens the Company’s position in the global communications market.

The purchase price was approximately $ 5.3 million with a holdback of $ 0.8 million, inclusive of cash and debt.

The acquisition of Holplast has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date.

The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed on the acquisition date, as well as measurement period adjustments recorded as of December 31, 2022.

These estimates will continue to be revised during the measurement period as further information becomes available and additional analyses are performed.

The current measurement period adjustments did not have a material impact to the Consolidated Statements of Income.

Preliminary Allocation

Measurement Period Adjustments

Adjusted Preliminary Allocation

Accounts receivable

Prepaid expenses and other current assets

Property, plant and equipment and other assets

Accounts payable

Other current liabilities

Other non-current liabilities

Total identifiable net assets

Total consideration, inclusive of cash and debt

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Holplast.

Other non-current liabilities assumed is mainly comprised of long-term debt totaling approximately $ 1.1 million at a rate of 3.21 % with terms expiring between May 2023 and December 2030 .

From the date of the acquisition through December 31, 2022, the Company’s Consolidated Financial Statements included Holplast sales of approximately $ 2.0 million and is reported in the EMEA segment.

Acquisition of Delta Conectores , S.A.

On October 3, 2022, the Company acquired Delta Conectores, S.A.

("Delta"), a Mexico entity headquartered in Aguascalientes, Mexico, from its shareholders.

Delta designs and manufactures substation connector systems and accessory hardware for high voltage AC systems in Mexico.

The acquisition of Delta will expand the Company's operational and technical capabilities in the region while supporting its overall substation strategy.

The purchase price was approximately $ 3.8 million with a holdback of approximately $ 0.6 million.

The acquisition of Delta is accounted for using the acquisition method of accounting, which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date.

The opening balance sheet is preliminary and no measurement period adjustments have been recorded as of December 31, 2022.

Future adjustments are not expected to have a material impact to the Consolidated Statements of Income.

From the date of the acquisition through December 31, 2022, the Company’s Consolidated Financial Statements included Delta sales of approximately $ 1.3 million and is reported in The Americas segment.

Note 18 –

Exit of Russian Operations

Due to the ongoing conflict in Ukraine and overt hostilities shown by Russia in the conflict, the Company decided to exit its Russian operations in March 2022, which was completed during the third quarter.

The Russian operations did not have a material impact to the consolidated financial statements with net sales of $ 0.3 million for the twelve months ended December 31, 2022, and $ 1.0 million for the twelve months ended December 31, 2021, respectively.

As a result of the decision to exit operations, net charges of approximately $ 1.0 million were recorded for the twelve months ended December 31, 2022, mainly as a result of asset impairments and one-time termination benefits.

These impacts were included in Cost of products sold, General and administrative expense, or Other income, net, as appropriate.

In Note 15 –

Segment Information, these charges are recorded in the EMEA segment.

Note 19 –

Subsequent Events

On February 1, 2023, the Company acquired substantially all of the assets of Pilot Plastics, headquartered in Akron, Ohio.

Pilot Plastics is an inje ction molding manufacturer and the acquisition will expand the Company's injection molding capabilities and further enhance the Company's domestic manufacturing footprint.

The purchase price was approximately $ 11.5 million as of the closing date.

The purchase price is subject to a holdback of approximately $ 1.7 million.

To fund the Maxxweld acquisition, the Company borrowed $ 11.2 million on the Facility.

On March 1, 2022, the Company acquired all issued and outstanding shares of Holplast, s.r.o (“Holplast”), an entity headquartered in Prostejov, Czech Republic from its shareholder.

Holplast specializes in injection molding and will expand the Company’s operational capabilities in the region and strengthen the Company’s position in the global communications market.

The purchase price was approximately $ 5.3 million with a holdback of $ 0.8 million.

To fund the Holplast acquisition, the Company borrowed $ 4.4 million on its Facility.

After the incremental borrowings to fund both the Maxxweld and Holplast, the Company had total borrowings on the Facility of $ 35.1 million as of March 2, 2022.

On March 2, 2022, the Company amended its credit facility to increase the capacity from $ 65.0 million to $ 90.0 million.

As part of this amendment, the index used to determine the interest rate changed from LIBOR to the Bloomberg Short Term Bank Yield Index (“BSBY”).

The interest rate will now be defined as BSBY plus 1.125 % unless the Company’s funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 2.25 to 1, at which point the BSBY spread becomes 1.500 %.

The amendment also allows the Company to change its rate from BSBY to the Secured Overnight Financing Rate (“SOFR”) at the Company’s discretion.

The amendment extended the maturity from June 30, 2024 to March 2, 2026 .

All other terms remain the same.

The Company does not expect this change in index to have a material impact on the Company’s consolidated financial statements.

To fund the Pilot Plastics acquisition, the Company borrowed on the Facility.

Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity