What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-03 · 236 added, 221 removed, 622 unchanged (42% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2023

September 30, 2023

December 31, 2022

10 unchanged sentences

Deferred income taxes

Pension asset

LIABILITIES AND SHAREHOLDERS' EQUITY

15 unchanged sentences

Common shares –

$ 2 par value per share, 15,000,000 shares authorized, 4,917,501 and 4,917,020 issued and outstanding, at June 30, 2023 and December 31, 2022

Common shares issued to rabbi trust, 241,343 and 245,386 shares at June 30, 2023 and December 31, 2022, respectively

$ 2 par value per share, 15,000,000 shares authorized, 4,893,469 and 4,917,020 issued and outstanding, at September 30, 2023 and December 31, 2022

Common shares issued to rabbi trust, 241,528 and 245,386 shares at September 30, 2023 and December 31, 2022, respectively

Deferred compensation liability

1 unchanged sentence

Retained earnings

Treasury shares, at cost, 1,840,552 and 1,758,901 shares at June 30, 2023 and December 31, 2022, respectively

Treasury shares, at cost, 1,891,268 and 1,758,901 shares at September 30, 2023 and December 31, 2022, respectively

Accumulated other comprehensive loss

6 unchanged sentences

STATEMENTS OF CONSOLIDATED INCOME

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Thousands of dollars, except share and per share data)

2 unchanged sentences

General and administrative

Goodwill impairment

Research and engineering

Other operating expense, net

Other operating (income) expense, net

OPERATING INCOME

5 unchanged sentences

Income tax expense

Net loss (income) attributable to noncontrolling interests

Net income attributable to noncontrolling interests

NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS

4 unchanged sentences

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Thousands of dollars)

Other comprehensive income, net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustment

Recognized net actuarial gain

Other comprehensive income, net of tax

Comprehensive loss (income) attributable to noncontrolling interests

COMPREHENSIVE INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS

Other comprehensive loss, net of tax

Comprehensive income attributable to noncontrolling interests

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS

See notes to consolidated financial statements (unaudited).

1 unchanged sentence

STATEMENTS OF CONSOLIDATED CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(Thousands of dollars)

4 unchanged sentences

Share-based compensation expense

Goodwill impairment

Loss on exit of business

2 unchanged sentences

Changes in operating assets and liabilities:

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

NET CASH PROVIDED BY OPERATING ACTIVITIES

INVESTING ACTIVITIES

12 unchanged sentences

Purchase of common shares for treasury from related parties

NET CASH (USED IN) PROVIDED BY FINANCING

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

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

35 unchanged sentences

Balance at June 30, 2023

Foreign currency translation

Recognized net actuarial gain, net

of tax provision of $ 28

Total comprehensive income

Share-based compensation

Purchase of 50,717 common shares

Issuance of 26,285 common shares

Common shares issued to rabbi

trust of 185 , net

Cash dividends declared –

Balance at September 30, 2023

See notes to consolidated financial statements (unaudited).

PREFORMED LINE PRODUCTS COMPANY

STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY

Accumulated Other

27 unchanged sentences

Balance at June 30, 2022

Foreign currency translation

Recognized net actuarial gain, net

of tax provision of $ 23

Total comprehensive income

Share-based compensation

Purchase of 26,094 Shares

Issuance of 6,167 common shares

Common shares issued to rabbi

trust of 417 , net

Cash dividends declared –

Balance at September 30, 2022

See notes to consolidated financial statements (unaudited).

13 unchanged sentences

In the opinion of management, these consolidated financial statements contain all estimates and adjustments, consisting of normal recurring accruals, required to fairly present the financial position, results of operations, and cash flows for the interim periods.

Operating results for the three and six months ended June 30, 2023, are not necessarily indicative of the results to be expected for the full-year ending December 31, 2023.

Operating results for the three and nine months ended September 30, 2023, are not necessarily indicative of the results to be expected for the full-year ending December 31, 2023.

Noncontrolling interests a re 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.

18 unchanged sentences

The Company’s revenues by segment and product type are as follows:

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Communications

Special Industries

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Communications

Special Industries

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Communications

Special Industries

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Communications

6 unchanged sentences

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

Six Months Ended June 30,

Nine Months Ended September 30,

Allowance for credit losses, beginning of period

5 unchanged sentences

Inventories, net

June 30, 2023

September 30, 2023

December 31, 2022

5 unchanged sentences

Inventories at LIFO cost

Costs for inventories of certain material, mainly in the U.S., are determined using the LIFO method and totaled approximately $ 70.3 million at June 30, 2023 and $ 68.3 million at December 31, 2022.

Costs for inventories of certain material, mainly in the U.S., are determined using the LIFO method and totaled approximately $ 71.8 million at September 30, 2023 and $ 68.3 million at December 31, 2022.

An actual valuation of inventories under the LIFO method can be made only at the end of the year based on the inventory levels and costs at that time.

1 unchanged sentence

Because these estimates are subject to change and may be different than the actual inventory levels and costs at the end of the year, interim results are subject to the final year-end LIFO inventory valuation.

During the three-month periods ended June 30, 2023 and 2022, the net change in LIFO inventories resulted in expense of $ 0.6 million and $ 2.1 million, respectively, to Cost of products sold.

During the six-month periods ended June 30, 2023 and 2022, the net change in LIFO inventories resulted in expense of $ 1.2 million and of $ 3.4 million, respectively, to Cost of products sold.

The Company’s reserves for excess and obsolete inventory was $ 13.7 million at June 30, 2023 and $ 10.8 million at December 31, 2022.

During the three months ended September 30, 2023 and 2022, the net change in LIFO inventories resulted in expense of $ 0.6 million and $ 1.7 million, respectively, to Cost of products sold.

During the nine months ended September 30, 2023 and 2022, the net change in LIFO inventories resulted in expense of $ 1.7 million and $ 5.1 million, respectively, to Cost of products sold.

The Company’s reserves for excess and obsolete inventory was $ 15.5 million at September 30, 2023 and $ 10.8 million at December 31, 2022 .

Note 4 –

1 unchanged sentence

Major classes of property, plant and equipment are stated at cost and were as follows:

June 30, 2023

September 30, 2023

December 31, 2022

14 unchanged sentences

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.

As of June 30, 2023 and December 31, 2022, the Company maintained a reserve of approximately $ 2.1 million and $ 1.8 million, respectively, representing its best estimate for losses to be incurred on global legal matters.

The Company and its subsidiaries Helix Uniformed Ltd.

In November 2016, the Company and its subsidiaries Helix Uniformed Ltd.

(“Helix”) and Preformed Line Products (Canada) Limited (“PLPC Canada”), were each named, jointly and severally, with each of SNC-Lavalin ATP, Inc.

(“SNC ATP”), HD Supply Canada Inc., by its trade names HD Supply Power Solutions and HD Supply Utilities (“HD Supply”), and Anixter Power Solutions Canada Inc.

( the corporate successor to HD Supply, “Anixter”) and, together with the Company, PLPC Canada, Helix, SNC ATP and HD Supply (the “Defendants”), in a

complaint filed by Altalink, L.P.

(the corporate successor to HD Supply, “Anixter”) and, together with the Company, PLPC Canada, Helix, SNC ATP and HD Supply (the

“Defendants”), in a complaint filed by Altalink, L.P.

(the “Plaintiff”) in the Court of Queen’s Bench of Alberta in Alberta, Canada in November 2016 (the “Complaint”).

1 unchanged sentence

The Complaint alleges that the spacer dampers have and may continue to become loose, open and detach from the conductors, resulting in damage and potential injury and a failure to perform the intended function of providing spacing and damping to the Project.

The Plaintiff is seeking an estimated $ 56.0 million Canadian dollars in damages jointly and severally from the Defendants, representing the costs of monitoring and replacing the spacer dampers and remediating property damage, due to alleged defects in the design and construction of, and supply of materials for, the Projects by SNC ATP and HD Supply/Anixter and in the design of the spacer dampers by Helix.

The Company believes the claims against it are without merit and intends to vigorously defend against such claims.

The Company is unable to predict the outcome of this case, however, it has recorded a reserve for the low end of the range for potential loss associated with this matter.

If this matter is concluded in a manner adverse to the Company, it could have a material effect on the Company’s financial results.

A preliminary trial date for this complaint has been scheduled for January 2024.

The Plaintiff was seeking an estimated $ 56.0 million Canadian dollars in damages jointly and severally from the Defendants, representing the costs of monitoring and replacing the spacer dampers and remediating property damage, due to alleged defects in the design and construction of, and supply of materials for, the Projects by SNC ATP and HD Supply/Anixter and in the design of the spacer dampers by Helix.

On September 26, 2023, the Defendants and the Plaintiff entered into a settlement agreement which dismisses the action against all Defendants with prejudice.

Net of insurance, the total settlement amount required to be paid by the Company is $ 4.3 million Canadian dollars ($ 3.2 million US dollars), of which $ 2.5 million Canadian dollars ($ 1.8 million US dollars) was previously recorded and $ 1.8 million Canadian dollars ($ 1.4 million US dollars) was recorded in the third quarter in General and administrative expense.

The settlement reflects the Company’s desire to eliminate the burden, expense, distraction and further uncertainties of litigation, and settlement does not constitute an admission of liability, wrongdoing or fault by the Company and its subsidiaries.

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.

5 unchanged sentences

Net periodic pension expense (income) for the U.S.

Plan for the three and six month periods ended June 30, 2023 and 2022, respectively, follows:

Three Months Ended June 30,

Six Months Ended June 30,

Plan for the three and nine months ended September 30, 2023 and 2022, respectively, follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Interest cost

3 unchanged sentences

There were no contributions to the U.S.

Plan during the six months ended June 30, 2023 and 2022.

The Company is currently evaluating the option to contribute to the U.S.

Plan during the nine months ended September 30, 2023 and 2022.

The Company does not intend to contribute to the U.S.

Plan during 2023.

Components of retirement benefits expense (income) are included in Other (expense) income, net in the Consolidated Statements of Income.

In August 2023, the Board of Directors of the Company approved a resolution to terminate the US.

However, no further action has been taken to proceed with the termination beyond this approval as of the date of these financial statements.

Note 7 –

Accumulated Other Comprehensive Income (“AOCI”)

Accumulated Other Comprehensive Income (LOSS) (“AOCI”)

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

Three Months Ended June 30, 2023

Three Months Ended June 30, 2022

Balance at April 1

Three Months Ended September 30, 2023

Three Months Ended September 30, 2022

Balance at July 1

Other comprehensive income before reclassifications:

Gain on foreign currency translation adjustment

Foreign currency translation adjustment

Amounts reclassified from AOCI:

1 unchanged sentence

Net current period other comprehensive income (loss)

Balance at June 30

Six Months Ended June 30, 2023

Six Months Ended June 30, 2022

Balance at September 30

Nine Months Ended September 30, 2023

Nine Months Ended September 30, 2022

Balance at January 1

Other comprehensive income before reclassifications:

Gain on foreign currency translation adjustment

Amounts reclassified from AOCI:

Foreign currency translation adjustment

Gain on unfunded pension obligations

Amortization of defined benefit pension actuarial gain (a)

Net current period other comprehensive income (loss)

Balance at June 30

Balance at September 30

(a) This AOCI component is included in the computation of net periodic pension expense (income) as noted in Note 6 –

2 unchanged sentences

Debt and Credit Arrangements

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 June 30, 2023, the Company had utilized $ 53.0 million with $ 37.0 million available on the Facility, net of long-term outstanding letters of credit of $ 0.1 million.

The Company maintains a credit facility (the "Facility") with a capacity of $ 90.0 million that expires March 2, 2026 .

The interest rate is defined as the Secured Overnight Financing Rate (“SOFR”) 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 SOFR spread becomes 1.500 %.

At September 30, 2023, the Company had utilized $ 30.0 million with $ 60.0 million available on the Facility.

There were no long-term outstanding letters of credit as of September 30, 2023.

Our bank debt to equity percentage was 15.7 %.

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

At June 30, 2023, the Company was in compliance with these covenants.

At September 30, 2023, the Company was in compliance with these covenants.

On January 19, 2021, the Company purchased a new aircraft for $ 20.5 million and received funding for a term loan from PNC Equipment Finance, LLC for the full amount of the purchase price.

1 unchanged sentence

The loan is payable in 119 equal monthly installments , which commenced on March 1, 2021 with a final payment of any outstanding principal and accrued interest due and payable on the final monthly payment date.

Of the $ 15.7 million outstanding on this debt facility at June 30, 2023, $ 2.1 million was classified as current.

Of the $ 15.2 million outstanding on this debt facility at September 30, 2023 , $ 2.1 million was classified as current.

The loan is secured by the aircraft.

The Company has borrowing facilities at certain of its foreign subsidiaries, which consist of overdraft lines, working capital credit lines, and facilities for the issuance of letters of credit and short-term borrowing needs.

At June 30, 2023, and December 31, 2022, $ 21.0

million and $ 26.1 million was outstanding, of which $ 18.5 million and $ 19.1 million were classified as current, respectively.

The Company has other borrowing facilities at certain of its foreign subsidiaries, which consist of overdraft lines, working capital credit lines, and facilities for the issuance of letters of credit and short-term borrowing needs.

At September 30, 2023, and December 31, 2022, $ 17.6 million and $ 26.1 million was outstanding, of which $ 15.5 million and $ 19.1 million were classified as current, respectively.

These facilities support commitments made in the ordinary course of business.

For both periods ended June 30, 2023 and December 31, 2022, the Company’s Asia-Pacific segment had $ 0.2 million in restricted cash used to secure bank debt.

For both periods ended September 30, 2023 and December 31, 2022 , the Company’s Asia-Pacific segment had $ 0.2 million in restricted cash used to secure bank debt.

The restricted cash is shown on the Company’s Consolidated Balance Sheets in Cash, cash equivalents and restricted cash.

Note 9 –

For the three-month period ended June 30, 2023 and 2022, the Company’s effective tax rate was 26 % and 23 %, respectively.

The higher effective tax rate for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was primarily due to the unfavorable impact from the mix of earned income in certain foreign jurisdictions, as well as an increase in the limitations on the deductibility of executive compensation.

For the six-month period ended June 30, 2023 and 2022, the Company’s effective tax rate was 25 % and 18 %, respectively.

The higher effective tax rate for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily due to non-taxable benefit of $ 4.4 million related to the proceeds from a settlement of a Company-owned life insurance policy in 2022, an increase in the limitation on the deductibility of executive compensation as well an unfavorable impact from the mix of earned income in certain foreign jurisdictions.

For the three-month period ended September 30, 2023 and 2022 , the Company’s effective tax rate was 23 % and 33 %, respectively.

The effective tax rate for the three months ended September 30, 2023 was lower than the effective tax rate for the same period in 2022 mainly due to the favorable impact from the mix of taxable income in certain foreign jurisdictions, which in the third quarter of 2022 included a non-deductible goodwill impairment charge of $ 6.5 million in the Asia-Pacific region that was partially offset by the release of the valuation allowance on deferred tax assets for the Company’s Australian subsidiary of approximately $ 1.4 million, as well as the favorable impact in the third quarter of 2023 related to the excess tax benefit associated with stock compensation activity.

For the nine months ended September 30, 2023 and 2022 , the Company’s effective tax rate was 24 % and 23 %, respectively.

This change is not significant and was primarily due to the limitation on the deductibility of executive compensation partially offset by the favorable impact related to the excess tax benefit associated with stock compensation activity.

The Company provides valuation allowances against deferred tax assets when it is more likely than not that some portion or all of its deferred tax assets will not be realized.

During the period ended June 30, 2023, the Company did no t record any additional valuation allowances in various jurisdictions on their deferred tax assets.

For the six-month periods ending June 30, 2023, the Company did no t record any new uncertain tax positions.

During the period ended September 30, 2023 , the Company did no t record any additional valuation allowances on their deferred tax assets.

For the nine-month periods ending September 30, 2023 , the Company did no t record any new uncertain tax positions.

Note 10 –

2 unchanged sentences

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 periods presented.

The calculation of basic and diluted earnings per share for the three and six months ended June 30, was as follows:

Three Months Ended June 30,

Six Months Ended June 30,

The calculation of basic and diluted earnings per share for the three and nine months ended September 30, was as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Determination of shares (in thousands)

4 unchanged sentences

Earnings per common share

For the three months ended June 30, 2023 and 2022, there were zero and 18,000 stock options, respectively, which were excluded from the calculation of diluted earnings per share as the effect would have been anti-dilutive.

For the six months ended June 30, 2023 and 2022, there were zero and 23,000 stock options, respectively, which were excluded from the calculation of diluted earnings per share as the effect would have been anti-dilutive.

For the three and nine months ended September 30, 2023 and 2022, there were zero and 36,500 stock options, respectively, which were excluded from the calculation of diluted earnings per share as the effect would have been anti-dilutive.

Note 11 –

1 unchanged sentence

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

June 30, 2023

September 30, 2023

December 31, 2022

5 unchanged sentences

Indefinite-lived intangible assets

The aggregate amortization expense for other intangibles with finite lives for the three and six months ended June 30, 2023 was $ 0.5 million and $ 1.0 million, respectively .

The aggregate amortization expense for other intangibles with finite lives for the three and six months ended June 30, 2022 was $ 0.5 million and $ 1.1 million, respectively .

The aggregate amortization expense for other intangibles with finite lives for the three and nine months ended September 30, 2023 was $ 0.5 million and $ 1.4 million, respectively .

The aggregate amortization expense for other intangibles with finite lives for the three and nine months ended September 30, 2022 was $ 0.5 million and $ 1.7 million, respectively .

Amortization expense is estimated to be $ 0.4 million for the remainder of 2023, $ 1.7 million for 2024, $ 1.5 million for 2025, and $ 1.4 million for 2026 and 2027.

The weighted-average remaining amortization period is approximately 11.8 years.

The weighted-average remaining amortization period by intangible asset class;

The weighted-average remaining amortization period by intangible asset class is as follows:

land use rights, 52.1 years;

trademark, 13.8 years;

technology, 7.6 years and customer relationships, 10.0 years.

technology, 7.4 years;

and customer relationships, 10.0 years.

The Company’s measurement date for its annual impairment test for goodwill is October 1st of each year.

The Company performs additional interim impairment assessments as circumstances warrant.

There were no indicators of impairment noted for the period ending June 30, 2023.

There were no indicators of impairment noted for the period ending September 30, 2023.

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

6 unchanged sentences

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

As of September 30, 2022, 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 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 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, 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.

The Company’s only intangible asset with an indefinite life is goodwill.

3 unchanged sentences

Currency translation

Balance at June 30, 2023

Balance at September 30, 2023

See note 14 for additional information about acquisitions of businesses.

10 unchanged sentences

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 June 30, 2023 and December 31, 2022:

The following table summarizes the Company’s assets and liabilities, recorded and measured at fair value, in the Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022:

Balance as of

June 30, 2023

September 30, 2023

Quoted Prices in Active Markets for Identical Assets or Liabilities

19 unchanged sentences

These contracts are not designated as hedging instruments under U.S.

Accordingly, the changes in the fair value of the foreign currency forward contracts are recognized in each accounting period in Other operating expense, net on the Consolidated Statements of Income together with the transaction gain or loss from the related balance sheet position.

For the three and six months ended June 30, 2023, the Company recognized net losses o f $ 0.5 million and $ 0.4 million, respectively, on foreign currency forward contracts.

For the three and six months ended June 30, 2022, the Company recognized net gains of $ 3.1 million and $ 1.0 million, respectively, on foreign currency forward contracts.

Accordingly, the changes in the fair value of the foreign currency forward contracts are recognized in each accounting period in Other operating (income) expense, net on the Consolidated Statements of Income together with the transaction gain or loss from the related balance sheet position.

For the three and nine months ended September 30, 2023, the Company recognized net losses o f $ 0.5 million

and $ 0.9 million, respectively, on foreign currency forward contracts.

For the three and nine months ended September 30, 2022 , the Company recognized net gains of $ 1.2 million and $ 0.2 million, respectively, on foreign currency forward contracts.

The derivative financial instrument contracts are with major investment grade financial institutions, and we do not anticipate any material non-performance by any of the counterparties.

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

The liability for this unfunded Supplemental Profit Sharing Plan was $ 7.7 million at June 30, 2023 and was $ 7.3 million at December 31, 2022.

The liability for this unfunded Supplemental Profit Sharing Plan was $ 7.5 million at September 30, 2023 and was $ 7.3 million at December 31, 2022.

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

5 unchanged sentences

The carrying value of the Company’s current financial instruments, which include cash, cash equivalents and restricted cash, accounts receivable, accounts payable and short-term debt, approximates fair value because of the short-term maturity of these instruments.

At June 30, 2023 and December 31, 2022, the fair value of the Company’s long-term debt was estimated using a discounted cash flows analysis, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements that are considered to be Level 2 inputs .

At September 30, 2023 and December 31, 2022 , the fair value of the Company’s long-term debt was estimated using a discounted cash flows analysis, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements that are considered to be Level 2 inputs .

Based on the analysis performed, the fair value and the carrying value of the Company’s long-term debt are as follows:

June 30, 2023

September 30, 2023

December 31, 2022

5 unchanged sentences

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing performance.

The following tables present a summary of the Company’s reportable operating segments for the three and six months ended June 30, 2023 and 2022.

The following tables present a summary of the Company’s reportable operating segments for the three and nine months ended September 30, 2023 and 2022.

Financial results for the PLP-USA segment include the elimination of all segments’

intercompany profit in inventory.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Total net sales

14 unchanged sentences

The process of estimating the fair values of certain tangible assets, and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates.

The table below summarizes the fair values of the assets acquired and liabilities assumed on the acquisition date, inclusive of the preliminary measurement period adjustments recorded as of June 30, 2023, which were not material.

The measurement period remains open and future adjustments are not expected to have a material impact to the Consolidated Statements of Income.

7 unchanged sentences

Due to the consideration transferred equaling the fair value of the assets acquired, no residual goodwill was recognized.

From the date of the acquisition through June 30, 2023, the Company’s consolidated financial statements included Pilot Plastics sales of approximatel y $ 3.3 milli on and are reported in the PLP-USA segment.

From the date of the acquisition through September 30, 2023, the Company’s consolidated financial statements included Pilot Plastics sales of approximatel y $ 5.3 milli on and are reported in the PLP-USA segment.

Acquisition of Delta Conectores , S.A.

3 unchanged sentences

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, net of cash received, subject to a holdback of $ 0.6 million.

The purchase price was $ 3.3 million, net of cash received, subject to a holdback of $ 0.6 million.

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

The process of estimating the fair values of certain tangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates.

The fair value of t he net assets acquired was $ 3.4 million and the measurement period adjustments did not have a material impact to the consolidated Statements of Income.

The measurement period remains open and future adjustments are not expected to have a material impact to the Consolidated Statements of Income.

The fair value of t he identifiable net assets acquired was $ 2.9 million.

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

The goodwill recognized of $ 0.4 million is not expected to be deductible for tax purposes.

From the date of the acquisition through June 30, 2023, the Company’s consolidated financial statements included Delta sales of approximatel y $ 5.2 milli on and is reported in The Americas segment.

All measurement period adjustments were completed within a year from the acquisition date, and such adjustments did not have a material impact on the Company's results of operations and financial position.

Acquisition of Holplast, s.r.o.

5 unchanged sentences

During the measurement period, opening balance sheet adjustments were made to finalize the fair value estimates based on the final valuations received, which are summarized in the table below.

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

Preliminary Allocation

Measurement Period Adjustments

Final Allocation

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

Other noncurrent 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 .

Other noncurrent liabilities assumed is mainly comprised of long-term debt totaling approximately $ 1.1 million at a rate of 3.21 % with terms expiring between December 2026 and December 2030 .

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During the measurement period opening balance sheet adjustments were made to finalize the fair value estimates based on the final valuations received, which are summarized in the table below.

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

Preliminary Allocation

Measurement Period Adjustments

Final Allocation

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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.

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

See Note 11 for additional information about goodwill and other intangible assets.

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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 of 2022 .

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.

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.

The Russian operations did not have a material impact to the consolidated financial statements with net sales of $ 0.3 million for the nine months ended September 30, 2022.

As a result of the decision to exit operations, net charges of approximately $ 1.0 million were recorded for the nine months ended September 30, 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.

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We evaluate segment performance and allocate resources based on several factors primarily based on sales and net income.

The following discussion describes our results of operations for the three and six months ended June 30, 2023 and 2022.

The following discussion describes our results of operations for the three and nine months ended September 30, 2023 and 2022.

Our consolidated financial statements are prepared in conformity with United States ("U.S.") generally accepted accounting principles ("GAAP").

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.

Net sales of $181.8 million for the three months ended June 30, 2023, was an increase of $18.3 million year-over-year and net sales of $363.6 million for the six months ended June 30, 2023, was an increase of $61.9 million year-over-year.

In the three and six months ended June 30, 2023, the inflationary headwinds we experienced related to raw materials, specifically plastic resins, aluminum and sand (grit), have partially subsided.

Net sales of $160.4 million for the three months ended September 30, 2023, was a decrease of $5.0 million year-over-year and net sales of $524.1 million for the nine months ended September 30, 2023, was an increase of $57.0 million year-over-year.

In the three and nine months ended September 30, 2023, the inflationary headwinds we experienced related to raw materials, specifically plastic resins, aluminum and sand (grit), have partially subsided.

Costs related to shipping and freight have similarly fallen from their 2022 peak.

The decreases in these underlying costs along with the impacts of our previous price increases have benefited gross margins.

For PLP-USA, our largest business segment, we saw a year-over-year benefit for the three and six month periods of $5.4 million and $8.4 million, respectively related to the reduction in these costs.

For PLP-USA, our largest business segment, we saw a year-over-year benefit for the three and nine month periods ended September 30, 2023 of $5.9 million and $14.3 million, respectively related to the reduction in these costs.

Given the uncertainties in the macro-economic environment, we cannot determine if these trends will continue.

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PLPC’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 June 30, 2023 exchange rates.

The fluctuations of foreign currencies during the three and six months ended June 30, 2023 had an unfavorable impact on net sales of $2.5 million and $7.1 million, respectively.

The fluctuations on foreign currencies during the three and six months ended June 30, 2023 had an unfavorable impact on net income of $0.4 million and $0.6 million, respectively.

On a reportable segment basis, the impact of foreign currency translation on net sales and net income for the three and six months ended June 30, 2023 and 2022, was as follows:

dollars its foreign currency denominated loans, trade receivables and royalty receivables from its foreign subsidiaries at the September 30, 2023 exchange rates.

The fluctuations of foreign currencies during the three and nine months ended September 30, 2023 had a favorable impact on net sales of $1.4 million and an unfavorable impact on net sales of $5.6 million, respectively.

The fluctuations on foreign currencies during the three and nine months ended September 30, 2023 had an unfavorable impact on net income of $0.1 million and $0.7 million, respectively.

On a reportable

segment basis, the impact of foreign currency translation on net sales and net income for the three and nine months ended September 30, 2023 and 2022, was as follows:

Foreign Currency Translation Impact

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

Three Months Ended September 30, 2023

Nine Months Ended September 30, 2023

(Thousands of dollars)

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These investments in our U.S.

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

customers in 2023.

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

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.

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RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2023 COMPARED TO THREE MONTHS ENDED JUNE 30, 2022

The following table sets forth a summary of the Company’s Statements of Consolidated Income and the percentage of net sales for the three months ended June 30, 2023 and 2022.

THREE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2022

The following table sets forth a summary of the Company’s Statements of Consolidated Income and the percentage of net sales for the three months ended September 30, 2023 and 2022.

The Company’s past operating results are not necessarily indicative of future operating results.

Three Months Ended June 30,

Three Months Ended September 30,

(Thousands of dollars)

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INCOME BEFORE INCOME TAXES

Net loss (income) attributable to noncontrolling interests

Net (income) attributable to noncontrolling interests

NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS

In 2023, net sales were $181.8 million, an increase of $18.3 million, or 11%, compared to 2022.

Excluding the effect of currency translation, net sales increased 13% as summarized in the following table:

Three Months Ended June 30,

In 2023, net sales were $160.4 million, a decrease of $5.0 million, or 3%, compared to 2022.

Excluding the effect of currency translation, net sales decreased 4% as summarized in the following table:

Three Months Ended September 30,

(Thousands of dollars)

The increase in PLP-USA net sales of $13.6 million, or 16%, was primarily due to a volume increase in energy product and communication sales as well as the impact from price increases.

International net sales for the three months ended June 30, 2023 were unfavorably affected by $2.5 million when local currencies were converted to U.S.

The decrease in PLP-USA net sales of $7.2 million, or 8%, was primarily due to volume decreases in communication sales, partially offset by the impact from previously enacted price increases.

International net sales for the three months ended September 30, 2023 were favorably affected by $1.4 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 $21.5 million increased $0.3 million, or 2%, primarily due

to volume increases from the October 2022 Delta acquisition, partially offset by volume decreases in the region.

EMEA net sales of $37.3 million increased $4.4 million, or 14%, primarily due to volume increases in communication sales.

Asia-Pacific net sales of $26.0 million increased $2.5 million, or 10%, due to volume increases in special industries and energy products.

The Americas net sales of $22.8 million decreased $1.1 million, or 4%, primarily due to volume decreases within communications sales and energy products, partially offset by contributions from the October 2022 Delta acquisition.

EMEA net sales of $28.8 million decreased $4.2 million, or 14%, primarily due to volume decreases in communication sales.

Asia-Pacific net sales of $27.1 million increased $6.1 million, or 28%, primarily due to volume increases in energy products.

Gross profit.

Gross profit of $66.3 million for 2023 increased $13.6 million, or 26%, compared to 2022.

Excluding the effect of currency translation, gross profit increased $14.5 million, or 27%, as summarized in the following table:

Three Months Ended June 30,

Gross profit of $54.1 million for 2023 decreased $4.2 million, or 7%, compared to 2022.

Excluding the effect of currency translation, gross profit decreased $4.6 million, or 8%, as summarized in the following table:

Three Months Ended September 30,

(Thousands of dollars)

PLP-USA gross profit of $41.2 million increased by $11.3 million, or 38%, compared to the same period in 2022, primarily due to the incremental margins from the increased sales volumes, price increases and lower material costs.

International gross profit for the period ended June 30, 2023 was unfavorably impacted by $0.9 million when local currencies were translated to U.S.

PLP-USA gross profit of $30.7 million decreased by $3.9 million, or 11%, compared to the same period in 2022, primarily due to lower sales volumes, partially offset by previously enacted price increases and lower material costs.

International gross profit for the period ended September 30, 2023 was favorably impacted by $0.5 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 increased $0.5 million, or 7%, which was primarily the result of higher margin from lower material costs.

EMEA gross profit increased $1.7 million, or 22%, primarily due to the incremental margins from the increased sales volumes and lower manufacturing expenses.

The Americas gross profit decreased $2.3 million, or 22%, which was primarily the result of higher manufacturing and material costs.

EMEA gross profit decreased $0.5 million, or 6%, primarily due to the lower sales volumes.

Asia-Pacific’s gross profit increased $2.0 million, or 32%, which was primarily driven by the incremental margins on the increased sales volume and lower manufacturing costs.

Costs and expenses.

Costs and expenses of $38.2 million for the three months ended June 30, 2023 increased $3.4 million, or 10%, when compared to 2022.

Excluding the effect of currency translation, costs and expenses increased $3.9 million, or 11%, as summarized in the following table:

Three Months Ended June 30,

Costs and expenses of $34.1 million for the three months ended September 30, 2023 decreased $7.0 million, or 17%, when compared to 2022.

Excluding the effect of currency translation, costs and expenses decreased $7.5 million, or 18%, as summarized in the following table:

Three Months Ended September 30,

(Thousands of dollars)

Costs and expenses

PLP-USA costs and expenses of $20.5 million increased $2.8 million, or 16% year-over-year.

PLP-USA’s increase was primarily attributable to increased salary-related expenses, sales, personnel and insurance costs.

PLPC’s costs and expenses for the three months ended June 30, 2023 were favorably impacted by $0.5 million when local currencies were translated to U.S.

PLP-USA costs and expenses of $19.0 million decreased $1.1 million, or 5% year-over-year.

PLP-USA’s decrease was primarily attributable to lower professional services costs, partially offset by higher salary-related and employee benefit costs.

International costs and expenses for the three months ended September 30, 2023 were unfavorably impacted by $0.4 million when local currencies were translated to U.S.

The following discussion of costs and expenses excludes the effect of currency translation.

The Americas costs and expenses of $5.0 million increased $1.1 million primarily due to increased salary-related and professional services costs.

EMEA costs and expenses of $6.8 million increased by $0.3 million primarily due to increased salary-related costs.

Asia-Pacific costs and expenses of $5.9 million decreased $0.3 million primarily due to one-time expenses to streamline operations recorded in the second quarter of 2022 that did not recur.

The Americas costs and expenses of $5.9 million increased $2.6 million primarily due to a one-time legal settlement and an increase in salary-related expenses.

EMEA costs and expenses of $5.7 million decreased by $0.7 million primarily due to lower professional services, travel and sales related costs.

Asia-Pacific costs and expenses of $3.2 million decreased $8.3 million primarily due to a one-time $6.5 million goodwill impairment charge recorded in 2022 that did not recur, and a one-time $2.5 million gain on the sale of plant and equipment during the third quarter of 2023.

Other (expense) income, net.

Other expense, net of $0.6 million for the three months ended June 30, 2023 was unfavorable by $0.4 million when compared to Other expense, net of $0.2 million for the three months ended June 30, 2022.

The unfavorable movement was due to higher interest expense.

Other expense, net of $0.5 million for the three months ended September 30, 2023 was unfavorable by $0.7 million when compared to Other income, net of $0.2 million for the three months ended September 30, 2022.

The unfavorable movement was primarily due to increased interest expense.

Income taxes.

Income taxes for the three months ended June 30, 2023 and 2022 were $7.1 million and $4.0 million based on pre-tax income of $27.5 million and $17.8 million, respectively.

The tax rate for the three months ended June 30, 2023 and 2022 was 26% and 23%, respectively.

The effective tax rate for the three months ended June 30, 2023 was higher than the effective tax rate for the same period in 2022 mainly due to higher levels of income earned in higher tax jurisdictions as well as an increase in the limitation on the deductibility of executive compensation.

As a result of the preceding items, net income for the three months ended June 30, 2023 was $20.5 million, compared to $13.7 million for 2022.

Excluding the effect of currency translation, net income increased $7.1 million as summarized in the following

In all regions, the increase in net income was due to increases in operating income described above, partially offset by higher interest expense and higher tax expense:

Three Months Ended June 30,

Income taxes for the three months ended September 30, 2023 and 2022 were $4.4 million and $5.7 million based on pre-tax income of $19.6 million and $17.5 million, respectively.

The tax rate for the three months ended September 30, 2023 and 2022

was 23% and 33%, respectively.

The effective tax rate for the three months ended September 30, 2023 was lower than the effective tax rate for the same period in 2022 mainly due to the favorable impact from the mix of taxable income in certain foreign jurisdictions, which in the third quarter of 2022 included a non-deductible goodwill impairment charge of $6.5 million in the Asia-Pacific region and was partially offset by the release of the valuation allowance on deferred tax assets for the Company’s Australian subsidiary of approximately $1.4 million, as well as the favorable impact related to the excess tax benefit associated with stock compensation activity.

As a result of the preceding items, net income for the three months ended September 30, 2023 was $15.1 million, compared to $11.9 million for 2022.

Excluding the effect of currency translation, net income increased $3.4 million as summarized in the following table.

In all regions, the increase in net income was primarily due to increases in operating income described above, partially offset by higher interest expense:

Three Months Ended September 30,

(Thousands of dollars)

Net income (loss)

SIX MONTHS ENDED JUNE 30, 2023 COMPARED TO SIX MONTHS ENDED JUNE 30, 2022

The following table sets forth a summary of the Company’s Statements of Consolidated Income and the percentage of net sales for the six months ended June 30, 2023 and 2022.

NINE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2022

The following table sets forth a summary of the Company’s Statements of Consolidated Income and the percentage of net sales for the nine months ended September 30, 2023 and 2022.

The Company’s past operating results are not necessarily indicative of future operating results.

Six Months Ended June 30,

Nine Months Ended September 30,

(Thousands of dollars)

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NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS

Net sales were $363.6 million for the six months ended June 30, 2023, an increase of $61.9 million, or 21%, compared to 2022.

Net sales were $524.1 million for the nine months ended September 30, 2023, an increase of $57.0 million, or 12%, compared to 2022.

Excluding the effect of currency translation, net sales increased 13% as summarized in the following table:

Six Months Ended June 30,

Nine Months Ended September 30,

(Thousands of dollars)

The increase in PLP-USA net sales of $34.8 million, or 22%, was primarily due to a volume increase in energy products and communication sales as well as the impact from price increases.

International net sales for the six months ended June 30, 2023 were unfavorably affected by $7.1 million when local currencies were converted to U.S.

The increase in PLP-USA net sales of $27.6 million, or 11%, was primarily due to a volume increase in energy products as well as the impact from previously enacted price increases.

International net sales for the nine months ended September 30, 2023 were unfavorably

affected by $5.6 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 $44.1 million increased $5.1 million, or 12%, primarily due to the volume increases from the October 2022 acquisition of Delta.

EMEA net sales of $76.3 million increased $18.2 million, or 30%, primarily due to volume increases in communication sales.

Asia-Pacific net sales of $49.1 million increased $10.9 million, or 27%, primarily due to volume increases in energy product sales.

The Americas net sales of $66.9 million increased $4.0 million, or 6%, primarily due to the volume increases from the October 2022 acquisition of Delta partially offset by volume decreases in communication product sales.

EMEA net sales of $105.1 million increased $14.0 million, or 15%, primarily due to volume increases in communication and energy product sales primarily in the first half of 2023.

Asia-Pacific net sales of $76.2 million increased $17.0 million, or 27%, primarily due to volume increases in energy product and special industries sales.

Gross profit.

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Excluding the effect of currency translation, gross profit increased $35.5 million, or 23%, as summarized in the following table:

Six Months Ended June 30,

Nine Months Ended September 30,

(Thousands of dollars)

PLP-USA gross profit of $114.0 million increased by $23.3 million, or 26%, compared to the same period in 2022, primarily due to the incremental margins from the increased sales volumes and tailwinds from operational efficiencies, price increases and lower material costs.

International gross profit for the period ended June 30, 2023 was unfavorably impacted by $2.1 million when local currencies were translated to U.S.

International gross profit for the period ended September 30, 2023 was unfavorably impacted by $1.7 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 increased $1.2 million, or 5%, which was primarily the result of the incremental margin from the increased sales volumes, and contributions from the October 2022 Delta acquisition.

EMEA gross profit increased $5.2 million, or 36%, primarily due to the incremental margins from the increased sales volumes and the non-recurring charges recorded in 2022 related to the exit of our Russia operations.

Asia-Pacific’s gross profit increased $4.3 million, or 40%, which was primarily driven by the incremental margins on the increased sales volume and cost containment measures.

EMEA gross profit increased $4.7 million, or 22%, primarily due to the incremental margins from the increased sales volumes, lower material costs and the non-recurring charges recorded in 2022 related to the exit of our Russia operations.

Asia-Pacific’s gross profit increased $6.3 million, or 37%, which was primarily driven by the incremental margins on the increased sales volume, lower material costs, and operational efficiencies.

Costs and expenses.

Costs and expenses of $75.5 million for the six months ended June 30, 2023 increased $8.2 million, or 12%, when compared to 2022.

Costs and expenses of $109.5 million for the nine months ended September 30, 2023 increased $1.4 million, or 1%, when compared to 2022.

Excluding the effect of currency translation, costs and expenses increased $2.4 million, or 2%, as summarized in the following table:

Six Months Ended June 30,

Nine Months Ended September 30,

(Thousands of dollars)

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PLP-USA costs and expenses of $59.6 million increased $6.0 million, or 11% year-over-year.

PLP-USA’s increase was primarily attributable to increased salary-related, sales, personnel and insurance costs.

PLPC’s costs and expenses for the six months ended June 30, 2023 were favorably impacted by $1.5 million when local currencies were translated to U.S.

PLP-USA’s increase was primarily attributable to increased salary-related, sales, employee benefit and insurance costs, partially offset by lower professional services.

International costs and expenses for the nine months ended September 30, 2023 were favorably impacted by $1.0 million when local currencies were translated to U.S.

The following discussion of costs and expenses excludes the effect of currency translation.

The Americas costs and expenses of $10.5 million increased $1.7 million primarily due to increased salary-related costs, and bad debt expense.

EMEA costs and expenses of $13.5 million increased by $0.7 million primarily due to increased salary-related, professional services, travel and marketing-related costs, partially offset by Russia closure costs that did not recur.

Asia-Pacific costs and expenses of $11.1 million increased $0.4 million primarily due to increased sales and professional services, offset by one-time expenses to streamline operations recorded in the second quarter of 2022 that did not recur.

The Americas costs and expenses of $16.3 million increased $4.3 million primarily due to a one-time legal settlement and an increase in salary-related expenses.

EMEA costs and expenses of $19.3 million was flat, as increases in salary-related expenses and professional services were offset by decreases in travel and marketing-related costs.

Asia-Pacific costs and expenses of $14.4 million decreased $7.9 million primarily due to a one-time $6.5 million goodwill impairment charge recorded in 2022 that did not recur and a one-time $2.5 million gain on the sale of plant and equipment during the third quarter of 2023.

Other (expense) income, net.

Other expense, net of $1.3 million for the six months ended June 30, 2023 was unfavorable by $5.8 million when compared to Other income, net of $4.5 million for the six months ended June 30, 2022.

The unfavorable movement was primarily due to a nonrecurring gain of $4.4 million that was recorded in March 2022 related to a settlement of a Company-owned life insurance policy, and higher interest expense for the six months ended June 30, 2023.

Other expense, net of $1.8 million for the nine months ended September 30, 2023 was unfavorable by $6.6 million when compared to Other income, net of $4.7 million for the nine months ended September 30, 2022.

Income taxes.

Income taxes for the six months ended June 30, 2023 and 2022 were $13.9 million and $5.9 million based on pre-tax income of $55.8 million and $31.9 million, respectively.

The tax rate for the six months ended June 30, 2023 and 2022 was 25% and 18%, respectively.

The effective tax rate for the six months ended June 30, 2023 was higher than the effective tax rate for the same period in 2022 mainly due to a non-taxable benefit of $4.4 million related to the proceeds from the settlement of a Company-owned life insurance policy in 2022 in addition to an increase in unfavorable permanent adjustments.

As a result of the preceding items, net income for the six months ended June 30, 2023 was $41.9 million, compared to $26.0 million for 2022.

Income taxes for the nine months ended September 30, 2023 and 2022 were $18.3 million and $11.5 million based on pre-tax income of $75.3 million and $49.5 million, respectively.

The tax rate for the nine months ended September 30, 2023, and 2022 was 24% and 23%, respectively.

As a result of the preceding items, net income for the nine months ended September 30, 2023 was $57.0 million, compared to $37.9 million for 2022.

Excluding the effect of currency translation, net income increased $19.8 million as summarized in the following table.

In all regions, the increase in net income was due to increases in operating income described above, partially offset by higher interest expense and higher tax expense:

Six Months Ended June 30,

In all regions, the increase in net income was primarily due to increases in operating income described above, partially offset by higher interest expense and higher tax expense:

Nine Months Ended September 30,

(Thousands of dollars)

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Our investments include expenditures required for equipment and facilities as well as expenditures in support of our strategic initiatives.

During the first six months of 2023, we used cash of $17.2 million for capital expenditures and $12.1 million for a business acquisition.

We ended the first six months of 2023 with $43.2 million of cash, cash equivalents and restricted cash (collectively, “Cash”).

During the first nine months of 2023, we used cash of $27.1 million for capital expenditures and $12.1 million for a business acquisition.

We ended the first nine months of 2023 with $43.7 million of cash, cash equivalents and restricted cash (collectively, “Cash”).

Our Cash is held in various locations throughout the world.

At June 30, 2023, the majority of our Cash was held outside the U.S.

At September 30, 2023, the majority of our Cash was held outside the U.S.

We expect most accumulated non-U.S.

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

Total debt, including notes payable, at June 30, 2023 was $89.5 million.

At June 30, 2023, our unused availability under our credit facility (the "Facility") was $37.0 million and our bank debt to equity percentage was 22.5%.

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.

Total debt, including notes payable, at September 30, 2023 was $62.8 million.

At September 30, 2023, our unused availability under our credit facility (the "Facility") was $60.0 million and our bank debt to equity percentage was 15.7%.

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

At June 30, 2023, the Company was in compliance with these covenants.

Our Asia-Pacific segment had $0.2 million in restricted cash for both periods ended June 30, 2023 and December 31, 2022.

At September 30, 2023, the Company was in compliance with these covenants.

Our Asia-Pacific segment had $0.2 million in restricted cash for both periods ended September 30, 2023 and December 31, 2022.

The restricted cash was used to secure bank debt and is included in Cash, cash equivalents and restricted cash on the Consolidated Balance Sheets.

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The loan is payable in 119 equal monthly installments, which commenced on March 1, 2021 with a final payment of any outstanding principal and accrued interest due and payable on the final monthly payment date.

Of the $15.7 million outstanding on this debt facility at June 30, 2023, $2.1 million was classified as current.

Of the $15.2 million outstanding on this debt facility at September 30, 2023, $2.1 million was classified as current.

The loan is secured by the aircraft.

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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.

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.

2 unchanged sentences

Sources and Uses of Cash

Net cash provided by operating activities for the six months ended June 30, 2023 was $45.9 million compared to $6.2 million used in operating activities in the comparable prior year six-month period.

Net cash provided by operating activities for the nine months ended September 30, 2023 was $88.4 million compared to $9.2 million provided by operating activities in the comparable prior year nine-month period.

The $79.2 million increase was primarily a result of increases in net income and changes in operating assets and liabilities.

Net cash used in investing activities for the six months ended June 30, 2023 was $29.1 million compared to $16.7 million in the comparable prior year six-month period.

The $12.4 million change was primarily a result of an increase in capital expenditures and decreases in proceeds from the settlement of a Company-owned life insurance policy and sale of property and equipment in 2022 that did not recur.

Net cash used in financing activities for the six months ended June 30, 2023 was $11.7 million compared to cash provided by financing activities of $15.5 million in the comparable prior year six-month period.

The $27.2 million change was primarily the result of an increase in payments on long-term debt and share repurchases.

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

At June 30, 2023, we had $1.2 million of current operating lease liabilities and $7.5 million of noncurrent operating lease liabilities.

Total liabilities related to finance lease obligations were less than $1 million at June 30, 2023.

As of June 30, 2023, the Company had total outstanding guarantees of $13.9 million.

Net cash used in investing activities for the nine months ended September 30, 2023 was $36.7 million compared to $28.1 million in the comparable prior year nine-month period.

The $8.6 million change was primarily a result of an increase in capital expenditures and decreases in proceeds from the settlement of a Company-owned life insurance policy in 2022 that did not recur.

Net cash used in financing activities for the nine months ended September 30, 2023 was $45.5 million compared to cash provided by financing activities of $14.6 million in the comparable prior year nine-month period.

The $60.2 million change was primarily the result of an increase in payments on long-term debt, share repurchases, and notes payable.

We have commitments under operating leases primarily for office and manufacturing space, motor vehicles, office and computer equipment and finance leases primarily for equipment.

At September 30, 2023, we had $1.6 million of current operating lease liabilities and $7.9 million of noncurrent operating lease liabilities.

Total liabilities related to finance lease obligations were less than $1.0 million at September 30, 2023.

As of September 30, 2023, the Company had total outstanding guarantees of $13.9 million.

Additionally, certain domestic and foreign customers require the Company to issue letters of credit or performance bonds as a condition of placing an order.

As of June 30, 2023, the Company had total outstanding letters of credit of $1.0 million.

As of September 30, 2023, the Company had total outstanding letters of credit of $1.0 million.

At June 30, 2023 and December 31, 2022, $21.0 million and $26.1 million was outstanding, of which $18.5 million and $19.1 million were classified as current, respectively.

At September 30, 2023 and December 31, 2022, $17.6 million and $26.1 million was outstanding, of which $15.5 million and $19.1 million were classified as current, respectively.

These facilities support commitments made in the ordinary course of business.

34 unchanged sentences

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-Q

Item 1. Financial Statements