Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the readers of our financial statements better understand our results of operations, financial condition and present business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and related notes included elsewhere in this report.
OVERVIEW
Preformed Line Products Company (the “Company”, “PLPC”, “we”, “us”, or “our”) was incorporated in Ohio in 1947. We are an international designer and manufacturer of products and systems employed in the construction and maintenance of overhead and underground networks for the energy, telecommunication, cable operators, information (data communication), and other similar industries. Our primary products support, protect, connect, terminate, and secure cables and wires. 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. We have sales and manufacturing operations in 20 different countries.
We report our segments in four geographic regions: PLP-USA (including corporate), The Americas (includes operations in North and South America, excluding PLP-USA), 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”. Each segment distributes a full range of our primary products. Our PLP-USA segment is comprised of our U.S. 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 Executive Chairman, 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. The business components within each segment are managed to maximize the results of the entire operating segment and the Company rather than the results of any individual business component of the segment.
We evaluate segment performance and allocate resources based on several factors primarily based on sales and net income.
PREFACE
The following discussion describes our results of operations for the three and six months ended June 30, 2024 and 2023. 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 $138.7 million decreased $43.1 million for the three months ended June 30, 2024 year-over-year and net sales of $279.6 million decreased $84.0 million for the six months ended June 30, 2024 year-over-year, mainly due to the elevated inventory levels at PLP-USA communications markets' customers and distributors. The inflationary headwinds we experienced in 2022 and early 2023 related to raw materials, specifically plastic resins, aluminum and sand (grit), have generally subsided. Costs related to shipping and freight have similarly fallen from their 2022 peak. Decreases in these underlying costs along with the impacts of our previous price increases benefited gross margins in 2023 and have not meaningfully impacted the results for the second quarter or six months ended June 30, 2024. If inflationary pressures increase again, it may require further price adjustments to maintain profit margin, and any price increases may have a negative effect on demand.
Our financial statements are subject to fluctuations in the exchange rates of foreign currencies in relation to the U.S. dollar. The fluctuations of foreign currencies during the three and six months ended June 30, 2024 had a unfavorable impact on net sales of $1.1 million and $0.3 million, respectively. The fluctuations on foreign currencies during the three and six months ended June 30, 2024 had a de minimis impact on net income. 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, 2024, was as follows:
18
Foreign Currency Translation Impact
Three Months Ended June 30, 2024
Six Months Ended June 30, 2024
(Thousands of dollars)
Net Sales
Net Income
Net Sales
Net Income
The Americas
$
(420
)
$
(39
)
$
385
$
(5
)
EMEA
58
37
846
76
Asia-Pacific
(705
)
(40
)
(1,549
)
(114
)
Total
$
(1,067
)
$
(42
)
$
(318
)
$
(43
)
Although elevated inventory levels in the PLP-USA communications markets and other market headwinds have impacted our first half 2024 results, 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. As 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. Period cost containment has been a priority for the Company in 2024, shown through a reduction in costs and expenses of 13% for the six months ended June 30, 2024. 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. As of June 30, 2024, our liquidity remains strong with our bank debt to equity percentage at 9.2%. We can borrow needed funds at a competitive interest rate under the Facility.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2024 COMPARED TO THREE MONTHS ENDED JUNE 30, 2023
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, 2024 and 2023. The Company’s past operating results are not necessarily indicative of future operating results.
Three Months Ended June 30,
(Thousands of dollars)
2024
2023
Change
Net sales
$
138,720
100.0
%
$
181,813
100.0
%
$
(43,093
)
Cost of products sold
94,447
68.1
115,486
63.5
(21,039
)
GROSS PROFIT
44,273
31.9
66,327
36.5
(22,054
)
Costs and expenses
32,981
23.8
38,179
21.0
(5,198
)
OPERATING INCOME
11,292
8.1
28,148
15.5
(16,856
)
Other expense, net
(131
)
(0.1
)
(607
)
(0.3
)
476
INCOME BEFORE INCOME TAXES
11,161
8.0
27,541
15.1
(16,380
)
Income taxes
1,794
1.3
7,077
3.9
(5,283
)
NET INCOME
9,367
6.8
20,464
11.3
(11,097
)
Net (income) loss attributable to noncontrolling interests
(1
)
(0.0
)
8
0.0
(9
)
NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS
$
9,366
6.8
%
$
20,472
11.3
%
$
(11,106
)
Net sales. In 2024, net sales were $138.7 million, a decrease of $43.1 million, or 24%, compared to 2023. Excluding the effect of currency translation, net sales decreased 23% as summarized in the following table:
Three Months Ended June 30,
Change
Change
(Thousands of dollars)
Due to
Excluding
Currency
Currency
%
2024
2023
Change
Translation
Translation
Change
Net sales
PLP-USA
$
59,900
$
96,977
$
(37,077
)
$
—
$
(37,077
)
(38
)
%
The Americas
21,815
21,494
321
(420
)
741
3
EMEA
32,039
37,306
(5,267
)
58
(5,325
)
(14
)
Asia-Pacific
24,966
26,036
(1,070
)
(705
)
(365
)
(1
)
Consolidated
$
138,720
$
181,813
$
(43,093
)
$
(1,067
)
$
(42,026
)
(23
)
%
The decrease in PLP-USA net sales of $37.1 million, or 38%, was primarily due to lower volumes and unfavorable product mix in communications sales and energy product sales. International net sales for the three months ended June 30, 2024 were unfavorably affected by $1.1 million when local currencies were converted to U.S. dollars. The following discussion of changes in net sales excludes the effect of currency translation. The Americas net sales of $21.8 million increased $0.7 million, or 3%, primarily due to higher volumes
19
in energy product sales. EMEA net sales of $32.0 million decreased $5.3 million, or 14%, primarily due to lower volume in communications sales. Asia-Pacific net sales of $25.0 million decreased $0.4 million, or 1%, primarily due to lower volumes in special industries.
Gross profit. Gross profit of $44.3 million for 2024 decreased $22.1 million, or 33%, compared to 2023. Excluding the effect of currency translation, gross profit decreased $21.8 million, or 33%, as summarized in the following table:
Three Months Ended June 30,
Change
Change
(Thousands of dollars)
Due to
Excluding
Currency
Currency
%
2024
2023
Change
Translation
Translation
Change
Gross profit
PLP-USA
$
20,743
$
41,234
$
(20,492
)
$
—
$
(20,492
)
(50
)
%
The Americas
6,712
8,198
(1,485
)
(128
)
(1,357
)
(17
)
EMEA
9,364
9,518
(154
)
30
(184
)
(2
)
Asia-Pacific
7,454
7,377
77
(204
)
281
4
Consolidated
$
44,273
$
66,327
$
(22,054
)
$
(302
)
$
(21,752
)
(33
)
%
PLP-USA gross profit of $20.7 million decreased by $20.5 million, or 50%, compared to the same period in 2023, primarily due to lower sales volumes and unfavorable product mix. International gross profit for the period ended June 30, 2024 was unfavorably impacted by $0.3 million when local currencies were translated to U.S. dollars. The following discussion of gross profit changes excludes the effects of currency translation. The Americas gross profit decreased $1.4 million, or 17%, which was primarily the result of unfavorable product mix and higher manufacturing costs. EMEA gross profit decreased $0.2 million, or 2%, primarily due to lower sales volumes, partially offset by a reduction in warranty expense. Asia-Pacific gross profit increased $0.3 million, or 4%, which was primarily driven by favorable product mix.
Costs and expenses. Costs and expenses of $33.0 million for the three months ended June 30, 2024 decreased $5.2 million, or 14%, when compared to 2023. Excluding the effect of currency translation, costs and expenses decreased $4.9 million, or 13%, as summarized in the following table:
Three Months Ended June 30,
Change
Change
(Thousands of dollars)
Due to
Excluding
Currency
Currency
%
2024
2023
Change
Translation
Translation
Change
Costs and expenses
PLP-USA
$
16,939
$
20,459
$
(3,520
)
$
—
$
(3,520
)
(17
)
%
The Americas
4,644
5,001
(357
)
(81
)
(276
)
(6
)
EMEA
5,388
6,819
(1,431
)
(18
)
(1,413
)
(21
)
Asia-Pacific
6,010
5,900
110
(158
)
268
5
Consolidated
$
32,981
$
38,179
$
(5,198
)
$
(257
)
$
(4,941
)
(13
)
%
PLP-USA costs and expenses of $16.9 million decreased $3.5 million, or 17% year-over-year. PLP-USA’s decrease was primarily attributable to lower selling costs and lower personnel and professional services costs, primarily as a result of cost containment efforts. International costs and expenses for the three months ended June 30, 2024 were unfavorably impacted by $0.3 million when local currencies were translated to U.S. dollars. The following discussion of costs and expenses excludes the effect of currency translation. The Americas costs and expenses of $4.6 million decreased $0.3 million primarily due to lower selling, general, and administrative costs. EMEA costs and expenses of $5.4 million decreased by $1.4 million primarily due to elevated past-due receivable collections which reduced bad debt expenses. Asia-Pacific costs and expenses of $6.0 million increased $0.3 million due to the impact of foreign currency remeasurement.
Other expense, net. Other expense, net of $0.1 million for the three months ended June 30, 2024 was favorable by $0.5 million when compared to Other expense, net for the three months ended June 30, 2023 of $0.6 million. The favorable movement was due to lower interest expense from reduced debt balances and higher interest income earned on cash balances in certain international jurisdictions for the three months ended June 30, 2024.
Income taxes. Income taxes for the three months ended June 30, 2024 and 2023 were $1.8 million and $7.1 million based on pre-tax income of $11.2 million and $27.5 million, respectively. The tax rate for the three months ended June 30, 2024 and 2023 was 16% and 26%, respectively. The effective tax rate for the three months ended June 30, 2024 was lower than the effective tax rate for the same period in 2023 mainly due to discrete benefits recorded as a result of amending prior year federal tax returns.
Net income. As a result of the preceding items, net income for the three months ended June 30, 2024 was $9.4 million, compared to $20.5 million for 2023. Excluding the effect of currency translation, net income decreased $11.1 million as summarized in the following
20
table. The decrease in net income was due to decreases in operating income described above, partially offset by lower interest expense and lower tax expense:
Three Months Ended June 30,
Change
Change
(Thousands of dollars)
Due to
Excluding
Currency
Currency
%
2024
2023
Change
Translation
Translation
Change
Net income (loss)
PLP-USA
$
3,345
$
14,887
$
(11,542
)
$
—
$
(11,542
)
(78
)
%
The Americas
1,796
2,750
(954
)
(39
)
(915
)
(33
)
EMEA
2,975
1,876
1,099
37
1,062
57
Asia-Pacific
1,250
959
291
(40
)
331
35
Consolidated
$
9,366
$
20,472
$
(11,106
)
$
(42
)
$
(11,064
)
(54
)
%
SIX MONTHS ENDED JUNE 30, 2024 COMPARED TO SIX MONTHS ENDED JUNE 30, 2023
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, 2024 and 2023. The Company’s past operating results are not necessarily indicative of future operating results.
Six Months Ended June 30,
(Thousands of dollars)
2024
2023
Change
Net sales
$
279,625
100.0
%
$
363,637
100.0
%
$
(84,012
)
Cost of products sold
191,220
68.4
231,026
63.5
(39,806
)
GROSS PROFIT
88,405
31.6
132,611
36.5
(44,206
)
Costs and expenses
65,554
23.4
75,482
20.8
(9,928
)
OPERATING INCOME
22,851
8.2
57,129
15.7
(34,278
)
Other income (expense), net
168
0.1
(1,329
)
(0.4
)
1,497
INCOME BEFORE INCOME TAXES
23,019
8.2
55,800
15.3
(32,781
)
Income taxes
4,049
1.4
13,917
3.8
(9,868
)
NET INCOME
18,970
6.8
41,883
11.5
(22,913
)
Net income attributable to noncontrolling interests
(8
)
(0.0
)
(13
)
(0.0
)
5
NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS
$
18,962
6.8
%
$
41,870
11.5
%
$
(22,908
)
Net sales. In 2024, net sales were $279.6 million, a decrease of $84.0 million, or 23%, compared to 2023. Excluding the effect of currency translation, net sales decreased 23% as summarized in the following table:
Six Months Ended June 30,
Change
Change
(Thousands of dollars)
Due to
Excluding
Currency
Currency
%
2024
2023
Change
Translation
Translation
Change
Net sales
PLP-USA
$
130,637
$
194,155
$
(63,518
)
$
—
$
(63,518
)
(33
)
%
The Americas
40,173
44,061
(3,888
)
385
(4,273
)
(10
)
EMEA
60,693
76,340
(15,647
)
846
(16,493
)
(22
)
Asia-Pacific
48,122
49,081
(959
)
(1,549
)
590
1
Consolidated
$
279,625
$
363,637
$
(84,012
)
$
(318
)
$
(83,694
)
(23
)
%
The decrease in PLP-USA net sales of $63.5 million, or 33%, was primarily due to lower volumes and unfavorable product mix in communications sales and energy product sales. International net sales for the six months ended June 30, 2024 were unfavorably affected by $0.3 million when local currencies were converted to U.S. dollars. The following discussion of changes in net sales excludes the effect of currency translation. The Americas net sales of $40.2 million decreased $4.3 million, or 10%, primarily due to lower volumes in communications sales, partially offset by increased volumes in energy product sales. EMEA net sales of $60.7 million decreased $16.5 million, or 22%, primarily due to lower volume in communications sales, partially offset by increased volumes in energy product sales. Asia-Pacific net sales of $48.1 million increased $0.6 million, or 1%, primarily due to volume increases in energy product and special industries sales.
21
Gross profit. Gross profit of $88.4 million for 2024 decreased $44.2 million, or 33%, compared to 2023. Excluding the effect of currency translation, gross profit decreased $44.1 million, or 33%, as summarized in the following table:
Six Months Ended June 30,
Change
Change
(Thousands of dollars)
Due to
Excluding
Currency
Currency
%
2024
2023
Change
Translation
Translation
Change
Gross profit
PLP-USA
$
45,439
$
83,341
$
(37,902
)
$
—
$
(37,902
)
(45
)
%
The Americas
11,678
16,185
(4,507
)
125
(4,632
)
(29
)
EMEA
17,682
18,765
(1,083
)
209
(1,292
)
(7
)
Asia-Pacific
13,606
14,320
(714
)
(413
)
(301
)
(2
)
Consolidated
$
88,405
$
132,611
$
(44,206
)
$
(79
)
$
(44,127
)
(33
)
%
PLP-USA gross profit of $45.4 million decreased by $37.9 million, or 45%, compared to the same period in 2023, primarily due to lower sales volumes and unfavorable product mix. International gross profit for the period ended June 30, 2024 was unfavorably impacted by $0.1 million when local currencies were translated to U.S. dollars. The following discussion of gross profit changes excludes the effects of currency translation. The Americas gross profit decreased $4.6 million, or 29%, which was primarily the result of lower sales volumes. EMEA gross profit decreased $1.3 million, or 7%, primarily due to lower sales volumes, partially offset by favorable resolution of a warranty claim. Asia-Pacific gross profit decreased $0.3 million, or 2%, which was primarily driven by higher manufacturing costs, partially offset by favorable product mix.
Costs and expenses. Costs and expenses of $65.6 million for the six months ended June 30, 2024 decreased $9.9 million, or 13%, when compared to 2023. Excluding the effect of currency translation, costs and expenses decreased $9.9 million, or 13%, as summarized in the following table:
Six Months Ended June 30,
Change
Change
(Thousands of dollars)
Due to
Excluding
Currency
Currency
%
2024
2023
Change
Translation
Translation
Change
Costs and expenses
PLP-USA
$
35,103
$
40,365
$
(5,262
)
$
—
$
(5,262
)
(13
)
%
The Americas
9,364
10,458
(1,093
)
174
(1,267
)
(12
)
EMEA
11,518
13,512
(1,995
)
99
(2,094
)
(15
)
Asia-Pacific
9,569
11,147
(1,578
)
(265
)
(1,313
)
(12
)
Consolidated
$
65,554
$
75,482
$
(9,928
)
$
8
$
(9,936
)
(13
)
%
PLP-USA costs and expenses of $35.1 million decreased $5.3 million, or 13% year-over-year. PLP-USA’s decrease was primarily attributable to lower selling costs and lower personnel and professional services costs, primarily as a result of cost containment efforts. International costs and expenses for the six months ended June 30, 2024 had a de minimis impact when local currencies were translated to U.S. dollars. The following discussion of costs and expenses excludes the effect of currency translation. The Americas costs and expenses of $9.4 million decreased $1.3 million primarily due to lower sales and the impact of foreign currency remeasurement. EMEA costs and expenses of $11.5 million decreased by $2.1 million primarily due to lower sales-related costs and bad debt expenses. Asia-Pacific costs and expenses of $9.6 million decreased $1.3 million primarily due to a one-time gain on the sale of capital assets.
Other income (expense), net. Other income, net of $0.2 million for the six months ended June 30, 2024 was favorable by $1.5 million when compared to Other expense, net for the six months ended June 30, 2023 of $1.3 million. The favorable movement was due to higher interest income earned on cash balances in certain international jurisdictions and lower interest expense from reduced debt balances for the six months ended June 30, 2024.
Income taxes. Income taxes for the six months ended June 30, 2024 and 2023 were $4.0 million and $13.9 million based on pre-tax income of $23.0 million and $55.8 million, respectively. The tax rate for the six months ended June 30, 2024 and 2023 was 18% and 25%, respectively. The effective tax rate for the six months ended June 30, 2024 was lower than the effective tax rate for the same period in 2023 mainly due to an increase in excess tax benefits on share-based compensation in relation to overall lower pre-tax book income as well as other discrete benefits recorded as a result of amending prior year federal tax returns.
Net income. As a result of the preceding items, net income for the six months ended June 30, 2024 was $19.0 million, compared to $41.9 million for 2023. Excluding the effect of currency translation, net income decreased $22.9 million as summarized in the following
22
table. The decrease in net income was due to decreases in operating income described above, partially offset by higher interest income, lower interest expense, and lower tax expense:
Six Months Ended June 30,
Change
Change
(Thousands of dollars)
Due to
Excluding
Currency
Currency
%
2024
2023
Change
Translation
Translation
Change
Net income (loss)
PLP-USA
$
8,661
$
31,683
$
(23,022
)
$
—
$
(23,022
)
(73
)
%
The Americas
2,693
4,639
(1,946
)
(5
)
(1,941
)
(42
)
EMEA
4,555
3,537
1,018
76
942
27
Asia-Pacific
3,053
2,011
1,042
(114
)
1,156
57
Consolidated
$
18,962
$
41,870
$
(22,908
)
$
(43
)
$
(22,865
)
(55
)
%
APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our critical accounting policies are consistent with the information set forth in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K for the year ended December 31, 2023 filed on March 8, 2024 with the Securities and Exchange Commission and are, therefore, not presented herein.
WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES
Management Assessment of Liquidity
We measure liquidity on the basis of our ability to meet short-term and long-term operating needs, repay debt, fund additional investments, including acquisitions, and make dividend payments to shareholders. Significant factors affecting the management of liquidity are cash flows from operating activities, capital expenditures, cash dividends, business acquisitions and access to bank lines of credit.
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 2024, we used cash of $7.6 million for capital expenditures. We ended the first six months of 2024 with $47.4 million of cash, cash equivalents and restricted cash (collectively, “Cash”). Our Cash is held in various locations throughout the world. At June 30, 2024, the majority of our Cash was held outside the U.S. We expect most accumulated non-U.S. Cash balances will remain outside of the U.S. and that we will meet U.S. liquidity needs through future operating cash flows, use of U.S. Cash balances, external borrowings, or some combination of these sources. We complete comprehensive reviews of our significant customers and their creditworthiness by analyzing financial statements for customers where we have identified a measure of increased risk. We closely monitor payments and developments which may signal possible customer credit issues. We currently have not identified any potential material impact on our liquidity from customer credit issues.
Total debt, including notes payable, at June 30, 2024 was $38.6 million. At June 30, 2024, our unused availability under our credit facility (the "Facility") was $73.6 million and our bank debt to equity percentage was 9.2%. The Facility contains, among other provisions, requirements for maintaining levels of net worth and profitability. At June 30, 2024, the Company was in compliance with these covenants.
Our Asia-Pacific segment had $0.1 million and $0.2 million in restricted cash for the periods ended June 30, 2024 and December 31, 2023, respectively. The restricted cash was used to secure bank guarantees and is included in Cash, cash equivalents and restricted cash on the Consolidated Balance Sheets.
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 for the full amount of the purchase price for a new corporate aircraft. The term of the loan is 120 months at a fixed interest rate of 2.744%. 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 $13.7 million outstanding on this debt facility at June 30, 2024, $2.1 million was classified as current. The loan is secured by the aircraft.
We expect that our major source of funding for 2024 and beyond will be our operating cash flows, our existing Cash 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. We also believe that we can further expand our borrowing capacity, if necessary; however, we do not believe we would increase our debt to a level that would have a material adverse impact upon results of operations or financial condition.
23
Sources and Uses of Cash
Net cash provided by operating activities for the six months ended June 30, 2024 was $34.0 million compared to $45.9 million in the comparable prior year six-month period. The $11.9 million decrease was primarily a result of a decrease in net income and larger payables balances, which outpaced increases in current assets, primarily accounts receivable, inventory and prepaid expenses.
Net cash used in investing activities for the six months ended June 30, 2024 was $4.3 million compared to $29.1 million in the comparable prior year six-month period. The $24.8 million change was primarily a result of decreases in acquisition activity and capital expenditures during the current period.
Net cash used in financing activities for the six months ended June 30, 2024 was $33.5 million compared to $11.7 million in the comparable prior year six-month period. The $21.8 million change was primarily the result of increased net payments of long-term debt.
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, 2024, we had $1.6 million of current operating lease liabilities and $7.0 million of noncurrent operating lease liabilities. Total liabilities related to finance lease obligations were less than $0.7 million at June 30, 2024.
As of June 30, 2024, the Company had total outstanding guarantees of $12.9 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, 2024, the Company had total outstanding letters of credit of $0.9 million.
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, 2024, and December 31, 2023, $8.5 million and $13.3 million was outstanding, of which $7.7 million and $11.4 million were classified as current, respectively. These facilities support commitments made in the ordinary course of business.
FORWARD LOOKING STATEMENTS
Cautionary Statement for “Safe Harbor” Purposes Under The Private Securities Litigation Reform Act of 1995
This Form 10-Q and other documents we file with the SEC contain forward-looking statements regarding the Company’s and management’s beliefs and expectations. Any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. As a general matter, forward-looking statements are those focused upon future plans, objectives or performance (as opposed to historical items) and include statements of anticipated events or trends and expectations and beliefs relating to matters not historical in nature. Use of words such “anticipates,” “believes,” “may,” “should,” “will,” “would,” “could,” “plans,” “projects,” “expects,” “estimates,” “predicts,” “targets,” “forecasts,” “intends,” “contemplates,” and similar words may identify forward-looking statements. Such forward-looking statements are subject to uncertainties and factors relating to the Company’s operations and business environment, all of which are difficult to predict and many of which are beyond the Company’s control. Such uncertainties and factors could cause the Company’s actual results to differ materially from those matters expressed in or implied by such forward-looking statements.
The following factors, among others, could affect the Company’s future performance and cause the Company’s actual results to differ materially from those expressed or implied by forward-looking statements made in this report:
• The overall demand for cable anchoring and control hardware for electrical transmission and distribution lines on a worldwide basis, which has a slow growth rate in mature markets such as the United States, Canada, Australia and Western Europe and may grow slowly or experience prolonged delay in developing regions despite expanding power needs;
• The potential impact of global economic conditions, including the impact of inflation and rising interest rates, on the Company’s ongoing profitability and future growth opportunities in the Company’s core markets in the U.S. and other foreign countries, which may experience continued or further instability due to political and economic conditions, social unrest, acts of war, military conflict (including the ongoing Russian-Ukrainian and Israeli-Palestinian conflicts), international hostilities or the perception that hostilities may be imminent, terrorism, changes in diplomatic and trade relationships and public health concerns (including viral outbreaks such as COVID-19);
• The ability of the Company’s customers to raise funds needed to build the infrastructure projects their customers require;
• Technological developments that affect longer-term trends for communication lines, such as wireless communication;
• The decreasing demand for product supporting copper-based infrastructure due to the introduction of products using new technologies or adoption of new industry standards;
• The Company’s success at continuing to develop proprietary technology and maintaining high quality products and customer service to meet or exceed new industry performance standards and individual customer expectations;
24
• The Company’s success in strengthening and retaining relationships with the Company’s customers, growing sales at targeted accounts and expanding geographically;
• The extent to which the Company is successful at expanding the Company’s product line or production facilities into new areas or implementing efficiency measures at existing facilities;
• The effects of fluctuation in currency exchange rates upon the Company’s foreign subsidiaries’ operations and reported results from international operations, together with non-currency risks of investing in and conducting significant operations in foreign countries, including those relating to political, social, economic and regulatory factors;
• The Company’s ability to identify, complete, obtain funding for and integrate acquisitions for profitable growth;
• The potential impact of consolidation, deregulation and bankruptcy among the Company’s suppliers, competitors and customers and of any legal or regulatory claims;
• The relative degree of competitive and customer price pressure on the Company’s products;
• The cost, availability and quality of raw materials required for the manufacture of products and any tariffs that may be associated with the purchase of these products. The Company’s supply chain could face disruptions and constraints from inflationary pressures and ongoing wars and military conflicts, which could have a material, adverse effect on the ability to secure raw materials and supplies;
• Strikes, labor disruptions and other fluctuations in labor costs;
• Changes in significant government regulations affecting environmental or other compliance or litigation matters;
• Security breaches or other disruptions to the Company’s information technology structure;
• The telecommunication market’s continued deployment of Fiber-to-the-Premises;
• The impact of any failure to timely implement and maintain adequate financial, information technology and management processes and controls and procedures; and
• Those factors described under the heading “Risk Factors” in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 which was filed on March 8, 2024.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.