What changed in this filing

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Item 1. Financial Statements

2020-08-06 compared with 2020-05-01 · 235 added, 157 removed, 414 unchanged (49% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

March 31, 2020

June 30, 2020

December 31, 2019

29 unchanged sentences

Common shares - $ 2 par value per share, 15,000,000 shares authorized, 4,934,506 and

4,992,979 issued and outstanding, at March 31, 2020 and December 31, 2019,

Common shares issued to rabbi trust, 264,283 and 267,641 shares at March 31, 2020

4,992,979 issued and outstanding, at June 30, 2020 and December 31, 2019,

Common shares issued to rabbi trust, 264,886 and 267,641 shares at June 30, 2020

and December 31, 2019, respectively

2 unchanged sentences

Retained earnings

Treasury shares, at cost, 1,506,481 and 1,431,235 shares at March 31, 2020 and

Treasury shares, at cost, 1,567,692 and 1,431,235 shares at June 30, 2020 and

December 31, 2019, respectively

7 unchanged sentences

STATEMENTS OF CONSOLIDATED INCOME

Three Months Ended March 31

Three Months Ended June 30

Six Months Ended June 30

(Thousands of dollars, except per share data)

3 unchanged sentences

Research and engineering

Other operating expense - net

Other operating (income) expense - net

OPERATING INCOME

2 unchanged sentences

Interest expense

Other income - net

Other (expense) income - net

INCOME BEFORE INCOME TAXES

1 unchanged sentence

Net adjustment attributable to noncontrolling interests

NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS

NET INCOME ATTRIBUTABLE TO PREFORMED

LINE PRODUCTS COMPANY SHAREHOLDERS

AVERAGE NUMBER OF SHARES OF COMMON STOCK

EARNINGS PER SHARE OF COMMON STOCK

ATTRIBUTABLE TO PREFORMED LINE PRODUCTS

COMPANY SHAREHOLDERS:

AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING:

EARNINGS PER SHARE OF COMMON STOCK ATTRIBUTABLE TO

PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS:

See notes to consolidated financial statements (unaudited).

1 unchanged sentence

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

Three Months Ended March 31

Three Months Ended June 30

Six Months Ended June 30

(Thousands of dollars)

2 unchanged sentences

Recognized net actuarial gain (net of tax provision of $ 39 and

$32 for the three months ended March 31, 2020 and 2019,

$ 31 for the three month periods ended June 30, 2020 and

2019, respectively).

Other comprehensive (loss) income, net of tax

Recognized net actuarial gain (net of

tax provision of $ 70 and $ 63 for the six months ended

June 30, 2020 and 2019, respectively).

Other comprehensive income (loss), net of tax

Comprehensive adjustment attributable to noncontrolling interests

Comprehensive (loss) income attributable to Preformed Line Products

Company shareholders

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

Three Months Ended March 31

Six Months Ended June 30

(Thousands of dollars)

6 unchanged sentences

Share-based compensation expense

Gain on sale of property and equipment

Changes in operating assets and liabilities

2 unchanged sentences

Income taxes - net

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

NET CASH PROVIDED BY OPERATING ACTIVITIES

INVESTING ACTIVITIES

1 unchanged sentence

Purchase of marketable securities

Proceeds from marketable securities

Purchase of company owned life insurance policy

Acquisition, net of cash acquired

1 unchanged sentence

FINANCING ACTIVITIES

Increase (decrease) in notes payable to banks

Increase in notes payable to banks

Proceeds from long-term debt

9 unchanged sentences

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF

Includes no restricted cash at March 31, 2020 and $.3 million at December 31, 2019.

Includes no restricted cash at June 30, 2020 and $.

3 million at December 31, 2019.

For further information regarding restricted cash, refer to Note P, “Debt Arrangements.”

8 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 months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full-year ending December 31, 2020.

Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full-year ending December 31, 2020.

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

12 unchanged sentences

The Company estimates product returns based on historical return rates.

Disaggregated reven ue

Disaggregated revenue

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

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Communications

Special Industries

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019

Communications

Special Industries

Six Months Ended June 30, 2020

Communications

Special Industries

Six Months Ended June 30, 2019

Communications

Special Industries

NOTE C – OTHER FINANCIAL STATEMENT INFORMATION

5 unchanged sentences

Noncurrent portion of inventory

Cost of inventories for certain material is determined using the last-in-first-out (LIFO) method and totaled approximately $30.8 million at March 31, 2020 and $32.0 million at December 31, 2019.

Cost of inventories for certain material is determined using the last-in-first-out (LIFO) method and totaled approximately $ 30.8 million at June 30, 2020 and $ 32.0 million at December 31, 2019.

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 March 31, 2020 and 2019, the net change in LIFO inventories resulted in $.2 million and $.3 million, respectively, of expense to Income before income taxes.

During the three and six-month periods ended June 30, 2020, the net change in LIFO inventories resulted in less than $ .1 million and $ .2 million, respectively, of expense to Income before income taxes.

During the three and six-month periods ended June 30, 2019, the net change in LIFO inventories resulted in no change and $.

3 million, respectively, of expense to Income before income taxes.

Noncurrent inventory is included in Other assets on the Consolidated Balance Sheets.

25 unchanged sentences

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 flows.

NOTE D – SHARE HOLDERS EQUITY

The following table reflects the changes in shareholders equity for the three months ended March 31, 2020 and 2019:

NOTE D – SHAREHOLDERS EQUITY

The following table reflects the changes in shareholders equity for the three months ended June 30, 2020 and 2019:

Accumulated Other

1 unchanged sentence

Common Shares

Noncontrolling

Compensation Liability

Cumulative Translation

(In thousands, except share and per share data)

Balance at December 31,

Foreign currency translation

Recognized net actuarial gain,

net of tax provision of $31

Net income (loss)

Foreign currency

translation adjustment

Recognized net actuarial

gain, net of tax

provision of $ 31

Total comprehensive

Share-based compensation

Purchase of 75,246 common

Issuance of 77,381 common

Common shares distributed

from rabbi trust of 3,358,

Purchase of 75,246

common shares

Issuance of 77,381

common shares

Common shares

distributed from rabbi

trust of 3,358 , net

Cash dividends declared -

1 unchanged sentence

Balance at March 31,

Foreign currency

translation adjustment

Recognized net actuarial

gain, net of tax

provision of $ 39

Total comprehensive

Purchase of 60,608

common shares

Issuance of 603 common

Common shares issued to

rabbi trust of 603 , net

Cash dividends declared -

$ .20 per share

Balance at June 30, 2020

Accumulated Other

Comprehensive Income

Noncontrolling

Common Shares

Compensation Liability

Cumulative Translation

Preformed Line

(In thousands, except share and per share data)

Balance at December 31,

Foreign currency translation

Recognized net actuarial gain,

net of tax provision of $32

Foreign currency

translation adjustment

Recognized net actuarial

gain, net of tax

provision of $ 32

Total comprehensive

Share-based compensation

Purchase of 40,891 common

Issuance of 78,821 common

Common shares issued to rabbi

trust of 705, net

Purchase of 40,891

common shares

Issuance of 78,821

common shares

Common shares issued to

rabbi trust of 705 , net

Cash dividends declared -

$ .20 per share

Balance at March 31,

Foreign currency

Recognized net actuarial

gain, net of tax

provision of $ 31

Total comprehensive

Purchase of 29,724

common shares

Issuance of 525

common shares

Common shares

distributed from

rabbi trust of 525 ,

Cash dividends declared -

$ .20 per share

Balance at June 30, 2019

NOTE E – PENSION PLANS

1 unchanged sentence

Net periodic pension cost for this plan included the following components:

Three Months Ended March 31

Three Months Ended June 30

Six Months Ended June 30

Interest cost

2 unchanged sentences

Net periodic pension cost (benefit)

No contributions were made to the Plan during the three months ended March 31, 2020.

The Company does not plan to contribute additional funds to the Plan during the remainder of 2020.

No contributions were made to the Plan during the six months ended June 30, 2020.

The Company plans to contribute additional funds in the amount of $ .3 million to the Plan during the third quarter of 2020.

NOTE F – ACCUMULATED OTHER COMPREHENSIVE INCOME (“AOCI”)

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

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

Balance at January 1

Three Months Ended June 30, 2020

Three Months Ended June 30, 2019

Balance at April 1

Other comprehensive loss before

3 unchanged sentences

Amounts reclassified from AOCI:

Amortization of defined benefit pension

actuarial gain (a)

Net current period other comprehensive

income (loss)

Balance at March 31

Amortization of defined benefit

pension actuarial gain (a)

Net current period other

comprehensive income (loss)

Balance at June 30

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

Defined benefit

Balance at January 1

Other comprehensive loss before

reclassifications:

Loss on foreign currency

translation adjustment

Amounts reclassified from AOCI:

Amortization of defined benefit

pension actuarial gain (a)

Net current period other

comprehensive income (loss)

Balance at June 30

This AOCI component is included in the computation of net periodic pension costs.

2 unchanged sentences

Diluted earnings per share were calculated by dividing Net income by the weighted-average of all potentially dilutive common stock that was outstanding during the periods presented.

The calculation of basic and diluted earnings per share for the three mon ths ended March 31 , 20 20 and 201 9 was as follows:

Three Months Ended March 31

The calculation of basic and diluted earnings per share for the three and six months ended June 30, 2020 and 2019 was as follows:

Three Months Ended June 30

Six Months Ended June 30

Determination of shares

3 unchanged sentences

Earnings per common share

For the three-month period ended March 31, 2020, 20,000 stock options were excluded from the calculation of diluted earnings per share as the effect would have been anti-dilutive.

For the three-month period ended March 31, 2019, no stock options were excluded from the calculation of diluted earnings per share as there was no anti-dilutive effect.

For the three and six-month periods ended June 30, 2020, 40,313 and 30,157 stock options, respectively, were excluded from the calculation of diluted earnings per share as the effect would have been anti-dilutive.

For both three and six-month periods ended June 30, 2019, 15,000 stock options were excluded from the calculation of diluted earnings per share as the effect would have been anti-dilutive.

NOTE H – GOODWILL AND OTHER INTANGIBLES

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

March 31, 2020

June 30, 2020

December 31, 2019

5 unchanged sentences

Indefinite-lived intangible assets

The aggregate amortization expense for other intangibles with finite lives for the three month periods ended March 31, 2020 and 2019 was $.4 million and $.3 million, respectively.

Amortization expense is estimated to be $1.2 million for the remaining period of 2020, $1.5 million for each of the years 2021, 2022 and 2023 and $1.4 million for 2024.

The aggregate amortization expense for other intangibles with finite lives for the three and six-month periods ended June 30, 2020 was $ .4 million and $ .9 million, respectively.

The aggregate amortization expense for other intangibles with finite lives for the three and six-month periods ended June 30, 2019 was $ .3 million and $ .6 million, respectively.

Amortization expense is estimated to be $ .8 million for the remaining period of 2020 and $ 1.5 million for each of the years 2021, 2022 and 2023 and 2024.

The combined weighted-average remaining amortization period is approximately 12.8 years.

6 unchanged sentences

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

The Company performs its annual impairment test for goodwill utilizing a discounted cash flow methodology, market comparables, and an overall market cap italization reasonableness test in computing fair value by reporting unit.

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

The Company performs its annual impairment test for goodwill utilizing a discounted cash flow methodology, market comparables, and an overall market capitalization reasonableness test in computing fair value by reporting unit.

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

Based on the assumptions as to growth, discount rates and the weighting used for each respective valuation methodology, results of the valuations could be significantly different.

2 unchanged sentences

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

The changes in the carrying amount of goodwill, by segment, for the three months ended March 31, 2020 are as follows:

The changes in the carrying amount of goodwill, by segment, for the three months ended June 30, 2020 are as follows:

Balance at January 1, 2020

Currency translation

Balance at March 31, 2020

Balance at June 30, 2020

NOTE I – SHARE-BASED COMPENSATION

14 unchanged sentences

Dividends declared are accrued in cash.

A summary of the RSUs outstanding under the LTIP for the three months ended March 31, 2020 is as follows:

A summary of the RSUs outstanding under the LTIP for the six months ended June 30, 2020 is as follows:

Restricted Share Units

1 unchanged sentence

Nonvested as of January 1, 2020

Nonvested as of March 31, 2020

Nonvested as of June 30 , 2020

Nonvested, performance-based RSUs are reflected above at the maximum performance achievement level.

For time-based RSUs, the Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the award in General and administrative expense in the accompanying Statements of Consolidated Income.

Compensation expense related to the time-based RSUs for both three-month periods ended March 31, 2020 and 2019 was $.1 million.

As of March 31, 2020, there was $.9 million of total unrecognized compensation cost related to time-based RSUs that is expected to be recognized over the weighted-average remaining period of approximately 2.2 years.

Compensation expense related to the time-based RSUs for the three and six-month periods ended June 30, 2020 was $ .1 million and $ .2 million, respectively.

Compensation expense related to the time-based RSUs for the three and six-month periods ended June 30, 2019 was also $ .1 million and $ .2 million, respectively.

As of June 30, 2020, there was $ .7 million of total unrecognized compensation cost related to time-based RSUs that is expected to be recognized over the weighted-average remaining period of approximately 2.0 years.

For the performance-based RSUs, the number of RSUs in which the participants will vest depends on the Company’s level of performance measured by growth in either operating or pre-tax income and sales growth over a requisite performance period.

Depending on the extent to which the performance criterions are satisfied under the LTIP and the Incentive Plan, the participants are eligible to earn common shares over the vesting period.

Performance-based compensation expense for both three-month periods ended March 31, 2020 and 2019 was $.8 million.

As of March 31, 2020, the remaining compensation expense of $5.1 million for outstanding performance-based RSU’s is expected to be recognized over a period of approximately 1.9 years.

Performance-based compensation expense for the three and six-month periods ended June 30, 2020 was $ .5 million and $ 1.3 million, respectively.

Performance-based compensation expense for the three and six-month periods ended June 30, 2019 was $ .9 million and $ 1.7 million, respectively As of June 30, 2020, the remaining compensation expense of $ 3.9 million for outstanding performance-based RSU’s is expected to be recognized over a period of approximately 1.7 years.

In the event of a Change in Control (as defined in the LTIP and the Incentive Plan), vesting of the RSUs will be accelerated and all restrictions will lapse.

11 unchanged sentences

zero coupon Treasury yield in effect at the time of grant.

There were no options granted for either of the three-month periods ended March 31, 2020 and 2019.

Stock option activity under the Company’s LTIP for three months ended March 31, 2020 was as follows:

There were 25,500 options granted for the six-month period ended June 30, 2020 and no options granted for the six-month period ended June 30, 2019.

Stock option activity under the Company’s LTIP for six months ended June 30, 2020 was as follows:

Exercise Price

1 unchanged sentence

Outstanding at January 1, 2020

Outstanding (vested and expected to vest) at March 31, 2020

Exercisable at March 31, 2020

There were no shares exercised during either of the three-month periods ended March 31, 2020 and 2019.

For both three-month periods ended March 31, 2020 and 2019, the Company recorded compensation expense related to the stock options currently vested of less than $.1 million.

The total compensation cost related to nonvested awards not yet recognized at March 31, 2020 is expected to be $.1 million over a weighted-average period of approximately 2.3 years.

Outstanding (vested and expected to vest) at June 30, 2020

Exercisable at June 30, 2020

There were no stock option shares exercised during either of the six-month periods ended June 30, 2020 and 2019.

For each of the three and six-month periods ended June 30, 2020 and 2019, the Company recorded compensation expense related to the stock options currently vested of less than $ .1 million.

The total compensation cost related to nonvested awards not yet recognized at June 30, 2020 is expected to be $ .5 million over a weighted-average period of approximately 2.7 years.

Deferred Compensation Plan

2 unchanged sentences

First, Directors make elective deferrals of Director fees payable and held in the rabbi trust.

deferred compensation plan allows the Directors to elect to receive Director fees in common shares of the Company at a later date instead of fees paid each quarter in cash.

Seco nd, this plan allows certain Company employees to defer restricted shares or RSUs for future distribution in the form of common shares.

Assets of the rabbi trust are consolidated, and the value of the Company’s common shares held in the rabbi trust is clas sified in Shareholders’ equity and generally accounted for in a manner similar to treasury stock.

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

The deferred compensation plan allows the Directors to elect to receive Director fees in common shares of the Company at a later date instead of fees paid each quarter in cash.

Second, this plan allows certain Company employees to defer restricted shares or RSUs for future distribution in the form of common shares.

Assets of the rabbi trust are consolidated, and the value of the Company’s common shares held in the rabbi trust is classified in Shareholders’ equity and generally accounted for in a manner similar to treasury stock.

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

As of March 31, 2020 , 2 6 4 , 283 shares have been deferred and are being held in the rabbi trust.

As of June 30, 2020, 264,886 shares have been deferred and are being held in the rabbi trust.

NOTE J – FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

9 unchanged sentences

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

The following table summarizes the Company’s assets and liabilities, recorded and measured at fair value, in the consolidated balance sheets as of March 31, 2020 and December 31, 2019:

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, 2020 and December 31, 2019:

Balance as of

March 31, 2020

June 30, 2020

Quoted Prices in

8 unchanged sentences

December 31, 2019

Quoted Prices in

Active Markets for

Identical Assets or

Quoted Prices in Active Markets for Identical Assets or Liabilities

Significant Other

4 unchanged sentences

Consequently, the Company is subject to market risk arising from exchange rate movements between the dates foreign currency transactions occur and the dates they are settled.

We currently use foreign currency forward contracts to reduce the risk related to some of these transactions.

The Company currently uses foreign currency forward contracts to reduce the risk related to some of these transactions.

These contracts usually have maturities of 90 days or less and generally require an exchange of foreign currencies for U.S.

2 unchanged sentences

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 months ended March 31, 2020, the Company recognized net gains of $1.1 million on foreign currency forward contracts.

There were no foreign currency contracts in place at March 31, 2019.

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

The liability for this unfunded Supplemental Profit Sharing Plan was $5.3 million at March 31, 2020 and $ 6.1 million at December 31, 201 9 .

These amounts are recorded within Other noncurrent liabilities on the Compa ny’s consolidated balance sheets.

For the three months and six months ended June 30, 2020, the Company recognized a net loss of $ .3 million and a net gain of $ .9 million, respectively, on foreign currency forward contracts.

There were no foreign currency contracts in place at June 30, 2019.

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

The liability for this unfunded Supplemental Profit Sharing Plan was $ 5.8 million at June 30, 2020 and $ 6.1 million at December 31, 2019.

These amounts are recorded within Other noncurrent liabilities on the Company’s consolidated balance sheets.

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

The Company credits earnings, gains and losses to the participants’ deferred compensation account balances based on the investments selected by the participants.

The Company measures the fair value of the Supplemental Profit Sharing Plan liability using the market values of the partici pants’ underlying investment accounts.

The Company measures the fair value of the Supplemental Profit Sharing Plan liability using the market values of the participants’ underlying investment accounts.

The earn-out represents the estimated fair value of additional cash consideration payable in connection with a recent acquisition that is contingent upon the achievement of certain performance milestones using expected future cash flows over the earn-out period while applying a discount rate that appropriately captures the risk associated with the obligation.

These are considered to be Level 3 inputs.

The contingent liabilities at March 31, 2020 and December 31, 2019 of $.2 million and $.6 million, respectively, are recorded in Other noncurrent liabilities on the Company’s consolidated balance sheet.

The contingent liabilities at June 30, 2020 and December 31, 2019 of $ .2 million and $ .6 million, respectively, are recorded in Other noncurrent liabilities on the Company’s consolidated balance sheet.

NOTE K – RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

9 unchanged sentences

ASU 2016-13 is effective for public companies in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company has completed its evaluation process and the January 1, 2020 adoption did not have a material impact to the Company’s consolidated financial statements for the three months ended March 31, 2020.

The Company has completed its evaluation process and the January 1, 2020 adoption did not have a material impact to the Company’s consolidated financial statements for the six months ended June 30, 2020.

NOTE L – NEW ACCOUNTING STANDARDS TO BE ADOPTED

1 unchanged sentence

Recently issued ASUs that are not considered were assessed and determined to be not applicable in the current reporting period.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes:

Simplifying the Accounting for Income Taxes (“Topic 740”), which simplifies the accounting for income taxes, eliminates certain exceptions within Topic 740 and clarifies certain other aspects of the current guidance to promote consistency among reporting entities.

The new standard is effective for fiscal years beginning after December 15, 2020 on a prospective basis and early adoption is permitted.

The Company is currently evaluating the impact of the provisions of this standard on the Company’s Consolidated Financial Statements.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (“Topic 848”):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

ASU 2020-04 provides for temporary optional expedients and exceptions to the current guidance on certain contract modifications and hedging relationships to ease the burdens related to the expected market transition from the London Inter-bank Offered Rate (“LIBOR”) or other reference rates to alternative reference rates.

The guidance is effective upon issuance and can be applied through December 31, 2022.

The Company does not expect the adoption of this standard to have a material impact on its Consolidated Financial Statements.

NOTE M – SEGMENT INFORMATION

The following tables present a summary of the Company’s reportable segments for the three months ended March 31, 2020 and 2019.

The following tables present a summary of the Company’s reportable segments for the three and six months ended June 30, 2020 and 2019.

Financial results for the PLP-USA segment include the elimination of all segments’ intercompany profit in inventory.

Three Months Ended March 31

Three Months Ended June 30

Six Months Ended June 30

Total net sales

4 unchanged sentences

Products Company shareholders

Total net income attributable to Preformed

Line Products Company shareholders

March 31, 2020

Total net income attributable to Preformed Line

Products Company shareholders

June 30, 2020

December 31, 2019

1 unchanged sentence

NOTE N – INCOME TAXES

The Company’s effective tax rate was 28% and 5% for the three months ended March 31, 2020 and 2019, respectively .

The higher effective tax rate for the three months ended March 31, 2020 compared to the U.S.

federal statutory rate of 21% was primarily due to increase in earnings in jurisdictions with higher tax rates than the U.S.

federal statutory rate where such earnings are permanently reinvested and an increase in various U.S.

permanent items, primarily limitations on the deductibility of executive compensation.

The lower effective tax rate for the three months ended March 31, 2019 compared to the U.S.

federal statutory rate of 21% was primarily due to the recognition of benefits related to stock based compensation, partially offset by U.S.

permanent items primarily related to deductibility of executive compensation and increased earnings in jurisdictions with higher tax rates than the U.S.

statutory rate.

The Company’s effective tax rate was 25 % and 28 % for the three months ended June 30, 2020 and 2019, respectively, and 26 % and 24 % for the six months ended June 30, 2020 and 2019, respectively .

The higher effective tax rate for the three and six months ended June 30, 2020 and 2019 compared to the U.S.

federal statutory rate of 21 % was primarily due to increases in earnings in jurisdictions with higher tax rates than the U.S.

federal statutory rate where such earnings are permanently reinvested, an increase in various U.S.

permanent items, primarily limitations on the deductibility of executive compensation, and losses in jurisdictions where no tax benefit is realized.

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.

No significant changes to the valuation allowances were reflected fo r the periods ended March 31, 2020 or March 31, 2019.

The Company previously considered the majority of the earnings in non-U.S.

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

No significant changes to the valuation allowances were reflected for the periods ended June 30, 2020 or June 30, 2019.

The Company previously considered the majority of the earnings in its non-U.S.

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

The Company intends to continue to invest most or all of these earnings, as well as its capital in these subsidiaries, indefinitely, outside of the U.S.

and does not expect to incur any significant additional taxes related to such amounts.

and does not expect to incur any significant additional taxes related to such earnings.

NOTE O – PRODUCT WARRANTY RESERVE

5 unchanged sentences

The following is a rollforward of the product warranty reserve:

Three Months Ended March 31

Six Months Ended June 30

Beginning of period balance

4 unchanged sentences

NOTE P – DEBT ARRANGEMENTS

On March 13, 2018, the Company extended the term on its $65 million credit facility from June 30, 2019 to June 30, 2021.

On April 17, 2020, the Company extended the term on its $ 65 million credit facility from June 30, 2021 to June 30, 2024 and added its Austrian subsidiary as a borrower on the facility.

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

At March 31, 2020, the Company’s Polish subsidiary had borrowed $6.0 million U.S.

At June 30, 2020, the Company’s Polish subsidiary had borrowed $ 6.2 million U.S.

dollars at a rate of 1.125 % plus the Warsaw Interbank Offer Rate with a term expiring June 30, 2024 .

At March 31, 2020, the Company’s Australian subsidiary had borrowed $4.5 million U.S.

At June 30, 2020, the Company’s Australian subsidiary had borrowed $ 5.2 million U.S.

dollars, also with a term expiring June 30, 2024 .

At March 31, 2020, the interest rates on the U.S., Polish and Australian line of credit agreement were 2.118%, 2.755% and 1.955%, respectively.

Under the credit facility, at March 31, 2020, the Company had utilized $38.5 million with $26.5 million available under the line of credit, net of long-term outstanding letters of credit.

At June 30, 2020, the interest rates on the U.S., Polish and Australian line of credit agreement were 1.287 %, 1.365 % and 1.225 %, respectively.

Under the credit facility, at June 30, 2020, the Company had utilized $ 37.5 million with $ 27.5 million available under the line of credit, net of long-term outstanding letters of credit of $ .1 million.

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

At March 31, 2020, the Company was in compliance with these covenants.

At June 30, 2020, the Company was in compliance with these covenants.

On February 28, 2019, the Company acquired its Austrian subsidiary, SubCon Electrical Fittings GmbH (“SubCon”), headquartered in Dornbirn, Austria.

The Company’s Austrian subsidiary has a 1.0 million euros, or $1.1 million U.S.

The Company’s Austrian subsidiary had a 1.0 million euros, or $ 1.1 million U.S.

dollars line of credit with a term expiration of May 31, 2021 with the option to renew for an additional twelve months indefinitely.

At March 31, 2020, the Company’s Austrian subsidiary had borrowed $.5 million on the line of credit at an interest rate of 1.400%.

On June 26 2020, the Company’s Austrian subsidiary borrowed $ .6 million on the Company’s line of credit at an interest rate of 1.315 %.

The proceeds were used to repay the previously outstanding local line of credit.

At repayment, the local line of credit was cancelled.

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

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

At March 31, 2020, $7.3 million was outstanding on this debt facility, of which $.8 million is classified as current.

At June 30, 2020, $ 7.1 million was outstanding on this debt facility, of which $ .8 million is classified as current.

On August 14, 2019, the Company’s New Zealand subsidiary borrowed $ 5.3 million U.S.

dollars at a rate of 3.900 % with a term expiring on August 26, 2021 .

At March 31, 2020, $4.6 million was outstanding on this facility, of which $.4 million is classified as current.

At June 30, 2020, $ 4.9 million was outstanding on this facility, of which $ .5 million is classified as current.

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

For the periods ended March 31, 2020 and December 31, 2019, the Company’s Asia Pacific segment had none and $.3 million, respectively, in restricted cash used to secure bank debt.

For the periods ended June 30, 2020 and December 31, 2019, the Company’s Asia Pacific segment had none and $ .3 million, respectively, in restricted cash used to secure bank debt.

The restricted cash is shown on the balance sheet in Other assets.

1 unchanged sentence

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

As of March 31, 2020, the leases in effect were related to land, buildings, vehicles, office equipment and other production equipment under operating leases with lease terms of up to 99 years.

As of June 30, 2020, the leases in effect were related to land, buildings, vehicles, office equipment and other production equipment under operating leases with lease terms of up to 99 years.

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

2 unchanged sentences

The Company evaluates renewal and termination options at the lease commencement date to determine if the Company is reasonably certain to exercise the option on the basis of economic factors.

The weighted average remaining lease term for the Company’s operating and financing leases as of March 31, 2020 was 17.3 and 2.2 years, respectively.

The weighted average remaining lease term for the Company’s operating and financing leases as of June 30, 2020 was 17.1 and 2.8 years, respectively.

Lease expense is recognized for these leases on a straight-line basis over the lease term with variable lease payments recognized in the period those payments are incurred.

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

The Company’s operating and finance lease costs for the three months ended March 31, 2020 were as follows:

Three Months Ended

March 31, 2020

Three Months Ended

March 31, 2019

The Company’s operating and finance lease costs for the six months ended June 30, 2020 were as follows:

Six Months Ended

June 30, 2020

Six Months Ended

June 30, 2019

Components of lease expense

6 unchanged sentences

The incremental borrowing rate for the Company’s leases is determined based on lease term and currency in which lease payments are made, adjusted for impacts of collateral.

The weighted average discount rate used to measure the Company’s operating and finance lease liabilities as of March 31, 2020 was 4.71% and 4.24%, respectively.

Future maturities of the Company’s lease liabilities as of March 31, 2020 are as follows:

The weighted average discount rate used to measure the Company’s operating and finance lease liabilities as of June 30, 2020 was 4.63 % and 4.21 %, respectively.

Future maturities of the Company’s lease liabilities as of June 30, 2020 are as follows:

Operating Leases

5 unchanged sentences

The total minimum sublease rentals under noncancelable subleases to be received through 2023 is $ 3.1 million.

Supplemental cash flow information related to leases for the three-month period ended March 31, 2020 was as follows:

Three Months Ended

March 31, 2020

Three Months Ended

March 31, 2019

Supplemental cash flow information related to leases for the six-month period ended June 30, 2020 was as follows:

Six Months Ended

June 30, 2020

Six Months Ended

June 30, 2019

Supplemental cash flow information

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Operating cash flows from finance leases

Operating cash flows from operating and financing leases

Financing cash flows from finance leases

2 unchanged sentences

The Audit Committee of the Board of Directors approved this transaction.

On February 5 , 20 20 , the Company purchased 39,208 shares o f the Company from current and retired Officer s at a price per share of $5 8 .

65 , which was calculated from a 30-day average market price in connection with the vesting of equity awards.

The Audit Committee of the Board of Directors approved this transactio n.

On February 5, 2020, the Company purchased 39,208 shares of the Company from current and retired Officers at a price per share of $ 58.65 , which was calculated from a 30 -day average market price in connection with the vesting of equity awards.

The Audit Committee of the Board of Directors approved this transaction.

NOTE S – BUSINESS COMBINATIONS

6 unchanged sentences

SubCon’s overall purchase price included an estimated contingent liability of $ .6 million for an earn-out consideration with a potential maximum payment of 4.0 million Euros that will be considered for remeasurement during each reporting period as the operating results of SubCon are evaluated during each reporting period based upon operating results over a four year period.

At March 31, 2020, the current earnout value of $.2 million is recorded in Other noncurrent liabilities on the Company’s consolidated balance sheet.

At June 30, 2020, the current earnout value of $ .2 million is recorded in Other noncurrent liabilities on the Company’s consolidated balance sheet.

On April 1, 2019, the Company acquired MICOS Telcom s.r.o (“MICOS Telcom”) headquartered in Prostějov, Czech Republic.

5 unchanged sentences

The operating results and financial position of both SubCon and MICOS Telcom are included in the Company’s EMEA reportable segment as of their respective dates of acquisition.

Pro-forma results of the Company’s consolidated operations for the three-month periods ended March 31, 2020 and 2019 would not have been materially different from reported results and are, therefore, not presented.

Pro-forma results of the Company’s consolidated operations for the three and six-month periods ended June 30 , 2020 and 201 9 would not have been materially different from reported results and are , therefore , not presented.

The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition dates:

7 unchanged sentences

Net assets acquired

NOTE T – SUBSEQUENT EVENTS

On April 17, 2020, the Company extended the term on its $65 million credit facility from June 30, 2021 to June 30, 2024.

All other terms remain the same.

In addition to extending the term, the Company added its Austrian subsidiary as a borrower on the credit facility.

For further information regarding this debt, refer to Exhibit 10.1, Term Note dated April 17, 2020 between the Company and PNC Bank, National Association and Exhibit 10.2, Amended and Restated Loan Agreement dated April 17, 2020 between the Company and PNC Bank, National Association.

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