What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-10-30 compared with 2020-08-06 · 187 added, 187 removed, 462 unchanged (45% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2020

September 30, 2020

December 31, 2019

29 unchanged sentences

Common shares - $ 2 par value per share, 15,000,000 shares authorized, 4,914,543 and

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

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

Common shares issued to rabbi trust, 265,508 and 267,641 shares at September 30, 2020

and December 31, 2019, respectively

2 unchanged sentences

Retained earnings

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

Treasury shares, at cost, 1,592,027 and 1,431,235 shares at September 30, 2020 and

December 31, 2019, respectively

7 unchanged sentences

STATEMENTS OF CONSOLIDATED INCOME

Three Months Ended June 30

Six Months Ended June 30

(Thousands of dollars, except per share data)

Three Months Ended September 30

Nine Months Ended September 30

(Amounts in thousands of dollars, except earnings per share data)

Cost of products sold

2 unchanged sentences

Research and engineering

Other operating (income) expense - net

Other operating expense - net

OPERATING INCOME

2 unchanged sentences

Interest expense

Other (expense) income - net

Other income (expense) - net

INCOME BEFORE INCOME TAXES

Income tax expense

Net adjustment attributable to noncontrolling interests

Net income (loss) attributable to noncontrolling interests

NET INCOME ATTRIBUTABLE TO PREFORMED

7 unchanged sentences

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

Three Months Ended June 30

Six Months Ended June 30

Three Months Ended September 30

Nine Months Ended September 30

(Thousands of dollars)

1 unchanged sentence

Foreign currency translation adjustment

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

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

2019, respectively).

Recognized net actuarial gain (net of

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

June 30, 2020 and 2019, respectively).

Recognized net actuarial gain (net of tax provision of $ 23 and $ 32 for the three months ended September 30, 2020 and 2019, respectively).

Recognized net actuarial gain (net of tax provision of $ 84 and $ 95 for the nine months ended September 30, 2020 and 2019, respectively).

Other comprehensive (income) loss, net of tax

Comprehensive adjustment attributable to noncontrolling interests

Comprehensive income (loss) attributable to Preformed Line

Products Company shareholders

Comprehensive (income) loss attributable to noncontrolling interests

Comprehensive income 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)

6 unchanged sentences

Share-based compensation expense

Gain (loss) on sale of property and equipment

Changes in operating assets and liabilities

2 unchanged sentences

Income taxes - net

Contributions to company pension plan

NET CASH PROVIDED BY OPERATING ACTIVITIES

1 unchanged sentence

Capital expenditures

Proceeds from the sale of property and equipment

Purchase of marketable securities

4 unchanged sentences

FINANCING ACTIVITIES

Increase in notes payable to banks

Increase (decrease) in notes payable to banks

Proceeds from long-term debt

4 unchanged sentences

Purchase of common shares for treasury from related parties

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

Effects of exchange rate changes on cash and cash equivalents

Net decrease in cash, cash equivalents and restricted cash

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

Cash, cash equivalents and restricted cash at beginning of year

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF

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

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

3 million at December 31, 2019.

9 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, 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 nine months ended September 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.

As a result, investments in noncontrolling interests are reported as equity in our consolidated financial statements.

As a result, investments in noncontrolling interests are reported as equity in the Company’s consolidated financial statements.

Additionally, the Company’s consolidated financial statements include 100 % of a controlled subsidiary’s earnings, rather than only its share.

12 unchanged sentences

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

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Communications

Special Industries

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Communications

Special Industries

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Communications

Special Industries

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Communications

2 unchanged sentences

Inventories – net

September 30,

Raw materials

3 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 June 30, 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 $ 31.1 million at September 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 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.

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

During the three and nine-month periods ended September 30, 2019, the net change in LIFO inventories resulted in $ .1 million and $ .5 million, respectively, of expense to Income before income taxes.

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

Property, plant and equipment—net

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

September 30,

Land and improvements

23 unchanged sentences

NOTE D – SHAREHOLDERS EQUITY

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

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

Accumulated Other

Comprehensive Income

Common Shares

Compensation Liability

Cumulative Translation

Noncontrolling

(In thousands, except share and per share data)

1 unchanged sentence

Net income (loss)

Foreign currency

translation adjustment

Recognized net actuarial

gain, net of tax

provision of $ 31

Total comprehensive

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 -

$ .20 per share

Foreign currency translation adjustment

Recognized net actuarial gain, net of tax provision of $ 31

Total comprehensive income

Share-based compensation

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 - $ .20 per share

Balance at March 31, 2020

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

Foreign currency translation adjustment

Recognized net actuarial gain, net of tax provision of $ 39

Total comprehensive income

Share-based compensation

Purchase of 60,608 common shares

Issuance of 603 common shares

Common shares issued to rabbi trust of 603 , net

Cash dividends declared - $ .20 per share

Balance at June 30, 2020

Foreign currency translation adjustment

Recognized net actuarial gain, net of tax provision of $ 23

Total comprehensive income

Share-based compensation

Purchase of 24,335 common shares

Issuance of 622 common shares

Common shares issued to rabbi trust of 622 , net

Cash dividends declared - $ .20 per share

Balance at September 30, 2020

Accumulated Other

Comprehensive Income

Common Shares

Compensation Liability

Cumulative Translation

Preformed Line

Noncontrolling

(In thousands, except share and per share data)

Balance at December 31, 2018

Foreign currency

translation adjustment

Recognized net actuarial

gain, net of tax

provision of $ 32

Total comprehensive

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

Foreign currency translation adjustment

Recognized net actuarial gain, net of tax provision of $ 32

Total comprehensive income

Share-based compensation

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, 2019

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

Foreign currency translation adjustment

Recognized net actuarial gain, net of tax provision of $ 31

Total comprehensive income

Share-based compensation

Purchase of 29,724 common shares

Issuance of 525 common shares

Common shares distributed from rabbi trust of 525 , net

Cash dividends declared - $ .20 per share

Balance at June 30, 2019

Foreign currency translation adjustment

Recognized net actuarial gain, net of tax provision of $ 32

Total comprehensive income

Share-based compensation

Purchase of 15,150 common shares

Issuance of 1,262 common shares

Common shares distributed from rabbi trust of 3,219 , net

Cash dividends declared - $ .20 per share

Balance at September 30, 2019

NOTE E – PENSION PLANS

1 unchanged sentence

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

Three Months Ended June 30

Six Months Ended June 30

Three Months Ended September 30

Nine Months Ended September 30

Interest cost

2 unchanged sentences

Net periodic pension cost (benefit)

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.

The Company contributed $ .3 million to the Plan during the nine months ended September 30, 2020.

The Company does no t plan to contribute additional funds to the Plan during the remainder 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 June 30, 2020

Three Months Ended June 30, 2019

Balance at April 1

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

Balance at July 1

Other comprehensive loss before

7 unchanged sentences

comprehensive income (loss)

Balance at June 30

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

Balance at September 30

Nine Months Ended September 30, 2020

Nine Months Ended September 30, 2019

Defined benefit

10 unchanged sentences

comprehensive income (loss)

Balance at June 30

Balance at September 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 and six months ended June 30, 2020 and 2019 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, 2020 and 2019 was as follows:

Three Months Ended September 30

Nine Months Ended September 30

Determination of shares

3 unchanged sentences

Earnings per common share

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.

For the three and nine-month periods ended September 30, 2020, 45,500 and 35,364 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 nine-month periods ended September 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:

June 30, 2020

September 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 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 aggregate amortization expense for other intangibles with finite lives for the three and nine-month periods ended September 30, 2020 was $ .5 million and $ 1.3 million, respectively.

The aggregate amortization expense for other intangibles with finite lives for the three and nine-month periods ended September 30, 2019 was $ .5 million and $ 1.1 million, respectively.

Amortization expense is estimated to be $ .5 million for the remainder of 2020 and $ 1.6 million for each of the years 2021, 2022 and 2023 and $ 1.5 million for 2024.

The combined weighted-average remaining amortization period is approximately 12.6 years.

12 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 June 30, 2020 are as follows:

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

Balance at January 1, 2020

Currency translation

Balance at June 30, 2020

Balance at September 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 six months ended June 30, 2020 is as follows:

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

Restricted Share Units

1 unchanged sentence

Nonvested as of January 1, 2020

Nonvested as of June 30 , 2020

Nonvested as of September 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 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.

Compensation expense related to the time-based RSUs for the three and nine-month periods ended September 30, 2020 was $ .1 million and $ .3 million, respectively.

Compensation expense related to the time-based RSUs for the three and nine-month periods ended September 30, 2019 was $ .2 million and $ .4 million, respectively.

As of September 30, 2020, there was $ .6 million of total unrecognized compensation cost related to time-based RSUs that is expected to be recognized over the weighted-average remaining period of approximately 1.8 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 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.

Performance-based compensation expense for the three and nine-month periods ended September 30, 2020 was $ 1.2 million and $ 2.6 million, respectively.

Performance-based compensation expense for the three and nine-month periods ended September 30, 2019 was $ 1.2 million and $ 2.9 million, respectively.

As of September 30, 2020, the remaining compensation expense of $ 4.6 million for outstanding performance-based RSU’s is expected to be recognized over a period of approximately 1.8 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 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:

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

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

Exercise Price

1 unchanged sentence

Outstanding at January 1, 2020

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.

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

Exercisable at September 30, 2020

There were 3,750 and - 0 - stock option shares exercised during the nine-month periods ended September 30, 2020 and 2019, respectively.

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

The total compensation cost related to nonvested awards not yet recognized at September 30, 2020 is expected to be $ .4 million over a weighted-average period of approximately 2.4 years.

Deferred Compensation Plan

7 unchanged sentences

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

As of September 30, 2020, 265,508 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 June 30, 2020 and December 31, 2019:

The following table summarizes the Company’s assets and liabilities, recorded and measured at fair value, on the Company’s Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019:

Balance as of

June 30, 2020

September 30, 2020

Quoted Prices in

3 unchanged sentences

Observable Inputs

Foreign currency forward contracts, net

Foreign currency forward contracts

Supplemental profit sharing plan

Foreign currency forward contracts

Total Liabilities

13 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 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.

For the three months and nine months ended September 30, 2020, the Company recognized a net gain of $ .1 million and $ 1.0 million, respectively, on foreign currency forward contracts.

The Company recognized a gain of $ .1 million in both three and nine-month periods ended September 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.

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

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

4 unchanged sentences

These are considered to be Level 3 inputs.

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.

The contingent liabilities at September 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 Sheets.

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 six months ended June 30, 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 nine months ended September 30, 2020.

NOTE L – NEW ACCOUNTING STANDARDS TO BE ADOPTED

The Company considers the applicability and impact of all ASUs.

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.

10 unchanged sentences

NOTE M – SEGMENT INFORMATION

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

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

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

2 unchanged sentences

Total income taxes

Net income attributable to Preformed Line

Products Company shareholders

Total net income attributable to Preformed Line

Products Company shareholders

June 30, 2020

Net income attributable to

Preformed Line Products

Company shareholders

Total net income attributable to

Preformed Line Products

Company shareholders

September 30, 2020

December 31, 2019

1 unchanged sentence

NOTE N – INCOME TAXES

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.

The Company’s effective tax rate was 26 % and 29 % for the three months ended September 30, 2020 and 2019, respectively, and 26 % for both nine-month periods ended September 30, 2020 and 2019 .

The higher effective tax rate for the three and nine months ended September 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.

2 unchanged sentences

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 for the periods ended June 30, 2020 or June 30, 2019.

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

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

4 unchanged sentences

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

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

These amounts are recorded in Accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets.

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

2 unchanged sentences

The following is a rollforward of the product warranty reserve:

Six Months Ended June 30

Nine Months Ended September 30

Beginning of period balance

6 unchanged sentences

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

At September 30, 2020, the Company’s Polish subsidiary had borrowed $ 6.3 million U.S.

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

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

At September 30, 2020, the Company’s Australian subsidiary had borrowed $ 5.3 million U.S.

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

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.

At September 30, 2020, the interest rates on the U.S., Polish and Australian line of credit agreement were 1.273 %, 1.325 % and 1.215 %, respectively.

Under the credit facility, at September 30, 2020, the Company had utilized $ 30.1 million with $ 34.9 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 June 30, 2020, the Company was in compliance with these covenants.

At September 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.

6 unchanged sentences

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

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

At September 30, 2020, $ 6.9 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 June 30, 2020, $ 4.9 million was outstanding on this facility, of which $ .5 million is classified as current.

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

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

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.

For the periods ended September 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 Company’s Consolidated Balance Sheets in Other assets.

NOTE Q – LEASES

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

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.

As of September 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 June 30, 2020 was 17.1 and 2.8 years, respectively.

The weighted average remaining lease term for the Company’s operating and financing leases as of September 30, 2020 was 17.5 and 2.7 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 six months ended June 30, 2020 were as follows:

Six Months Ended

June 30, 2020

Six Months Ended

June 30, 2019

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

Three Months Ended

September 30, 2020

September 30, 2019

Components of lease expense

4 unchanged sentences

Total lease cost

Nine Months Ended

September 30, 2020

September 30, 2019

Components of lease expense

Operating lease cost

Finance lease cost

Amortization of right-of-use assets

Interest on lease liabilities

Total lease cost

The discount rate implicit within each lease is often not determinable and, therefore, the Company establishes the discount rate based on its incremental borrowing rate.

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 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:

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 September 30 , 2020 was 4.55 % and 4.19 %, respectively .

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

Operating Leases

5 unchanged sentences

The total minimum sublease rentals under noncancelable subleases to be received through 2023 is $ 2.9 million.

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 related to leases for the nine-month period ended September 30, 2020 was as follows:

Nine Months Ended

September 30, 2020

Nine Months Ended

September 30, 2019

Supplemental cash flow information

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

At September 30, 2020, the current earnout value of $ .2 million is recorded in Other noncurrent liabilities on the Company’s Consolidated Balance Sheets.

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

1 unchanged sentence

The total purchase price was $ 8.8 million in cash, net of $ .5 million in cash acquired, including a hold-back liability of $ 1.5 million payable in two years from the date of purchase and $ .9 million of deferred consideration for the remaining 10 %.

The hold-back liability and deferred consideration are recorded in Other noncurrent liabilities on the Company’s consolidated balance sheet.

The hold-back liability and deferred consideration are recorded in Other noncurrent liabilities on the Company’s Consolidated Balance Sheets.

The purchase price was predominantly allocated to Goodwill of $ 5.6 million and Intangible assets of $ 3.4 million.

1 unchanged sentence

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 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.

Pro-forma results of the Company’s consolidated operations for the three and nine-month periods ended September 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:

8 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