What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-10-30 compared with 2020-08-06 · 128 added, 117 removed, 200 unchanged (55% of the section changed)

27 unchanged sentences

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 consolidated financial statements in the assessment of our performance and operating trends.

The following discussion describes our results of operations for the three and six months ended June 30, 2020.

The following discussion describes our results of operations for the three and nine months ended September 30, 2020.

The first quarter of 2020 saw the global outbreak of a novel strain of coronavirus (“COVID-19”), which in the latter part of the quarter created significant global economic disruption.

While the recent outbreak did not have a material impact on our reported results for the reported periods, it created challenges for us in countries that were the earliest to be impacted by the pandemic, namely our Asia-Pacific business segment.

While the recent outbreak did not have a material impact on our results for the reported periods, it created challenges for us in countries that were the earliest to be impacted by the pandemic, namely our Asia-Pacific business segment.

Due to restrictions on our operations, the operations of our customers and the global supply chain, we are actively monitoring its impact on future periods.

As the virus spread, we took action to protect the health and safety of our employees while we maintained critical operations to protect our customers and suppliers.

Currently, many of our customers are considered “essential” and are open for business, although maybe in a limited capacity, which has slowed demand into the second quarter.

Nearly all of our North American plants have remained operational and only some of our international plants were closed temporarily.

M any of our customers are considered “essential” and are open for business, although maybe in a limited capacity, which has slowed demand into the second and third quarter , most notably for specific customers in Asia Pacific .

O ur North American plants have remained fully operational and only some of our international plants were closed temporarily.

While there are some restrictions to the supply of products globally and those restrictions may continue or expand to other regions, our global supply chain currently remains strong.

Due to the uncertainty created by COVID-19, we are actively managing costs and our liquidity position to provide additional flexibility while still supporting our customers and their specific needs.

We are scaling back capital expenditures and reducing operating expenses and could experience lower variable SG&A, primarily through a decrease in employee-related expenses and reduced travel-related expenses incurred by our associates, due to travel restrictions in place.

We are reducing operating expenses and could experience lower variable SG&A, primarily through a decrease travel-related expenses incurred by our associates, due to travel restrictions in place.

While we expect the COVID-19 outbreak will continue to have an adverse impact on our business, the businesses of our customers and the global economy, we cannot predict the duration or scope of the COVID-19 pandemic or the magnitude of its impact on our business and results of operations.

The extent of any future impact is dependent upon several factors including those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (“SEC”) on March 6, 2020 and the Company’s Quarterly Report on Form 10-Q file with the SEC on May 1, 2020.

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

3 unchanged sentences

dollars, and, conversely, when foreign currencies weaken, our sales and costs decrease upon translation into U.S.

The fluctuations of foreign currencies during the three and six months ended June 30, 2020 had a $7.1 million and $11.3 million unfavorable effect, respectively, on net sales compared to the same period in 2019.

There was a $.5 million and a $.7 million unfavorable effect, respectively, on net income for the three and six months ended June 30, 2020 as compared to the prior year.

On a reportable segment basis, the impact of foreign currency on net sales and net income for the three and six months ended June 30, 2020 was as follows:

The fluctuations of foreign currencies during the three and nine months ended September 30, 2020 had a $3.7 million and $15.0 million unfavorable effect, respectively, on net sales compared to the same period in 2019.

There was a $.3 million and a $1.0 million unfavorable effect, respectively, on net income for the three and nine months ended September 30, 2020 as compared to the prior year.

On a reportable segment basis, the impact of foreign currency on net sales and net income for the three and nine months ended September 30, 2020 was as follows:

Foreign Currency Translation Impact

(Thousands of dollars)

The operating results for the three months ended June 30, 2020 are compared to the same period in 2019.

Net sales for the three months ended June 30, 2020 of $117.6 million increased $2.8 million, or 2%, compared to 2019.

The operating results for the three months ended September 30, 2020 are compared to the same period in 2019.

Net sales for the three months ended September 30, 2020 of $127.5 million increased $8.2 million, or 7%, compared to 2019.

As a percentage of net sales, gross profit increased to 35.2% in 2020 from 33.0% in 2019.

Gross profit for the three-month periods ended June 30, 2020 and 2019 was $39.6 million and $37.8 million, respectively.

Gross profit for the three-month periods ended September 30, 2020 and 2019 was $44.9 million and $39.3 million, respectively.

Excluding the unfavorable impact of foreign currency translation, gross profit increased $6.7 million, or 17%, compared to 2019.

Costs and expenses of $24.8 million decreased $1.9 million compared to 2019 and included a favorable impact from currency translation of $1.4 million.

Operating income for the three months ended June 30, 2020 was $14.8 million, an increase of $3.7 million compared to 2019.

Net income for the three months ended June 30, 2020 of $10.5 million increased $2.6 million compared to the three months ended June 30, 2019.

The effect of currency translation had a $.9 million and a $.5 million negative impact on operating income and net income, respectively.

The operating results for the six months ended June 30, 2020 are compared to the same period in 2019.

Net sales for the six months ended June 30, 2020 of $220.5 million increased $8.5 million, or 4%, compared to 2019.

Costs and expenses of $28.0 million increased $.3 million compared to 2019 and included a favorable impact from currency translation of $.6 million.

Operating income for the three months ended September 30, 2020 was $16.9 million, an increase of $5.2 million compared to 2019.

Net income for the three months ended September 30, 2020 of $13.3 million increased $5.3 million compared to the three months ended September 30, 2019.

The effect of currency translation had negative impacts of $.5 million and $.3 million on operating income and net income, respectively.

The operating results for the nine months ended September 30, 2020 are compared to the same period in 2019 .

Net sales for the nine months ended September 30, 2020 of $347.9 million increased $16.7 million, or 5%, compared to 2019.

As a percentage of net sales, gross profit increased to 33.7% in 2020 from 31.5% in 2019.

Gross profit for the six-month periods ended June 30, 2020 and 2019 was $72.5 million and $65.1 million, respectively.

Gross profit for the nine-month periods ended September 30, 2020 and 2019 was $117.4 million and $104.41 million, respectively.

Excluding the unfavorable impact of foreign currency translation, gross profit increased $17.6 million, or 17%, compared to 2019.

Costs and expenses of $81.1 million increased $1.4 million compared to 2019 and included a favorable impact from currency translation of $3.0 million.

Operating income for the six months ended June 30, 2020 was $19.5 million, an increase of $6.3 million compared to 2019.

Net income for the six months ended June 30, 2020 of $14.2 million increased $4.5 million compared to the six months ended June 30, 2019.

Operating income for the nine months ended September 30, 2020 was $36.3 million, an increase of $11.5 million compared to 2019.

Net income for the nine months ended September 30, 2020 of $27.4 million increased $9.7 million compared to the nine months ended September 30, 2019.

The year-to-date effect of currency translation had a $1.7 million and a $1.0 million negative impact on operating income and net income, respectively.

The following table reflects the impact of foreign currency fluctuations on operating income for the three and six- month periods ended June 30 , 2020 and 201 9 :

The following table reflects the impact of foreign currency fluctuations on operating income for the three and nine-month periods ended September 30 , 2020 and 201 9 :

Foreign Currency Impact

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

Translation loss

Transaction loss (gain)

Net loss (gain) on forward currency

Transaction loss

Net gain on forward currency

Operating income excluding currency

5 unchanged sentences

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2020 COMPARED TO THREE MONTHS ENDED JUNE 30, 2019

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, 2020 and 2019.

THREE MONTHS ENDED SEPTEMBER 30, 2020 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2019

The following table sets forth a summary of the Company’s Statements of Consolidated Income and the percentage of net sales for the three months ended September 30, 2020 and 2019.

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

Three Months Ended June 30

Three Months Ended September 30

(Thousands of dollars)

2 unchanged sentences

OPERATING INCOME

Other expense - net

Other income (expense) net

INCOME BEFORE INCOME TAXES

3 unchanged sentences

PREFORMED LINE PRODUCTS COMPANY

Net sales were $1 17.6 million for the three months ended June 30 , 2020 , an increase of $ 2.8 million, or 2 %, from the three months ended June 30 , 201 9 .

Excluding the unfavorable effect of currency translation, net sales for the three months ended June 30, 2020 increased $ 9.9 million compared to the same period in 201 9 , or 9 %, as summarized in the following table:

Three Months Ended June 30

Net sales were $1 27.5 million for the three months ended September 30 , 2020 , an increase of $ 8.2 million, or 7 %, from the three months ended September 30 , 201 9 .

Excluding the unfavorable effect of currency translation, net sales for the three months ended September 30 , 2020 increased $ 11 .9 million compared to the same period in 201 9 , or 10 %, as summarized in the following table:

Three Months Ended September 30

(Thousands of dollars)

The year-over-year increase in PLP-USA net sales of $5.4 million, or 11%, was primarily due to a volume increase in energy product sales.

International net sales for the three months ended June 30, 2020 experienced an unfavorable impact of $7.1 million when local currencies were converted to U.S.

International net sales for the three months ended September 30, 2020 experienced an unfavorable impact of $3.7 million when local currencies were converted to U.S.

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

The Americas net sales of $19.9 million increased $4.9 million, or 25%, primarily due to a volume increase in energy product sales.

EMEA net sales of $21.0 million decreased $.4 million, or 2%, primarily due to a volume decrease in energy and communications product sales within the region, slightly offset by additional incremental sales from a newly acquired business in the prior year.

In Asia-Pacific, net sales of $25.1 million decreased $2.0 million, or 7%, compared to 2019 primarily due to a combined volume decrease in communications and special industries products mostly as a result of the disruption to the global economy caused by the COVID-19 pandemic.

EMEA net sales of $27.0 million increased $5.4 million, or 25%, primarily due to a volume increase in energy product sales within the region.

In Asia-Pacific, net sales of $27.5 million decreased $3.8 million, or 12%, compared to 2019 primarily due to a combined volume decrease in energy products mostly as a result of the disruption to the global economy caused by the COVID-19 pandemic.

Gross profit.

Gross profit was $39.6 million and $37.8 million for the three-month periods ended June 30, 2020 and 2019, respectively.

Gross profit was $44.9 million and $39.3 million for the three-month periods ended September 30, 2020 and 2019, respectively.

Excluding the unfavorable effect of currency translation, gross profit increased $6.7 million, or 17%, as summarized in the following table:

Three Months Ended June 30

Three Months Ended September 30

(Thousands of dollars)

PLP-USA gross profit of $21.6 million increased $3.9 million compared to the same period in 2019 as a result of increased sales volume combined with a product sales mix shift to higher margin product and continued cost containment within material, labor and manufacturing expense.

International gross profit for the three months ended June 30, 2020 was unfavorably impacted by $2.2 million when local currencies were translated to U.S.

International gross profit for the three months ended September 30, 2020 was unfavorably impacted by $1.1 million when local currencies were translated to U.S.

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

The Americas gross profit increase of $.7 million was primarily the result of a $4.9 million increase in sales combined with a product margin improvement in the region due to sales product mix.

Despite a decrease in net sales, EMEA gross profit increased $1.7 million, mainly as a result of a shift to higher sales volume in higher margin products.

Asia-Pacific gross profit decreased $1.1 million primarily as a result of a year-over-year reduction in sales volume and the negative impact related to the COVID-19 pandemic.

EMEA’s gross profit increased $3.0 million, mainly as a result of a shift to higher sales volume in higher margin products.

Asia-Pacific gross profit decreased $1.0 million primarily as a result of a year-over-year reduction in sales volume, largely caused by the negative impact related to the COVID-19 pandemic.

The gross profit decrease in Asia-Pacific was partially offset by $.2 million of COVID-19 subsidies.

C osts and expenses.

Costs and expenses of $ 2 5.8 million for the three months ended June 30 , 2020 de creased $ 1.9 million, or 7 %.

Excluding the favorable effect of currency translation, costs and expenses de creased $ .6 million, or 2 %, as summarized in the following table:

Three Months Ended June 30

Costs and expenses of $ 2 8.0 million for the three months ended September 30 , 2020 in creased $ .

3 million, or 1 %.

Excluding the favorable effect of currency translation, costs and expenses in creased $ .

9 million, or 3 %, as summarized in the following table:

Three Months Ended September 30

(Thousands of dollars)

Costs and expenses

PLP-USA costs and expenses of $11.6 million for the three months ended June 30, 2020 decreased $.6 million compared to 2019 mainly due to $.6 million of lower travel and entertainment expenses and $.2 million of lower professional fees, which were partially offset by higher combined personnel-related costs and miscellaneous decreases of $.2 million.

On a consolidated basis, costs and expenses for the three months ended June 30, 2020 were favorably impacted by $1.4 million when local currencies were translated to U.S.

PLP-USA costs and expenses of $12.9 million for the three months ended September 30, 2020 were relatively flat compared to 2019 mainly due to $.7 million of combined lower travel and entertainment and marketing expenses and lower professional fees of $.1 million, partially offset by higher personnel-related costs of $.5 million and increased commissions of $.3 million.

On a consolidated basis, costs and expenses for the three months ended September 30, 2020 were favorably impacted by $.6 million when local currencies were translated to U.S.

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

The Americas costs and expenses of $3.2 million increased $.6 million for the three months ended June 30, 2020 compared to the same period in 2019 primarily due to a $.2 million increase in personnel-related expenses and an increase in foreign currency exchange losses of $.3 million, combined with higher commissions of $.1 million.

EMEA costs and expenses of $5.0 million decreased $.4 million mainly due to lower travel and entertainment expenses of $.2 million, lower professional fees of $.2 and decreased personnel-related expenses of $.1 million.

These decreases were offset by the remaining incremental costs incurred with our acquired businesses.

Asia-Pacific costs and expenses of $5.0 million decreased $.2 million.

This decrease was primarily due to a decrease in combined personnel-related and travel and entertainment expenses of $.2 million.

The Americas costs and expenses of $3.7 million increased $.8 million for the three months ended September 30, 2020 compared to the same period in 2019 primarily due to an increase in net foreign currency exchange losses of $.4 million, higher compensation expense of $.3 million and higher commissions of $.1 million.

EMEA costs and expenses of $5.9 million increased $.4 million mainly due to higher personnel-related expenses of $.3 million combined with miscellaneous net expenses of $.1 million.

Asia-Pacific costs and expenses of $5.6 million decreased $.3 million primarily due to a decrease in travel and entertainment expenses.

Other income (expense).

Other expense for the three-month periods ended June 30, 2020 and 2019 was $.9 million and $.3 million, respectively.

Other income (expense) for the three-month periods ended September 30, 2020 and 2019 was $.5 million of income and $.4 million of expense, respectively.

During the quarter ended September 30, 2020, Asia-Pacific received government subsidies of $.7 million related to COVID-19.

Income taxes.

Income taxes for the three months ending June 30, 2020 and 2019 were $3.4 million and $3.0 million, respectively, based on pre-tax income of $13.9 million and $10.9 million, respectively.

The effective tax rate for the three-month periods ending June 30, 2020 and 2019 was 25% and 28%, respectively, compared to the U.S.

Income taxes for the three months ending September 30, 2020 and 2019 were $4.5 million and $3.2 million, respectively, based on pre-tax income of $17.4 million and $11.3 million, respectively.

The effective tax rate for the three-month periods ending September 30, 2020 and 2019 was 26% and 29%, respectively, compared to the U.S.

federal statutory rate of 21%.

5 unchanged sentences

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

A $.1 million, or 1%, increase resulting from earnings in jurisdictions with higher tax rates than the U.S.

A $.2 million, or 1%, decrease resulting from earnings in jurisdictions with higher tax rates than the U.S.

federal statutory rate where such earnings are permanently reinvested.

3 unchanged sentences

federal statutory rate where such earnings are permanently reinvested.

As a result of the preceding items, net income for the three months ended June 30, 2020 was $ 10.5 million, compared to $ 7.9 million for the three months ended June 30 , 201 9 , a n in crease of $ 2.6 million as summarized in the following table:

Three Months Ended June 30

As a result of the preceding items, net income for the three months ended September 30 , 2020 was $ 1 3.

0 million, compared to $ 8.0 million for the three months ended September 30 , 201 9 , a n in crease of $ 5.

0 million as summarized in the following table:

Three Months Ended September 30

(Thousands of dollars)

PLP-USA’s net income for the three months ended June 30, 2020 increased $1.9 million compared to the same period in 2019, primarily due to an increase in operating income of $2.4, partially offset by a decrease in other income of $.2 million combined with an increase in income taxes of $.3 million.

PLP-USA’s net income for the three months ended September 30, 2020 increased $3.5 million compared to the same period in 2019, primarily due to an increase in operating income of $3.9 million combined with an increase in other income of $.3 million, partially offset by an increase in income taxes of $.7 million.

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

The Americas net income increased $.5 million as a result of a $1.0 million increase in operating income, partially offset by higher income taxes of $.2 million combined with an increase in other non-operating expense of $.3 million.

The Americas net income decreased $.2 million as a result of operating income that was relatively unchanged year-over-year combined with higher income taxes of $.2 million.

EMEA net income increased $2.0 million as a result of a $2.6 million increase in operating income, partially offset by a $.6 million year-over-year increase in income tax expense.

Asia-Pacific net income decreased $.8 million due to a $.8 million decrease in operating income and an increase in other expense of $.2 million, partially offset by a decrease in income tax expense of $.2 million.

Asia-Pacific net income remained relatively flat due to a $.7 million decrease in operating income, partially offset by an increase in other income of $.6 million along with a decrease in income tax expense of $.1 million.

During the three-month period ended September 30, 2020, the Americas, EMEA and Asia-Pacific received COVID-19 government subsidies of $.2 million, $.1 million and $1.1 million, respectively.

PLP-USA did not apply for or receive any COVID-19 related government subsidies.

PLP’s EMEA segment incurred a net adjustment attributable to noncontrolling interests of less than $.1 million, which when added back to net income, resulted in an immaterial change to net income attributable to PLP Shareholders.

SIX MONTHS ENDED JUNE 30, 2020 COMPARED TO SIX MONTHS ENDED JUNE 30, 2019

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, 2020 and 2019.

NINE MONTHS ENDED SEPTEMBER 30, 2020 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2019

The following table sets forth a summary of the Company’s Statements of Consolidated Income and the percentage of net sales for the nine months ended September 30, 2020 and 2019.

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

Six Months Ended June 30

Nine Months Ended September 30

(Thousands of dollars)

2 unchanged sentences

OPERATING INCOME

Other expense—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 LINE PRODUCTS COMPANY

Net sales were $ 22 0.5 million for the six months ended June 30 , 2020, an increase of $ 8.5 million, or 4 %, from the six months ended June 30 , 2019.

Excluding the unfavorable effect of currency translation, net sales for the six months ended June 30 , 2020 increased $ 19.8 million compared to the same period in 2019, or 9 %, as summarized in the following table:

Six Months Ended June 30

Net sales were $ 347.9 million for the nine months ended September 30 , 2020, an increase of $ 16.7 million, or 5 %, from the nine months ended September 30 , 2019.

Excluding the unfavorable effect of currency translation, net sales for the nine months ended September 30 , 2020 increased $ 31.7 million compared to the same period in 2019, or 10 %, as summarized in the following table:

Nine Months Ended September 30

(Thousands of dollars)

The year-over-year increase in PLP-USA net sales of $12.8 million, or 15%, was primarily due to a volume increase in energy product sales.

International net sales for the six months ended June 30, 2020 experienced an unfavorable impact of $11.3 million when local currencies were converted to U.S.

The year-over-year increase in PLP-USA net sales of $18.2 million, or 13%, was primarily due to a volume increase mainly in energy product sales.

International net sales for the nine months ended September 30, 2020 experienced an unfavorable impact of $15.0 million when local currencies were converted to U.S.

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

The Americas net sales of $34.7 million increased $10.6 million, or 34%, primarily due to a volume increase in energy product sales.

EMEA net sales of $41.4 million increased $5.1 million, or 13%, primarily due to a volume increase in energy and communications product sales within the region, including the remaining incremental sales from the newly acquired businesses.

In Asia-Pacific, net sales of $43.8 million decreased $8.7 million, or 16%, compared to 2019 primarily due to a combined volume decrease in the energy, communications and special industries products mostly as a result of the disruption to the global economy caused by the COVID-19 pandemic.

The Americas net sales of $54.6 million increased $15.5 million, or 30%, primarily due to a volume increase in energy and communication product sales.

EMEA net sales of $68.4 million increased $10.4 million, or 18%, primarily due to a volume increase in energy and communications product sales within the region, inclusive of the remaining incremental sales from the newly acquired businesses.

In Asia-Pacific, net sales of $71.3 million decreased $12.5 million, or 15%, compared to 2019 primarily due to a combined volume decrease in the energy, communications and special industries products mostly resulting from the disruption to the global economy caused by the COVID-19 pandemic.

Gross profit.

Gross profit was $72.5 million and $65.1 million for the six-month periods ended June 30, 2020 and 2019, respectively.

Gross profit was $117.4 million and $104.4 million for the nine-month periods ended September 30, 2020 and 2019, respectively.

Excluding the unfavorable effect of currency translation, gross profit increased $17.6 million, or 17%, as summarized in the following table:

Six Months Ended June 30

Nine Months Ended September 30

(Thousands of dollars)

PLP-USA gross profit of $59.4 million increased $11.1 million compared to the same period in 2019 as a result of increased sales volume of $18.2 million combined with a product sales mix shift to higher margin product and continued cost containment within material, labor and manufacturing expense.

International gross profit for the six months ended June 30, 2020 was unfavorably impacted by $3.4 million when local currencies were translated to U.S.

International gross profit for the nine months ended September 30, 2020 was unfavorably impacted by $4.6 million when local currencies were translated to U.S.

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

3 unchanged sentences

C osts and expenses.

Costs and expenses of $ 53.0 million for the six months ended June 30 , 2020 increased $ 1.

Costs and expenses of $ 81.1 million for the nine months ended September 30 , 2020 increased $ 1.

4 million, or 2 %.

Excluding the favorable effect of currency translation, costs and expenses increased $ 4.4 million, or 6 %, as summarized in the following table:

Six Months Ended June 30

Nine Months Ended September 30

(Thousands of dollars)

Costs and expenses

PLP-USA costs and expenses of $25.3 million for the six months ended June 30, 2020 increased $.7 million compared to 2019 mainly due to $1.1 million of higher personnel-related expenses combined with an increase in miscellaneous net expense of $.1 million, partially offset by a decrease in professional fees of $.6 million.

On a consolidated basis, costs and expenses for the six months ended June 30, 2020 were favorably impacted by $2.4 million when local currencies were translated to U.S.

PLP-USA costs and expenses of $38.2 million for the nine months ended September 30, 2020 increased $.7 million compared to 2019 mainly due to $1.6 million of higher personnel-related expenses, increased commissions of $.8 million and an increase in miscellaneous net expense of $.2 million.

Partially offsetting the higher expenses were decreases in travel and entertainment expenses of $.9 million, professional fees of $.7 million combined with lower bad debt expense of $.3 million.

On a consolidated basis, costs and expenses for the nine months ended September 30, 2020 were favorably impacted by $3.0 million when local currencies were translated to U.S.

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

The Americas costs and expenses of $6.7 million increased $1.7 million for the six months ended June 30, 2020 compared to the same period in 2019 primarily due to a $.7 million increase in personnel-related expenses and an increase in foreign currency exchange losses of $.8 million combined with net increases in miscellaneous expenses of $.2 million.

EMEA costs and expenses of $10.6 million increased $1.4 million mainly due to incremental costs incurred with our acquired businesses.

Asia-Pacific costs and expenses of $10.4 million decreased $.3 million.

This decrease was primarily due to a decrease in combined personnel-related and travel and entertainment expenses.

The Americas costs and expenses of $10.4 million increased $2.5 million for the nine months ended September 30, 2020 compared to the same period in 2019 primarily due to a $.9 million increase in personnel-related expenses, higher commissions of $.3 million and an increase in foreign currency exchange losses of $1.4 million, partially offset by net decreases in miscellaneous expenses of $.1 million.

The higher costs were offset by savings in travel and entertainment expenses of $.3 million.

EMEA costs and expenses of $16.4 million increased $1.8 million mainly due to higher personnel-related expense of $1.2 million and the various additional incremental costs incurred with our acquired businesses.

Asia-Pacific costs and expenses of $16.0 million decreased $.6 million, primarily due to a decrease in travel and entertainment expenses.

Other income (expense).

Other expense for the six-month periods ended June 30, 2020 and 2019 was $.5 million and $.4 million, respectively.

Other income (expense) for the nine-month periods ended September 30, 2020 and 2019 was $.1 million of income and expense of $.8 million, respectively.

During the nine-month period ended September 30, 2020, Asia-Pacific received government subsidies of $.7 million related to COVID-19.

Income taxes.

Income taxes for the six months ending June 30, 2020 and 2019 were $4.8 million and $3.1 million, respectively, based on pre-tax income of $19.0 million and $12.8 million, respectively.

The effective tax rate for the six-month periods ending June 30, 2020 and 2019 was 26% and 24%, respectively, compared to the U.S.

Income taxes for the nine months ended September 30, 2020 and 2019 were $9.3 million and $6.3 million, respectively, based on pre-tax income of $36.4 million and $24.0 million, respectively.

The effective tax rate for both nine-month periods ended September 30, 2020 and 2019 was 26% compared to the U.S.

federal statutory rate of 21%.

5 unchanged sentences

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

A $.4 million, or 2%, increase resulting from earnings in jurisdictions with higher tax rates than the U.S.

federal statutory rate where such earnings are permanently reinvested.

A $.2 million, or 1%, net increase resulting from U.S.

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

There was no material movement in earnings in jurisdictions with higher tax rates than the U.S.

federal statutory rate.

A $.5 million, or 2%, net increase resulting from higher U.S.

permanent items and discrete items related to uncertain tax positions.

A $.8 million, or 3%, increase resulting from earnings in jurisdictions with higher tax rates than the U.S.

federal statutory rate.

As a result of the preceding items, net income for the six months ended June 30 , 2020 was $ 14.2 million, compared to $ 9.7 million for the six months ended June 30 , 2019, an increase of $ 4.5 million as summarized in the following table:

Six Months Ended June 30

As a result of the preceding items, net income for the nine months ended September 30 , 2020 was $ 27.

1 million, compared to $ 17 .7 million for the nine months ended September 30 , 2019, an increase of $ 9.

5 million as summarized in the following table:

Nine Months Ended September 30

(Thousands of dollars)

PLP-USA’s net income for the six months ended June 30, 2020 increased $5.5 million compared to the same period in 2019, primarily due to an increase in operating income of $6.5 million combined with an increase in other income of $.6 million, partially offset by an increase in income taxes of $1.6 million.

PLP-USA’s net income for the nine months ended September 30, 2020 increased $9.0 million compared to the same period in 2019, primarily due to an increase in operating income of $10.4 million combined with an increase in other income of $.9 million, partially offset by an increase in income taxes of $2.3 million.

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

1 unchanged sentence

EMEA net income increased $3.3 million as a result of a $4.5 million increase in operating income, partially offset by a $1.2 million year-over-year increase in income tax expense.

Asia-Pacific net income decreased $2.4 million due to a $2.8 million decrease in operating income and an increase in other expense of $.3 million, partially offset by a decrease in income tax expense of $.7 million.

Asia-Pacific net income decreased $2.4 million due to a $3.5 million decrease in operating income partially offset by an increase in other income of $.3 million and a decrease in income tax expense of $.8 million.

During the nine-month period ended September 30, 2020, the Americas, EMEA and Asia-Pacific received COVID-19 government subsidies of $.5 million, $.2 million and $1.5 million respectively.

PLP-USA did not apply for or receive any COVID-19 government subsidies.

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

During the first six months of 2020, we used cash of $11.8 million for capital expenditures.

We ended the first six months of 2020 with $36.5 million of cash, cash equivalents and restricted cash (“Cash”).

During the first nine months of 2020, we used cash of $24.2 million for capital expenditures.

We ended the first nine months of 2020 with $41.2 million of cash, cash equivalents and restricted cash (“Cash”).

Our Cash is held in various locations throughout the world.

At June 30, 2020, the majority of our Cash was held outside the United States (“U.S.”).

At September 30, 2020, the majority of our Cash was held outside the United States (“U.S.”).

We expect most accumulated non-U.S.

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

Total debt, including notes payable, at June 30, 2020 was $72.8 million.

At June 30, 2020, our unused availability under our line of credit was $27.5 million and our bank debt to equity percentage was 27.6%.

On April 17, 2020, we further extended the term to June 30, 2024.

Total debt , including notes payable, at September 30 , 2020 was $ 68.0 million.

At September 30 , 2020 , our unused availability under our line of credit was $ 34.9 million and our bank debt to equity percentage was 2 4.3 %.

O n April 17, 2020, we further extended the term to June 30 , 2024 .

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

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The net worth and profitability requirements are calculated based on the line of credit agreement.

At June 30, 2020 and December 31, 2019, we were in compliance with these covenants.

At September 30 , 2020 and December 31, 201 9 , we were in compliance with these covenants.

We expect that our major source of funding for 2020 and beyond will be our operating cash flows and our existing Cash as well as our line of credit agreement.

We earn a significant amount of our operating income outside the U .

, which, except for current earnings in certain jurisdictions, is deemed to be indefinitely reinvested in foreign jurisdictions.

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

As we cannot predict the duration or scope of the COVID-19 pandemic and its impact on our customers and suppliers, the negative financial impact to our financial results and liquidity cannot be reasonably estimated but could be material.

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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 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.

We also believe that we can 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.

Sources and Uses of Cash

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Net Cash provided by operating activities was $33.6 million.

The most significant net investing and financing uses of Cash in the six months ended June 30, 2020 were payments of long-term debt of $36.7 million, capital expenditures of $11.8 million, share repurchases of $7.0 million and dividends paid of $2.2 million, partially offset by net debt and notes payable proceeds of $46.3 million.

The most significant net investing and financing uses of Cash in the nine months ended September 30, 2020 were payments of long-term debt of $72.7 million, capital expenditures of $24.2 million, share repurchases of $8.0 million and dividends paid of $3.2 million, partially offset by debt and notes payable proceeds of $77.4 million.

Currency had a negative $.9 million impact on Cash when translating foreign denominated financial statements to U.S.

Net Cash provided from operating activities for the six months ended June 30, 2020 was $9.2 million compared to $5.8 million of cash generated in the comparable prior year six-month period.

The $3.4 million increase was primarily a result of an increase in in net income of $4.5 million combined with an increase in cash provided by non-cash items of $.8 million, partially offset by an increase in Cash usage for operating assets (net of operating liabilities) of $1.9 million.

Net Cash used in investing activities of $11.8 million for the six months ended June 30, 2020 decreased $19.6 million when compared to Cash used in investing activities in the six months ended June 30, 2019 of $31.5 million.

The change was primarily related to Cash used in the prior year to fund the SubCon and MICOS acquisitions, net of Cash, of $19.0 million combined with cash used to purchase marketable securities of $.5 million during the six months ended June 30, 2019 and a year-over-year decrease in capital expenditures of $.1 million.

Cash provided by financing activities for the six months ended June 30, 2020 was $.7 million compared to $24.7 million for the six months ended June 30, 2019.

The $24.0 million reduction was primarily the result of a net decrease in net debt borrowings and payments in 2020 compared to 2019 of $21.0 million and an increase in net share repurchases and issuances of $3.0 million.

Net Cash provided from operating activities for the nine months ended September 30, 2020 was $33.6 million compared to $20.7 in the comparable prior year nine-month period.

The $12.9 million increase was primarily a result of an increase in net income of $9.4 million combined with an increase in cash provided by non-cash items of $3.1 million, combined with a slight increase in Cash provided by operating assets (net of operating liabilities) of $.4 million.

Net Cash used in investing activities of $24.2 million for the nine months ended September 30, 2020 decreased $17.1 million when compared to Cash used in investing activities in the nine months ended September 30, 2019 of $41.3 million.

The change was primarily related to Cash used in the prior year to fund the SubCon and MICOS acquisitions, net of Cash, of $18.9 million combined with cash used to purchase marketable securities of $.5 million during the nine months ended September 30, 2019, partially offset by a year-over-year increase in capital expenditures of $2.3 million.

Cash used in financing activities for the nine months ended September 30, 2020 was $6.5 million compared to Cash provided by financing activities of $20.0 million during the nine months ended September 30, 2019.

The $26.5 million change was primarily the result of a net decrease in net debt borrowings, net of payments in 2020 compared to 2019 of $23.0 million and an increase in net share repurchases and issuances of $3.5 million.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

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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 U.S, Canada, Australia and Western Europe and may grow slowly or experience prolonged delay in developing regions despite expanding power needs;

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 U.S.

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 on the Company’s ongoing profitability and future growth opportunities in the Company’s core markets in the U.S.

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The duration and scope of the COVID-19 pandemic cannot be predicted, therefore, anticipated negative financial impact to the Company’s operating results cannot be reasonably estimated;

The ability of the Company’s customers to raise funds needed to build the facilities their customers require;

Technological developments that affect longer-term trends for communication lines, such as wireless communication;

The ability of the Company’s customers to raise funds needed to build the infrastructure their customers require;

Technological developments that affect longer-term trends for communication lines, such as enhancements to 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;

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Changes in significant government regulations affecting environmental compliances or other litigation matters;

Security breaches or other disruptions to the Company’s information technology structure;

Security breaches, malicious computer viruses or other disruptions to the Company’s information technology structure or on the economy as a whole;

The telecommunication market’s continued deployment of Fiber-to-the-Premises;

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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 2. Management’s Discussion and Analysis