What changed in this filing

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Item 1. Financial Statements

2021-04-30 compared with 2020-10-30 · 355 added, 247 removed, 402 unchanged (60% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30, 2020

March 31, 2021

December 31, 2020

29 unchanged sentences

Common shares - $ 2 par value per share, 15,000,000 shares authorized, 4,912,959 and

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

4,902,233 issued and outstanding, at March 31, 2021 and December 31, 2020,

Common shares issued to rabbi trust, 261,781 and 265,508 shares at March 31, 2021

and December 31, 2020, respectively

2 unchanged sentences

Retained earnings

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

Treasury shares, at cost, 1,664,517 and 1,611,927 shares at March 31, 2021 and

December 31, 2020, respectively

7 unchanged sentences

STATEMENTS OF CONSOLIDATED INCOME

Three Months Ended September 30

Nine Months Ended September 30

Three Months Ended March 31

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

8 unchanged sentences

Interest expense

Other income (expense) - net

Other income - net

INCOME BEFORE INCOME TAXES

Income tax expense

Net income (loss) attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

NET INCOME ATTRIBUTABLE TO PREFORMED

7 unchanged sentences

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

Three Months Ended September 30

Nine Months Ended September 30

Three Months Ended March 31

(Thousands of dollars)

1 unchanged sentence

Foreign currency translation adjustment

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 (income) loss attributable to noncontrolling interests

Comprehensive income attributable to Preformed Line Products Company shareholders

Recognized net actuarial gain (net of tax provision of $ 35 and $ 31 for the three months ended March 31, 2021 and 2020, respectively).

Other comprehensive loss, net of tax

Comprehensive loss attributable to noncontrolling interests

Comprehensive income (loss) attributable to Preformed Line Products Company shareholders

See notes to consolidated financial statements (unaudited).

1 unchanged sentence

STATEMENTS OF CONSOLIDATED CASH FLOWS

Nine Months Ended September 30

Three Months Ended March 31

(Thousands of dollars)

6 unchanged sentences

Share-based compensation expense

Gain (loss) on sale of property and equipment

Loss on sale of property and equipment

Changes in operating assets and liabilities

Accounts receivable

Prepaid expenses

Trade accounts payable and accrued liabilities

Income taxes - net

Contributions to company pension plan

NET CASH PROVIDED BY OPERATING ACTIVITIES

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

INVESTING ACTIVITIES (1)

1 unchanged sentence

Proceeds from the sale of property and equipment

Purchase of marketable securities

Proceeds from marketable securities

Purchase of company owned life insurance policy

Acquisition, net of cash acquired

NET CASH USED IN INVESTING ACTIVITIES

FINANCING ACTIVITIES (1)

Increase (decrease) in notes payable to banks

(Decrease) increase in notes payable to banks

Proceeds from long-term debt

6 unchanged sentences

Effects of exchange rate changes on cash and cash equivalents

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

Net 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 September 30, 2020 and $.

3 million at December 31, 2019.

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

(1) Non-cash investing and financing activities:

The Company purchased a new corporate aircraft during the period ended March 31, 2021 with a term loan in the principal amount of $ 20.5 million.

For further information regarding this transaction, refer to Note P, “Debt Arrangements.

See notes to consolidated financial statements (unaudited).

7 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 nine months ended September 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 months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full-year ending December 31, 2021.

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.

14 unchanged sentences

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

Three Months Ended September 30, 2020

Communications

Special Industries

Three Months Ended September 30, 2019

Communications

Special Industries

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Communications

Special Industries

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2020

Communications

2 unchanged sentences

Inventories – net

September 30,

Raw materials

2 unchanged sentences

Excess of current cost over LIFO cost

Noncurrent portion of inventory

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.

Net Inventory

Cost of inventories for certain material is determined using the last-in-first-out (LIFO) method and totaled approximately $ 32.1 million at March 31, 2021 and $ 32.0 million at December 31, 2020.

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 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.

During the three-month periods ended March 31, 2021 and 2020, the net change in LIFO inventories resulted in expense of $ .5 million and $ .2 million, respectively, to Income before income taxes.

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

9 unchanged sentences

To the extent that there is a reasonable possibility the losses could exceed amounts already accrued, the Company will adjust the accrual in the period in which the determination is made, disclose an estimate of the additional loss or range of loss and if the amount of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made.

During the year ended December 31, 2020, the Company accrued approximately $ 2.2 million representing its best estimate for losses to be incurred on a variety of global legal matters.

The accrual remained unchanged at $ 2.2 million at March 31, 2021.

The Company and its subsidiaries Helix Uniformed Ltd.

5 unchanged sentences

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

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

The Plaintiffs reduced their demand for damages to $ 29.4 million Canadian dollars on June 1, 2018.

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

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

The Company is unable to predict the outcome of this case and cannot reasonably estimate a potential range of loss.

However, if it is to be determined to be adverse to the Company, it could have a material effect on the Company’s financial results.

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

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

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 – SHAREHOLDERS EQUITY

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

The following table reflects the changes in shareholders equity for the three months ended March 31, 2021 and 2020:

Accumulated Other

14 unchanged sentences

Balance at March 31, 2021

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

9 unchanged sentences

Issuance of 77,381 common shares

Common shares issued to rabbi trust of 705 , net

Cash dividends declared - $ .20 per share

Balance at March 31, 2019

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 3,358 , 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

Balance at March 31, 2020

NOTE E – PENSION PLANS

1 unchanged sentence

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

Three Months Ended September 30

Nine Months Ended September 30

Three Months Ended March 31

Interest cost

2 unchanged sentences

Net periodic pension cost (benefit)

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

There were no contributions to the Plan during the three months ended March 31, 2021.

The Company does no t plan to contribute additional funds to the Plan during the remainder of 2021.

1 unchanged sentence

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

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

Balance at July 1

Other comprehensive loss before

reclassifications:

(Loss) gain 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 September 30

Nine Months Ended September 30, 2020

Nine Months Ended September 30, 2019

Defined benefit

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

Balance at January 1

8 unchanged sentences

comprehensive income (loss)

Balance at September 30

Balance at March 31

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 nine months ended September 30, 2020 and 2019 was as follows:

Three Months Ended September 30

Nine Months Ended September 30

The calculation of basic and diluted earnings per share for the three-month periods ended March 31, 2021 and 2020 was as follows:

Three Months Ended March 31

Determination of shares

3 unchanged sentences

Earnings per common share

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.

For the three-month periods ended March 31, 2021 and 2020, 15,000 and 20,000 stock options, respectively, 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:

September 30, 2020

March 31, 2021

December 31, 2020

5 unchanged sentences

Indefinite-lived intangible assets

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 aggregate amortization expense for other intangibles with finite lives for the three-month periods ended March 31, 2021 and 2020 was $ .5 million and $ .4 million, respectively.

Amortization expense is estimated to be $ 1.5 million for the remainder of 2021, $ 1.7 million for 2022 and 2023, $ 1.6 million for 2024 and $ 1.4 million for 2025.

The combined weighted-average remaining amortization period is approximately 12.2 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 nine months ended September 30, 2020 are as follows:

The changes in the carrying amount of goodwill, by segment, for the three months ended March 31, 2021 are as follows:

Balance at January 1, 2021

Currency translation

Balance at September 30, 2020

Balance at March 31, 2021

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 nine months ended September 30, 2020 is as follows:

A summary of the RSUs outstanding under the LTIP for the three months ended March 31, 2021 is as follows:

Restricted Share Units

1 unchanged sentence

Nonvested as of January 1, 2021

Nonvested as of September 30 , 2020

Nonvested as of March 31, 2021

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 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.

Compensation expense related to the time-based RSUs for both three-month periods ended March 31, 2021 and 2020 was $ .1 million.

As of March 31, 2021, there was $ 1.2 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 2.4 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 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.

Performance-based compensation expense for the three-month periods ended March 31, 2021 and 2020 was $ .7 million and $ .8 million, respectively.

As of March 31, 2021, the remaining compensation expense of $ 4.8 million for outstanding performance-based RSU’s is expected to be recognized over the weighted-average period of approximately 1.9 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 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:

There were no options granted during either of the three-month periods ended March 31, 2021 and 2020.

Stock option activity under the Company’s LTIP for three months ended March 31, 2021 was as follows:

Exercise Price

1 unchanged sentence

Outstanding at January 1, 2021

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.

Outstanding (vested and expected to vest) at March 31, 2021

Exercisable at March 31, 2021

There were no stock option shares exercised during either of the three-month periods ended March 31, 2021 and 2020.

For the three-month periods ended March 31, 2021 and 2020, the Company recorded compensation expense related to the stock options currently vested of $ .1 million and less than $ .1 million, respectively.

The total compensation cost related to nonvested awards not yet recognized at March 31, 2021 is expected to be $ .3 million over a weighted-average period of approximately 1.9 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 September 30, 2020, 265,508 shares have been deferred and are being held in the rabbi trust.

As of March 31, 2021, 261,781 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, on the Company’s Consolidated Balance Sheets as of September 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 March 31, 2021 and December 31, 2020:

Balance as of

September 30, 2020

March 31, 2021

Quoted Prices in

9 unchanged sentences

December 31, 2020

Quoted Prices in Active Markets for Identical Assets or Liabilities

Quoted Prices in

Active Markets for

Identical Assets or

Significant Other

Observable Inputs

Foreign currency forward contracts

Supplemental profit sharing plan

Foreign currency forward contracts

Total Liabilities

6 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 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 $ 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.

For the three-month periods ended March 31, 2021 and 2020, the Company recognized net gains of $ .3 million and $ 1.1 million, respectively, on foreign currency forward contracts.

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

The liability for this unfunded Supplemental Profit Sharing Plan was $ 7.1 million at both March 31 , 202 1 and December 31, 20 20 .

These amounts are recorded within Other noncurrent liabilities on the Company’s C onsolidated B alance S heets.

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

1 unchanged sentence

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 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

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which will modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including the removal of certain disclosure requirements.

The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The Company adopted the new disclosure requirements for the period ending March 31, 2020 .

The additional components of this release did not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (“Topic 326”):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

ASU 2016-13 changes how entities will measure credit losses for most financial assets and other instruments that are not measured at fair value through net income.

This update introduces the current expected credit loss (CECL) model, which will require an entity to measure credit losses for certain financial instruments and financial assets, including trade receivables.

Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument.

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 nine months ended September 30, 2020.

In January 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU” No.

2021-01), Reference Rate Reform (“Topic 848”) to ASU No.

2020-04, Reference Rate Reform (ASU 2021-01) which was effective immediately.

The amendments in ASU 2021-01 provide optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of the reference rate reform.

The provisions must be applied at a Topic, Subtopic, or Industry Subtopic level for all transactions other than derivatives, which may be applied at a hedging relationship level.

The Company adopted ASU 2021-01 on January 1, 2021 and is currently evaluating the potential future impact, if any, on its Consolidated Financial Statements.

NOTE L – NEW ACCOUNTING STANDARDS TO BE ADOPTED

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.

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.

NOTE M – SEGMENT INFORMATION

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

The following tables present a summary of the Company’s reportable segments for the three months ended March 31, 2021 and 2020.

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

Three Months Ended September 30

Nine Months Ended September 30

Three Months Ended March 31

Total net sales

8 unchanged sentences

Company shareholders

September 30, 2020

March 31, 2021

December 31, 2020

1 unchanged sentence

NOTE N – INCOME TAXES

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.

The Company’s effective tax rate was 32 % and 28 % for the three month periods ended March 31, 2021 and 2020, respectively.

The higher effective tax rate for the three months ended March 31, 2021 and 2020 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.

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

permanent items, primarily from the deductibility of officer’s compensations.

The effective tax rate increased for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 due to the decrease in non-deductible executive compensation combined with an increase from adjustments due to foreign income.

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 September 30, 2020 or September 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 earnings.

No significant changes to the valuation allowances were reflected for the periods ended March 31, 2021 or December 31, 2020.

There were no significant changes to any of the balances of unrecognized tax benefits on for the three months ended March 31, 2021 or the year ended December 31, 2020.

NOTE O – PRODUCT WARRANTY RESERVE

5 unchanged sentences

The following is a rollforward of the product warranty reserve:

Nine Months Ended September 30

Three Months Ended March 31

Beginning of period balance

4 unchanged sentences

NOTE P – DEBT ARRANGEMENTS

On January 19, 2021, the Company received funding for a term loan from PNC Equipment Finance, LLC in the principal amount of $ 20.5 million to fund the purchase of a corporate aircraft.

In September 2020, the Company made a deposit of $ 6.8 million toward the purchase of the aircraft, which amount was subsequently refunded in January 2021 and the full amount of the $ 20.5 million purchase price was drawn on the loan.

The aircraft replaces the Company’s previously owned aircraft, which was sold in December 2020.

The proceeds of the sale were used to pay off the debt associated with the previously-owned aircraft.

The term of the new loan is 120 months at a fixed interest rate of 2.744 %.

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

Of the $ 20.3 million outstanding on this debt facility at March 31, 2021, $ 2.1 million was classified as current.

The loan is secured by the aircraft.

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

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

At March 31, 2021, 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 September 30, 2020, the Company’s Australian subsidiary had borrowed $ 5.3 million U.S.

At March 31, 2021, the Company’s Australian subsidiary had borrowed $ 3.7 million U.S.

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

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.

At March 31, 2021, the Company’s Austrian subsidiary had borrowed $ .6 million U.S.

dollars with a term expiring June 30, 2024 .

At March 31, 2021, the interest rates on the U.S., Polish, Australian and Austrian line of credit agreement were 1.236 %, 1.315 %, 1.145 % and 1.273 %, respectively.

Under the credit facility, at March 31, 2021, the Company had utilized $ 11.5 million with $ 53.5 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 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.

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.

On June 26, 2020, the Company’s Austrian subsidiary borrowed $ .6 million on the Company’s line of credit at an interest rate of 1.308 %.

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

At repayment, the local line of credit was cancelled.

At March 31, 2021, the Company was in compliance with these covenants.

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 September 30, 2020, $ 6.9 million was outstanding on this debt facility, of which $ .8 million is classified as current.

At March 31, 2021, $ 5.7 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 September 30, 2020, $ 4.9 million was outstanding on this facility, all of which is classified as current.

At March 31, 2021, $ 4.1 million was outstanding on this facility, all of which is classified as current and has an interest rate of 3.150 %.

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

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.

For the periods ended March 31, 2021 and December 31, 2020, the Company’s Asia Pacific segment had $ .7 million and $ .6 million, respectively, in restricted cash used to secure bank debt.

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

NOTE Q – LEASES

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

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.

As of March 31, 2021, 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 September 30, 2020 was 17.5 and 2.7 years, respectively.

The weighted average remaining lease term for the Company’s operating and financing leases as of March 31, 2021 was 18.5 and 3.1 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 and nine months ended September 30, 2020 were as follows:

The Company’s operating and finance lease costs for the three months ended March 31, 2021 and 2020 were as follows:

Three 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

Nine Months Ended

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Components of lease expense

5 unchanged sentences

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 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:

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, 2021 was 4.93 % and 4.14 %, respectively.

Future maturities of the Company’s lease liabilities as of March 31, 2021 are as follows:

Operating Leases

5 unchanged sentences

The total minimum sublease rentals under noncancelable subleases to be received through 2023 is $ 2.4 million.

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 related to leases for the three-month period ended March 31, 2021 was as follows:

March 31, 2021

March 31, 2020

Supplemental cash flow information

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

Operating cash flows from operating and financing leases

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

4 unchanged sentences

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

NOTE S – BUSINESS COMBINATIONS

The Company accounts for business combinations using the acquisition method of accounting and, accordingly, the assets and liabilities of the acquired entities are recorded at their estimated fair values at the date of acquisition.

On February 28, 2019, the Company acquired 100 % of SubCon.

Subcon is headquartered in Dornbirn, Austria with manufacturing operations in Brno, Czech Republic.

The acquisition of SubCon will strengthen the Company’s position in the global substation market and will expand its operational presence in Europe.

The total purchase price was $ 10.1 million in cash, net of $ 1.9 million in cash acquired.

The purchase price was predominantly allocated to Goodwill of $ 6.6 million and Intangible assets of $ 4.7 million with useful lives ranging from 10 to 11 years .

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 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.

The acquisition of MICOS Telcom will strengthen the Company’s position in the global telecom market and will also expand its operational presence in Europe.

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 Sheets.

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

The Intangible assets included in the acquisition of MICOS have useful lives of 12 years.

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 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:

Assets acquired

Current assets, net of cash

Property, plant and equipment

Finite-lived intangible assets

Other long-term assets

Total assets acquired

Liabilities assumed

Net assets acquired

On March 10, 2021, the Company purchased 19,497 shares of the Company from current Officers at a price per share of $ 71.10 , 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.

On March 15, 2021, the Company purchased 2,257 shares of the Company from a current employee at a price per share of $ 71.91 , 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.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the readers of our consolidated financial statements better understand our results of operations, financial condition and present business environment.

The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and related notes included elsewhere in this report.

The MD&A is organized as follows:

Results of Operations

Application of Critical Accounting Policies and Estimates

Working Capital, Liquidity and Capital Resources

Recently Adopted Accounting Pronouncements

New Accounting Standards to be Adopted

Preformed Line Products Company (the “Company”, “PLPC”, “we”, “us”, or “our”) was incorporated in Ohio in 1947.

We are an international designer and manufacturer of products and systems employed in the construction and maintenance of overhead and underground networks for the energy, telecommunication, cable operators, information (data communication), and other similar industries.

Our primary products support, protect, connect, terminate, and secure cables and wires.

We also provide solar hardware systems, mounting hardware for a variety of solar power applications, and fiber optic and copper splice closures.

PLPC is respected around the world for quality, dependability and market-leading customer service.

Our goal is to continue to achieve profitable growth as a leader in the research, innovation, development, manufacture, and marketing of technically advanced products and services related to energy, communications and cable systems and to take advantage of this leadership position to sell additional quality products in familiar markets.

We have 30 sales and manufacturing operations in 22 different countries.

We report our segments in four geographic regions:

PLP-USA (including corporate), The Americas (includes operations in North and South America without PLP-USA), EMEA (Europe, Middle East & Africa) and Asia-Pacific, in accordance with accounting standards codified in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 280, Segment Reporting.

Each segment distributes a full range of our primary products.

Our PLP-USA segment is comprised of our U.S.

operations manufacturing our traditional products primarily supporting our domestic energy, communications and special industries products.

Our other three segments, The Americas, EMEA and Asia-Pacific, support our energy, communications and special industries products in each respective geographical region.

The segment managers responsible for each region report directly to the Company’s Chief Executive Officer, who is the chief operating decision maker, and are accountable for the financial results and performance of their entire segment for which they are responsible.

The business components within each segment are managed to maximize the results of the entire operating segment and Company rather than the results of any individual business component of the segment.

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

Our consolidated financial statements are prepared in conformity with U.S.

generally accepted accounting principles (GAAP).

Our discussions of the financial results include non-GAAP measures (e.g., foreign currency impact) to provide additional information concerning our financial results and provide information that we believe is useful to the readers of our consolidated financial statements in the assessment of our performance and operating trends.

The following discussion describes our results of operations for the three months ended March 31, 2021.

The first quarter of 2020 saw the initial 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 prior year outbreak did not have a material impact on our results for those reported periods, it created challenges for us in countries that were the earliest to be impacted by the pandemic, namely countries in our Asia-Pacific business segment.

Due to restrictions on our operations, the operations of our customers and the global supply chain, we are continuing to actively monitor the impact of COVID-19 on current and 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.

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

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 and potential price increases 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 continuing to actively manage costs and our liquidity position to provide additional flexibility while still supporting our customers and their specific needs.

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

While we expect that 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.

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.

We continue to assess all challenges related to COVID-19 and plan accordingly.

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, 2020 filed with the Securities and Exchange Commission (“SEC”) on March 5, 2021.

Our consolidated financial statements are subject to fluctuations in the exchange rates of foreign currencies in relation to the U.S.

As foreign currencies strengthen against the U.S.

dollar, our sales and costs increase as the foreign currency-denominated financial statements translate into more U.S.

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 months ended March 31, 2021 had a $1.8 million favorable effect on net sales when compared to the same period in 2020.

There was a less than $.1 million favorable effect on net income for the three months ended March 31, 2021 as compared to the same period in 2020.

On a reportable segment basis, the impact of foreign currency on net sales and net income for the three months ended March 31, 2021 was as follows:

Foreign Currency Translation Impact

(Thousands of dollars)

The operating results for the three months ended March 31, 2021 are compared to the same period in 2020.

Net sales for the three months ended March 31, 2021 of $117.6 million increased $14.7 million, or 14%, compared to 2020.

As a percentage of net sales, gross profit increased to 34.2% in 2021 from 32.0% in 2020.

Gross profit for the three-month periods ended March 31, 2021 and 2020 was $40.2 million and $32.9 million, respectively.

Excluding the favorable impact of foreign currency translation, gross profit increased $6.7 million, or 20%, compared to 2020.

Costs and expenses of $29.4 million increased $1.7 million compared to 2020 and included an unfavorable impact from currency translation of $.6 million.

Operating income for the three months ended March 31, 2021 was $10.8 million, an increase of $5.6 million compared to 2020.

Net income for the three months ended March 31, 2021 of $7.2 million increased $3.5 million compared to the three months ended March 31, 2020.

The effect of currency translation had negative impacts of less than $.1 million on both operating income and net income.

The following table reflects the impact of foreign currency fluctuations on operating income for the three-month periods ended March 31, 2021 and 2020:

Foreign Currency Impact

Three Months Ended March 31

(Thousands of dollars)

Operating income

Translation gain

Transaction loss

Net gain on forward currency

Operating income excluding currency

Despite the constant changes in the current global economy, and aside from the uncertainty created by the COVID-19 outbreak, we believe our business fundamentals and our financial position are sound and that we are strategically well-positioned.

We remain focused on assessing our business structure, global facilities and overall capacity in conjunction with the requirements of local manufacturing in the markets that we serve.

If necessary, we will modify redundant processes and utilize our global manufacturing network to manage costs, increase sales volumes and deliver value to our customers.

We have continued to invest in the business to expand into new markets for the Company, improve efficiency, develop new products, increase our capacity and become an even stronger supplier to our customers.

We currently have a bank debt to equity ratio of 20.4% and can borrow needed funds at a competitive interest rate under our credit facility.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2021 COMPARED TO THREE MONTHS ENDED MARCH 31, 2020

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 March 31, 2021 and 2020.

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

Three Months Ended March 31

(Thousands of dollars)

Cost of products sold

Costs and expenses

OPERATING INCOME

Other expense, net

INCOME BEFORE INCOME TAXES

Income tax expense

Net adjustment attributable to noncontrolling

NET INCOME ATTRIBUTABLE TO

PREFORMED LINE PRODUCTS COMPANY

Net sales were $117.6 million for the three months ended March 31, 2021, an increase of $14.7 million, or 14%, from the three months ended March 31, 2020.

Excluding the favorable effect of currency translation, net sales for the three months ended March 31, 2021 increased $12.9 million compared to the same period in 2020, or 13%, as summarized in the following table:

Three Months Ended March 31

(Thousands of dollars)

The year-over-year increase in PLP-USA net sales of $9.6 million, or 21%, was primarily due to a volume increase in communication product sales.

International net sales for the three months ended March 31, 2021 experienced a favorable impact of $1.8 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 $17.5 million increased $2.1 million, or 12%, primarily due to a volume increase in energy product sales.

EMEA net sales of $23.5 million increased $1.4 million, or 7%, primarily due to a volume increase in communication product sales within the region.

Asia-Pacific net sales of $20.3 million decreased $.2 million, or 1%, compared to 2020 primarily due to a volume decrease in energy products, partially resulting from the residual effects of the disruption to the global economy caused by the COVID-19 pandemic.

Gross profit.

Gross profit was $ 4 0.2 mill ion and $ 3 2.9 million for the three-month periods ended March 31, 2021 and 20 20 , respectively .

Excluding the unfavorable effect of currency translation, gross profit increased $ 6.7 million, or 20 %, as summarized in the following table:

Three Months Ended March 31

(Thousands of dollars)

PLP-USA gross profit of $21.1 million increased $3.7 million compared to the same period in 2020 as a result of increased sales volume of $9.6 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 three months ended March 31, 2021 was favorably impacted by $.6 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 $.8 million was primarily the result of a $2.1 million increase in sales combined with a product margin improvement in the region due to sales product mix.

EMEA’s gross profit increased $1.6 million, mainly as a result an increase in sales of $1.4 million and a shift to higher sales volume in higher margin communication products.

Although Asia-Pacific’s sales decreased by $.2 million, gross profit increased $.6 million primarily as a result of continued cost containment to mitigate the continued effects of the COVID-19 pandemic.

Costs and expenses.

Costs and expenses of $29.4 million for the three months ended March 31, 2021 increased $1.7 million, or 6%.

Excluding the unfavorable effect of currency translation, costs and expenses increased $1.1 million, or 4%, as summarized in the following table:

Three Months Ended March 31

(Thousands of dollars)

Costs and expenses

PLP-USA costs and expenses of $13.1 million for the three months ended March 31, 2021 were relatively flat compared to 2020 mainly due to offsetting variances, which included $.5 million of combined lower travel and entertainment and marketing expenses, partially offset by higher legal and professional fees of $.2 million and higher commissions of $.2 million.

On a consolidated basis, costs and expenses for the three months ended March 31, 2021 were unfavorably 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 $3.7 million increased $.6 million for the three months ended March 31, 2021 compared to the same period in 2020 primarily due to higher personnel-related expense of $.1 million, higher commissions of $.1 million, combined with miscellaneous net increases of $.4 million.

EMEA costs and expenses of $6.5 million increased $.4 million mainly due to higher personnel-related expenses of $.5 million, partially offset by lower travel and entertainment expenses of $.1 million.

Asia-Pacific costs and expenses of $6.1 million increased $.1 million primarily due to an increase in personnel-related expenses of $.4 million, increased travel and entertainment expenses of $.1 million and higher legal and professional fees of $.1 million, partially offset by the favorable effect of transactional foreign currency exchange of $.5 million.

Other income, net.

Other income, net for the three-month periods ended March 31, 2021 and 2020 was $.2 million and less than $.1 million, respectively.

Income taxes .

Income taxes for the three months ending March 31, 2021 and 2020 were $ 3.4 million and $1.5 million, respectively, based on pre-tax income of $10.6 million and $5.1 million, respectively.

The effective tax rate for the three-month periods ending March 31, 2021 and 2020 was 32% and 28%, respectively, compared to the U.S.

federal statutory rate of 21%.

Our tax rate is affected by recurring items such as tax rates in foreign jurisdictions and the relative amount of income we earn in those jurisdictions.

It is also affected by discrete items that may occur in any given year but are not consistent from year to year.

On January 1, 2021, we adopted Account Stands Update (“ASU”) 2019-12, Income Taxes (“ASC 740”) - “Simplifying the Accounting for Income Taxes”, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application.

The adoption of ASU 2019-12 did not result in any material adjustments.

As a result of the preceding items, net income for the three months ended March 31, 2021 was $7.2 million, compared to $3.7 million for the three months ended March 31, 2020, an increase of $3.5 million as summarized in the following table:

Three Months Ended March 31

(Thousands of dollars)

PLP-USA’s net income for the three months ended March 31, 2021 increased $2.0 million compared to the same period in 2020, primarily due to an increase in operating income of $4.3 million, partially offset by a decrease in other income, net of $.8 million combined with an increase in income tax expense of $1.5 million.

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

The Americas net income increased $.2 million as a result of an increase in operating income of $.2 million.

EMEA net income increased $.7 million as a result of a $1.0 million increase in operating income, partially offset by a $.3 million year-over-year increase in income tax expense.

Asia-Pacific net income increased $.4 million largely due to a $.5 million decrease in operating expense, partially offset by an increase in income tax expense of $.1 million.

POLICIES AND ESTIMATES

Our critical accounting policies are consistent with the information set forth in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K for the year ended December 31, 2020 filed on March 5, 2021 with the Securities and Exchange Commission and are, therefore, not presented herein.

WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES

Management Assessment of Liquidity

We measure liquidity on the basis of our ability to meet short-term and long-term operating needs, repay debt, fund additional investments, including acquisitions, and make dividend payments to shareholders.

Significant factors affecting the management of liquidity are cash flows from operating activities, capital expenditures, cash dividends, business acquisitions and access to bank lines of credit.

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

During the first thre e months of 20 2 1 , we used cash of $ 3.5 million for capital expenditures.

We ended the first three months of 20 2 1 with $ 34.

7 million of cash, cash equivalents and restricted cash ( collectively, “Cash”).

Our Cash is held in various locations throughout the world.

At March 31 , 202 1 , the majority of our Cash was held outside the United States (“ U.S.

We expect most accumulated non-U.S.

Cash balances will remain outside of the U.S.

and that we will meet U .

liquidity needs through future operating cash flows, use of U.S.

Cash balances, external borrowings, or some combination of these sources.

We complete comprehensive reviews of our significant customers and their creditworthiness by analyzing financial statements for customers where we have identified a measure of increased risk.

We closely monitor payments and developments which may signal possible customer credit issues.

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

Total debt, including notes payable, at March 31, 2021 was $59.3 million.

At March 31, 2021, our unused availability under our line of credit was $53.5 million and our bank debt to equity percentage was 20.4%.

On April 17, 2020, we further extended the term on the line of credit 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%.

The line of credit agreement contains, among other provisions, requirements for maintaining levels of net worth and funded debt-to-earnings before interest, taxes, depreciation and amortization along with an interest coverage ratio.

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

At March 31, 2021 and December 31, 2020, we were in compliance with these covenants.

We expect that our major source of funding for 2021 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.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 continuing 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.

We are actively managing the business to maintain cash flow and secure favorable liquidity position.

We believe that our future cash flows, together with these factors, will be more than sufficient to cover debt repayments, other contractual obligations, capital expenditures and dividends for the next twelve months and thereafter for the foreseeable future.

In addition, we believe our borrowing capacity provides substantial financial resources, if needed, to supplement funding of capital expenditures and/or acquisitions.

We also believe that we can 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

Cash increased $.6 million compared to the same period in 2020.

Net Cash provided by operating activities was $13.2 million.

The most significant net investing and financing uses of Cash in the three months ended March 31, 2021 were payments of long-term debt of $27.1 million, capital expenditures of $3.5 million, share repurchases of $3.7 million and dividends paid of $1.1 million, partially offset by net debt and notes payable proceeds of $11.4 million.

Currency had a positive $.2 million impact on Cash when translating foreign denominated financial statements to U.S.

Net Cash provided from operating activities for the three months ended March 31, 2021 was $13.2 million compared to a use of $3.1 million in the comparable prior year three-month period.

The $16.3 million improvement was primarily a result of an increase in net income of $3.5 million, an increase in cash provided by non-cash items of $4.7 million and an increase in Cash provided by operating assets (net of operating liabilities) of $8.1 million which included the $6.8 million deposit on the new corporate aircraft that was paid in the fourth quarter of 2020 and fully refunded in 2021.

Net Cash used in investing activities of $3.5 million for the three months ended March 31, 2021 decreased $2.5 million when compared to Cash used in investing activities in the three months ended March 31, 2020 of $6.0 million.

The change was primarily related to a year-over-year decrease in capital expenditures.

Cash used in financing activities for the three months ended March 31, 2021 was $20.5 million compared to Cash provided by financing activities of $5.7 million during the three months ended March 31, 2020.

The $26.2 million change was primarily the result of a net decrease in net debt borrowings, net of payments in 2021 compared to 2021 of $26.3 million, partially offset by a decrease in net share repurchases and issuances of $.1 million.

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

As of March 31, 2021, the Company had total outstanding guarantees of $ 6.9 million.

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

As of March 31, 2021, the Company had total outstanding letters of credit of $ 9.1 million.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

See Note K of the Notes to the Consolidated Financial Statements

NEW ACCOUNTING STANDARDS TO BE ADOPTED

See Note L of the Notes to the Consolidated Financial Statements

FORWARD LOOKING STATEMENTS

Cautionary Statement for “Safe Harbor” Purposes Under The Private Securities Litigation Reform Act of 1995

This Form 10-Q and other documents we file with the SEC contain forward-looking statements regarding the Company’s and management’s beliefs and expectations.

As a general matter, forward-looking statements are those focused upon future plans, objectives or performance (as opposed to historical items) and include statements of anticipated events or trends and expectations and beliefs relating to matters not historical in nature.

Such forward-looking statements are subject to uncertainties and factors relating to the Company’s operations and business environment, all of which are difficult to predict and many of which are beyond the Company’s control.

Such uncertainties and factors could cause the Company’s actual results to differ materially from those matters expressed in or implied by such forward-looking statements.

The following factors, among others, could affect the Company’s future performance and cause the Company’s actual results to differ materially from those expressed or implied by forward-looking statements made in this report:

The overall demand for cable anchoring and control hardware for electrical transmission and distribution lines on a worldwide basis, which has a slow growth rate in mature markets such as the 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.

and other foreign countries, which may experience continued or further instability due to political and economic conditions, social unrest, terrorism, changes in diplomatic and trade relationships and public health concerns (including viral outbreaks such as COVID-19).

The COVID-19 pandemic has significantly impacted worldwide economic conditions and has and will continue to have an adverse effect on the Company’s operations and businesses as government authorities impose mandatory closures, work-from-home orders and social distancing protocols along with other unknown potential restrictions.

The duration and scope of the COVID-19 pandemic cannot be predicted, and therefore, any 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 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;

The Company’s success at continuing to develop proprietary technology and maintaining high quality products and customer service to meet or exceed new industry performance standards and individual customer expectations;

The Company’s success in strengthening and retaining relationships with the Company’s customers, growing sales at targeted accounts and expanding geographically;

The extent to which the Company is successful at expanding the Company’s product line or production facilities into new areas or implementing efficiency measures at existing facilities;

The effects of fluctuation in currency exchange rates upon the Company’s foreign subsidiaries’ operations and reported results from international operations, together with non-currency risks of investing in and conducting significant operations in foreign countries, including those relating to political, social, economic and regulatory factors;

The Company’s ability to identify, complete, obtain funding for and integrate acquisitions for profitable growth;

The potential impact of consolidation, deregulation and bankruptcy among the Company’s suppliers, competitors and customers and of any legal or regulatory claims;

The relative degree of competitive and customer price pressure on the Company’s products;

The cost, availability and quality of raw materials required for the manufacture of products and any tariffs that may be associated with the purchase of these products.

The Company’s supply chain has and could continue to be disrupted by the COVID-19 pandemic which could have a material, adverse effect on the ability to secure raw materials and supplies;

Strikes, labor disruptions and other fluctuations in labor costs;

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

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;

The effects of the possible enactment of the Made in America Tax Plan which could increase the U.S.

federal corporate income tax rates on U.S.

income and, also, reduce tax credits from foreign sourced income;

Those factors described under the heading “Risk Factors” in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 which was filed on March 5, 2021.

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

The situation continues to change and additional impacts may arise that the Company is not aware of currently.

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