Form 10-Q PREFORMED LINE PRODUCTS For: Sep 30
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Office) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of common shares outstanding as of October 25, 2021:
Securities registered pursuant to Section 12(b) of the Act:
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Name of exchange on which registered |
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Table of Contents
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Page |
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Item 1. |
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3 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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32 |
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Item 4. |
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32 |
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Item 1. |
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33 |
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Item 1A. |
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33 |
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Item 2. |
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34 |
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Item 3. |
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34 |
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Item 4. |
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34 |
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Item 5. |
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34 |
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Item 6. |
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34 |
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35 |
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2
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PREFORMED LINE PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEETS
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September 30, 2021 |
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December 31, 2020 |
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(Thousands of dollars, except share and per share data) |
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(Unaudited) |
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ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, less allowances of $ |
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Inventories - net |
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Prepaid tax expense |
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Other prepaid expenses |
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Other current assets |
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TOTAL CURRENT ASSETS |
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Property, plant and equipment - net |
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Operating lease, right-of-use assets |
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Goodwill |
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Other intangible assets - net |
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Deferred income taxes |
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Other assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Trade accounts payable |
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$ |
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$ |
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Notes payable to banks |
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Operating lease liabilities, current |
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Current portion of long-term debt |
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Accrued compensation |
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Accrued expenses and other liabilities |
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Accrued profit-sharing and other benefits |
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Dividends payable |
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Income taxes payable |
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TOTAL CURRENT LIABILITIES |
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Long-term debt, less current portion |
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Pension obligation |
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Operating lease liabilities, non-current |
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Deferred income taxes |
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Other noncurrent liabilities |
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SHAREHOLDERS’ EQUITY |
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Shareholders’ equity: |
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Common shares - $ |
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Common shares issued to rabbi trust, |
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Deferred compensation liability |
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Paid-in capital |
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Retained earnings |
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Treasury shares, at cost, |
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Accumulated other comprehensive loss |
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TOTAL PREFORMED LINE PRODUCTS, COMPANY SHAREHOLDERS’ EQUITY |
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Noncontrolling interest |
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TOTAL SHAREHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
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$ |
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$ |
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See notes to consolidated financial statements (unaudited).
3
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
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Three Months Ended September 30 |
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Nine Months Ended September 30 |
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2021 |
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2020 |
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2021 |
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2020 |
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(Amounts in thousands of dollars, except earnings per share data) |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of products sold |
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GROSS PROFIT |
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Costs and expenses |
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Selling |
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General and administrative |
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Research and engineering |
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Other operating expense - net |
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OPERATING INCOME |
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Other income (expense) |
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Interest income |
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Interest expense |
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Other income - net |
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INCOME BEFORE INCOME TAXES |
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Income tax expense |
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NET INCOME |
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$ |
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$ |
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$ |
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$ |
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Net loss (gain) attributable to noncontrolling interests |
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NET INCOME ATTRIBUTABLE TO PREFORMED |
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$ |
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$ |
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$ |
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$ |
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AVERAGE NUMBER OF SHARES OF COMMON STOCK |
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Basic |
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Diluted |
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EARNINGS PER SHARE OF COMMON STOCK |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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See notes to consolidated financial statements (unaudited).
4
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(UNAUDITED)
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Three Months Ended September 30 |
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Nine Months Ended September 30 |
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2021 |
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2020 |
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2021 |
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2020 |
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(Thousands of dollars) |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss), net of tax |
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Foreign currency translation adjustment |
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Recognized net actuarial gain (net of tax provision of $ |
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Other comprehensive (loss) gain, net of tax |
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Comprehensive loss (gain) attributable to noncontrolling interests |
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Comprehensive income attributable to Preformed Line Products Company shareholders |
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$ |
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$ |
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$ |
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$ |
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See notes to consolidated financial statements (unaudited).
5
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
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Nine Months Ended September 30 |
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2021 |
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2020 |
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(Thousands of dollars) |
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OPERATING ACTIVITIES |
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Net income |
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$ |
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$ |
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Adjustments to net cash provided by (used in) operations: |
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Depreciation and amortization |
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Provision for accounts receivable allowances |
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Provision for inventory reserves |
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Deferred income taxes |
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Share-based compensation expense |
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(Loss) gain on sale of property and equipment |
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Other - net |
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Changes in operating assets and liabilities |
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Accounts receivable |
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Inventories |
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Prepaid expenses |
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Trade accounts payable and accrued liabilities |
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Accrued income and other taxes |
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Contributions to company pension plan |
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Other - net |
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NET CASH PROVIDED BY OPERATING ACTIVITIES |
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INVESTING ACTIVITIES (1) |
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Capital expenditures |
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Proceeds from the sale of property and equipment |
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NET CASH USED IN INVESTING ACTIVITIES |
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FINANCING ACTIVITIES(1) |
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Increase in notes payable to banks |
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Proceeds from long-term debt |
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Payments of long-term debt |
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Dividends paid |
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Proceeds from issuance of common shares |
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Purchase of common shares for treasury |
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Purchase of common shares for treasury from related parties |
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NET CASH USED IN FINANCING ACTIVITIES |
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Effects of exchange rate changes on cash and cash equivalents |
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Net (decrease) increase in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash at beginning of year |
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CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF |
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$ |
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$ |
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(1)
See notes to consolidated financial statements (unaudited).
6
PREFORMED LINE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands, except share and per share data, unless specifically noted)
NOTE A – BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Preformed Line Products Company and subsidiaries (the “Company” or “PLPC”) have been prepared in accordance with United States of America (U.S.) generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from these estimates. 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, 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. As a result, investments in noncontrolling interests are reported as equity in the Company’s consolidated financial statements. Additionally, the Company’s consolidated financial statements include
NOTE B – REVENUE
Revenue recognition
Net sales include products and shipping and handling charges, net of estimates for product returns. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. All revenue is recognized when the Company satisfies the performance obligations under the contract and control of the product is transferred to the customer, primarily based on shipping terms. Revenue for shipping and handling charges are recognized at the time the products are shipped to, delivered to or picked up by the customer. The Company estimates product returns based on historical return rates.
Disaggregated revenue
The Company’s revenues by segment and product type are as follows:
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Three Months Ended September 30, 2021 |
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Product Type |
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PLP-USA |
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The Americas |
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EMEA |
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Asia-Pacific |
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Consolidated |
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Energy |
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% |
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Communications |
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Special Industries |
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Total |
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Three Months Ended September 30, 2020 |
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Product Type |
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PLP-USA |
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The Americas |
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EMEA |
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Asia-Pacific |
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Consolidated |
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Energy |
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% |
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Communications |
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Special Industries |
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Total |
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7
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Nine Months Ended September 30, 2021 |
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Product Type |
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PLP-USA |
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The Americas |
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EMEA |
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Asia-Pacific |
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Consolidated |
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Energy |
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% |
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% |
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Communications |
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Special Industries |
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Total |
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Nine Months Ended September 30, 2020 |
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Product Type |
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PLP-USA |
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The Americas |
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EMEA |
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Asia-Pacific |
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Consolidated |
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Energy |
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% |
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% |
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Communications |
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Special Industries |
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Total |
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Credit losses for receivables
The Company maintains an allowance for credit losses for estimated losses resulting from the inability of its customers to make required payments. The Company uses a current expected credit loss model in order to immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments, mainly trade receivables. Additionally, the allowance is based upon identified delinquent accounts, customer payment patterns and other analyses of historical data trends. Receivable balances are written off against an allowance for credit losses after a final determination has been made.
Accounts receivable are net of an allowance for credit losses of $
NOTE C – OTHER FINANCIAL STATEMENT INFORMATION
Inventories – net
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September 30, |
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December 31, |
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Raw materials |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Finished Goods |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Excess of current cost over LIFO cost |
|
|
( |
) |
|
|
( |
) |
Net Inventory |
|
$ |
|
|
$ |
|
||
Cost of inventories for certain material is determined using the last-in-first-out (LIFO) method and totaled approximately $
8
Property, plant and equipment—net
Major classes of Property, plant and equipment are stated at cost and were as follows:
|
|
September 30, |
|
|
December 31, |
|
||
Land and improvements |
|
$ |
|
|
$ |
|
||
Buildings and improvements |
|
|
|
|
|
|
||
Machinery, equipment and aircraft |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
||
Legal proceedings
The Company can be party to a variety of pending legal proceedings and claims arising in the normal course of business, including, but not limited to, litigation relating to employment, workers’ compensation, product liability, environmental and intellectual property. The Company has liability insurance to cover many of these claims.
Although the outcomes of these matters are not predictable with certainty, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In the event the Company determines that a loss is not probable, but is reasonably possible, and the likelihood to develop what the Company believes to be a reasonable range of potential loss exists, the Company will include disclosure related to such matters. 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. As of September 30, 2021 and December 31, 2020, the Company has accrued approximately $
The Company and its subsidiaries Helix Uniformed Ltd. (“Helix”) and Preformed Line Products (Canada) Limited (“PLPC Canada”), were each named, jointly and severally, with each of SNC-Lavalin ATP, Inc. (“SNC ATP”), HD Supply Canada Inc., by its trade names HD Supply Power Solutions and HD Supply Utilities (“HD Supply”), and Anixter Power Solutions Canada Inc. (the corporate successor to HD Supply), “Anixter” and, together with the Company, PLPC Canada, Helix, SNC ATP and HD Supply, the (“Defendants”) in a complaint filed by
The Complaint states that Plaintiff engaged SNC ATP to design, engineer, procure and construct numerous power distribution and transmission facilities in Alberta (the “Projects”) and that through SNC ATP and HD Supply (now Anixter), spacer dampers manufactured by Helix were procured and installed in the Projects. 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 are seeking an estimated $
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, 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.
9
NOTE D – SHAREHOLDERS EQUITY
The following table reflects the changes in shareholders equity for the nine months ended September 30, 2021 and 2020:
|
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|||||||||||
|
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|
|
Accumulated Other |
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|
|
|
|
|
|
|
|
||||||||||||||
|
|
Common |
|
|
Common |
|
|
Deferred |
|
|
Paid in |
|
|
Retained |
|
|
Treasury |
|
|
Cumulative |
|
|
Unrecognized |
|
|
Total |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||||
|
(In thousands, except share and per share data) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||||
Recognized net actuarial gain, net of tax provision of $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||||
Issuance of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common shares distributed from rabbi trust of |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends declared - $ |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||||
Balance at March 31, 2021 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Recognized net actuarial gain, net of tax provision of $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||||
Issuance of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common shares issued to rabbi trust of |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends declared - $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||||
Balance at June 30, 2021 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||||
Recognized net actuarial gain, net of tax provision of $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||||
Issuance of |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Common shares distributed from rabbi trust of |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends declared - $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||||
Balance at September 30, 2021 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other |
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Common |
|
|
Common |
|
|
Deferred |
|
|
Paid in |
|
|
Retained |
|
|
Treasury |
|
|
Cumulative |
|
|
Unrecognized |
|
|
Total |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||||
|
(In thousands, except share and per share data) |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||||
Recognized net actuarial gain, net of tax provision of $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||||
Issuance of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common shares distributed from rabbi trust of |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends declared - $ |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||||
Balance at March 31, 2020 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Recognized net actuarial gain, net of tax provision of $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||||
Issuance of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common shares distributed from rabbi trust of |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends declared - $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||||
Balance at June 30, 2020 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|||||||||||
Recognized net actuarial gain, net of tax provision of $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|||||||||||
Total comprehensive income |
|
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|||||||||||
Share-based compensation |
|
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|||||||||||
Purchase of |
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|
|
|
|
|
|
|
( |
) |
|
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|
|
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|
( |
) |
|
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( |
) |
||||||||
Issuance of |
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|
|||||||||||
Common shares distributed from rabbi trust of |
|
|
|
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|
( |
) |
|
|
|
|
|
|
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|
|
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|
|
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|
||||||||||
Cash dividends declared - $ |
|
|
|
|
|
|
|
|
|
|
|
|
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|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||||
Balance at September 30, 2020 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
11
NOTE E – PENSION PLANS
The Company uses a December 31 measurement date for the Preformed Line Products Company Employees’ Retirement Plan (the “Plan”).
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recognized net actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net periodic pension benefit |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
There were
NOTE F – ACCUMULATED OTHER COMPREHENSIVE INCOME (“AOCI”)
The following tables set forth the total changes in AOCI by component, net of tax:
|
|
Three Months Ended September 30, 2021 |
|
|
Three Months Ended September 30, 2020 |
|
||||||||||||||||||
|
|
Unrecognized |
|
|
Currency |
|
|
Total |
|
|
Unrecognized |
|
|
Currency |
|
|
Total |
|
||||||
Balance at July 1 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(Loss) Gain on foreign currency |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Amounts reclassified from AOCI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of defined benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net current period other |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Balance at September 30 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Nine Months Ended September 30, 2021 |
|
|
Nine Months Ended September 30, 2020 |
|
||||||||||||||||||
|
|
Defined benefit |
|
|
Currency |
|
|
Total |
|
|
Defined benefit |
|
|
Currency |
|
|
Total |
|
||||||
Balance at January 1 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive loss before |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss on foreign currency |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Amounts reclassified from AOCI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of defined benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net current period other |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Balance at September 30 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
12
NOTE G – COMPUTATION OF EARNINGS PER SHARE
Basic earnings per share were computed by dividing Net income by the weighted-average number of common shares outstanding for each respective period. 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-month periods ended September 30, 2021 and 2020 was as follows:
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Determination of shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect - share-based awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
For both the three and nine-month periods ended September 30, 2021,
NOTE H – GOODWILL AND OTHER INTANGIBLES
The Company’s finite and indefinite-lived intangible assets consist of the following:
|
|
September 30, 2021 |
|
|
December 31, 2020 |
|
||||||||||
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Gross Carrying |
|
|
Accumulated |
|
||||
Finite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Patents |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Land use rights |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Trademarks |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Technology |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Customer relationships |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Indefinite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goodwill |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
The aggregate amortization expense for other intangibles with finite lives for the three and nine-month periods ended September 30, 2021 was $ million and $
13
The Company’s measurement date for its annual impairment test for goodwill is October 1st of each year. The Company performs additional interim impairment assessments as circumstances warrant. The Company performs its annual impairment test for goodwill utilizing a discounted cash flow methodology, market comparables, and an overall market capitalization reasonableness test in computing fair value by reporting unit. The Company then compares the fair value of the reporting unit to its carrying value to assess if goodwill has been impaired. Based on the assumptions as to growth, discount rates and the weighting used for each respective valuation methodology, results of the valuations could be significantly different. However, the Company believes that the methodologies and weightings used are reasonable and result in appropriate fair values of the reporting units. The Company’s valuation method uses Level 3 inputs under the fair value hierarchy.
Given the continued decline in the Company’s results in the Asia Pacific region and the uncertainty surrounding COVID-19 including the lingering impacts of the Delta variant, the Company concluded that an indicator of impairment was present and conducted an interim impairment review of its goodwill in the Asia-Pacific reporting unit as of September 30, 2021. The Company reassessed its previous forecasts for this reporting unit which expected increased sales levels in the second half of 2021. However, actual results were lower than forecast due to extended lockdowns and the postponing of projects. The interim impairment assessment was performed utilizing the same methodologies as the annual assessments discussed above and included revised projections, which are subject to various risks and uncertainties, including forecasted revenues, expenses and cash flows. Based on the interim impairment assessment, the Asia-Pacific reporting unit’s fair value exceeded its carrying value by approximately
The Company’s only intangible asset with an indefinite life is goodwill.
|
|
USA |
|
|
The Americas |
|
|
EMEA |
|
|
Asia-Pacific |
|
|
Total |
|
|||||
Balance at January 1, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Currency translation |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||
Balance at September 30, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
NOTE I – SHARE-BASED COMPENSATION
Long Term Incentive Plan of 2008 and 2016 Incentive Plan
The Company maintains an equity award program to give the Company a competitive advantage in attracting, retaining, and motivating officers, employees and directors and to provide an incentive to those individuals to increase shareholder value through long-term incentives directly linked to the Company’s performance. Under the Preformed Line Products Company Long Term Incentive Plan of 2008 (the “LTIP”), certain employees, officers, and directors were eligible to receive awards of options, restricted shares and restricted share units (RSUs). The total number of Company common shares reserved for awards under the LTIP was
Restricted Share Units
For the regular annual grants, a portion of the RSUs is subject to time-based cliff vesting and a portion is subject to vesting based upon the Company’s performance over a set period for all participants except the CEO. All of the CEO’s regular annual RSUs are subject to vesting based upon the Company’s performance over a set-year period.
The RSUs are offered at no cost to the employees. The fair value of RSUs is based on the market price of a common share on the grant date and the shares underlying the awards are not issued until they vest. Dividends declared are accrued in cash.
14
A summary of the RSUs outstanding under the LTIP for the nine months ended September 30, 2021 is as follows:
|
|
Restricted Share Units |
|
|||||||||||||
|
|
Performance |
|
|
Service |
|
|
Total |
|
|
Weighted-Average |
|
||||
Nonvested as of January 1, 2021 |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vested |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Nonvested as of September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
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, 2021 was $ million and $ million, respectively. Compensation expense related to the time-based RSUs for the three and nine-month periods ended September 30, 2020 was $ million and $ million, respectively. As of September 30, 2021, there was $ 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 .
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, 2021 was $
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. Unvested performance-based awards will vest on a target potential payout.
To satisfy the vesting of its RSU awards, the Company has reserved new shares from its authorized but unissued shares. Any additional awards granted will also be issued from the Company’s authorized but unissued shares.
Share Option Awards
The LTIP permitted and now the Incentive Plan permits the grant of
The Company utilizes the Black-Scholes option pricing model for estimating fair values of options. The Black-Scholes model requires assumptions regarding the volatility of the Company’s stock, the expected life of the stock award and the Company’s dividend yield. The Company utilizes historical data in determining these assumptions. The risk-free rate for periods within the contractual life of the option is based on the U.S. zero coupon Treasury yield in effect at the time of grant.
There were
15
Stock option activity under the Company’s LTIP for nine months ended September 30, 2021 was as follows:
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
Outstanding at January 1, 2021 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding (vested and expected to vest) at September 30, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at September 30, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
There were option exercises for
For the three and nine-month periods ended September 30, 2021, the Company recorded compensation expense related to the stock options currently vested of less than $ million and $ million, respectively. For both the three and nine-month periods ended September 30, 2020, the Company also recorded compensation expense related to the stock options currently vested of less than $ million and $ million, respectively. The total compensation cost related to nonvested awards not yet recognized at September 30, 2021 is expected to be $ million over a weighted-average period of approximately .
Deferred Compensation Plan
The Company maintains a trust, commonly referred to as a rabbi trust, in connection with the Company’s deferred compensation plan. This plan allows for
NOTE J – FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The Company measures and records certain assets and liabilities at fair value. A fair value hierarchy is used for those assets and liabilities measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of the following three levels:
Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 Inputs other than Level 1 inputs that are either directly or indirectly observable, which may include:
Level 3 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.
16
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, 2021 and December 31, 2020:
Description |
|
Balance as of |
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Supplemental profit sharing plan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign currency forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Description |
|
Balance as of |
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Supplemental profit sharing plan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign currency forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company operates internationally and enters into intercompany transactions denominated in foreign currencies. Consequently, the Company is subject to market risk arising from exchange rate movements between the dates when foreign currency transactions occur and the dates they are settled. The Company currently uses foreign currency forward contracts to reduce the risk related to some of these transactions. These contracts usually have maturities of
The Company has a non-qualified Supplemental Profit Sharing Plan for its executives and directors. The liability for this unfunded Supplemental Profit Sharing Plan was $
17
NOTE K – RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
On
NOTE L – NEW ACCOUNTING STANDARDS TO BE ADOPTED
NOTE M – BUSINESS SEGMENT INFORMATION
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing performance.
The following tables present a summary of the Company’s reportable operating segments for the three and nine months ended September 30, 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 |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
PLP-USA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Americas |
|
|
|
|
|
|
|
|
|
|
|
|
||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia-Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Intersegment sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
PLP-USA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Americas |
|
|
|
|
|
|
|
|
|
|
|
|
||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia-Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total intersegment sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
PLP-USA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Americas |
|
|
|
|
|
|
|
|
|
|
|
|
||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia-Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net income attributable to Preformed Line Products Company shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
||||
PLP-USA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Americas |
|
|
|
|
|
|
|
|
|
|
|
|
||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia-Pacific |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total net income attributable to Preformed Line Products Company shareholders |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
18
|
|
September 30, 2021 |
|
|
December 31, 2020 |
|
||
Assets |
|
|
|
|
|
|
||
PLP-USA |
|
$ |
|
|
$ |
|
||
The Americas |
|
|
|
|
|
|
||
EMEA |
|
|
|
|
|
|
||
Asia-Pacific |
|
|
|
|
|
|
||
Total identifiable assets |
|
$ |
|
|
$ |
|
||
NOTE N – INCOME TAXES
The Company’s effective tax rate was
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.
There were
NOTE O – PRODUCT WARRANTY RESERVE
The Company records an accrual for estimated warranty costs to Costs of products sold in the Statements of Consolidated Income. These amounts are recorded in Accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets. The Company records and accounts for its warranty reserve based on specific claim incidents. Should the Company become aware of a specific potential warranty claim for which liability is probable and reasonably estimable, a specific charge is recorded and accounted for accordingly. Adjustments are made quarterly to the accruals as claim information changes.
The following is a rollforward of the product warranty reserve:
|
|
Nine Months Ended September 30 |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Beginning of period balance |
|
$ |
|
|
$ |
|
||
Additions charged to income |
|
|
|
|
|
|
||
Warranty usage |
|
|
( |
) |
|
|
( |
) |
Currency translation |
|
|
( |
) |
|
|
( |
) |
End of period balance |
|
$ |
|
|
$ |
|
||
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 $
On April 17, 2020, the Company extended the term on its $
19
Australian and Austrian line of credit agreement were
On April 25, 2019, the Company borrowed $
On August 16, 2021, the Company’s New Zealand subsidiary borrowed $
NOTE Q – LEASES
The Company regularly enters into leases in the normal course of business. As of September 30, 2021,
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.
|
|
Nine Months Ended |
|
|||||
|
|
September 30, 2021 |
|
|
September 30, 2020 |
|
||
Components of lease expense |
|
|
|
|
|
|
||
Operating lease cost |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Finance lease cost |
|
|
|
|
|
|
||
Amortization of right-of-use assets |
|
|
|
|
|
|
||
Interest on lease liabilities |
|
|
|
|
|
|
||
Total lease cost |
|
$ |
|
|
$ |
|
||
The discount rate implicit within each lease is often not determinable and, therefore, the Company establishes the discount rate based on its incremental borrowing rate. The incremental borrowing rate for the Company’s leases is determined based on lease term and currency in which lease payments are made, adjusted for impacts of collateral. The weighted average discount rate used to measure the Company’s operating and finance lease liabilities as of September 30, 2021 was
Future maturities of the Company’s lease liabilities as of September 30, 2021 are as follows:
|
|
Operating Leases |
|
|
Finance Leases |
|
||
2021 |
|
$ |
|
|
$ |
|
||
2022 |
|
|
|
|
|
|
||
2023 |
|
|
|
|
|
|
||
2024 |
|
|
|
|
|
|
||
2025 and thereafter |
|
|
|
|
|
|
||
Total lease payments |
|
|
|
|
|
|
||
Less amount of lease payments representing interest |
|
|
|
|
|
|
||
Total present value of lease payments |
|
$ |
|
|
$ |
|
||
20
The total minimum sublease rentals under noncancelable subleases to be received through 2023 is $
Supplemental cash flow information related to leases for the nine-month period ended September 30, 2021 was as follows:
|
|
September 30, 2021 |
|
|
September 30, 2020 |
|
||
Supplemental cash flow information |
|
|
|
|
|
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
||
Operating cash flows from finance leases |
|
|
|
|
|
|
||
Financing cash flows from finance leases |
|
|
|
|
|
|
||
NOTE R – RELATED PARTY TRANSACTIONS
On January 4, 2021, the Company purchased
On February 3, 2021, the Company purchased
On March 10, 2021, the Company purchased
On March 15, 2021, the Company purchased
On June 9, 2021, the Company purchased
On June 15, 2021, the Company purchased
On July 1, 2021, the Company purchased
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the readers of our 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:
OVERVIEW
Preformed Line Products Company (the “Company”, “PLPC”, “we”, “us”, or “our”) was incorporated in Ohio in 1947. We are an international designer and manufacturer of products and systems employed in the construction and maintenance of overhead and underground networks for the energy, telecommunication, cable operators, information (data communication), and other similar industries. Our primary products support, protect, connect, terminate, and secure cables and wires. We 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, manufacturing, 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.
PREFACE
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 and nine-month periods ended September 30, 2021. The first quarter of 2020 saw the initial global outbreak of a novel strain of coronavirus (“COVID-19”), which created significant global economic disruption. While the outbreak did not have a material impact on our results, it has continued to create challenges for us in countries that have significant outbreak mitigation strategies, namely countries in our Asia-Pacific business segment.
During the quarter ended September 30, 2021, the resurgence of COVID-19 and the Delta variant has resulted in extended lockdowns and temporary project postponements, primarily in our Asia Pacific segment, which continued to impact results in this segment. There
22
have been some restrictions to the supply of products since the pandemic began and, during the quarters ended June 30, 2021 and September 30, 2021, we experienced significant raw material and transportation cost inflation that negatively affected our earnings. To offset these increased costs, we implemented an initial price increase in June 2021, but due to our order backlog, these price increases had a moderate effect in offsetting increased costs during the third quarter. A second price increase was implemented in October 2021 to further mitigate cost inflation. Continued cost inflation in these areas through the remainder of 2021 may require further price adjustments going forward to maintain profit margin, and any price increases may have a negative effect on demand.
We may experience other potential inflationary pressures globally and restrictions on operations may continue or expand to other regions, however, we believe that our global supply chain currently remains strong.
Due to the continued uncertainty created by COVID-19, 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 and actively manage costs and our liquidity position to provide additional flexibility while still supporting our customers and their specific needs.
While we expect that the COVID-19 outbreak will continue to bring uncertainty to 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. dollar. 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. dollars. The fluctuations of foreign currencies during the three and nine months ended September 30, 2021 had a $2.0 million and $10.0 million favorable effect, respectively, on net sales when compared to the same period in 2020. There were favorable effects of $.2 million and $.5 million on net income for the three and nine-month periods ended September 30, 2021, respectively, 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 and nine-month periods ended September 30, 2021 was as follows:
|
|
Foreign Currency Translation Impact |
|
|||||||||||||
(Thousands of dollars) |
|
Net Sales |
|
|
Net Income |
|
||||||||||
|
|
Three Months |
|
|
Nine Months |
|
|
Three Months |
|
|
Nine Months |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
The Americas |
|
$ |
381 |
|
|
$ |
(625 |
) |
|
$ |
72 |
|
|
$ |
176 |
|
EMEA |
|
|
993 |
|
|
|
5,781 |
|
|
|
90 |
|
|
|
377 |
|
Asia-Pacific |
|
|
663 |
|
|
|
4,839 |
|
|
|
29 |
|
|
|
(40 |
) |
Total |
|
$ |
2,037 |
|
|
$ |
9,995 |
|
|
$ |
191 |
|
|
$ |
513 |
|
The operating results for the three months ended September 30, 2021 are compared to the same period in 2020. Net sales for the three months ended September 30, 2021 of $135.4 million increased $7.9 million, or 6%, compared to 2020. As a percentage of net sales, gross profit decreased to 31.9% in 2021 from 35.2% in 2020. Gross profit for the three-month periods ended September 30, 2021 and 2020 was $43.2 million and $44.9 million, respectively. Excluding the favorable impact of foreign currency translation, gross profit decreased $2.5 million, or 5%, compared to 2020. Costs and expenses of $30.1 million increased $2.1 million compared to 2020 and included an unfavorable impact from currency translation of $.5 million. Operating income for the three months ended September 30, 2021 was $13.1 million, a decrease of $3.8 million compared to 2020. Net income for the three months ended September 30, 2021 of $10.7 million decreased $13.0 million compared to the three months ended September 30, 2020. The effect of currency translation had favorable impacts of $.2 million on both operating income and net income.
The operating results for the nine months ended September 30, 2021 are compared to the same period in 2020. Net sales for the nine months ended September 30, 2021 of $386.0 million increased $38.0 million, or 11%, compared to 2020. As a percentage of net sales, gross profit decreased to 32.7% in 2021 from 33.7% in 2020. Gross profit for the nine-month periods ended September 30, 2021 and 2020 was $126.4 million and $117.4 million, respectively. Excluding the favorable impact of foreign currency translation, gross profit increased $5.8 million, or 5%, compared to 2020. Costs and expenses of $89.8 million increased $8.8 million compared to 2020 and included an unfavorable impact from currency translation of $2.5 million. Operating income for the nine months ended September 30, 2021 was $36.6 million, an increase of $.2 million compared to 2020. Net income for the nine months ended September 30, 2021 of $26.8 million decreased $.3 million compared to the nine months ended September 30, 2020. The effect of currency translation had favorable impacts of $.7 million and $.4 million on operating income and net income, respectively.
23
The following table reflects the impact of foreign currency fluctuations on operating income for the three and nine months ended September 30, 2021 and 2020:
|
|
Foreign Currency Impact |
|
|||||||||||||
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
||||||||||
(Thousands of dollars) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Operating income |
|
$ |
13,078 |
|
|
$ |
16,890 |
|
|
$ |
36,584 |
|
|
$ |
36,340 |
|
Translation gain |
|
|
(245 |
) |
|
|
0 |
|
|
|
(714 |
) |
|
|
0 |
|
Transaction (gain) loss |
|
|
(50 |
) |
|
|
314 |
|
|
|
124 |
|
|
|
1,702 |
|
Net loss (gain) on forward currency |
|
|
(198 |
) |
|
|
(136 |
) |
|
|
740 |
|
|
|
(1,039 |
) |
Operating income excluding currency |
|
$ |
12,585 |
|
|
$ |
17,068 |
|
|
$ |
36,734 |
|
|
$ |
37,003 |
|
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 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. The growth in PLP-USA net sales will require additional investment to be made within our PLP-USA facilities, both in the form of operational capacity as well as increased warehouse space. These investments in our U.S. operations will allow us to further enhance the service we provide to our U.S. customers beginning in late 2022. If necessary, we will modify redundant processes and further 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 20.5% and have the continued ability borrow needed funds at a competitive interest rate under our credit facility.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2021 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 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 September 30, 2021 and 2020. The Company’s past operating results are not necessarily indicative of future operating results.
|
|
Three Months Ended September 30 |
|
|||||||||||||||||
(Thousands of dollars) |
|
2021 |
|
|
2020 |
|
|
Change |
|
|||||||||||
Net sales |
|
$ |
135,380 |
|
|
100.0% |
|
|
$ |
127,463 |
|
|
100.0% |
|
|
$ |
7,917 |
|
||
Cost of products sold |
|
|
92,217 |
|
|
|
68.1 |
|
|
|
82,549 |
|
|
|
64.8 |
|
|
|
9,668 |
|
GROSS PROFIT |
|
|
43,163 |
|
|
|
31.9 |
|
|
|
44,914 |
|
|
|
35.2 |
|
|
|
(1,751 |
) |
Costs and expenses |
|
|
30,085 |
|
|
|
22.2 |
|
|
|
28,024 |
|
|
|
22.0 |
|
|
|
2,061 |
|
OPERATING INCOME |
|
|
13,078 |
|
|
|
9.7 |
|
|
|
16,890 |
|
|
|
13.3 |
|
|
|
(3,812 |
) |
Other income, net |
|
|
722 |
|
|
|
0.5 |
|
|
|
530 |
|
|
|
0.4 |
|
|
|
192 |
|
INCOME BEFORE INCOME TAXES |
|
|
13,800 |
|
|
|
10.2 |
|
|
|
17,420 |
|
|
|
13.7 |
|
|
|
(3,620 |
) |
Income tax expense |
|
|
3,097 |
|
|
|
2.3 |
|
|
|
4,458 |
|
|
|
3.5 |
|
|
|
(1,361 |
) |
NET INCOME |
|
|
10,703 |
|
|
|
7.9 |
|
|
|
12,962 |
|
|
|
10.2 |
|
|
|
(2,259 |
) |
Net loss (gain) attributable to noncontrolling interests |
|
|
5 |
|
|
|
0.0 |
|
|
|
(8 |
) |
|
|
(0.0 |
) |
|
|
13 |
|
NET INCOME ATTRIBUTABLE TO |
|
$ |
10,708 |
|
|
7.9% |
|
|
$ |
12,954 |
|
|
10.2% |
|
|
$ |
(2,246 |
) |
||
24
Net sales. Net sales were $135.4 million for the three months ended September 30, 2021, an increase of $7.9 million, or 6%, from the three months ended September 30, 2020. Excluding the favorable effect of currency translation, net sales for the three months ended September 30, 2021 increased $5.9 million compared to the same period in 2020, or 5%, as summarized in the following table:
|
|
Three Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
66,891 |
|
|
$ |
53,027 |
|
|
$ |
13,864 |
|
|
$ |
0 |
|
|
$ |
13,864 |
|
|
|
26 |
% |
The Americas |
|
|
18,084 |
|
|
|
19,914 |
|
|
|
(1,830 |
) |
|
|
381 |
|
|
|
(2,211 |
) |
|
|
(11 |
) |
EMEA |
|
|
26,619 |
|
|
|
27,034 |
|
|
|
(415 |
) |
|
|
993 |
|
|
|
(1,408 |
) |
|
|
(5 |
) |
Asia-Pacific |
|
|
23,786 |
|
|
|
27,488 |
|
|
|
(3,702 |
) |
|
|
663 |
|
|
|
(4,365 |
) |
|
|
(16 |
) |
Consolidated |
|
$ |
135,380 |
|
|
$ |
127,463 |
|
|
$ |
7,917 |
|
|
$ |
2,037 |
|
|
$ |
5,880 |
|
|
|
5 |
% |
The year-over-year increase in PLP-USA net sales of $13.9 million, or 26%, was primarily due to a volume increase in communication product sales. International net sales for the three months ended September 30, 2021 experienced a favorable impact of $2.0 million when local currencies were converted to U.S. dollars. The following discussion of net sales excludes the effect of currency translation. The Americas net sales of $18.1 million decreased $2.2 million, or 11%, primarily due to a volume decrease in energy product sales. EMEA net sales of $26.6 million decreased $1.4 million, or 5%, primarily due to a volume decrease in energy product sales within the region. Asia-Pacific net sales of $23.8 million decreased $4.4 million, or 16%, compared to 2020 primarily due to a volume decrease in special industries products, partially resulting from the continuing effects of the disruption to the region's economy caused by the COVID-19 pandemic.
Gross profit. Gross profit was $43.2 million and $44.9 million for the three-month periods ended September 30, 2021 and 2020, respectively. Excluding the favorable effect of currency translation, gross profit decreased $2.5 million, or 5%, as summarized in the following table:
|
|
Three Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
22,589 |
|
|
$ |
21,613 |
|
|
$ |
976 |
|
|
$ |
0 |
|
|
$ |
976 |
|
|
|
5 |
% |
The Americas |
|
|
6,283 |
|
|
|
6,535 |
|
|
|
(252 |
) |
|
|
130 |
|
|
|
(382 |
) |
|
|
(6 |
) |
EMEA |
|
|
7,522 |
|
|
|
10,021 |
|
|
|
(2,499 |
) |
|
|
352 |
|
|
|
(2,851 |
) |
|
|
(28 |
) |
Asia-Pacific |
|
|
6,769 |
|
|
|
6,745 |
|
|
|
24 |
|
|
|
236 |
|
|
|
(212 |
) |
|
|
(3 |
) |
Consolidated |
|
$ |
43,163 |
|
|
$ |
44,914 |
|
|
$ |
(1,751 |
) |
|
$ |
718 |
|
|
$ |
(2,469 |
) |
|
|
(5 |
)% |
PLP-USA gross profit of $22.6 million increased $1.0 million compared to the same period in 2020 mainly as a result of increased sales volume of $13.9 million, offset by the negative impact of rising commodity prices, freight costs, inflation and an increase in warranty costs. Incremental price increases were enacted in the PLP-USA region in June and October of 2021 to further mitigate the ongoing inflation and commodity price increases. International gross profit for the three months ended September 30, 2021 was favorably impacted by $.7 million when local currencies were translated to U.S. dollars. The following discussion of gross profit excludes the effects of currency translation. The Americas gross profit decrease of $.4 million was primarily the result of a year-over-year sales decrease in the region combined with an unfavorable shift in sales product mix. EMEA’s gross profit decreased $2.9 million, mainly due to margin pressure associated with rising commodity prices, freight costs and inflation. Asia-Pacific’s gross profit decrease was the result of a year-over-year reduction in sales of $4.4 million combined with commodity price increases, partially mitigated by ongoing cost containment initiatives to offset the continued negative effects of the COVID-19 pandemic.
25
Costs and expenses. Costs and expenses of $30.1 million for the three months ended September 30, 2021 increased $2.1 million, or 7%. Excluding the unfavorable effect of currency translation, costs and expenses increased $1.6 million, or 6%, as summarized in the following table:
|
|
Three Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
14,506 |
|
|
$ |
12,872 |
|
|
$ |
1,634 |
|
|
$ |
0 |
|
|
$ |
1,634 |
|
|
|
13 |
% |
The Americas |
|
|
3,607 |
|
|
|
3,707 |
|
|
|
(100 |
) |
|
|
49 |
|
|
|
(149 |
) |
|
|
(4 |
) |
EMEA |
|
|
6,299 |
|
|
|
5,863 |
|
|
|
436 |
|
|
|
225 |
|
|
|
211 |
|
|
|
4 |
|
Asia-Pacific |
|
|
5,673 |
|
|
|
5,582 |
|
|
|
91 |
|
|
|
199 |
|
|
|
(108 |
) |
|
|
(2 |
) |
Consolidated |
|
$ |
30,085 |
|
|
$ |
28,024 |
|
|
$ |
2,061 |
|
|
$ |
473 |
|
|
$ |
1,588 |
|
|
|
6 |
% |
PLP-USA costs and expenses of $14.5 million for the three months ended September 30, 2021 increased when compared to the same period in 2020 due to increases in commissions expense and professional fees combined with net year-over-year unfavorable transactional foreign currency losses. On a consolidated basis, costs and expenses for the three months ended September 30, 2021 were unfavorably impacted by $.5 million when local currencies were translated to U.S. dollars. The following discussion of costs and expenses excludes the effect of currency translation. The Americas costs and expenses of $3.6 million were relatively flat when compared to the three-month period ended September 30, 2021. EMEA costs and expenses of $6.3 million increased $.2 million mainly due to higher personnel-related expenses. Asia-Pacific costs and expenses were relatively flat year-over-year.
Other income, net. Other income, net for the three-month periods ended September 30, 2021 and 2020 was $.7 million and $.5 million, respectively. Other income, net for the three-month period ended September 30, 2021 includes a pre-tax recovery of approximately $1.0 million related to a recent Brazilian Supreme Court decision that granted the Company the right to recover, through offset of federal tax liabilities, certain tax over-payments collected by the Brazilian government. For the three-month period ended September 30, 2020, the Company recorded $.7 million of non-recurring COVID-19 subsidies received by various subsidiaries around the world.
Income taxes. Income taxes for the three months ended September 30, 2021 and 2020 were $3.1 million and $4.5 million, respectively, based on pre-tax income of $13.8 million and $17.3 million, respectively. The effective tax rate for the three-month periods ended September 30, 2021 and 2020 was 22% and 26%, respectively. The decrease in the effective tax rate is primarily related to favorable movement in permanent items including executive retirement compensation.
Net income. As a result of the preceding items, net income for the three months ended September 30, 2021 was $10.7 million, compared to $13.0 million for the three months ended September 30, 2020, a decrease of $2.2 million as summarized in the following table:
|
|
Three Months Ended September 30 |
|||||||||||||||||||||||
(Thousands of dollars) |
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
6,688 |
|
|
$ |
6,753 |
|
|
$ |
(65 |
) |
|
$ |
0 |
|
|
$ |
(65 |
) |
|
|
(1 |
) |
% |
The Americas |
|
|
2,474 |
|
|
|
1,908 |
|
|
|
566 |
|
|
|
72 |
|
|
|
494 |
|
|
|
26 |
|
|
EMEA |
|
|
697 |
|
|
|
2,912 |
|
|
|
(2,215 |
) |
|
|
90 |
|
|
|
(2,305 |
) |
|
|
(79 |
) |
|
Asia-Pacific |
|
|
849 |
|
|
|
1,381 |
|
|
|
(532 |
) |
|
|
29 |
|
|
|
(561 |
) |
|
|
(41 |
) |
|
Consolidated |
|
$ |
10,708 |
|
|
$ |
12,954 |
|
|
$ |
(2,246 |
) |
|
$ |
191 |
|
|
$ |
(2,437 |
) |
|
|
(19 |
) |
% |
PLP-USA’s net income for the three months ended September 30, 2021 decreased $.1 million compared to the same period in 2020, primarily due to an decrease in operating income of $.7 million combined with an increase in net other expense of $.1 million, partially offset by a decrease in income tax expense of $.7 million. The following discussion of net income excludes the effect of currency translation. The Americas net income increased $.5 million mainly as a result of a pre-tax recovery in Brazil of $1.0 million. EMEA net income decreased $2.3 million mainly as a result of a $3.0 million decrease in operating income, partially offset by a decrease in income tax expense of $.7 million. Asia-Pacific net income decreased $.6 largely due to a decrease in operating income of $.1 million combined with an increase of other expense, net of $.8 million, which was due to non-recurring subsidy income recorded during the three months ended September 30, 2020. A decrease in income tax expense of $.3 million partially offset the negative impacts on net income.
26
NINE MONTHS ENDED SEPTEMBER 30, 2021 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2020
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, 2021 and 2020. The Company’s past operating results are not necessarily indicative of future operating results.
|
|
Nine Months Ended September 30 |
|
|||||||||||||||||
(Thousands of dollars) |
|
2021 |
|
|
2020 |
|
|
Change |
|
|||||||||||
Net sales |
|
$ |
385,971 |
|
|
|
100.0 |
% |
|
$ |
347,944 |
|
|
|
100.0 |
% |
|
$ |
38,027 |
|
Cost of products sold |
|
|
259,577 |
|
|
|
67.3 |
|
|
|
230,554 |
|
|
|
66.3 |
|
|
|
29,023 |
|
GROSS PROFIT |
|
|
126,394 |
|
|
|
32.7 |
|
|
|
117,390 |
|
|
|
33.7 |
|
|
|
9,004 |
|
Costs and expenses |
|
|
89,810 |
|
|
|
23.3 |
|
|
|
81,050 |
|
|
|
23.3 |
|
|
|
8,760 |
|
OPERATING INCOME |
|
|
36,584 |
|
|
|
9.5 |
|
|
|
36,340 |
|
|
|
10.4 |
|
|
|
244 |
|
Other income, net |
|
|
347 |
|
|
|
0.1 |
|
|
|
69 |
|
|
|
0.0 |
|
|
|
278 |
|
INCOME BEFORE INCOME TAXES |
|
|
36,931 |
|
|
|
9.6 |
|
|
|
36,409 |
|
|
|
10.5 |
|
|
|
522 |
|
Income tax expense |
|
|
10,161 |
|
|
|
2.6 |
|
|
|
9,306 |
|
|
|
2.7 |
|
|
|
855 |
|
NET INCOME |
|
$ |
26,770 |
|
|
|
6.9 |
|
|
$ |
27,103 |
|
|
|
7.8 |
|
|
$ |
(333 |
) |
Net (gain) loss attributable to noncontrolling interests |
|
|
(15 |
) |
|
|
(0.0 |
) |
|
|
30 |
|
|
|
0.0 |
|
|
|
(45 |
) |
NET INCOME ATTRIBUTABLE TO |
|
$ |
26,755 |
|
|
|
6.9 |
% |
|
$ |
27,133 |
|
|
|
7.8 |
% |
|
$ |
(378 |
) |
Net sales. Net sales were $386.0 million for the nine months ended September 30, 2021, an increase of $38.0 million, or 11%, from the nine months ended September 30, 2020. Excluding the favorable effect of currency translation, net sales for the nine months ended September 30, 2021 increased $28.0 million compared to the same period in 2020, or 8%, as summarized in the following table:
|
|
Nine Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
185,208 |
|
|
$ |
153,595 |
|
|
$ |
31,613 |
|
|
$ |
0 |
|
|
|
31,613 |
|
|
|
21 |
% |
The Americas |
|
|
54,230 |
|
|
|
54,641 |
|
|
|
(411 |
) |
|
|
(625 |
) |
|
|
214 |
|
|
|
0 |
|
EMEA |
|
|
77,452 |
|
|
|
68,441 |
|
|
|
9,011 |
|
|
|
5,781 |
|
|
|
3,230 |
|
|
|
5 |
|
Asia-Pacific |
|
|
69,081 |
|
|
|
71,267 |
|
|
|
(2,186 |
) |
|
|
4,839 |
|
|
|
(7,025 |
) |
|
|
(10 |
) |
Consolidated |
|
$ |
385,971 |
|
|
$ |
347,944 |
|
|
$ |
38,027 |
|
|
$ |
9,995 |
|
|
$ |
28,032 |
|
|
|
8 |
% |
The year-over-year increase in PLP-USA net sales of $31.6 million, or 21%, was primarily due to a volume increase in communication product sales. International net sales for the nine months ended September 30, 2021 experienced a favorable impact of $10.0 million when local currencies were converted to U.S. dollars. The following discussion of net sales excludes the net effect of currency translation. The Americas net sales of $54.2 million increased $.2 million, primarily due to a volume increase in communication product sales, partially offset by decreases in energy product sales. EMEA net sales of $77.5 million increased $3.2 million, or 5%, primarily due to a volume increase in communication product sales within the region. Asia-Pacific net sales of $69.1 million decreased $7.0 million, or 10%, compared to 2020 primarily due to a year-over-year volume decrease across all product lines, partially resulting from the continuing effects of the disruption to the region's economy caused by the COVID-19 pandemic.
27
Gross profit. Gross profit was $126.4 million and $117.4 million for the nine-month periods ended September 30, 2021 and 2020, respectively. Excluding the favorable effect of currency translation, gross profit increased $5.8 million, or 5%, as summarized in the following table:
|
|
Nine Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
66,493 |
|
|
$ |
59,379 |
|
|
$ |
7,114 |
|
|
$ |
0 |
|
|
$ |
7,114 |
|
|
|
12 |
% |
The Americas |
|
|
17,719 |
|
|
|
17,658 |
|
|
|
61 |
|
|
|
(52 |
) |
|
|
113 |
|
|
|
1 |
|
EMEA |
|
|
23,981 |
|
|
|
23,621 |
|
|
|
360 |
|
|
|
1,933 |
|
|
|
(1,573 |
) |
|
|
(7 |
) |
Asia-Pacific |
|
|
18,201 |
|
|
|
16,732 |
|
|
|
1,469 |
|
|
|
1,338 |
|
|
|
131 |
|
|
|
1 |
|
Consolidated |
|
$ |
126,394 |
|
|
$ |
117,390 |
|
|
$ |
9,004 |
|
|
$ |
3,219 |
|
|
$ |
5,785 |
|
|
|
5 |
% |
PLP-USA gross profit of $66.5 million increased $7.1 million compared to the same period in 2020 as a result of increased sales volume of $31.6 million combined with a product sales mix shift to higher margin product and continued cost containment within labor and manufacturing expense, partially offset by commodity price increases and inflation. International gross profit for the nine months ended September 30, 2021 was favorably impacted by $3.2 million when local currencies were translated to U.S. dollars. The following discussion of gross profit excludes the effects of currency translation. The Americas gross profit increase of $.1 million was largely the result of a product margin improvement in the region due to sales product mix. EMEA’s gross profit decreased $1.6 million, primarily as a result an increase in sales of $3.2 million and a shift to higher sales volume in higher margin communication products. Despite the year-over-year decrease in sales, Asia-Pacific’s gross profit remained relatively flat, partially as a result of continued cost containment measures to mitigate the ongoing effects of COVID-19.
Costs and expenses. Costs and expenses of $89.8 million for the nine months ended September 30, 2021 increased $8.8 million, or 11%. Excluding the unfavorable effect of currency translation, costs and expenses increased $6.3 million, or 8%, as summarized in the following table:
|
|
Nine Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
41,649 |
|
|
$ |
38,193 |
|
|
$ |
3,456 |
|
|
$ |
0 |
|
|
$ |
3,456 |
|
|
|
9 |
% |
The Americas |
|
|
10,652 |
|
|
|
10,419 |
|
|
|
233 |
|
|
|
(258 |
) |
|
|
491 |
|
|
|
5 |
|
EMEA |
|
|
19,549 |
|
|
|
16,420 |
|
|
|
3,129 |
|
|
|
1,413 |
|
|
|
1,716 |
|
|
|
10 |
|
Asia-Pacific |
|
|
17,960 |
|
|
|
16,018 |
|
|
|
1,942 |
|
|
|
1,351 |
|
|
|
591 |
|
|
|
4 |
|
Consolidated |
|
$ |
89,810 |
|
|
$ |
81,050 |
|
|
$ |
8,760 |
|
|
$ |
2,506 |
|
|
$ |
6,254 |
|
|
|
8 |
% |
PLP-USA costs and expenses of $41.6 million for the nine months ended September 30, 2021 increased $3.5 million when compared to the same period in 2020 mainly due to increased commission expenses and higher personnel-related costs. On a consolidated basis, costs and expenses for the nine months ended September 30, 2021 were unfavorably impacted by $2.5 million when local currencies were translated to U.S. dollars. The following discussion of costs and expenses excludes the effect of currency translation. The Americas costs and expenses of $10.7 million increased $.5 million for the nine months ended September 30, 2021 compared to the same period in 2020 primarily due to higher net transactional foreign currency losses. EMEA costs and expenses of $19.5 million increased $1.7 million mainly due to higher personnel-related expenses, which were partially offset by a decrease in foreign currency net transactional gains and lower travel and entertainment expenses. Asia-Pacific saw an increase of $.6 million primarily due to increases in personnel related costs.
Other income, net. Other income, net for the nine-month periods ended September 30, 2021 and 2020 was $.5 million and $.1 million, respectively. Other income, net for the nine-month period ended September 30, 2021 includes a pre-tax recovery of approximately $1.0 million related to a recent Brazilian Supreme Court decision that granted the Company the right to recover, through offset of federal tax liabilities, certain tax overpayments collected by the Brazilian government. For the nine-month period ended September 30, 2020, the Company recorded $.8 million of non-recurring COVID-19 subsidies received by various subsidiaries around the world.
28
Income taxes. Income taxes for the nine months ended September 30, 2021 and 2020 were $10.2 million and $9.0 million, respectively, based on pre-tax income of $36.9 million and $36.4 million, respectively. The effective tax rate for the nine months ended September 30, 2021 and 2020 was 28% and 26%, respectively. The increase in the effective tax rate was due increased earnings in higher tax jurisdictions.
On January 1, 2021, the Company adopted Accounting Standards 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.
Net income. As a result of the preceding items, net income for the nine months ended September 30, 2021 was $26.8 million, compared to $27.1 million for the nine months ended September 30, 2020, a decrease of $.4 million as summarized in the following table:
|
|
Nine Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
18,583 |
|
|
$ |
16,439 |
|
|
$ |
2,144 |
|
|
$ |
0 |
|
|
$ |
2,144 |
|
|
|
13 |
% |
The Americas |
|
|
5,627 |
|
|
|
4,598 |
|
|
|
1,029 |
|
|
|
176 |
|
|
|
853 |
|
|
|
19 |
|
EMEA |
|
|
2,935 |
|
|
|
5,495 |
|
|
|
(2,560 |
) |
|
|
377 |
|
|
|
(2,937 |
) |
|
|
(53 |
) |
Asia-Pacific |
|
|
(390 |
) |
|
|
601 |
|
|
|
(991 |
) |
|
|
(40 |
) |
|
|
(951 |
) |
|
|
158 |
|
Consolidated |
|
$ |
26,755 |
|
|
$ |
27,133 |
|
|
$ |
(378 |
) |
|
$ |
513 |
|
|
$ |
(891 |
) |
|
|
(3 |
)% |
PLP-USA’s net income for the nine months ended September 30, 2021 increased $2.1 million, or 13%, compared to the same period in 2020, primarily due to an increase in operating income of $3.7 million, partially offset by an increase in other expense, net of $.3 million combined with an increase in income tax expense of $1.3 million. The following discussion of net income excludes the effect of currency translation. The Americas net income increased $.9 million, mainly as a result of a pre-tax recovery of approximately $1.0 million in Brazil. EMEA net income decreased $2.9 million as a result of a $3.3 million decrease in operating income combined with a $.1 million increase in other operating expense, net, of $.1 million, partially offset by $.5 million year-over-year decrease in income tax expense. Asia-Pacific net income decreased $1.0 million mainly due to a $.5 million decrease in operating expense combined with an increase in other expense, net of $.7 million, partially offset by a decrease in income tax expense of $.2 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 nine months of 2021, we used cash of $12.6 million for capital expenditures. We ended the first nine months of 2021 with $38.3 million of cash, cash equivalents and restricted cash (collectively, “Cash”). Our Cash is held in various locations throughout the world. At September 30, 2021, 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.S. liquidity needs through future operating cash flows, use of U.S. Cash balances, external borrowings, or some combination of these sources. We complete comprehensive reviews of our significant customers and their creditworthiness by analyzing financial statements for customers where we have identified a measure of increased risk. We closely monitor payments and developments which may signal possible customer credit issues. We currently have not identified any potential material impact on our liquidity from customer credit issues.
29
Total debt, including notes payable, at September 30, 2021 was $63.2 million. At September 30, 2021, our unused availability under our line of credit was $50.6 million and our bank debt to equity percentage was 20.5%. 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 September 30, 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 a 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 decreased $2.9 million compared to the same period in 2020. Net Cash provided by operating activities was $24.1 million. The most significant net investing and financing uses of Cash in the nine months ended September 30, 2021 were payments of long-term debt of $81.6 million, capital expenditures of $12.6 million, share repurchases of $5.3 million and dividends paid of $3.1 million, partially offset by net debt and notes payable proceeds of $70.5 million. Currency had a positive $.8 million impact on Cash when translating foreign denominated financial statements to U.S. dollars.
Net Cash provided from operating activities for the nine months ended September 30, 2021 was $24.1 million compared to $33.6 million in the comparable prior year nine-month period. The $9.5 million decrease was primarily a result of an increase in Cash used by operating assets (net of operating liabilities) of $9.2 million, which included the $6.5 million deposit on the new corporate aircraft that was paid in the fourth quarter of 2020 and fully refunded in 2021, combined with a decrease in net income of $.3 million.
Net Cash used in investing activities of $12.6 million for the nine months ended September 30, 2021 decreased $11.6 million when compared to Cash used in investing activities in the nine months ended September 30, 2020 of $24.2 million. The change was primarily related to a year-over-year decrease in capital expenditures.
Cash used in financing activities for the nine months ended September 30, 2021 was $19.1 million compared to $6.5 million during the nine months ended September 30, 2020. The $12.6 million increase was primarily the result of a net increase in net debt payments, net of borrowings in 2021 compared to 2020 of $15.9 million, partially offset by a decrease in net share repurchases and issuances of $3.2 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. See Note Q of the Notes to the Consolidated Financial Statements for more information.
As of September 30, 2021, the Company had total outstanding guarantees of $8.7 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 September 30, 2021, the Company had total outstanding letters of credit of $3.2 million.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
See Note K of the Notes to the Consolidated Financial Statements
30
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:
31
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company operates manufacturing facilities and offices around the world and uses fixed and floating rate debt to finance the Company’s global operations. As a result, the Company is subject to business risks inherent in non-U.S. activities, including political and economic uncertainty, import and export limitations and market risk related to changes in interest rates and foreign currency exchange rates. The Company believes that the political and economic risks related to the Company’s international operations are mitigated due to the geographic diversity in which the Company’s international operations are located.
Effective July 1, 2018, Argentina was designated as a highly inflationary economy as the projected three-year cumulative inflation rate exceeded 100%. As such, beginning July 1, 2018, the functional currency for the Company’s Argentina subsidiary became the U.S. dollar. Revenue from operations in Argentina represented less than 1% of total consolidated net sales for both nine-month periods ended September 30, 2021 and 2020.
As of September 30, 2021, the Company had $.3 million in net foreign currency forward exchange contracts outstanding. The Company does not hold derivatives for trading purposes.
The Company’s primary currency rate exposures are related to foreign denominated debt, intercompany debt, foreign denominated receivables and payables and cash and short-term investments. A hypothetical 10% change in currency rates would have a favorable/unfavorable impact on fair values on such instruments of $5.2 million and a $1.2 million favorable/unfavorable impact on income before at September 30, 2021.
The Company is exposed to market risk, including changes in interest rates and foreign exchange rates since we conduct business in a variety of foreign currencies. The Company is subject to interest rate risk on its variable rate revolving credit facilities and term notes, which consisted of long-term borrowings, which includes the current portion, of $45.5 million at September 30, 2021. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $.6 million for the nine months ended September 30, 2021.
As discussed elsewhere in this report, the outbreak of COVID-19 could negatively impact the Company’s business and results of operations. Since we cannot predict the duration or scope of the COVID-19 pandemic, the potential negative financial impact to the Company’s results cannot be reasonably estimated but could be material.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s Principal Executive Officer and Principal Accounting Officer have concluded that the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended, were effective as of September 30, 2021.
Changes in Internal Control over Financial Reporting
There were no other changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)) of the Securities and Exchange Act of 1934, as amended, during the three-month period ended September 30, 2021 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
32
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is and may in the future be party to a variety of pending legal proceedings and claims arising in the normal course of business, including, but not limited to, litigation relating to employment, workers’ compensation, product liability, environmental and intellectual property. The Company has liability insurance to cover many of these claims.
Although the outcomes of these matters are not predictable with certainty, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In the event the Company determines that a loss is not probable, but is reasonably possible, and the likelihood to develop what the Company believes to be a reasonable range of potential loss exists, the Company will include disclosure related to such matters. 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. As of September 30, 2021 and December 31, 2020, the Company has accrued approximately $2.2 million, representing its best estimate for losses to be incurred on a variety of global legal matters.
The Company and its subsidiaries, Helix Uniformed Ltd. (“Helix”) and Preformed Line Products (Canada) Limited (“PLPC Canada”), were each named, jointly and severally, with each of SNC-Lavalin ATP, Inc. (“SNC ATP”), HD Supply Canada Inc., by its trade names HD Supply Power Solutions and HD Supply Utilities (“HD Supply”), and Anixter Power Solutions Canada Inc. (the corporate successor to HD Supply), “Anixter” and, together with the Company, PLPC Canada, Helix, SNC ATP and HD Supply, the (“Defendants”) in a complaint filed by Altalink, L.P. (the “Plaintiff”) in the Court of Queen’s Bench of Alberta in Alberta, Canada in November 2016 (the “Complaint”).
The Complaint states that Plaintiff engaged SNC ATP to design, engineer, procure and construct numerous power distribution and transmission facilities in Alberta (the “Projects”) and that through SNC ATP and HD Supply (now Anixter), spacer dampers manufactured by Helix were procured and installed in the Projects. 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 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, 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 flow.
ITEM 1A. RISK FACTORS
There were no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 5, 2021. 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. The situation continues to change and additional impacts may arise that the Company is not aware of currently.
33
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 28, 2021, the Board of Directors authorized a plan to repurchase up to an additional 191,163 of Preformed Line Products Company common shares, resulting in a total of 250,000 shares available for repurchase with no expiration date. The following table reflects repurchases for the three-month period ended September 30, 2021:
Period |
|
Total |
|
|
Average |
|
|
Total Number of |
|
|
Maximum Number |
|
||||
July |
|
|
7,070 |
|
|
$ |
76.87 |
|
|
|
7,070 |
|
|
|
242,930 |
|
August |
|
|
0 |
|
|
|
0.00 |
|
|
|
7,070 |
|
|
|
242,930 |
|
September |
|
|
0 |
|
|
|
0.00 |
|
|
|
7,070 |
|
|
|
242,930 |
|
Total |
|
|
7,070 |
|
|
|
|
|
|
|
|
|
|
|||
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
|
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document. |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
104 |
|
Cover Page Interactive Data (embedded with the Inline XBRL document. |
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
October 29, 2021 |
|
/s/ Robert G. Ruhlman |
|
|
Robert G. Ruhlman |
|
|
Chairman, President and Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
October 29, 2021 |
|
/s/ Andrew S. Klaus |
|
|
Andrew S. Klaus |
|
|
Chief Financial Officer |
|
|
(Principal Accounting Officer) |
35
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