10-Q 1 plpc-20240331.htm 10-Q 10-Q
--12-31 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal quarter ended March 31, 2024

or

Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

for the Transition Period From ________To _______

Commission file number 0-31164

Preformed Line Products Company

(Exact name of registrant as specified in its charter)

 

Ohio

 

34-0676895

(State or Other Jurisdiction of Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

660 Beta Drive

Mayfield Village, Ohio

 

44143

(Address of Principal Executive Office)

 

(Zip Code)

 

(440) 461‑5200

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, $2 par value per share

PLPC

NASDAQ

 

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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

Accelerated filer

Non-accelerated filer

 

Smaller Reporting Company

Emerging Growth Company

 

 

 

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 shares outstanding as of April 19, 2024: 4,918,036.

 


 

Table of Contents

 

 

 

 

 

Page

 

 

 

 

 

Part I – Financial Information

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

22

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

23

 

 

 

 

 

Part II – Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

23

 

 

 

 

 

Item 1A.

 

Risk Factors

 

23

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

23

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

23

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

23

 

 

 

 

 

Item 5.

 

Other Information

 

23

 

 

 

 

 

Item 6.

 

Exhibits

 

24

 

 

 

 

 

SIGNATURES

 

25

 

2


 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PREFORMED LINE PRODUCTS COMPANY

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

(Thousands of dollars, except share and per share data)

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

45,859

 

 

$

53,607

 

Accounts receivable, net

 

 

111,527

 

 

 

106,892

 

Inventories, net

 

 

141,508

 

 

 

148,814

 

Prepaid expenses

 

 

8,314

 

 

 

8,246

 

Other current assets

 

 

7,053

 

 

 

7,256

 

TOTAL CURRENT ASSETS

 

 

314,261

 

 

 

324,815

 

Property, plant and equipment, net

 

 

203,242

 

 

 

207,892

 

Operating lease, right-of-use assets

 

 

11,021

 

 

 

11,671

 

Goodwill

 

 

28,603

 

 

 

29,497

 

Other intangible assets, net

 

 

11,868

 

 

 

12,981

 

Deferred income taxes

 

 

7,379

 

 

 

7,109

 

Other assets

 

 

9,735

 

 

 

9,186

 

TOTAL ASSETS

 

$

586,109

 

 

$

603,151

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Trade accounts payable

 

$

41,748

 

 

$

37,788

 

Notes payable to banks

 

 

1,487

 

 

 

6,968

 

Operating lease liabilities, current

 

 

1,532

 

 

 

1,671

 

Current portion of long-term debt

 

 

7,078

 

 

 

6,486

 

Accrued compensation and other benefits

 

 

23,348

 

 

 

28,018

 

Accrued expenses and other liabilities

 

 

20,961

 

 

 

27,414

 

Dividends payable

 

 

1,189

 

 

 

1,300

 

Income taxes payable

 

 

2,361

 

 

 

1,672

 

TOTAL CURRENT LIABILITIES

 

 

99,704

 

 

 

111,317

 

Long-term debt, less current portion

 

 

47,928

 

 

 

48,796

 

Operating lease liabilities, noncurrent

 

 

7,391

 

 

 

7,892

 

Deferred income taxes

 

 

3,414

 

 

 

3,536

 

Other noncurrent liabilities

 

 

14,304

 

 

 

15,454

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Common shares – $2 par value per share, 15,000,000 shares authorized, 4,918,036 and 4,908,413 issued and outstanding, at March 31, 2024 and December 31, 2023

 

 

13,711

 

 

 

13,607

 

Common shares issued to rabbi trust, 238,641 and 243,118 shares at March 31, 2024 and December 31, 2023, respectively

 

 

(10,214

)

 

 

(10,183

)

Deferred compensation liability

 

 

10,214

 

 

 

10,183

 

Paid-in capital

 

 

61,408

 

 

 

60,958

 

Retained earnings

 

 

528,733

 

 

 

520,154

 

Treasury shares, at cost, 1,937,150 and 1,894,419 shares at March 31, 2024 and December 31, 2024, respectively

 

 

(123,701

)

 

 

(118,249

)

Accumulated other comprehensive loss

 

 

(66,782

)

 

 

(60,306

)

TOTAL PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS' EQUITY

 

 

413,369

 

 

 

416,164

 

Noncontrolling interest

 

 

(1

)

 

 

(8

)

TOTAL SHAREHOLDERS' EQUITY

 

 

413,368

 

 

 

416,156

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

586,109

 

 

$

603,151

 

See notes to consolidated financial statements (unaudited).

3


 

PREFORMED LINE PRODUCTS COMPANY

STATEMENTS OF CONSOLIDATED INCOME

(UNAUDITED)

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

(Thousands of dollars, except share and per share data)

 

 

 

 

 

Net sales

$

140,904

 

 

$

181,824

 

Cost of products sold

 

96,773

 

 

 

115,541

 

GROSS PROFIT

 

44,131

 

 

 

66,283

 

Costs and expenses

 

 

 

 

 

Selling

 

11,900

 

 

 

12,388

 

General and administrative

 

16,608

 

 

 

18,609

 

Research and engineering

 

5,431

 

 

 

5,193

 

Other operating (income) expense, net

 

(1,367

)

 

 

1,112

 

 

 

32,572

 

 

 

37,302

 

OPERATING INCOME

 

11,559

 

 

 

28,981

 

Other income (expense)

 

 

 

 

 

Interest income

 

972

 

 

 

304

 

Interest expense

 

(708

)

 

 

(1,066

)

Other income, net

 

35

 

 

 

40

 

 

 

299

 

 

 

(722

)

INCOME BEFORE INCOME TAXES

 

11,858

 

 

 

28,259

 

Income tax expense

 

2,255

 

 

 

6,840

 

NET INCOME

$

9,603

 

 

$

21,419

 

Net income attributable to noncontrolling interests

 

(7

)

 

 

(21

)

NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS

$

9,596

 

 

$

21,398

 

AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING:

 

 

 

 

 

Basic

 

4,915

 

 

 

4,937

 

Diluted

 

4,944

 

 

 

4,997

 

EARNINGS PER SHARE OF COMMON STOCK ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS:

 

 

 

 

 

Basic

$

1.95

 

 

$

4.33

 

Diluted

$

1.94

 

 

$

4.28

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

4


 

PREFORMED LINE PRODUCTS COMPANY

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

(Thousands of dollars)

 

 

 

 

 

 

Net income

 

$

9,603

 

 

$

21,419

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(6,565

)

 

 

3,922

 

Recognized net actuarial gain

 

 

89

 

 

 

89

 

Other comprehensive (loss) income, net of tax

 

 

(6,476

)

 

 

4,011

 

Comprehensive income attributable to noncontrolling interests

 

 

(7

)

 

 

(21

)

COMPREHENSIVE INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS

 

$

3,120

 

 

$

25,409

 

See notes to consolidated financial statements (unaudited).

5


 

PREFORMED LINE PRODUCTS COMPANY

STATEMENTS OF CONSOLIDATED CASH FLOWS

(UNAUDITED)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

(Thousands of dollars)

 

 

 

OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

9,603

 

 

$

21,419

 

Adjustments to reconcile net income to net cash provided by (used in) operations:

 

 

 

 

 

 

Depreciation and amortization

 

 

5,414

 

 

 

4,275

 

Deferred income taxes

 

 

(386

)

 

 

(1,530

)

Share-based compensation expense

 

 

383

 

 

 

1,066

 

(Gain) loss on sale of property and equipment

 

 

(1,843

)

 

 

16

 

Other, net

 

 

1,230

 

 

 

1,942

 

Changes in operating assets and liabilities

 

 

(8,648

)

 

 

(1,758

)

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

 

5,753

 

 

 

25,430

 

INVESTING ACTIVITIES

 

 

 

 

 

 

Capital expenditures

 

 

(3,918

)

 

 

(8,351

)

Proceeds from the sale of property and equipment

 

 

3,237

 

 

 

124

 

Acquisition of businesses, net of cash

 

 

-

 

 

 

(14,068

)

NET CASH USED IN INVESTING ACTIVITIES

 

 

(681

)

 

 

(22,295

)

FINANCING ACTIVITIES

 

 

 

 

 

 

Payments of notes payable to banks

 

 

(5,307

)

 

 

(4,524

)

Proceeds from long-term debt

 

 

33,232

 

 

 

50,389

 

Payments of long-term debt

 

 

(33,069

)

 

 

(50,633

)

Dividends paid

 

 

(1,130

)

 

 

(1,154

)

Proceeds from issuance of common shares

 

 

60

 

 

 

355

 

Purchase of common shares for treasury

 

 

-

 

 

 

(116

)

Purchase of common shares for treasury from related parties

 

 

(5,452

)

 

 

(3,624

)

NET CASH USED IN FINANCING ACTIVITIES

 

 

(11,666

)

 

 

(9,307

)

Effects of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(1,154

)

 

 

724

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(7,748

)

 

 

(5,448

)

Cash, cash equivalents and restricted cash at beginning of year

 

 

53,607

 

 

 

37,239

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

 

$

45,859

 

 

$

31,791

 

See notes to consolidated financial statements (unaudited).

6


 

PREFORMED LINE PRODUCTS COMPANY

STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Other
Comprehensive Income
(Loss)

 

 

 

 

 

 

 

 

Common Shares

 

Common
Shares
Issued to
Rabbi Trust

 

Deferred
Compensation Liability

 

Paid in
Capital

 

Retained
Earnings

 

Treasury
Shares

 

Cumulative
Translation
Adjustment

 

Unrecognized
Pension
Benefit Cost

 

Total Preformed Line Products Company Equity

 

Noncontrolling Interests

 

Total Equity

 

 

(In thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2023

$

13,607

 

$

(10,183

)

$

10,183

 

$

60,958

 

$

520,154

 

$

(118,249

)

$

(55,828

)

$

(4,478

)

$

416,164

 

$

(8

)

$

416,156

 

Net income

 

 

 

 

 

 

 

 

 

9,596

 

 

 

 

 

 

 

 

9,596

 

 

7

 

 

9,603

 

Foreign currency translation
   adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,565

)

 

 

 

(6,565

)

 

 

(6,565

)

Pension adjustment, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

89

 

 

89

 

 

 

 

89

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,120

 

 

7

 

 

3,127

 

Share-based compensation

 

 

 

 

 

 

 

383

 

 

 

 

 

 

 

 

 

383

 

 

 

 

383

 

Purchase of 42,731 common shares

 

 

 

 

 

 

 

 

 

 

 

(5,452

)

 

 

 

 

 

(5,452

)

 

 

 

(5,452

)

Issuance of 52,354 common shares

 

104

 

 

 

 

 

 

67

 

 

 

 

 

 

 

 

 

 

171

 

 

 

 

171

 

Common shares distributed from rabbi
   trust of
4,477, net

 

 

 

(31

)

 

31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared – $0.20 per
   share

 

 

 

 

 

 

 

 

 

(1,017

)

 

 

 

 

 

 

 

(1,017

)

 

 

 

(1,017

)

Balance at March 31, 2024

$

13,711

 

$

(10,214

)

$

10,214

 

$

61,408

 

$

528,733

 

$

(123,701

)

$

(62,393

)

$

(4,389

)

$

413,369

 

$

(1

)

$

413,368

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Other
Comprehensive Income
(Loss)

 

 

 

 

 

 

 

 

Common Shares

 

Common
Shares
Issued to
Rabbi Trust

 

Deferred
Compensation Liability

 

Paid in
Capital

 

Retained
Earnings

 

Treasury
Shares

 

Cumulative
Translation
Adjustment

 

Unrecognized
Pension
Benefit Cost

 

Total Preformed Line Products Company Equity

 

Noncontrolling Interests

 

Total Equity

 

 

(In thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2022

$

13,351

 

$

(10,261

)

$

10,261

 

$

53,646

 

$

460,930

 

$

(99,303

)

$

(65,495

)

$

(4,492

)

$

358,637

 

$

(13

)

$

358,624

 

Net income

 

 

 

 

 

 

 

 

 

21,398

 

 

 

 

 

 

 

 

21,398

 

 

21

 

 

21,419

 

Foreign currency translation
   adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

3,922

 

 

 

 

3,922

 

 

 

3,922

 

Pension adjustment, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

89

 

 

89

 

 

 

 

89

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,409

 

 

21

 

 

25,430

 

Share-based compensation

 

 

 

 

 

 

 

1,066

 

 

 

 

 

 

 

 

 

1,066

 

 

 

 

1,066

 

Purchase of 41,573 common shares

 

 

 

 

 

 

 

 

 

 

 

(3,740

)

 

 

 

 

 

(3,740

)

 

 

 

(3,740

)

Issuance of 72,477 common shares

 

140

 

 

 

 

 

 

244

 

 

 

 

 

 

 

 

 

 

384

 

 

 

 

384

 

Common shares distributed from rabbi
   trust of
3,541, net

 

 

 

185

 

 

(185

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared – $0.20 per
   share

 

 

 

 

 

 

 

 

 

(1,050

)

 

 

 

 

 

 

 

(1,050

)

 

 

 

(1,050

)

Balance at March 31, 2023

$

13,491

 

$

(10,076

)

$

10,076

 

$

54,956

 

$

481,278

 

$

(103,043

)

$

(61,573

)

$

(4,403

)

$

380,706

 

$

8

 

$

380,714

 

See notes to consolidated financial statements (unaudited).

7


 

PREFORMED LINE PRODUCTS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

(Tables in thousands of dollars, except share and per share data, unless specifically noted)

 

Note 1 – Significant Accounting Policies

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 ("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. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. This Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Form 10-K for the year ended December 31, 2023 filed on March 8, 2024 with the Securities and Exchange Commission. The interim period results are not necessarily indicative of the results to be expected for the full year. Management has evaluated subsequent events through the date this Form 10-Q was filed with the Securities and Exchange Commission.

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 months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full-year ending December 31, 2024.

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 100% of a controlled subsidiary’s earnings, rather than only its share. Transactions between the parent company and noncontrolling interests are reported in equity as transactions between stockholders, provided that these transactions do not create a change in control.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Recently Adopted or Issued Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update ("ASU") No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU enhances reportable segment disclosures on both an annual and interim basis primarily in regards to the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within the reported measure(s) of segment profit or loss. In addition, the ASU requires disclosure, by segment, of other items included in the reported measure(s) of segment profit or loss, including qualitative information describing the composition, nature and type of each item. The ASU also expands disclosure requirements related to the CODM, including how the reported measure(s) of segment profit or loss are used to assess segment performance and allocate resources, the method used to allocate overhead for significant segment expenses and others. Lastly, all current required annual segment reporting disclosures under Topic 280 are now effective for interim periods. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of adopting this ASU.

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU enhances income tax disclosures by providing information to better assess how an entity's operations, related tax risks, tax planning and operational opportunities affect its tax rate and prospects for future cash flows. This ASU requires additional disclosures to the annual effective tax rate reconciliation including specific categories and further disaggregated reconciling items that meet the quantitative threshold. Additionally, the ASU requires disclosures relating to income tax expense and payments made to federal, state, local and foreign jurisdictions. This ASU is effective for fiscal years and interim periods beginning after December 15, 2024. The Company is evaluating the impact of adopting this ASU.

Note 2 – Revenue

Revenue Recognition

Sales are recognized when obligations under the terms of the contract are satisfied and control of promised goods or services have transferred to our customers. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the

8


 

goods or services and is primarily based on shipping terms. Sales are measured as the amount of consideration the Company expects to receive in exchange for transferring products.

 

Disaggregated Revenue

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

 

 

Three Months Ended March 31, 2024

 

Product Type

 

PLP-USA

 

The Americas

 

EMEA

 

Asia-Pacific

 

Consolidated

 

Energy

 

 

67

%

 

74

%

 

70

%

 

76

%

 

70

%

Communications

 

 

28

%

 

25

%

 

24

%

 

3

%

 

23

%

Special Industries

 

 

5

%

 

1

%

 

6

%

 

21

%

 

7

%

Total

 

 

100

%

 

100

%

 

100

%

 

100

%

 

100

%

 

 

 

Three Months Ended March 31, 2023

 

Product Type

 

PLP-USA

 

The Americas

 

EMEA

 

Asia-Pacific

 

Consolidated

 

Energy

 

 

59

%

 

63

%

 

36

%

 

74

%

 

56

%

Communications

 

 

37

%

 

35

%

 

61

%

 

2

%

 

38

%

Special Industries

 

 

4

%

 

2

%

 

3

%

 

24

%

 

6

%

Total

 

 

100

%

 

100

%

 

100

%

 

100

%

 

100

%

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. The change in the allowance for credit losses includes expense and net write-offs, which are identified in the following table:

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Allowance for credit losses, beginning of period

 

$

8,260

 

 

$

5,021

 

Additions charged to costs and expenses

 

 

66

 

 

 

752

 

Write-offs

 

 

(6

)

 

 

(3

)

Foreign exchange and other

 

 

(131

)

 

 

37

 

Allowance for credit losses, end of period

 

$

8,189

 

 

$

5,807

 

 

Note 3 – Inventories, Net

Inventories, net

 

Inventory is carried at lower of cost or net realizable value. The components of inventory are as follows:

 

 

 

 

 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Raw materials

 

 

$

93,392

 

 

$

98,708

 

Work-in-process

 

 

 

13,874

 

 

 

14,397

 

Finished products

 

 

 

44,958

 

 

 

46,250

 

Inventories, net of excess and obsolete inventory reserve

 

 

 

152,224

 

 

 

159,355

 

Excess of current cost over LIFO cost

 

 

 

(10,716

)

 

 

(10,541

)

Inventories at LIFO cost

 

 

$

141,508

 

 

$

148,814

 

 

Costs for inventories of certain material, mainly in the U.S., are determined using the Last-In First-Out ("LIFO") method and totaled approximately $55.3 million at March 31, 2024 and $60.1 million at December 31, 2023. An actual valuation of inventories under the LIFO method can be made only at the end of the year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs. Because these estimates are subject to change and may be different than the actual inventory levels and costs at the end of the year, interim results are subject to the final year-end LIFO inventory valuation. During the three-month periods ended March 31, 2024 and 2023, the net change in LIFO inventories resulted in expense of $0.2 million and $0.5 million, respectively, to Cost of products sold. The Company’s reserves for slow moving and obsolete inventory was $17.8 million at March 31, 2024 and $17.6 million at December 31, 2023.

9


 

Note 4 – Property and Equipment, Net

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

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Land and improvements

 

 

$

20,840

 

 

$

21,374

 

Buildings and improvements

 

 

 

125,828

 

 

 

129,369

 

Machinery, equipment and aircraft

 

 

 

240,671

 

 

 

238,868

 

Construction in progress

 

 

 

20,725

 

 

 

22,619

 

Property, plant and equipment, gross

 

 

 

408,064

 

 

 

412,230

 

Less accumulated depreciation

 

 

 

(204,822

)

 

 

(204,338

)

Property, plant and equipment, net

 

 

$

203,242

 

 

$

207,892

 

 

Note 5 – Contingent Liabilities

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.

In November 2016, 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 stated that the 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 alleged 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 Plaintiff was 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.

On September 26, 2023, the Defendants and the Plaintiff entered into a settlement agreement which dismissed the action against all Defendants with prejudice. Net of insurance, the total settlement amount paid by the Company in the fourth quarter of 2023 was $4.3 million Canadian dollars ($3.2 million US dollars). The settlement reflects the Company’s desire to eliminate the burden, expense, distraction and further uncertainties of litigation, and settlement does not constitute an admission of liability, wrongdoing or fault by the Company and its subsidiaries.

The Company is not a party to any 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. As of March 31, 2024 and December 31, 2023, there were zero reserves for known global legal matters.

Note 6 – Pension Plans

The Company uses a December 31 measurement date for the Preformed Line Products Company Employees’ Retirement Plan (the “U.S. Plan”). Net periodic pension expense for the U.S. Plan for the three months ended March 31, 2024 and 2023, respectively, follows:

10


 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Interest cost

$

387

 

 

$

392

 

Expected return on plan assets

 

(485

)

 

 

(501

)

Recognized net actuarial loss

 

117

 

 

 

117

 

Net periodic pension expense

$

19

 

 

$

8

 

There were no contributions to the U.S. Plan during the three months ended March 31, 2024 and 2023. The Company is evaluating whether to make additional contributions to the U.S. Plan during 2024. In August 2023, the Board of Directors of the Company approved a resolution to terminate the U.S. Plan and preliminary administrative actions have been undertaken to proceed with the termination. Components of pension expense are included in Other income, net in the Consolidated Statements of Income.

Note 7 – Accumulated Other Comprehensive Income (“AOCI”)

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

 

 

 

Three Months Ended March 31, 2024

 

 

Three Months Ended March 31, 2023

 

 

 

 

 

 

Cumulative

 

 

 

 

 

 

 

 

Cumulative

 

 

 

 

 

 

Unrecognized

 

 

Translation

 

 

 

 

 

Unrecognized

 

 

Translation

 

 

 

 

 

 

Benefit Cost

 

 

Adjustment

 

 

Total

 

 

Benefit Cost

 

 

Adjustment

 

 

Total

 

Balance at January 1,

 

$

(4,478

)

 

$

(55,828

)

 

$

(60,306

)

 

$

(4,492

)

 

$

(65,495

)

 

$

(69,987

)

Other comprehensive income before reclassifications:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on foreign currency translation adjustment

 

 

 

 

 

(6,565

)

 

 

(6,565

)

 

 

 

 

 

3,922

 

 

 

3,922

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts reclassified from AOCI:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of defined benefit pension actuarial gain (a)

 

 

89

 

 

 

 

 

 

89

 

 

 

89

 

 

 

 

 

 

89

 

Net current period other comprehensive income (loss)

 

 

89

 

 

 

(6,565

)

 

 

(6,476

)

 

 

89

 

 

 

3,922

 

 

 

4,011

 

Balance at March 31,

 

$

(4,389

)

 

$

(62,393

)

 

$

(66,782

)

 

$

(4,403

)

 

$

(61,573

)

 

$

(65,976

)

 

(a)
This AOCI component is included in the computation of net periodic pension expense (income) as noted in Note 6 – Pension Plans.

Note 8 – Debt and Credit Arrangements

The Company maintains a credit facility (the "Facility") with a capacity of $90.0 million that expires March 2, 2026. The interest rate is defined as the Secured Overnight Financing Rate (“SOFR”) plus 1.125% unless the Company’s funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 2.25 to 1, at which point the SOFR spread becomes 1.500%. At March 31, 2024, the Company had utilized $35.0 million with $55.0 million available on the Facility. There were no long-term outstanding letters of credit as of March 31, 2024. Our bank debt to equity percentage was 13.7%. The Facility contains, among other provisions, requirements for maintaining levels of net worth and profitability. At March 31, 2024, the Company was in compliance with these covenants.

On January 19, 2021, the Company received funding for a term loan from PNC Equipment Finance, LLC in the principal amount of $20.5 million for the full amount of the purchase price for a new corporate aircraft. The term of the loan is 120 months at a fixed interest rate of 2.744%. The loan is payable in 119 equal monthly installments, which commenced on March 1, 2021 with a final payment of any outstanding principal and accrued interest due and payable on the final monthly payment date. Of the $14.2 million outstanding on this debt facility at March 31, 2024, $2.1 million was classified as current. The loan is secured by the aircraft.

The Company has other borrowing facilities at certain of its foreign subsidiaries, which consist of overdraft lines, working capital credit lines, and facilities for the issuance of letters of credit and short-term borrowing needs. At March 31, 2024, and December 31, 2023, $7.3 million and $13.3 million was outstanding, of which $6.5 million and $11.4 million were classified as current, respectively. These facilities support commitments made in the ordinary course of business.

The Company's Asia-Pacific segment had $0.2 million in restricted cash used to secure bank debt at March 31, 2024 and December 31, 2023, respectively. The restricted cash is shown on the Company’s Consolidated Balance Sheets in Cash, cash equivalents and restricted cash.

Note 9 – Income Taxes

For the three months ended March 31, 2024 and 2023, the Company’s effective tax rate was 19% and 24%, respectively. The effective tax rate for the three months ended March 31, 2024 was lower than the effective tax rate for the same period in 2023 mainly due to an increase in excess tax benefits on share-based compensation in relation to overall lower pre-tax book income.

11


 

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. During the period ended March 31, 2024, the Company did not record any additional valuation allowances in various jurisdictions on their deferred tax assets.

For the three-month periods ending March 31, 2024 and 2023, the Company did not record any new uncertain tax positions.

Note 10 – 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 shares that were outstanding during the periods presented.

The calculation of basic and diluted earnings per share for the three months ended March 31, was as follows:

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Numerator

 

 

 

 

 

Net income

$

9,596

 

 

$

21,398

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

Determination of shares (in thousands)

 

 

 

 

 

Weighted-average common shares outstanding

 

4,915

 

 

 

4,937