SEC Info - Preformed Line Products Co - ‘10-Q’ for 9/30/19

Preformed Line Products Co – ‘10-Q’ for 9/30/19

Preformed Line Products Co – ‘10-Q’ for 9/30/19

On: Friday, 11/1/19, at 1:04pm ET · For: 9/30/19 · Accession #: 1564590-19-39355 · File #: 0-31164

Quarterly Report — Form 10-Q — Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

‘10-Q’ — Plpc-Q3-20190930
Document Table of Contents

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

On: Friday, 11/1/19, at 1:04pm ET · For: 9/30/19 · Accession #: 1564590-19-39355 · File #: 0-31164

Previous ‘10-Q’: ‘10-Q’ on 8/2/19 for 6/30/19 · Next: ‘10-Q’ on 5/1/20 for 3/31/20 · Latest: ‘10-Q’ on 11/2/23 for 9/30/23

Quarterly Report — Form 10-Q — Sect. 13 / 15(d) – SEA’34Filing Table of Contents

‘10-Q’ — Plpc-Q3-20190930Document Table of Contents

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

Quarterly Report — Form 10-Q — Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

‘10-Q’ — Plpc-Q3-20190930
Document Table of Contents

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

11/01/19  Preformed Line Products Co        10-Q        9/30/19   87:16M                                    ActiveDisclosure/FA

Document/Exhibit                   Description                      Pages   Size 

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                (Loss) (Unaudited)                                               
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67: R11         Other Financial Statement Information               HTML     90K 
18: R12         Share Holders Equity                                HTML   1.03M 
45: R13         Pension Plans                                       HTML     68K 
78: R14         Accumulated Other Comprehensive Income ("Aoci")     HTML    188K 
68: R15         Computation of Earnings Per Share                   HTML    101K 
19: R16         Goodwill and Other Intangibles                      HTML    137K 
46: R17         Share-Based Compensation                            HTML    172K 
79: R18         Fair Value of Financial Assets and Liabilities      HTML    121K 
66: R19         Recently Adopted Accounting Pronouncements          HTML     34K 
24: R20         New Accounting Standards to be Adopted              HTML     30K 
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                Inventories - Net (Detail)                                       
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                Shareholders Equity (Detail)                                     
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                Shareholders Equity (Parenthetical) (Detail)                     
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                Cost (Detail)                                                    
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                Summary of Total Changes in AOCI by Component, Net               
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                Indefinite-Lived Intangible Assets (Detail)                      
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                Outstanding Under LTIP (Detail)                                  
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Page	(sequential)	(alphabetic)	↑Top
		Alternative Formats (Word, et al.) Controls and Procedures Defaults Upon Senior Securities Exhibits Financial Information Financial Statements Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Mine Safety Disclosures Other Information Part I -- Financial Information Part II -- Other Information Quantitative and Qualitative Disclosures About Market Risk Risk Factors Signatures Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page – Filing Submission
"	Part I -- Financial Information
"	Financial Statements
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Quantitative and Qualitative Disclosures About Market Risk
"	Controls and Procedures
"	Part II -- Other Information
"	Legal Proceedings
"	Risk Factors
"	Unregistered Sales of Equity Securities and Use of Proceeds
"	Defaults Upon Senior Securities
"	Mine Safety Disclosures
"	Exhibits
"	Signatures

<! C:

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 quarterly period ended September 30, 2019

☐	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)

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.

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 28, 2019: 5,008,398.

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

Title of each class		Trading Symbol		Name of exchange on which registered
Common stock, par value $2.00 per share		PLPC		NASDAQ

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	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	34

Part II - Other Information

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Defaults Upon Senior Securities	36

Item 4.	Mine Safety Disclosures	36

Item 5.	Other Information	36

Item 6.	Exhibits	36

SIGNATURES		37

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PREFORMED LINE PRODUCTS COMPANY

CONSOLIDATED BALANCE SHEETS

	September 30, 2019			December 31, 2018
(Thousands of dollars, except share and per share data)	(Unaudited)
ASSETS
Cash and cash equivalents	$	41,158		$	43,609
Accounts receivable, less allowances of $3,845 ($3,178 in 2018)		85,842			73,139
Inventories - net		92,227			85,259
Prepaids		6,821			6,205
Prepaid taxes		2,068			3,169
Other current assets		4,798			2,882
TOTAL CURRENT ASSETS		232,914			214,263
Property, plant and equipment - net		117,697			102,955
Operating lease, right-of-use assets		12,512			0
Intangibles - net		15,216			8,458
Goodwill		25,278			15,621
Deferred income taxes		8,220			6,900
Other assets		13,167			10,600
TOTAL ASSETS	$	425,004		$	358,797
LIABILITIES AND SHAREHOLDERS’ EQUITY
Trade accounts payable	$	28,607		$	26,414
Notes payable to banks		7,398			9,042
Operating lease liabilities, current		2,090			0
Current portion of long-term debt		2,719			1,448
Accrued compensation and amounts withheld from employees		14,957			11,153
Accrued expenses and other liabilities		17,806			12,582
Accrued profit-sharing and other benefits		5,959			6,982
Dividends payable		1,132			1,051
Income taxes payable		2,814			815
TOTAL CURRENT LIABILITIES		83,482			69,487
Long-term debt, less current portion		52,888			24,960
Unfunded pension obligation		5,082			5,259
Operating lease liabilities, non-current		8,366			0
Deferred income taxes		3,619			1,711
Other noncurrent liabilities		11,850			8,010
SHAREHOLDERS’ EQUITY
Shareholders’ equity:
Common shares - $2 par value per share, 15,000,000 shares authorized, 5,016,293 and 5,020,410 issued and outstanding, at September 30, 2019 and December 31, 2018, respectively		12,825			12,662
Common shares issued to rabbi trust, 267,641 and 269,630 shares at September 30, 2019 and December 31, 2018, respectively		(10,981	)		(11,008	)
Deferred compensation liability		10,981			11,008
Paid-in capital		37,642			34,401
Retained earnings		348,710			334,170
Treasury shares, at cost, 1,396,152 and 1,310,387 shares at September 30, 2019 and December 31, 2018, respectively		(76,781	)		(72,280	)
Accumulated other comprehensive loss		(62,733	)		(59,583	)
TOTAL PREFORMED LINE PRODUCTS, COMPANY SHAREHOLDERS’ EQUITY		259,663			249,370
Noncontrolling interest		54			0
TOTAL SHAREHOLDERS’ EQUITY		259,717			249,370
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	425,004		$	358,797

See notes to consolidated financial statements (unaudited).

PREFORMED LINE PRODUCTS COMPANY

STATEMENTS OF CONSOLIDATED INCOME

(UNAUDITED)

	Three Months Ended September 30						Nine Months Ended September 30
	2019			2018			2019			2018
(Thousands of dollars, except per share data)
Net sales	$	119,217		$	108,413		$	331,212		$	315,467
Cost of products sold		79,874			74,922			226,798			215,255
GROSS PROFIT		39,343			33,491			104,414			100,212
Costs and expenses
Selling		9,410			8,965			26,868			27,297
General and administrative		13,275			11,655			38,486			33,859
Research and engineering		4,240			3,706			12,809			11,013
Other operating expense - net		775			1,150			1,447			2,950
		27,700			25,476			79,610			75,119
OPERATING INCOME		11,643			8,015			24,804			25,093
Other income (expense)
Interest income		211			111			613			340
Interest expense		(735	)		(364	)		(1,688	)		(992	)
Other income - net		138			94			306			267
		(386	)		(159	)		(769	)		(385	)
INCOME BEFORE INCOME TAXES		11,257			7,856			24,035			24,708
Income tax expense (benefit)		3,213			(1,198	)		6,302			3,390
NET INCOME	$	8,044		$	9,054		$	17,733		$	21,318
Less: Net income attributable to noncontrolling interests		93			0			54			0
NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS	$	7,951		$	9,054		$	17,679		$	21,318
AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING:
Basic		5,024			5,025			5,039			5,038
Diluted		5,119			5,138			5,077			5,088
EARNINGS PER SHARE OF COMMON STOCK ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS:
Basic	$	1.58		$	1.80		$	3.51		$	4.23
Diluted	$	1.55		$	1.76		$	3.48		$	4.19

See notes to consolidated financial statements (unaudited).

PREFORMED LINE PRODUCTS COMPANY

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	Three Months Ended September 30						Nine Months Ended September 30
	2019			2018			2019			2018
(Thousands of dollars)
Net income	$	8,044		$	9,054		$	17,733		$	21,318
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment		(5,897	)		(563	)		(3,444	)		(10,098	)
Recognized net actuarial gain (net of tax provision of $32 and $35 for the three months ended September 30, 2019 and 2018, respectively, and net of tax provision of $95 and $94 for the nine months ended September 30, 2019 and 2018, respectively).		108			116			294			299
Other comprehensive loss, net of tax		(5,789	)		(447	)		(3,150	)		(9,799	)
Less: Comprehensive income attributable to noncontrolling interests		93			0			54			0
Comprehensive income attributable to Preformed Line Products Company shareholders	$	2,162		$	8,607		$	14,529		$	11,519

See notes to consolidated financial statements (unaudited).

PREFORMED LINE PRODUCTS COMPANY

STATEMENTS OF CONSOLIDATED CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30
	2019			2018
(Thousands of dollars)
OPERATING ACTIVITIES
Net income	$	17,733		$	21,318
Adjustments to reconcile net income to net cash provided by (used in) operations:
Depreciation and amortization		9,844			9,295
Provision for accounts receivable allowances		1,327			853
Provision for inventory reserves		1,288			1,728
Deferred income taxes		(1,503	)		(480	)
Share-based compensation expense		3,344			2,301
Gain on sale of property and equipment		(47	)		(147	)
Other - net		(35	)		152
Changes in operating assets and liabilities
Accounts receivable		(12,865	)		(17,471	)
Inventories		(6,891	)		(9,912	)
Trade accounts payable and accrued liabilities		11,591			8,870
Income taxes - net		1,880			(726	)
Contributions to company pension plan		0			(5,340	)
Other - net		(4,997	)		(3,354	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		20,669			7,087
INVESTING ACTIVITIES
Capital expenditures		(21,950	)		(7,292	)
Proceeds from the sale of property and equipment		48			3
Purchase of marketable securities		(496	)		(4,690	)
Proceeds from marketable securities		2,309			2,953
Purchase of company owned life insurance policy		(2,309	)		(2,953	)
Acquisition of businesses, net of cash acquired		(18,894	)		0
NET CASH USED IN INVESTING ACTIVITIES		(41,292	)		(11,979	)
FINANCING ACTIVITIES
(Decrease) increase in notes payable to banks		(1,478	)		3,131
Proceeds from long-term debt		70,730			57,488
Payments of long-term debt		(41,578	)		(59,295	)
Dividends paid		(3,226	)		(3,121	)
Proceeds from issuance of common shares		29			1,146
Purchase of common shares for treasury		(2,397	)		(155	)
Purchase of common shares for treasury from related parties		(2,104	)		(3,971	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		19,976			(4,777	)
Effects of exchange rate changes on cash and cash equivalents		(1,778	)		(1,569	)
Net (decrease) increase in cash, cash equivalents and restricted cash		(2,425	)		(11,238	)
Cash, cash equivalents and restricted cash at beginning of year		43,910			45,579
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD⁽¹⁾	$	41,485		$	34,341

(1)	Includes restricted cash of $.3 million at both September 30, 2019 and December 31, 2018. For further information regarding restricted cash, refer to Note P, “Debt Arrangements.”

See notes to consolidated financial statements (unaudited).

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, 2019 are not necessarily indicative of the results to be expected for the full-year ending December 31, 2019.

Noncontrolling interests are presented in the Company’s consolidated financial statements as if parent company investors (controlling interests) and other minority investors (noncontrolling interests) in partially-owned subsidiaries have similar economic interests in a single entity. As a result, investments in noncontrolling interests are reported as equity in our consolidated financial statements. 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.

The Consolidated Balance Sheet at December 31, 2018 has been derived from the audited consolidated financial statements but does not include all of the information and notes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes to consolidated financial statements included in the Company’s 2018 Annual Report on Form 10-K filed on March 8, 2019 with the Securities and Exchange Commission.

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:

	Three Months Ended September 30, 2019
Product Type	PLP-USA			The Americas			EMEA			Asia-Pacific			Consolidated
Energy		63	%		72	%		54	%		75	%		66	%
Communications		29			26			34			5			23
Special Industries		8			2			12			20			11
Total		100	%		100	%		100	%		100	%		100	%


	Three Months Ended September 30, 2018
Product Type	PLP-USA			The Americas			EMEA			Asia-Pacific			Consolidated
Energy		60	%		51	%		63	%		68	%		61	%
Communications		33			44			25			4			26
Special Industries		7			5			12			28			13
Total		100	%		100	%		100	%		100	%		100	%


	Nine Months Ended September 30, 2019
Product Type	PLP-USA			The Americas			EMEA			Asia-Pacific			Consolidated
Energy		63	%		67	%		59	%		68	%		64	%
Communications		30			29			27			7			24
Special Industries		7			4			14			25			12
Total		100	%		100	%		100	%		100	%		100	%

	Nine Months Ended September 30, 2018
Product Type	PLP-USA			The Americas			EMEA			Asia-Pacific			Consolidated
Energy		59	%		70	%		73	%		72	%		66	%
Communications		35			26			13			4			22
Special Industries		6			4			14			24			12
Total		100	%		100	%		100	%		100	%		100	%

NOTE C – OTHER FINANCIAL STATEMENT INFORMATION

Inventories – net

	September 30, 2019			December 31, 2018
Raw materials	$	48,948		$	43,041
Work-in-process		10,926			8,818
Finished Goods		40,945			42,163
		100,819			94,022
Excess of current cost over LIFO cost		(4,978	)		(4,474	)
Noncurrent portion of inventory		(3,614	)		(4,289	)
	$	92,227		$	85,259

Cost of inventories for certain material is determined using the last-in-first-out (LIFO) method and totaled approximately $30.3 million at September 30, 2019 and $29.5 million at December 31, 2018. 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 and nine-month periods ended September 30, 2019, the net change in LIFO inventories resulted in $.1 million and $.5 million of expense, respectively, to Income before income taxes. During the three and nine-month periods ended September 30, 2018, the net change in LIFO inventories resulted in $.6 million and $1.1 million of expense, respectively, to Income before income taxes.

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

Property, plant and equipment—net

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

	September 30, 2019			December 31, 2018
Land and improvements	$	18,380		$	12,552
Buildings and improvements		81,896			74,743
Machinery, equipment and aircraft		179,503			171,015
Construction in progress		6,356			3,392
		286,135			261,702
Less accumulated depreciation		(168,438	)		(158,747	)
	$	117,697		$	102,955

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.

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 were initially seeking an estimated $56.0 million Canadian dollars in damages jointly and severally from the Defendants, representing the costs of monitoring and replacing the spacer dampers and remediating property damage, due to alleged defects in the design and construction of, and supply of materials for, the Projects by SNC ATP and HD Supply/Anixter and in the design of the spacer dampers by Helix. The Plaintiffs reduced their demand for damages to $29.4 million Canadian dollars on June 1, 2018.

The Company believes the claims against it are without merit and intends to vigorously defend against such claims. The Company is unable to predict the outcome of this case and cannot reasonably estimate a potential range of loss. However, if it is to be determined to be adverse to the Company, it could have a material effect on the Company’s financial results.

The Company is not a party to any other pending legal proceedings that the Company believes would, individually or in the aggregate, have a material adverse effect on its financial condition, results of operations or cash flows.

NOTE D – SHARE HOLDERS EQUITY

The following table reflects the changes in shareholders equity for the three and nine months ended September 30, 2019 and 2018:

																			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, 2018		$	12,662	$	(11,008	)	$	11,008		$	34,401		$	334,170		$	(72,280	)	$	(53,710	)	$	(5,873	)	$	249,370		$	0		$	249,370
Net income														1,824												1,824						1,824
Foreign currency translation adjustment																				1,353						1,353						1,353
Recognized net actuarial gain, net of tax provision of $32																							93			93						93
Total comprehensive income																										3,270						3,270
Share-based compensation											928			(36	)											892						892
Purchase of 40,891 common shares																	(2,294	)								(2,294	)					(2,294	)
Issuance of 78,821 common shares			159								(18	)														141						141
Common shares issued to rabbi trust of 705, net					(30	)		30																		0						0
Cash dividends declared – $.20 per share											(165	)		(1,011	)											(1,176	)					(1,176	)
Balance at March 31, 2019		$	12,821	$	(11,038	)	$	11,038		$	35,146		$	334,947		$	(74,574	)	$	(52,357	)	$	(5,780	)	$	250,203		$	0		$	250,203
Net income														7,904												7,904			(39	)		7,865
Foreign currency translation adjustment																				1,100						1,100						1,100
Recognized net actuarial gain, net of tax provision of $31																							93			93						93
Total comprehensive income																										9,097			(39	)		9,058
Share-based compensation											1,028			(43	)											985						985
Purchase of 29,724 common shares																	(1,456	)								(1,456	)					(1,456	)
Issuance of 525 common shares			1								26															27						27
Common shares issued to rabbi trust of 525, net					(28	)		28																		0						0
Cash dividends declared – $.20 per share														(1,004	)											(1,004	)					(1,004	)
Balance at June 30, 2019		$	12,822	$	(11,066	)	$	11,066		$	36,200		$	341,804		$	(76,030	)	$	(51,257	)	$	(5,687	)	$	257,852		$	(39	)	$	257,813
Net income														7,951												7,951			93			8,044
Foreign currency translation adjustment																				(5,897	)					(5,897	)					(5,897	)
Recognized net actuarial gain, net of tax provision of $32																							108			108						108
Total comprehensive income																										2,162			93			2,255
Share-based compensation											1,388			(43	)											1,345						1,345
Purchase of 15,150 common shares																	(751	)								(751	)					(751	)
Issuance of 1,262 common shares			3								54															57						57
Common shares distributed from rabbi trust of 3,219, net					85			(85	)																	0						0
Cash dividends declared – $.20 per share														(1,002	)											(1,002	)					(1,002	)
Balance at September 30, 2019		$	12,825	$	(10,981	)	$	10,981		$	37,642		$	348,710		$	(76,781	)	$	(57,154	)	$	(5,579	)	$	259,663		$	54		$	259,717

																			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 Equity
	(In thousands, except share and per share data)
Balance at December 31, 2017		$	12,593	$	(11,834	)	$	11,834		$	29,734		$	311,765		$	(68,115	)	$	(41,425	)	$	(6,015	)	$	238,537
Net income														5,528												5,528
Foreign currency translation adjustment																				3,832						3,832
Recognized net actuarial gain, net of tax provision of $30																							91			91
Total comprehensive income																										9,451
Share-based compensation											790			(9	)											781
Purchase of 10,907 common shares																	(833	)								(833	)
Issuance of 21,458 common shares			42								52															94
Common shares issued to rabbi trust of 112, net					(15	)		15																		0
Cash dividends declared - $.20 per share														(1,009	)											(1,009	)
Balance at March 31, 2018		$	12,635	$	(11,849	)	$	11,849		$	30,576		$	316,275		$	(68,948	)	$	(37,593	)	$	(5,924	)	$	247,021
Net income														6,735												6,735
Foreign currency translation adjustment																				(13,367	)					(13,367	)
Recognized net actuarial gain, net of tax provision of $29																							92			92
Total comprehensive income																										(6,540	)
Share-based compensation											1,994			(49	)											1,945
Purchase of 13,500 common shares																	(981	)								(981	)
Issuance of 1,730 common shares			4																							4
Common shares distributed from rabbi trust of 19,780, net					861			(861	)																	0
Cash dividends declared - $.20 per share											(913	)		(1,007	)											(1,920	)
Balance at June 30, 2018		$	12,639	$	(10,988	)	$	10,988		$	31,657		$	321,954		$	(69,929	)	$	(50,960	)	$	(5,832	)	$	239,529
Net income														9,054												9,054
Foreign currency translation adjustment																				(563	)					(563	)
Recognized net actuarial gain, net of tax provision of $35																							116			116
Total comprehensive income																										8,607
Share-based compensation											1,421			(17	)											1,404
Purchase of 27,141 common shares																	(2,313	)								(2,313	)
Issuance of 272 common shares			4								206															210
Common shares issued to rabbi trust of 272, net					(20	)		20																		0
Cash dividends declared - $.20 per share														(1,032	)											(1,032	)
Balance at September 30, 2018		$	12,643	$	(11,008	)	$	11,008		$	33,284		$	329,959		$	(72,242	)	$	(51,523	)	$	(5,716	)	$	246,405

NOTE E – PENSION PLANS

The Company uses a December 31 measurement date for the Preformed Line Products Company Employees’ Retirement Plan (the “Plan”). Net periodic pension cost for this plan included the following components:

	Three Months Ended September 30						Nine Months Ended September 30
	2019			2018			2019			2018
Service cost	$	130		$	22		$	225		$	188
Interest cost		350			346			1,058			1,012
Expected return on plan assets		(483	)		(612	)		(1,459	)		(1,603	)
Recognized net actuarial loss		140			151			390			393
Net periodic pension cost (benefit)	$	137		$	(93	)	$	214		$	(10	)

No contributions were made to the Plan during the nine months ended September 30, 2019. The Company does not plan to contribute additional funds to the Plan during the remainder of 2019.

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, 2019									Three Months Ended September 30, 2018
	Defined benefit pension plan activity			Currency Translation Adjustment			Total			Defined benefit pension plan activity			Currency Translation Adjustment			Total
Balance at July 1	$	(5,687	)	$	(51,257	)	$	(56,944	)	$	(5,832	)	$	(50,960	)	$	(56,792	)
Other comprehensive loss before reclassifications:
Loss on foreign currency translation adjustment		0			(5,897	)		(5,897	)		0			(563	)		(563	)
Amounts reclassified from AOCI:
Amortization of defined benefit pension actuarial gain (a)		108			0			108			116			0			116
Net current period other comprehensive income (loss)		108			(5,897	)		(5,789	)		116			(563	)		(447	)
Balance at September 30	$	(5,579	)	$	(57,154	)	$	(62,733	)	$	(5,716	)	$	(51,523	)	$	(57,239	)

	Nine Months Ended September 30, 2019									Nine Months Ended September 30, 2018
	Defined benefit pension plan activity			Currency Translation Adjustment			Total			Defined benefit pension plan activity			Currency Translation Adjustment			Total
Balance at January 1	$	(5,873	)	$	(53,710	)	$	(59,583	)	$	(6,015	)	$	(41,425	)	$	(47,440	)
Other comprehensive loss before reclassifications:
Loss on foreign currency translation adjustment		0			(3,444	)		(3,444	)		0			(10,098	)		(10,098	)
Amounts reclassified from AOCI:
Amortization of defined benefit pension actuarial gain (a)		294			0			294			299			0			299
Net current period other comprehensive income (loss)		294			(3,444	)		(3,150	)		299			(10,098	)		(9,799	)
Balance at September 30	$	(5,579	)	$	(57,154	)	$	(62,733	)	$	(5,716	)	$	(51,523	)	$	(57,239	)

(a)	This AOCI component is included in the computation of net periodic pension costs.

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 months ended September 30, 2019 and 2018 was as follows:

	Three Months Ended September 30				Nine Months Ended September 30
	2019		2018		2019		2018
Numerator
Net income	$	7,951	$	9,054	$	17,679	$	21,318
Denominator
Determination of shares
Weighted-average common shares outstanding		5,024		5,025		5,039		5,038
Dilutive effect - share-based awards		95		113		38		50
Diluted weighted-average common shares outstanding		5,119		5,138		5,077		5,088
Earnings per common share
Basic	$	1.58	$	1.80	$	3.51	$	4.23
Diluted	$	1.55	$	1.76	$	3.48	$	4.19

For both the three and nine-month periods ended September 30, 2019, 15,000 stock options were excluded from the calculation of diluted earnings per share as the effect would have been anti-dilutive. For both of the three and nine-month periods ended September 30, 2018, no stock options were excluded from the calculation of diluted earnings per share as there was no anti-dilutive effect.

NOTE H – GOODWILL AND OTHER INTANGIBLES

The Company’s finite and indefinite-lived intangible assets consist of the following:

	September 30, 2019					December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Finite-lived intangible assets
Patents	$	4,806	$	(4,806	)	$	4,806	$	(4,788	)
Land use rights		1,124		(258	)		1,134		(203	)
Trademarks		1,672		(1,294	)		1,707		(1,247	)
Technology		6,767		(1,539	)		2,994		(1,334	)
Customer relationships		15,672		(6,928	)		11,804		(6,415	)
	$	30,041	$	(14,825	)	$	22,445	$	(13,987	)
Indefinite-lived intangible assets
Goodwill	$	25,278				$	15,621

At September 30, 2019, the Company’s total net Finite-lived intangible assets includes $3.9 million of Customer relationships and $3.7 million of Technology attributable to its newly acquired businesses. Refer to Note S, “Business Combinations” for further information regarding additions.

The aggregate amortization expense for other intangibles with finite lives for the three and nine months ended September 30, 2019 was $.5 million and $1.1 million, respectively. The aggregate amortization expense for other intangibles with finite lives for the three and nine months ended September 30, 2018 was $.3 million and $.8 million, respectively. Amortization expense is estimated to be $1.1 million for the remaining period of 2019, $1.5 million for 2020 and $1.4 million for 2021, 2022 and 2023. The weighted-average remaining amortization period is approximately 14.8 years. The weighted-average remaining amortization period by intangible asset class is as follows: patents, 6.3 years; land use rights, 56.0 years; trademarks, 7.8; technology, 13.7 years; and customer relationships, 12.3 years.

The Company’s measurement date for its annual impairment test for goodwill is October 1st of each year. 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 with 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.

The Company’s only intangible asset with an indefinite life is goodwill. The changes in the carrying amount of goodwill, by segment, for the nine months ended September 30, 2019 are as follows:

	USA		The Americas		EMEA			Asia-Pacific			Total
Balance at January 1, 2019	$	3,078	$	3,997	$	1,355		$	7,191		$	15,621
Currency translation				101		(451	)		(403	)		(753	)
Additions						10,410						10,410
Balance at September 30, 2019	$	3,078	$	4,098	$	11,314		$	6,788		$	25,278

The Company’s total Indefinite-lived intangible assets includes $10.4 million attributable to its newly acquired businesses. Refer to Note S, “Business Combinations” for further information regarding additions.

NOTE I – SHARE-BASED COMPENSATION

The 1999 Stock Option Plan

Activity in the Company’s 1999 Stock Option Plan for the nine months ended September 30, 2019 was as follows:

	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (000's)
Outstanding at January 1, 2019		750	$	39.10
Granted		0	$	0.00
Exercised		750	$	39.10
Forfeited		0	$	0.00
Outstanding (exercisable and vested) at September 30, 2019		0	$	0.00		0.0	$	0

There were 750 and -0- stock options exercised under this Plan during the nine months ended September 30, 2019 and 2018, respectively.

As all stock options from the 1999 Stock Option Plan had been fully vested and exercised, the Company recorded no compensation expense related to stock options for the nine months ended September 30, 2019 and 2018.

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 900,000, of which 800,000 common shares were reserved for RSUs and 100,000 common shares have been reserved for share options. The LTIP was terminated and replaced with the Preformed Line Products Company 2016 Incentive Plan (the “Incentive Plan”) in May 2016 upon approval by the Company’s Shareholders at the 2016 Annual Meeting of Shareholders on May 10, 2016. No further awards will be made under the LTIP and previously granted awards remain outstanding in accordance with their terms. Under the Incentive Plan, certain employees, officers, and directors will be eligible to receive awards of options, restricted shares and RSUs. The total number of Company common shares reserved for awards under the Incentive Plan is 1,000,000 of which 900,000 common shares have been reserved for restricted share awards and 100,000 common shares have been reserved for share options. The Incentive Plan expires on May 10, 2026.

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.

A summary of the RSUs outstanding under the LTIP for the nine months ended September 30, 2019 is as follows:

	Restricted Share Units
	Performance and Service Required ⁽¹⁾			Service Required			Total Restricted Share Units			Weighted-Average Grant-Date Fair Value
Nonvested as of January 1, 2019		213,624			17,298			230,922		$	76.20
Granted		65,392			8,123			73,515			56.22
Vested		(75,921	)		(1,292	)		(77,213	)		34.16
Forfeited		(6,753	)		(1,068	)		(7,821	)		68.95
Nonvested as of September 30, 2019		196,342			23,061			219,403		$	60.86

(1)	Nonvested, performance-based RSUs are reflected above at the maximum performance achievement level.

For time-based RSUs, the Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the award in General and administrative expense in the accompanying Statements of Consolidated Income. Compensation expense related to the time-based RSUs for the three and nine-month periods ended September 30, 2019 was $.2 million and $.4 million, respectively. Compensation expense related to the time-based RSUs for the three and nine-month periods ended September 30, 2018 was $.1 million and $.3 million, respectively. As of September 30, 2019, there was $.6 million of total unrecognized compensation cost related to time-based RSUs that is expected to be recognized over the weighted-average remaining period of approximately 1.8 years.

For the performance-based RSUs, the number of RSUs in which the participants will vest depends on the Company’s level of performance measured by growth in either operating or pre-tax income and sales growth over a requisite performance period. Depending on the extent to which the performance criterions are satisfied under the LTIP and the Incentive Plan, the participants are eligible to earn common shares over the vesting period. Performance-based compensation expense for the three and nine-month periods ended September 30, 2019 was $1.2 million and $2.9 million, respectively. Performance-based compensation expense for the three and nine-month periods ended September 30, 2018 was $1.3 million and $2.7 million, respectively. As of September 30, 2019, the remaining compensation expense of $4.8 million for outstanding performance-based RSU’s is expected to be recognized over a period of approximately 1.7 years.

In the event of a Change in Control (as defined in the LTIP and the Incentive Plan), vesting of the RSUs will be accelerated and all restrictions will lapse. 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 100,000 options to buy common shares of the Company to certain employees at not less than fair market value of the shares on the date of grant. Options issued to date under the LTIP and the Incentive Plan vest 50% after one year following the date of the grant, 75% after two years, and 100% after three years, and expire from five to ten years from the date of grant. Shares issued as a result of stock option exercises will be funded with the issuance of new shares.

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 no options granted for either of the nine-month periods ended September 30, 2019 and 2018.

Stock option activity under the Company’s LTIP for nine months ended September 30, 2019 was as follows:

	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (000's)
Outstanding at January 1, 2019		30,750	$	56.81
Granted		0	$	0.00
Exercised		0	$	0.00
Forfeited	0		$	0.00
Outstanding (vested and expected to vest) at September 30, 2019		30,750	$	56.81		6.2	$	136
Exercisable at September 30, 2019		24,500	$	56.33		5.4	$	128

There were -0- and 3,500 shares exercised during the nine-month periods ended September 30, 2019 and 2018, respectively.

For the three and nine-month periods ended September 30, 2019, the Company recorded compensation expense related to the stock options currently vested of less than $.1 million and $.1 million, respectively. For both three and nine-month periods ended September 30, 2018, the Company recorded compensation expense related to the stock options currently vested of less than $.1 million. The total compensation cost related to nonvested awards not yet recognized at September 30, 2019 is expected to be less than $.1 million over a weighted-average period of approximately 1.9 years.

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 two deferrals. First, Directors make elective deferrals of Director fees payable and held in the rabbi trust. The deferred compensation plan allows the Directors to elect to receive Director fees in common shares of the Company at a later date instead of fees paid each quarter in cash. Second, this plan allows certain Company employees to defer restricted shares or RSUs for future distribution in the form of common shares. Assets of the rabbi trust are consolidated, and the value of the Company’s common shares held in the rabbi trust is classified in Shareholders’ equity and generally accounted for in a manner similar to treasury stock. The Company recognizes the original amount of the deferred compensation (fair value of the deferred stock award at the date of grant) as the basis for recognition in common shares issued to the rabbi trust. Changes in the fair value of amounts owed to certain employees or Directors are not recognized as the Company’s deferred compensation plan does not permit diversification and must be settled by the delivery of a fixed number of the Company’s common shares. As of September 30, 2019, 267,641 shares have been deferred and are being held in the rabbi trust.

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:

Quoted prices for similar assets in active markets;

Quoted prices for identical or similar assets or liabilities in inactive markets;

Inputs other than quoted prices that are observable for the asset or liability; and

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

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.

The following table summarizes the Company’s assets and liabilities, recorded and measured at fair value, in the consolidated balance sheets as of September 30, 2019 and December 31, 2018:

Description	Balance as of September 30, 2019		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities:
Supplemental profit sharing plan		5,334		0		5,334		0
Total Liabilities	$	5,334	$	0	$	5,334	$	0

Description	Balance as of December 31, 2018		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Marketable securities	$	1,648	$	1,648	$	0	$	0
Total Assets	$	1,648	$	1,648	$	0	$	0

Liabilities:
Supplemental profit sharing plan		4,946		0		4,946		0
Total Liabilities	$	4,946	$	0	$	4,946	$	0

The Company has a non-qualified Supplemental Profit Sharing Plan for its executives. The liability for this unfunded Supplemental Profit Sharing Plan was $5.3 million at September 30, 2019 and $4.9 million at December 31, 2018. These amounts are recorded within Other noncurrent liabilities on the Company’s consolidated balance sheets. During January 2018, the Company amended the Supplemental Profit Sharing Plan to allow the participants the ability to hypothetically invest their proportionate award into various investment options, which primarily includes mutual funds. The Company credits earnings, gains and losses to the participants’ deferred compensation account balances based on the investments selected by the participants. The Company measures the fair value of the Supplemental Profit Sharing Plan liability using the market values of the participants’ underlying investment accounts.

In order to mitigate the risk associated with the Supplemental Profit Sharing Plan, the Company had invested in marketable securities, principally equity-based mutual funds, which were all transferred to the Company’s Corporate Owned Life Insurance Policy (“COLI”) in April 2019. The balance in the marketable securities of $0 million and $1.6 million were reported at fair value within Other current assets on the Company’s consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively. At September 30, 2019 and December 31, 2018, the cash surrender value of the COLI was $5.4 million and $2.8 million, respectively, and is recorded in Other assets on the Company’s consolidated balance sheet. Changes in the fair value of the securities of $.0 million and $.2 million were recognized within Other income, net within the consolidated statements of income for the three and nine-month periods ended September 30, 2019, respectively. Changes in the fair value of the securities of less than $.1 million and $.1 million were recognized within Other income, net within the consolidated statements of income for the three and nine-month periods ended September 30, 2018, respectively.

NOTE K – RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In August 2018, the SEC issued Final Rule Release No. 33-10532, “Disclosure Update and Simplification,” which makes a number of changes meant to simplify interim disclosures. The new rule requires a presentation of the changes in shareholders’ equity and noncontrolling interest in the form of a reconciliation, either as a separate financial statement or in the notes to the financial statements, for the current and comparative year-to-date interim periods. The Company adopted the new disclosure requirements for the period ending September 30, 2019. The additional components of this release did not have a material impact on the Company’s consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, “Income Statement (Topic 220), Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”) which gives the entity the option to reclassify to retained earnings the tax effect resulting the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Act”) related items that the FASB refers to as having been stranded in accumulated other comprehensive income (“OCI”). The Company adopted ASU 2018-02 effective January 1, 2019 and did not elect the option to reclassify to retained earnings the tax effects resulting from the Tax Act that are stranded in OCI. The adoption of this new guidance did not have a material effect on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The amendments in this update require the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, a lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation for leases classified as operating leases under previous guidance. Both the asset and liability will initially be measured at the present value of the future minimum lease payments over the lease term. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. Initial costs directly attributable to negotiating and arranging the lease will be included in the asset. For leases with a term of 12 months or less, the lessee is permitted to make an accounting policy election by class of underlying asset to not recognize an asset and corresponding liability. The lessee is also required to provide additional qualitative and quantitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. These disclosures are intended to supplement the amounts recorded in the financial statements and provide additional information about the nature of an organization’s leasing activities.

This ASU was applied using a modified retrospective adoption method with the option of applying the guidance either retrospectively to each prior comparative reporting period presented or retrospectively at the beginning of the period of adoption, effective January 1, 2019. The Company applied the transitional package of practical expedients allowed by the standard to not reassess the identification, classification and initial direct costs of leases commencing before this ASU's effective date, however, the Company did not elect the hindsight transitional practical expedient. The Company also applied the practical expedient to not separate lease and non-lease components to new leases as well as existing leases through transition. The Company also elected the practical expedient allowed under “Leases (Topic 842)” to exclude leases with a term of twelve months or less form the calculation of the lease liabilities and right-of-use assets.

In July 2018, the FASB issued ASU 2018-11, “Targeted Improvements to ASC 842,” which includes an option to not restate comparative periods in transition and elect to use the effective date of ASC 842 as the initial application of transition. The amendments in Topic 842 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted.

The Company has finalized its policy elections, the discount rate used and data to support recognition and disclosure under the new standard. The adoption of this ASU resulted in an initial recognition of right-of-use assets and corresponding current and long-term lease obligations, on a discounted basis, of its lease obligations of $10.4 million on the Company’s balance sheet at January 1, 2019. Refer to Note Q “Leases” for additional details regarding the Company’s leases as of September 30. 2019. The adoption of ASU 842 did not have a material impact on the Company’s results of operations, cash flows or debt covenants.

NOTE L – NEW ACCOUNTING STANDARDS TO BE ADOPTED

The Company considers the applicability and impact of all ASUs. Recently issued ASUs that are not listed below were assessed and determined to be not applicable in the current reporting period.

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which will modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including the removal of certain disclosure requirements. The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of the ASU and delay adoption of the additional disclosures until the effective date. The Company is currently evaluating what impact its adoption, effective January 1, 2020, will have to the presentation of the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 changes how entities will measure credit losses for most financial assets and other instruments that are not measured at fair value through net income. This update introduces the current expected credit loss (CECL) model, which will require an entity to measure credit losses for certain financial instruments and financial assets, including trade receivables. Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. ASU 2016-13 is effective for public companies in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating what impact its adoption, effective January 1, 2020, will have to the presentation of the Company’s consolidated financial statements.

NOTE M – SEGMENT INFORMATION

The following tables present a summary of the Company’s reportable segments for the three and nine months ended September 30, 2019 and 2018. 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
	2019		2018			2019		2018
Net sales
PLP-USA	$	47,617	$	46,189		$	135,411	$	128,296
The Americas		19,663		14,662			51,142		52,217
EMEA		21,132		18,273			59,376		54,756
Asia-Pacific		30,805		29,289			85,283		80,198
Total net sales	$	119,217	$	108,413		$	331,212	$	315,467
Intersegment sales
PLP-USA	$	3,440	$	4,862		$	7,868	$	9,296
The Americas		2,149		2,622			5,905		7,204
EMEA		335		510			898		1,350
Asia-Pacific		3,572		3,409			10,699		8,681
Total intersegment sales	$	9,496	$	11,403		$	25,370	$	26,531
Income taxes
PLP-USA	$	1,333	$	(1,968	)	$	2,585	$	(743	)
The Americas		901		213			1,948		2,581
EMEA		496		230			574		889
Asia-Pacific		483		327			1,195		663
Total income taxes	$	3,213	$	(1,198	)	$	6,302	$	3,390
Net income attributable to Preformed Line Products Company shareholders
PLP-USA	$	3,246	$	6,200		$	7,442	$	9,759
The Americas		2,565		811			5,188		6,611
EMEA		853		805			2,171		2,729
Asia-Pacific		1,287		1,238			2,878		2,219
Total net income attributable to Preformed Line Products Company shareholders	$	7,951	$	9,054		$	17,679	$	21,318

	September 30, 2019		December 31, 2018
Assets
PLP-USA	$	132,197	$	118,171
The Americas		73,453		69,764
EMEA		92,667		57,263
Asia-Pacific		126,687		113,599
Total identifiable assets	$	425,004	$	358,797

NOTE N – INCOME TAXES

The Company’s effective tax rate was 29% and (15%) for the three months ended September 30, 2019 and 2018, respectively, and 26% and 14% for the nine months ended September 30, 2019 and 2018, respectively. The higher effective tax rate for the three and nine months ended September 30, 2019 compared to the U.S. federal statutory rate of 21% was primarily due to an increase in earnings in jurisdictions with higher tax rates than the U.S. federal statutory rate where such earnings are permanently reinvested and an increase in various U.S. permanent items, primarily limitations on the deductibility of executive compensation. The lower effective tax rate for the three months and nine months ended September 30, 2018 compared to the U.S. federal statutory rate of 21% was primarily due to the recognition of benefits related to the Tax Act for discrete items related to the Deemed Repatriation Transition Tax (“Transition Tax”).

As described in Note K, effective January 1, 2019, the Company adopted the new guidance under ASU 2018-02 and has elected not to reclassify the income tax effects of the Tax Act from accumulated other comprehensive income to retained earnings.

The Company provides valuation allowances against deferred tax assets when it is more likely than not that some portion or all of its deferred tax assets will not be realized. No significant changes to the valuation allowances were reflected for the periods ended September 30, 2019 and 2018.

During the nine-month period ended September 30, 2019, the Company recorded $.1 million of unrecognized tax benefits and as of September 30, 2019, the Company had $.1 million in total unrecognized tax benefits. The Company does not anticipate any significant changes to its gross unrecognized tax benefits within the next twelve months.

The Company previously considered the majority of the earnings in non-U.S. subsidiaries to be permanently reinvested and accordingly did not record any associated deferred income taxes on such earnings. The Company intends to continue to invest most or all of these earnings, as well as its capital in these subsidiaries, indefinitely outside of the U.S. and does not expect to incur any significant additional taxes related to such amounts.

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 in the 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
	2019			2018
Beginning of period balance	$	928		$	1,076
Additions charged to income		692			103
Warranty usage		(293	)		(156	)
Currency translation		(46	)		(74	)
End of period balance	$	1,281		$	949

NOTE P – DEBT ARRANGEMENTS

On March 13, 2018, the Company extended the term on its $65 million credit facility from June 30, 2019 to June 30, 2021. All other terms remain the same, including the interest rate at LIBOR plus 1.125% unless its funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 2.25 to 1, at which point the LIBOR spread becomes 1.500%. At September 30, 2019, the Company’s Polish subsidiary had borrowed $4.7 million U.S. dollars at a rate of 1.125% plus the Warsaw Interbank Offer Rate with a term expiring June 30, 2021. At September 30, 2019, the Company’s Australian subsidiary had borrowed $5.7 million U.S. dollars, also with a term expiring June 30, 2021. At September 30, 2019, the interest rates on the U.S., Polish and Australian line of credit agreement were 3.141%, 2.765% and 2.155%, respectively. Under the credit facility, at September 30, 2019, the Company had utilized $32.1 million with $32.9 million available under the line of credit, net of long-term outstanding letters of credit. The line of credit agreement contains, among other provisions, requirements for maintaining levels of net worth and profitability. At September 30, 2019, the Company was in compliance with these covenants.

On February 28, 2019, the Company acquired its Austrian subsidiary, SubCon Electrical Fittings GmbH (“SubCon”), headquartered in Dornbirn, Austria. The Company’s Austrian subsidiary has a $1.0 million euros, or $1.1 million U.S. dollars line of credit with a term expiration of May 31, 2020 with the option to renew for an additional twelve months indefinitely. At September 30, 2019, the Company’s Austrian subsidiary had borrowed $.6 million on the line of credit at an interest rate of 1.400%.

On April 25, 2019, the Company borrowed $8.0 million U.S. dollars on behalf of its Indonesian subsidiary at a rate of 3.501% with a term expiring on April 30, 2024. At September 30, 2019, $7.7 million was outstanding on this debt facility, of which $.8 million is classified as current.

On August 14, 2019, the Company’s New Zealand subsidiary borrowed $5.3 million U.S. dollars at a rate of 3.900% with a term expiring on August 26, 2021. At September 30, 2019, $5.2 million was outstanding on this facility, of which $.5 million is classified as current. This loan is secured by the Company’s New Zealand subsidiary’s land and building.

For both periods ended September 30, 2019 and December 31, 2018, the Company’s Asia Pacific segment had $.3 million in restricted cash used to secure bank debt. The restricted cash is shown on the balance sheet in Other assets.

NOTE Q – LEASES

The Company adopted guidance effective in ASU 2016-02, “Leases (Topic 842)” on January 1, 2019. Adoption of this guidance did not change the Company’s balance sheet or income statement recognition of finance leases. As a result of adopting this guidance, the Company recorded short and long-term lease liabilities and corresponding right-of-use assets related to its operating leases.

The Company regularly enters into leases in the normal course of business. As of September 30, 2019, the leases in effect were related to land, buildings, vehicles, office equipment and other production equipment under operating leases with lease terms of up to 99 years. The Company often has the option to renew lease terms for buildings and other assets. The exercise of lease renewal options are generally at the Company’s sole discretion. In addition, certain lease arrangements may be terminated prior to their original expiration date at the Company’s discretion. The Company evaluates renewal and termination options at the lease commencement date to determine if the Company is reasonably certain to exercise the option on the basis of economic factors. The weighted average remaining lease term for the Company’s operating and financing leases as of September 30, 2019 was 17.2 and 2.7, respectively.

Lease expense is recognized for these leases on a straight-line basis over the lease term with variable lease payments recognized in the period those payments are incurred. The components of operating and finance lease costs are recognized in Costs and expenses and Interest expense, respectively, on the Company’s Consolidated Statements of Income. The Company’s operating and finance lease costs for the three and nine months ended September 30, 2019 were as follows:


	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Components of lease expense
Operating lease cost	$	859	$	2,338

Finance lease cost
Amortization of right-of-use assets		17		51
Interest on lease liabilities		2		8
Total lease cost	$	878	$	2,397

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, 2019 was 4.53% and 5.14%, respectively.

Future maturities of the Company’s lease liabilities as of September 30, 2019 are as follows:

	Operating Leases		Finance Leases
2019	$	644	$	27
2020		2,268		107
2021		1,880		44
2022		1,503		25
2023 and thereafter		9,602		20
Total lease payments	$	15,897	$	223
Less amount of lease payment representing interest		5,441		11
Total present value of lease payments	$	10,456	$	212

The total minimum sublease rentals under noncancelable subleases to be received through 2023 is $3.9 million.

Supplemental cash flow information related to leases for the three-month period ended September 30, 2019 was as follows:

	Nine Months Ended September 30, 2019
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,610
Operating cash flows from finance leases		8
Financing cash flows from finance leases		74

NOTE R – RELATED PARTY TRANSACTIONS

On February 6, 2019, the Company purchased 36,413 shares of the Company from current Officers at a price per share of $56.44, which was calculated from a 30-day average market price in connection with the vesting of equity awards. The Audit Committee of the Board of Directors approved this transaction.

On July 2, 2019, the Company purchased 952 shares of the Company from a retired Officer at a price per share of $51.20, which was calculated from a 30-day average market price in connection with the vesting of equity awards. The Audit Committee of the Board of Directors approved this transaction.

NOTE S – BUSINESS COMBINATIONS

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

On February 28, 2019, the Company acquired 100% of SubCon. Subcon is headquartered in Dornbirn, Austria with manufacturing operations in Brno, Czech Republic. The acquisition of SubCon will strengthen the Company’s position in the global substation market and will expand its operational presence in Europe. The total purchase price was $10.2 million in cash, net of $1.8 million in cash acquired. The preliminary purchase price was predominantly allocated to Goodwill of $7.0 million and Intangible assets of $4.7 million with useful lives of 15 years. SubCon’s overall purchase price includes an estimated liability of .9 million Euros for an earn-out consideration with a potential maximum payment of 4.0 million Euros that will be considered for remeasurement during each reporting period as the operating results of SubCon are evaluated on an Income before income taxes basis over a four-year period. The earnout of $.9 million Euros is recorded in Other noncurrent liabilities on the Company’s consolidated balance sheet. The values related to the acquisition are preliminary and subject to final opening balance sheet adjustments.

On April 1, 2019, the Company acquired MICOS Telcom s.r.o (“MICOS Telcom”) headquartered in Prostějov, Czech Republic. The acquisition of MICOS Telcom will strengthen the Company’s position in the global telecom market and will also expand its operational presence in Europe. The total purchase price was $8.8 million in cash, net of $.5 million in cash acquired, including a hold-back liability of $1.5 million payable in two years from the date of purchase. The hold-back liability is recorded in Other noncurrent liabilities on the Company’s consolidated balance sheet. The preliminary purchase price was predominantly allocated to Goodwill of $3.4 million, Intangible assets of $3.5 million and Property, plant and equipment of $1.9 million. During the quarter ended June 30, 2019, the Intangible assets of $3.5 million were included in Goodwill. The Intangible assets included in the acquisition of MICOS have useful lives of 15 years. The values related to the acquisition are preliminary and subject to final opening balance sheet adjustments.

The operating results and financial position of both SubCon and MICOS Telcom are included in the Company’s EMEA reportable segment as of their respective dates of acquisition. Pro-forma results of the Company’s consolidated operations for the three and nine-month periods ended September 30, 2019 and 2018 would not have been materially different from reported results and are therefore not presented.

The purchase price was preliminarily allocated based on information available at the date of acquisition and is subject to change as the Company completes its analysis of the fair values of the assets and liabilities assumed at the acquisition date during the remeasurement period as defined under FASB Accounting Standards Codification 805, Business Combinations. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date:

Assets acquired
Current assets, net of cash	$	5,976
Property, plant and equipment		2,669
Goodwill		10,403
Finite-lived intangible assets		8,144
Other long-term assets		1,883
Total assets acquired	$	29,075
Liabilities assumed		(10,181	)
Net assets acquired	$	18,894

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

•

Preface

•

Results of Operations

•

Application of Critical Accounting Policies and Estimates

•

Working Capital, Liquidity and Capital Resources

•

Recently Adopted Accounting Pronouncements

•

New Accounting Standards to be Adopted

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, manufacture, and marketing of technically advanced products and services related to energy, communications and cable systems and to take advantage of this leadership position to sell additional quality products in familiar markets. We have 28 sales and manufacturing operations in 20 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, telecommunications and solar products. Our other three segments, The Americas, EMEA and Asia-Pacific, support our energy, telecommunications, data communication and solar 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.

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, 2019 had a $3.3 million and $12.7 million unfavorable effect on net sales, respectively, compared to the same periods in 2018. There was no effect on net income for the three-months ended September 30, 2019 and an unfavorable effect on net income of $.2 million for the nine-month period ended September 30, 2019 as compared to the prior year. On a reportable segment basis, the impact of foreign currency on net sales and net income for the three and nine months ended September 30, 2019 was as follows:

	Foreign Currency Translation Impact
	Net Sales						Net Income
(Thousands of dollars)	Three Months			Nine Months			Three Months			Nine Months
The Americas	$	(1,380	)	$	(5,493	)	$	134		$	106
EMEA		(939	)		(3,927	)		(44	)		(215	)
Asia-Pacific		(931	)		(3,252	)		(87	)		(86	)
Total	$	(3,250	)	$	(12,672	)	$	3		$	(195	)

The operating results for the three months ended September 30, 2019 are compared to the same period in 2018. Net sales for the three months ended September 30, 2019 of $119.2 million increased $10.8 million, or 10%, compared to 2018. As a percentage of net sales, gross profit increased to 33.0% in 2019 from 30.9% in 2018. Gross profit for the three-month periods ended September 30, 2019 and 2018 was $39.3 million and $33.5 million, respectively. Excluding the unfavorable impact of foreign currency translation, gross profit increased $6.9 million, or 21%, compared to 2018. Costs and expenses of $27.7 million increased $2.2 million compared to 2018 and included a favorable impact from currency translation of $1.1 million. Operating income for the three months ended September 30, 2019 was $11.6 million, an increase of $3.6 million compared to 2018. Net income for the three months ended September 30, 2019 of $8.0 million decreased $1.1 million compared to the three months ended September 30, 2018. The effect of currency translation had virtually no impact on operating income or net income.

The operating results for the nine months ended September 30, 2019 are compared to the same period in 2018. Net sales for the nine months ended September 30, 2019 of $331.2 million increased $15.7 million, or 5%, compared to the same period in 2018. As a percentage of net sales, gross profit decreased to 31.5% in 2019 from 31.8% in 2018. Gross profit for the nine months ended September 30, 2019 of $104.4 million increased $4.2 million, or 4%, compared to 2018. Excluding the unfavorable impact of currency translation, gross profit increased $8.2 million, or 8%, compared to 2018. Costs and expenses of $79.6 million increased $4.5 million compared to 2018 and included a favorable impact from currency translation of $3.7 million. Operating income for the nine months ended September 30, 2019 was $24.8 million, a decrease of $.3 million compared to 2018. Net income for the nine months ended September 30, 2019 of $17.7 million decreased $3.6 million compared to the same period in 2018. The effect of currency translation had unfavorable impacts on operating income and net income of $.3 million and $.2 million, respectively.

The following table reflects the impact of foreign currency fluctuations on operating income for the three and nine months ended September 30, 2019 and 2018:

	Foreign Currency Translation Impact
	Three Months Ended September 30				Nine Months Ended September 30
(Thousands of dollars)	2019		2018		2019		2018
Operating income	$	11,643	$	8,015	$	24,804	$	25,093
Translation loss		23		0		251		0
Transaction loss		308		1,126		179		2,324
Operating income excluding currency impact	$	11,974	$	9,141	$	25,234	$	27,417

Despite the constant changes in the current global economy, we believe our business fundamentals and our financial position are sound and that we are strategically well-positioned. We remain focused on assessing our business structure, global facilities and overall capacity in conjunction with the requirements of local manufacturing in the markets that we serve. If necessary, we will modify redundant processes and utilize our global manufacturing network to manage costs, increase sales volumes and deliver value to our customers. We have continued to invest in the business to expand into new markets for the Company, improve efficiency, develop new products, increase our capacity and become an even stronger supplier to our customers. We currently have a bank debt to equity ratio of 24.3% and can borrow needed funds at a competitive interest rate under our credit facility.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2019 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2018

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, 2019 and 2018. The Company’s past operating results are not necessarily indicative of future operating results.

	Three Months Ended September 30
(Thousands of dollars)	2019					2018					Change
Net sales	$	119,217		100.0	%	$	108,413		100.0	%	$	10,804
Cost of products sold		79,874		67.0			74,922		69.1			4,952
GROSS PROFIT		39,343		33.0			33,491		30.9			5,852
Costs and expenses		27,700		23.2			25,476		23.5			2,224
OPERATING INCOME		11,643		9.8			8,015		7.4			3,628
Other expense - net		(386	)	(0.3	)		(159	)	(0.1	)		(227	)
INCOME BEFORE INCOME TAXES		11,257		9.4			7,856		7.2			3,401
Income tax expense (benefit)		3,213		2.7			(1,198	)	(1.1	)		4,411
NET INCOME		8,044		6.7			9,054		8.4			(1,010	)
Less: Net income attributable to noncontrolling interests		93		0.1			0		0.0			93
NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS	$	7,951		6.7	%	$	9,054		8.4	%	$	(1,103	)

Net sales. Net sales were $119.2 million for the three months ended September 30, 2019, an increase of $10.8 million, or 10%, from the three months ended September 30, 2018. Excluding the unfavorable effect of currency translation, net sales for the three months ended September 30, 2019 increased $14.1 million compared to the same period in 2018, or 13%, as summarized in the following table:

	Three Months Ended September 30
(Thousands of dollars)	2019		2018		Change		Change Due to Currency Translation			Change Excluding Currency Translation		% change
Net sales
PLP-USA	$	47,617	$	46,189	$	1,428	$	0		$	1,428		3	%
The Americas		19,663		14,662		5,001		(1,380	)		6,381		44
EMEA		21,132		18,273		2,859		(939	)		3,798		21
Asia-Pacific		30,805		29,289		1,516		(931	)		2,447		8
Consolidated	$	119,217	$	108,413	$	10,804	$	(3,250	)	$	14,054		13	%

The year-over-year increase in PLP-USA net sales of $1.4 million, or 3%, was primarily due to a volume increase in energy product sales. International net sales for the three months ended September 30, 2019 experienced an unfavorable impact of $3.3 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 $19.7 million increased $6.4 million, or 44%, primarily due to a volume increase in energy and communications product sales. EMEA net sales of $21.1 million increased $3.8 million, or 21%, primarily due to a volume increase in energy and communications product sales within the region, including incremental sales from the newly acquired businesses. In Asia-Pacific, net sales of $30.8 million increased $2.4 million, or 8%, compared to 2018 primarily due to a combined volume increase in the energy, communications and special industries products.

Gross profit. Gross profit was $39.3 million and $33.5 million for the three-month periods ended September 30, 2019 and 2018, respectively. Excluding the unfavorable effect of currency translation, gross profit increased $6.9 million, or 21%, as summarized in the following table:

	Three Months Ended September 30
(Thousands of dollars)	2019		2018		Change		Change Due to Currency Translation			Change Excluding Currency Translation		% change
Gross profit
PLP-USA	$	17,687	$	16,293	$	1,394	$	0		$	1,394		9	%
The Americas		7,254		5,290		1,964		(535	)		2,499		47
EMEA		6,768		4,683		2,085		(285	)		2,370		51
Asia-Pacific		7,634		7,225		409		(271	)		680		9
Consolidated	$	39,343	$	33,491	$	5,852	$	(1,091	)	$	6,943		21	%

PLP-USA gross profit of $17.7 million increased $1.4 million compared to the same period in 2018 as a result of increased sales volume combined with a product sales mix shift to higher margin product. International gross profit for the three months ended September 30, 2019 was unfavorably impacted by $1.1 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 $2.5 million was primarily the result of a $6.3 million increase in sales combined with a product margin improvement in the region due to sales product mix. EMEA gross profit increased $2.4 million, mainly as a result of increased sales volume. Asia-Pacific gross profit increased $.7 million primarily as a result of a year-over-year increase in sales combined with a sales mix shift to higher margin products.

Costs and expenses. Costs and expenses of $27.7 million for the three months ended September 30, 2019 increased $2.2 million, or 9%. Excluding the favorable effect of currency translation, costs and expenses increased $3.3 million, or 13%, as summarized in the following table:

	Three Months Ended September 30
(Thousands of dollars)	2019		2018		Change			Change Due to Currency Translation			Change Excluding Currency Translation		% change
Costs and expenses
PLP-USA	$	12,848	$	11,789	$	1,059		$	0		$	1,059		9	%
The Americas		3,721		4,340		(619	)		(683	)		64		1
EMEA		5,375		3,687		1,688			(225	)		1,913		52
Asia-Pacific		5,756		5,660		96			(159	)		255		5
Consolidated	$	27,700	$	25,476	$	2,224		$	(1,067	)	$	3,291		13	%

PLP-USA costs and expenses of $12.8 million for the three months ended September 30, 2019 increased $1.1 million compared to 2018 mainly due to $.3 million of higher personnel-related expenses, a net increase in foreign currency exchange losses of $.3 million, $.2 million of increased professional fees combined with a net $.2 million of higher year-over-year miscellaneous expenses. Foreign currency exchange gains and losses are primarily related to translating into U.S. dollars its foreign denominated loans, trade and royalty receivables from its foreign subsidiaries at the September 30, 2019 exchange rates. On a consolidated basis, costs and expenses for the three months ended September 30, 2019 were favorably impacted by $1.1 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 $3.7 million increased $.1 million for the three months ended September 30, 2019 compared to the same period in 2018 primarily due to a $.1 million increase in personnel-related expenses. EMEA costs and expenses of $5.4 million increased $1.9 million mainly due to incremental costs incurred with our acquired businesses. Asia-Pacific costs and expenses of $5.8 million increased $.3 million. This increase was primarily due to an increase in commission expense of $.2 million along with net higher various combined expenses of $.1 million.

Other income (expense). Other expense for the three-month periods ended September 30, 2019 and 2018 was $.4 million and $.2 million, respectively.

Income taxes. Income taxes for the three months ended September 30, 2019 and 2018 were $3.2 million and $(1.2) million, respectively, based on pre-tax income of $11.2 million and $7.9 million, respectively. The effective tax rate for the three months ended September 30, 2019 and 2018 was 29% and (15%), respectively, compared to the U.S. federal statutory rate of 21%. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amount of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In addition to state and local income taxes, the following items had the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% and our effective tax rate:

2019

A $.3 million, or 3%, net increase resulting from higher U.S. permanent items primarily related to uncertain tax positions.

A $.6 million, or 5%, increase resulting from earnings in jurisdictions with higher tax rates than the U.S. federal statutory rate.

2018

A $.9 million, or 12%, net decrease resulting from the final calculation of the Transition Tax.

A $.7 million, or 9%, net decrease resulting from a net reduction in our deferred taxes due to the result of the U.S. federal statutory rate decrease included in the tax act.

A $1.2 million, or 15%, net decrease resulting from favorable U.S. permanent items primarily related to discrete items.

Net income. As a result of the preceding items, net income for the three months ended September 30, 2019 was $8.0 million, compared to $9.1 million for the three months ended September 30, 2018, a decrease of $1.1 as summarized in the following table:

	Three Months Ended September 30
(Thousands of dollars)	2019		2018		Change			Change Due to Currency Translation			Change Excluding Currency Translation			% change
Net income
PLP-USA	$	3,246	$	6,200	$	(2,954	)	$	0		$	(2,954	)		(48	)	%
The Americas		2,565		811		1,754			134			1,620			200
EMEA		853		805		48			(44	)		92			11
Asia-Pacific		1,287		1,238		49			(87	)		136			11
Consolidated	$	7,951	$	9,054	$	(1,103	)	$	3		$	(1,106	)		(12	)	%

PLP-USA’s net income for the three months ended September 30, 2019 decreased $3.0 million compared to the same period in 2018. While operating income increased $.3 million, it was completely offset by an increase in income taxes of $3.3 million primarily due to a prior year, non-recurring, favorable adjustment resulting from the Tax Act. The following discussion of net income excludes the effect of currency translation. The Americas net income increased $1.6 million as a result of a $2.3 million increase in operating income, partially offset by higher income taxes of $.7 million. EMEA net income increased $.1 million as a result of a $.4 million increase in operating income, partially offset by a $.3 million year-over-year increase in income tax expense. Asia-Pacific net income increased $.1 million due to a $.4 million increase in operating income, partially offset by an increase in income tax expense of $.3 million.

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

NINE MONTHS ENDED SEPTEMBER 30, 2019 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2018

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, 2019 and 2018. The Company’s past operating results are not necessarily indicative of future operating results.

	Nine Months Ended September 30
(Thousands of dollars)	2019					2018					Change
Net sales	$	331,212		100.0	%	$	315,467		100.0	%	$	15,745
Cost of products sold		226,798		68.5			215,255		68.2			11,543
GROSS PROFIT		104,414		31.5			100,212		31.8			4,202
Costs and expenses		79,610		24.0			75,119		23.8			4,491
OPERATING INCOME		24,804		7.5			25,093		8.0			(289	)
Other expense—net		(769	)	(0.2	)		(385	)	(0.1	)		(384	)
INCOME BEFORE INCOME TAXES		24,035		7.3			24,708		7.8			(673	)
Income tax expense		6,302		1.9			3,390		1.1			2,912
NET INCOME	$	17,733		5.4	%	$	21,318		6.8	%	$	(3,585	)
Less: Net income attributable to noncontrolling interests		54		0.0			0		0.0			54
NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS	$	17,679		5.3	%	$	21,318		6.8	%	$	(3,639	)

Net sales. Net sales were $331.2 million for the nine months ended September 30, 2019, an increase of $15.7 million, or 5%, from the nine months ended September 30, 2018. Excluding the unfavorable effect of currency translation, net sales for the nine months ended September 30, 2019 increased $28.4 million compared to the same period in 2018, or 9%, as summarized in the following table:

	Nine Months Ended September 30
(Thousands of dollars)	2019		2018		Change			Change Due to Currency Translation			Change Excluding Currency Translation		% change
Net sales
PLP-USA	$	135,411	$	128,296	$	7,115		$	0			7,115		6	%
The Americas		51,142		52,217		(1,075	)		(5,493	)		4,418		8
EMEA		59,376		54,756		4,620			(3,927	)		8,547		16
Asia-Pacific		85,283		80,198		5,085			(3,252	)		8,337		10
Consolidated	$	331,212	$	315,467	$	15,745		$	(12,672	)	$	28,417		9	%

The year-over-year increase in PLP-USA net sales of $7.1 million, or 6%, was primarily due to a volume increase in energy product sales. International net sales for the nine months ended September 30, 2019 experienced an unfavorable impact of $12.7 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 $51.1 million increased $4.4 million, or 8%, primarily due to a volume increase in energy and communications product sales. EMEA net sales of $59.4 million increased $8.5 million, or 16%, primarily due to a volume increase in energy product sales within the region. In Asia-Pacific, net sales of $85.3 million increased $8.3 million, or 10%, compared to 2018 primarily due to a volume increase in energy and special industries products.

Gross profit. Gross profit of $104.4 million for the nine months ended September 30, 2019 increased $4.2 million, or 4%, compared to the nine months ended September 30, 2018. Excluding the $4.2 million unfavorable effect of currency translation, gross profit increased $8.2 million, or 8%, as summarized in the following table:

	Nine Months Ended September 30
(Thousands of dollars)	2019		2018		Change			Change Due to Currency Translation			Change Excluding Currency Translation			% change
Gross profit
PLP-USA	$	48,291	$	44,967	$	3,324		$	0		$	3,324			7	%
The Americas		17,169		20,569		(3,400	)		(1,889	)		(1,511	)		(7	)
EMEA		17,692		15,141		2,551			(1,178	)		3,729			25
Asia-Pacific		21,262		19,535		1,727			(904	)		2,631			13
Consolidated	$	104,414	$	100,212	$	4,202		$	(3,971	)	$	8,173			8	%

PLP-USA gross profit of $48.3 million increased $3.3 million compared to the same period in 2018 as a result of higher sales volume combined with a product sales mix shift to higher margin products, primarily energy products. International gross profit for the nine months ended September 30, 2019 was unfavorably impacted by $4.0 million when local currencies were translated to U.S. dollars. The following discussion of gross profit excludes the effects of currency translation. Despite the increase in sales, the Americas gross profit decreased $1.5 million which was primarily the result of a year-over-year product margin decline in the region due to sales mix and increases in raw material cost. EMEA gross profit increased $3.7 million year-over-year mainly as a result of the $8.5 million increase in sales volume combined with incremental growth from the newly acquired businesses. Asia-Pacific gross profit increased $2.6 million predominantly due to the region’s year-over-year $8.3 million increase in sales and a sales mix shift to higher margin products.

Costs and expenses. Costs and expenses of $79.6 million for the nine months ended September 30, 2019 increased $4.5 million, or 6%. Excluding the favorable effect of currency translation, costs and expenses increased $8.2 million, or 11%, as summarized in the following table:

	Nine Months Ended September 30
Thousands of dollars)	2019		2018		Change			Change Due to Currency Translation			Change Excluding Currency Translation		% change
Costs and expenses
PLP-USA	$	37,518	$	35,161	$	2,357		$	0		$	2,357		7	%
The Americas		10,111		11,634		(1,523	)		(2,006	)		483		4
EMEA		15,042		11,637		3,405			(946	)		4,351		37
Asia-Pacific		16,939		16,687		252			(768	)		1,020		6
Consolidated	$	79,610	$	75,119	$	4,491		$	(3,720	)	$	8,211		11	%

PLP-USA costs and expenses of $37.5 million for the nine months ended September 30, 2019 increased $2.4 million, or 7%, compared to 2018 mainly due to a $1.1 million increase in professional fees, which includes acquisition-related expenses, $1.0 million of higher personnel-related and benefits expenses combined with a $.4 million increase in bad debt expense, partially offset by $.1 million of net year-over-year gains on foreign currency exchange. Foreign currency exchange gains and losses are primarily related to translating into U.S. dollars its foreign denominated loans, trade and royalty receivables from its foreign subsidiaries at the September 30, 2019 exchange rates. On a consolidated basis, costs and expenses for the nine months ended September 30, 2019 were favorably impacted by $3.7 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 $10.1 million increased $.5 million for the nine months ended September 30, 2019 compared to the same period in 2018 primarily due to a year-over-year increase in personnel-related expenses. EMEA costs and expenses of $15.0 million increased $4.4 million mainly due to the incremental costs incurred in the newly acquired businesses. Asia-Pacific costs and expenses of $16.9 million increased $1.0 million. This increase was primarily due to higher personnel costs of $.4 million, higher commissions of $.2 million and increased combined legal and bad debt expense of $.4 million.

Other income (expense). Other expense for the nine-month periods ended September 30, 2019 and 2018 was $.8 million and $.4 million, respectively.

Income taxes. Income taxes for the nine months ended September 30, 2019 and 2018 were $6.3 million and $3.4 million, respectively, based on pre-tax income of $24.0 million and $24.7 million, respectively. The effective tax rate for the nine months ended September 30, 2019 and 2018 was 26% and 14%, respectively, compared to the U.S. federal statutory rate of 21%. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amount of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In addition to state and local income taxes, the following items had the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% and our effective tax rate:

2019

A $.5 million, or 2%, net increase resulting from higher U.S. permanent items and discrete items related to uncertain tax positions.

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

2018

A $.9 million, or 4%, net decrease resulting from the final calculation of the Transition Tax.

A $.7 million, or 3%, net decrease resulting from a net reduction in our deferred taxes due to the result of the U.S. federal statutory rate decrease included in the Tax Act.

A $1.0 million, or 4%, net decrease resulting from favorable U.S. permanent items primarily related to discrete items and provisions of the Tax Act.

A $.8 million, or 4%, increase resulting from earnings in jurisdictions with higher tax rates than the U.S. federal statutory rate.

Net income. As a result of the preceding items, net income for the nine months ended September 30, 2019 was $17.7 million, compared to $21.3 million for the nine months ended September 30, 2018, a decrease of $3.4 million when foreign currency impact is excluded as summarized in the following table:

	Nine Months Ended September 30
(Thousands of dollars)	2019		2018		Change			Change Due to Currency Translation			Change Excluding Currency Translation			% change
Net income
PLP-USA	$	7,442	$	9,759	$	(2,317	)	$	0		$	(2,317	)		(24	)%
The Americas		5,188		6,611		(1,423	)		106			(1,529	)		(23	)
EMEA		2,171		2,729		(558	)		(215	)		(343	)		(13	)
Asia-Pacific		2,878		2,219		659			(86	)		745			34
Consolidated	$	17,679	$	21,318	$	(3,639	)	$	(195	)	$	(3,444	)		(16	)%

PLP-USA’s net income for the nine months ended September 30, 2019 decreased $2.3 million compared to the same period in 2018. There was a $1.0 million increase in operating income that was completely offset by an income tax expense increase of $3.3 million which primarily resulted from a non-recurring, favorable prior year adjustment related to the Tax Act. The following discussion of net income excludes the effect of currency translation. The Americas net income decreased $1.5 million as a result of a $2.0 million decrease in operating income and an increase in net interest expense of $.2 million, partially offset by a decrease in income tax expense of $.7 million. EMEA net income decreased by $.3 million primarily as a result of a decrease in operating income of $.6 million, partially offset by a decrease in income tax expense of $.3 million. Asia-Pacific net income increased $.7 million as a result of a $1.6 million increase in operating income, partially offset by an increase in net interest expense of $.3 million combined with an increase in income tax expense of $.6 million.

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

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, 2018 filed on March 8,

2019 with the Securities and Exchange Commission and are, therefore, not presented herein. For more detail regarding the January 1, 2019 adoption of ASU 2016-02, “Leases (Topic 842),” refer to Note R “Leases” and Note K “Recently Adopted Accounting Pronouncements.”

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 2019, we used cash of $22.0 million for capital expenditures. We ended the first nine months of 2019 with $41.5 million of cash, cash equivalents and restricted cash (“Cash”). Our Cash is held in various locations throughout the world. At September 30, 2019, 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 cash flows, use of U.S. Cash balances, external borrowings, or some combination of these sources. We complete comprehensive reviews of our significant customers and their creditworthiness by analyzing financial statements for customers where we have identified a measure of increased risk. We closely monitor payments and developments which may signal possible customer credit issues. We currently have not identified any potential material impact on our liquidity from customer credit issues.

Total debt at September 30, 2019 was $63.0 million. At September 30, 2019, our unused availability under our line of credit was $32.9 million and our bank debt to equity percentage was 24.3%. In 2018, we extended the term on our $65 million credit facility from June 30, 2019 to June 30, 2021. 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, 2019 and December 31, 2018, we were in compliance with these covenants.

We expect that our major source of funding for 2019 and beyond will be our operating cash flows, 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. We believe our future operating cash flows will be more than sufficient to cover debt repayments, other contractual obligations, capital expenditures and dividends for the next 12 months and thereafter for the foreseeable future. In addition, we believe our borrowing capacity provides substantial financial resources, if needed, to supplement funding of capital expenditures and/or acquisitions. We also believe that we can expand our borrowing capacity, if necessary; however, we do not believe we would increase our debt to a level that would have a material adverse impact upon results of operations or financial condition.

Sources and Uses of Cash

Cash increased $7.1 million compared to the same period in 2018. Net Cash provided by operating activities was $20.7 million. The most significant net investing and financing uses of Cash in the nine months ended September 30, 2019 were payments of long-term debt of $41.6 million, Cash used to fund the acquisition of SubCon and MICOS Telcom of $18.9 million, capital expenditures of $22.0 million, share repurchases of $4.5 million and dividends paid of $3.2 million, partially offset by net debt and notes payable proceeds of $69.3 million. Currency had a negative $1.8 million impact on Cash when translating foreign denominated financial statements to U.S. dollars.

Net Cash provided by operating activities for the nine months ended September 30, 2019 and 2018 was $20.7 million compared to $7.1 million during the nine months ended September 30, 2018. The $13.6 million increase was primarily a result of a decrease in Cash usage for operating assets (net of operating liabilities) of $16.7 million, which included a reduction resulting from the $5.3 million contribution to the pension plan in 2018, partially offset by a decrease in net income of $3.6 million and an increase in non-cash items of $.5 million.

Net Cash used in investing activities of $41.3 million for the nine months ended September 30, 2019 increased $29.3 million when compared to Cash used in investing activities in the nine months ended September 30, 2018 of $12.0 million. The change was primarily related to Cash used to fund the SubCon and MICOS Telcom acquisitions, net of Cash, of $18.9 million and a year-over-year increase in capital expenditures of $14.7 million, partially offset by a reduction in Cash used year-over year to purchase marketable securities of $4.2 million in 2018.

Cash provided by financing activities for the nine months ended September 30, 2019 was $20.0 million compared to a cash usage of $4.8 million for the nine months ended September 30, 2018. The $24.8 million improvement was primarily the result of a net increase in debt borrowings in 2019 compared to 2018 of $26.4 million, partially offset by a year-over-year change in Cash used for net stock repurchases of $1.5 million.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

See Note K of the Notes to the Consolidated Financial Statements

NEW ACCOUNTING STANDARDS TO BE ADOPTED

See Note L of the Notes to the Consolidated Financial Statements

FORWARD LOOKING STATEMENTS

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

This Form 10-Q and other documents we file with the Securities and Exchange Commission (“SEC”) contain forward-looking statements regarding the Company’s and management’s beliefs and expectations. As a general matter, forward-looking statements are those focused upon future plans, objectives or performance (as opposed to historical items) and include statements of anticipated events or trends and expectations and beliefs relating to matters not historical in nature. Such forward-looking statements are subject to uncertainties and factors relating to the Company’s operations and business environment, all of which are difficult to predict and many of which are beyond the Company’s control. Such uncertainties and factors could cause the Company’s actual results to differ materially from those matters expressed in or implied by such forward-looking statements.

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

•

The overall demand for cable anchoring and control hardware for electrical transmission and distribution lines on a worldwide basis, which has a slow growth rate in mature markets such as the U.S., Canada, Australia and Western Europe and may grow slowly or experience prolonged delay in developing regions despite expanding power needs;

•

The potential impact of the global economic condition on the Company’s ongoing profitability and future growth opportunities in the Company’s core markets in the U.S. and other foreign countries where the financial situation is expected to be similar going forward;

•

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

•

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

•

The decreasing demand for product supporting copper-based infrastructure due to the introduction of products using new technologies or adoption of new industry standards;

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

Strikes, labor disruptions and other fluctuations in labor costs;

•

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

•

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

•

Those factors described under the heading “Risk Factors” on page 12 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed on March 8, 2019.

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. The remeasurement impact to the three and nine-month periods ended September 30, 2019 was immaterial and is included in the Company’s consolidated financial statements.

As of September 30, 2019, the Company had no foreign currency forward exchange contracts outstanding. The Company does not hold derivatives for trading or speculative 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 $4.1 million and on income before taxes of $1.1 million.

The Company is exposed to market risk, including changes in interest rates. The Company is subject to interest rate risk on its variable rate revolving credit facilities and term notes, which consisted of borrowings of $32.1 million at September 30, 2019. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $.2 million for the nine months ended September 30, 2019.

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, 2019.

Changes in Internal Control over Financial Reporting

On January 1, 2019, the Company adopted ASU 2016-02, “Leases (Topic 842).” For the adoption, the Company implemented changes to its lease recognition process and control activities, including the development of new entity-wide policies, processes, including the use of a software package, controls, training and ongoing lease contract reviews to accommodate presentation and disclosure requirements. For more detail regarding the January 1, 2019 adoption of ASU No. 2016-02, refer to Note Q “Leases” and Note K “Recently Adopted Accounting Pronouncements.”

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 during the nine-month period ended September 30, 2019 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the course of business, the Company is subject to a variety of claims and lawsuits, including, but not limited to, litigation relating to employment, workers’ compensation, products liability, environmental and intellectual property. The ultimate outcomes of these matters are not predictable with certainty. The Company has liability insurance to cover many of these claims.

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 Company believes the claims against it are without merit and intends to vigorously defend against such claims. We are unable to predict the outcome of this case and cannot reasonably estimate a potential range of loss. However, if it is determined adverse to the Company, it could have a material effect on the Company’s financial results.

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, 2018 filed with the Securities and Exchange Commission on March 8, 2019.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On December 13, 2017, the Board of Directors authorized a plan to repurchase up to an additional 228,138 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 months ended September 30, 2019:

Period (2019)	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that may yet be Purchased under the Plans or Programs
July		952	$	51.20		123,885		126,115
August		10,176		49.09		134,061		115,939
September		4,022		50.22		138,083		111,917
Total		15,150

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

31.1		Certifications of the Principal Executive Officer, Robert G. Ruhlman, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

31.2		Certifications of the Principal Accounting Officer, Michael A. Weisbarth, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.1		Certifications of the Principal Executive Officer, Robert G. Ruhlman, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished.

32.2		Certifications of the Principal Accounting Officer, Michael A. Weisbarth, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished.

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

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.

November 1, 2019		/s/ *Robert G. Ruhlman*
		Robert G. Ruhlman
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)

November 1, 2019		/s/ *Michael A. Weisbarth*
		Michael A. Weisbarth
		Vice President – Finance and Treasurer
		(Principal Accounting Officer)

This ‘10-Q’ Filing	Date	Other Filings

	5/10/26
	4/30/24
	8/26/21
	6/30/21
	5/31/20
	1/1/20	3, 3/A
	12/31/19	10-K, SD
	12/15/19
Filed on:	11/1/19	8-K
	10/28/19
For Period end:	9/30/19
	8/14/19
	7/2/19
	6/30/19	10-Q
	4/25/19
	4/1/19
	3/31/19	10-Q
	3/8/19	10-K, 8-K
	2/28/19
	2/6/19	4
	1/1/19	4
	12/31/18	10-K, 3, 8-K, SD
	12/15/18
	9/30/18	10-Q
	7/1/18
	6/30/18	10-Q
	6/1/18
	3/31/18	10-Q
	3/13/18
	12/31/17	10-K, SD
	12/13/17	4, 8-K
	5/10/16	8-K, DEF 14A, PRE 14A
		List all Filings

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