Preformed Line Products Co: Form 10-Q for the period ended Mar 31, 2026

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the readers of our 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.

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 provide helical solutions, string hardware, connectors, insulators, fiber optic and copper splice closures, solar hardware mounting applications, and electric vehicle charging station foundations. We also provide aerial drone inspection services for utility assets including transmission and distribution power lines, substations, and generation facilities. We are 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 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, excluding 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, solar framing products and inspection services. Our other three segments, The Americas, EMEA and Asia-Pacific, support our energy, telecommunications, data communication, solar and other products in each respective geographical region.

The segment managers responsible for each region report directly to the Company’s Executive Chairman, 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 the 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 gross sales and income before income taxes.

PREFACE

The following discussion describes our results of operations for the three months ended March 31, 2026 and 2025. Our consolidated financial statements are prepared in conformity with United States ("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 financial statements in the assessment of our performance and operating trends.

Net sales of $176.3 million increased $27.7 million for the three months ended March 31, 2026 year-over-year, mainly due to an increase in energy and communication sales, led by PLP-USA. Tariffs and geopolitical developments continue to present headwinds related to raw material imports and commodity prices, impacting essential inputs like steel, aluminum and plastic resins. While we continue to manage trade matters and commodity prices proactively, further tariff increases or geopolitical events may give rise to inflationary pressures, which may require further price adjustments to maintain profit margin, and any price increases may have a negative effect on demand. Please see Note 5 of the Notes to the Consolidated Financial Statements for further considerations on tariffs and potential refunds as a result of the February 2026 Supreme Court ruling.

Our financial statements are subject to fluctuations in the exchange rates of foreign currencies in relation to the U.S. dollar. The fluctuations of foreign currencies during the three months ended March 31, 2026 and March 31, 2025 had a favorable impact on net sales of $7.2 million and unfavorable impact of $4.4 million, respectively. The effect of currency translation had a favorable impact of $0.1 million and an unfavorable impact of $0.2 million on net income during the three months ended March 31, 2026 and 2025, respectively. On a reportable segment basis, the impact of foreign currency translation on net sales and net income for the three months ended March 31, 2026, was as follows:

While uncertainty remains in the global economy due to trade matters and geopolitical instability, we believe our business portfolio, including our significant U.S. manufacturing footprint, as well as our financial position, are sound and strategically well-positioned. We remain focused on assessing our global market opportunities and overall manufacturing capacity in conjunction with the requirements of local manufacturing in the markets that we serve. As necessary, we will modify redundant processes and further utilize our global manufacturing network to manage costs, including tariff impacts, increase sales volume and deliver value to our customers. We closely monitor developments in trade policy and geo-political instability and actively evaluate strategies to mitigate the impact of tariffs or supply chain constraints, including sourcing alternatives, where needed. We have continued to invest in the business to expand into new markets for the Company, evaluate strategic mergers and acquisitions, improve efficiency, develop new products and increase our capacity. As of March 31, 2026, our liquidity remains strong with our bank debt to equity percentage at 8.9%. We can borrow needed funds at a competitive interest rate under the Facility.

RESULTS OF OPERATIONS

The following table sets forth a summary of the Company’s Statements of Consolidated Income and the percentage of net sales for the three months ended March 31, 2026 and 2025. The Company’s past operating results are not necessarily indicative of future operating results.

Net sales. In 2026, net sales were $176.3 million, an increase of $27.7 million, or 19%, compared to 2025. Excluding the effect of currency translation, net sales increased 14% as summarized in the following table:

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The increase in PLP-USA net sales of $19.3 million, or 26%, was primarily due to higher volumes in energy and communications sales. International net sales for the three months ended March 31, 2026 were favorably affected by $7.2 million when local currencies were converted to U.S. dollars. The following discussion of changes in net sales excludes the effect of currency translation. The Americas net sales of $25.1 million increased $0.5 million, or 2%, primarily due to higher volumes in communications sales due to the acquisition of JAP Telecom in May 2025. EMEA net sales of $33.3 million increased $0.1 million primarily due to higher volumes in special industry sales. Asia-Pacific net sales of $24.6 million increased $0.6 million, or 3%, primarily due to higher volumes in energy product sales and communications sales.

Gross profit. Gross profit of $55.2 million for 2026 increased $6.5 million, or 14%, compared to 2025. Excluding the effect of currency translation, gross profit increased $4.6 million, or 9%, as summarized in the following table:

PLP-USA gross profit of $32.5 million increased by $5.7 million, or 21%, compared to the same period in 2025, primarily due to higher sales volumes and the benefit of price increases enacted in 2025, partially offset by higher tariff and manufacturing costs. International gross profit for the period ended March 31, 2026 was favorably impacted by $2.0 million when local currencies were translated to U.S. dollars. The following discussion of gross profit changes excludes the effects of currency translation. The Americas gross profit decreased $0.9 million, or 13%, which was primarily the result of unfavorable product mix. EMEA gross profit decreased $0.7 million, or 7%, primarily due to unfavorable product mix and increased manufacturing costs. Asia-Pacific gross profit increased $0.5 million, or 8%, which was primarily driven by higher sales volumes.

Costs and expenses. Costs and expenses of $41.5 million for the three months ended March 31, 2026 increased $6.0 million, or 17%, when compared to 2025. Excluding the effect of currency translation and intercompany transactions, costs and expenses increased $4.4 million, or 12%, as summarized in the following table:

Excluding intercompany transactions, PLP-USA costs and expenses increased $3.0 million, or 18% year-over-year, primarily due to increased selling and personnel costs supporting strategic market growth initiatives in core product offerings in both energy and communications. International costs and expenses for the three months ended March 31, 2026 were unfavorably impacted when local currencies were translated to U.S. dollars and favorably impacted by intercompany transactions with PLP-USA. The following discussion of costs and expenses excludes the effect of currency translation and intercompany transactions. The Americas costs and expenses of $5.9 million increased $1.0 million primarily due to increases in personnel and administrative costs. EMEA costs and expenses of $7.9 million increased by $0.3 million primarily due to increases in selling, administrative and engineering costs. Asia-Pacific costs and expenses of $5.8 million increased $0.1 million primarily due to an increase in personnel costs.

Other Income, net. Other income, net of $0.6 million for the three months ended March 31, 2026 was favorable by $0.1 million when compared to $0.5 million of Other income, net for the three months ended March 31, 2025. The favorable movement was mainly due to an increase in interest income.

Income taxes. Income taxes for the three months ended March 31, 2026 and 2025 were $3.8 million and $2.1 million based on pre-tax income of $14.3 million and $13.7 million, respectively. The tax rate for the three months ended March 31, 2026 and 2025 was 26% and 16%, respectively. The higher effective tax rates for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to a valuation allowance of approximately $1.3 million recorded on deferred tax assets related to the Company's French subsidiary.

Net income. As a result of the preceding items, net income for the three months ended March 31, 2026 was $10.5 million, compared to $11.6 million for 2025. Excluding the effect of currency translation, net income decreased $1.1 million as summarized in the following table. The decrease in net income was due to the increase in income taxes as described above:

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APPLICATION OF CRITICAL ACCOUNTING 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, 2025 filed on March 5, 2026 with the Securities and Exchange Commission and are, therefore, not presented herein.

WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES

Management Assessment of Liquidity

We measure liquidity on the basis of our ability to meet short-term and long-term operating needs, repay debt, fund additional investments, including acquisitions, and make dividend payments to shareholders. Significant factors affecting the management of liquidity are cash flows from operating activities, capital expenditures, cash dividends, business acquisitions and access to bank lines of credit.

Our investments include expenditures required for equipment and facilities as well as expenditures in support of our strategic initiatives. During the first three months of 2026, we used cash of $10.0 million for capital expenditures, mainly related to new facilities in the EMEA region. We ended the first three months of 2026 with $69.5 million of cash, cash equivalents and restricted cash (collectively, “Cash”). Our Cash is held in various locations throughout the world. At March 31, 2026, the majority of our Cash was held outside the U.S. We expect most accumulated non-U.S. Cash balances will remain outside of the U.S. and that we will meet U.S. liquidity needs through future operating cash flows, use of U.S. Cash balances, external borrowings, or some combination of these sources. We complete comprehensive reviews of our significant customers and their creditworthiness by analyzing financial statements for customers where we have identified a measure of increased risk. We closely monitor payments and developments which may signal possible customer credit issues. We currently have not identified any potential material impact on our liquidity from customer credit issues.

Total debt, including notes payable, at March 31, 2026 was $41.9 million. The Company maintained a credit facility (the "Facility") with PNC Bank, National Association ("PNC") with a capacity of $60.0 million and a maturity date of June 30, 2028. The interest rate is defined as the Secured Overnight Financing Rate (“SOFR”) plus 1.225% unless the Company’s funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 3.00 to 1, at which point the SOFR spread becomes 1.600%. At March 31, 2026, the Company had utilized $7.1 million with $52.9 million available on the Facility. There were no long-term outstanding letters of credit on the Facility as of March 31, 2026. Our bank debt to equity percentage was 8.9%. The Facility contains, among other provisions, requirements for maintaining levels of net worth and profitability. At March 31, 2026, the Company was in compliance with these covenants.

On January 19, 2021, the Company received funding for a term loan from PNC Equipment Finance, LLC in the principal amount of $20.5 million for the full amount of the purchase price for a new corporate aircraft. As of March 31, 2026, $10.1 million was outstanding on this debt facility, of which $2.1 million was classified as current. The aircraft has been pledged as collateral against the loan.

The Company has other borrowing facilities at certain of its foreign subsidiaries, which consist of overdraft lines, working capital credit lines, and facilities for the issuance of letters of credit and short-term borrowing needs. At March 31, 2026 and December 31, 2025, $24.8 million and $20.9 million were outstanding, of which $5.2 million and $4.6 million were classified as current, respectively. Of the $24.8 million outstanding at March 31, 2026, $16.5 million is attributable to the Poland subsidiary and $7.5 million is attributable to the Spain subsidiary. These facilities support commitments made in the ordinary course of business.

On July 16, 2025, PLP Poland (Belos) S.A. ("PLP Poland"), a subsidiary of the Company, entered into a non-revolving investment loan with Bank Polska Kasa Opieki Spółka Akcyjna ("Bank Pekao S.A") to finance the construction of a new manufacturing plant for an amount up to PLN100.3 million ($26.9 million). The maturity date of the loan is January 31, 2035 and is payable in annual installments in the amounts of PLN5.3 million ($1.4 million) in 2026, PLN9.0 million ($2.4 million) in 2027, PLN9.6 million ($2.6 million) in 2028 through 2034, and PLN18.8 million ($4.9 million) in 2035.

The loan bears interest at the one month Warsaw Interbank Offered Rate ("WIBOR") plus 1.0% unless the Company does not meet the covenants as set forth in the Facility with PNC, at which point the WIBOR spread becomes 1.5%. The current manufacturing plant owned by PLP Poland, the plant under construction and all fixed assets within the plants are pledged as collateral against the loan. The loan also is guaranteed by the Company.

The Company's Asia-Pacific segment had $0.3 million and $0.1 million in restricted cash used to secure bank guarantees at March 31, 2026 and December 31, 2025, respectively. The restricted cash is shown on the Company’s Consolidated Balance Sheets in Cash, cash equivalents and restricted cash.

We expect that our major source of funding for 2026 and beyond will be our operating cash flows, our existing Cash as well as our Facility agreement. Except for current earnings in certain jurisdictions, our operating income is deemed to be indefinitely reinvested in foreign jurisdictions. We currently do not intend nor foresee a need to repatriate these funds. 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 further 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

Net cash provided by operating activities for the three months ended March 31, 2026 was $6.0 million compared to $5.7 million in the comparable prior year three-month period. The $0.3 million increase was primarily a result of the net favorable movement in non-cash items including shared based compensation and depreciation and amortization, offset by changes in operating assets and liabilities.

Net cash used in investing activities for the three months ended March 31, 2026 was $9.9 million compared to $9.7 million in the comparable prior year three-month period. The $0.2 million change was primarily a result of a reduction in proceeds from the sale of investments year over year.

Net cash used in financing activities for the three months ended March 31, 2026 was $10.0 million compared to a nominal amount for the comparable prior year three-month period. The $10.0 million change was primarily the result of share repurchases from related parties and a reduction in the net payments of notes payable to banks.

We have commitments under operating leases primarily for office and manufacturing space, transportation equipment, office and computer equipment and finance leases primarily for equipment. At March 31, 2026, we had $1.5 million of current operating lease liabilities and $5.5 million of noncurrent operating lease liabilities. Total liabilities related to finance lease obligations were approximately $0.6 million at March 31, 2026.

As of March 31, 2026, the Company had total outstanding guarantees of $13.7 million. Additionally, certain domestic and foreign customers require the Company to issue letters of credit or performance bonds as a condition of placing an order. As of March 31, 2026, the Company had total outstanding letters of credit of $3.7 million.

The Company has other borrowing facilities at certain of its foreign subsidiaries, which consist of overdraft lines, working capital credit lines, and facilities for the issuance of letters of credit and short-term borrowing needs. At March 31, 2026, and December 31, 2025, $24.8 million and $20.9 million were outstanding, of which $5.2 million and $4.6 million were classified as current, respectively. Of the $24.8 million outstanding at March 31, 2026, $16.5 million is attributable to the Poland subsidiary and $7.5 million is attributable to the Spain subsidiary. These facilities support commitments made in the ordinary course of business.

FORWARD LOOKING STATEMENTS

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

This Form 10-Q and other documents we file with the SEC contain forward-looking statements regarding the Company’s and management’s beliefs and expectations. Any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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. Use of words such “anticipates,” “believes,” “may,” “should,” “will,” “would,” “could,” “plans,” “projects,” “expects,” “estimates,” “predicts,” “targets,” “forecasts,” “intends,” “contemplates,” and similar words may identify forward-looking statements. 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 United States (“U.S.”), Canada, Australia and Western Europe and may grow slowly or experience prolonged delay in developing regions despite expanding power needs;
• The impact of global economic conditions, including the impact of inflation, previously enacted or future tariffs and related economic uncertainty (including the outcome of legal challenges and refunds), and rising interest rates, on the Company’s ongoing profitability and future growth opportunities in the Company’s core markets in the U.S. and other foreign countries, which may experience continued or further instability due to political and economic conditions, social unrest, acts of war, military conflict (such as the Russian-Ukrainian, Israeli-Palestinian and Iranian conflicts), international hostilities or the perception that hostilities may be imminent, terrorism, changes in diplomatic and trade relationships and public health concerns (including viral outbreaks such as COVID-19);
• The ability of the Company’s customers to raise funds needed to build the infrastructure projects 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, trade 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 have been, and in the future may be, associated with the purchase of these products or components of these products. The Company’s supply chain has faced and could continue to face disruptions and constraints from such tariffs, inflationary pressures and ongoing wars and military conflicts, which could have a material, adverse effect on the ability to secure raw materials and supplies and customer demand;
• Strikes, labor disruptions and other fluctuations in labor costs;
• Changes and uncertainty in significant government regulations and funding priorities, including those affecting environmental compliance or other regulatory matters, or third-party litigation matters;
• Security breaches or other disruptions to the Company’s information technology structure;
• The telecommunication market’s continued deployment of Fiber-to-the-Premises;
• The impact of any failure to timely implement and maintain adequate financial, information technology and management processes and controls and procedures; and
• Those factors described under the heading “Risk Factors” in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 which was filed on March 5, 2026.

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.

There have been no material changes in the Company’s disclosed exposure to market risk since December 31, 2025. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

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 March 31, 2026.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) of the Securities and Exchange Act of 1934, as amended, during the three-month period ended March 31, 2026 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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, 2025 filed with the SEC on March 5, 2026. In addition, the ongoing tariff developments and new and ongoing conflicts involving the U.S. and other countries could potentially exacerbate other risks discussed, any of which could have a material adverse effect on the Company. The situation continues to change, and additional impacts may arise that the Company is not aware of currently.