# Preformed Line Products Co: Form 10-Q for the period ended Mar 31, 2022

- Company: [Preformed Line Products Co](/companies/plpc.md) (CIK 80035)
- Form: 10-Q
- Filed: 2022-05-06
- Accepted by EDGAR: May 6, 2022, 13:04 ET
- Period: 2022-03-31
- Accession: 0000950170-22-008079
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/80035/000095017022008079/plpc-20220331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/80035/000095017022008079/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $138.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-01-01 to 2022-03-31 | $96.3m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2022-01-01 to 2022-03-31 | $42.0m | us-gaap:GrossProfit |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | $9.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-01-01 to 2022-03-31 | $526.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | $1.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | $12.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-01-01 to 2022-03-31 | $2.49 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | $2.49 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-01-01 to 2022-03-31 | 4,943,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | −$5.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $8.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2022-01-01 to 2022-03-31 | $1.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2022-01-01 to 2022-03-31 | $66.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2022-03-31 | $34.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-03-31 | $299.1m | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $534.5m | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $115.5m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2022-03-31 | $60.6m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-03-31 | $3.3m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-03-31 | $328.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 31,831 characters.

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

OVERVIEW

Preformed Line Products Company (the “Company”, “PLPC”, “we”, “us”, or “our”) was incorporated in Ohio in 1947. We are an international designer and manufacturer of products and systems employed in the construction and maintenance of overhead and underground networks for the energy, telecommunication, cable operators, information (data communication), and other similar industries. Our primary products support, protect, connect, terminate, and secure cables and wires. We also provide solar hardware systems, mounting hardware for a variety of solar power applications, and fiber optic and copper splice closures. PLPC is respected around the world for quality, dependability and market-leading customer service. Our goal is to continue to achieve profitable growth as a leader in the research, innovation, development, manufacturing, and marketing of technically advanced products and services related to energy, communications and cable systems and respond to key infrastructure priorities around the world, including bolstering grid reliability, strengthening grid resilience to climate events, upgrading aging infrastructure, enhancing communication networks and transitioning to renewable energy. We have 30 sales and manufacturing operations in 22 different countries.

We report our segments in four geographic regions: PLP-USA (including corporate), The Americas (includes operations in North and South America without PLP-USA), EMEA (Europe, Middle East & Africa) and Asia-Pacific, in accordance with accounting standards codified in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 280, Segment Reporting. Each segment distributes a full range of our primary products. Our PLP-USA segment is comprised of our U.S. operations manufacturing our traditional products primarily supporting our domestic energy, communications and special industries products. Our other three segments, The Americas, EMEA and Asia-Pacific support our energy, communications and special industries products in each respective geographical region.

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

PREFACE

The following discussion describes our results of operations for the three months ended March 31, 2022 and 2021. 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.

While the ongoing COVID-19 pandemic has not had a material effect on our overall results, it has continued to create challenges for us in countries that have significant outbreak mitigation strategies, namely, countries in our Asia-Pacific business segment, which led to temporary project postponements and has continued to impact results in this segment. We are continuing to actively monitor the impact of COVID-19 on current and future periods and actively manage costs and our liquidity position to provide additional flexibility while still supporting our customers and their specific needs. We cannot predict the duration or scope of the COVID-19 pandemic or the magnitude of its impact on our business and results of operations. In addition, the impact of COVID-19 could potentially exacerbate other risks discussed, any of which could have a material adverse effect on the Company. We continue to assess all challenges related to COVID-19 and plan accordingly. The extent of any future impact is dependent upon several factors including those described in the

Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on March 4, 2022.

Overall customer demand has remained strong, which is reflected in net sales of $138.2 million for the three months ended March 31, 2022, an increase of $20.7 million year-over-year. However, we have also experienced significant commodity and transportation cost inflation that has impacted our profit margins. To mitigate the ongoing inflationary pressures, we implemented several price increases in the U.S. and internationally in 2021 and again in 2022. Due to the large volume in our order backlog, we continue to experience tailwinds from these 2021 increases into 2022, however, continued cost inflation in these areas may require further price adjustments to maintain profit margin, and any price increases may have a negative effect on demand.

The geopolitical environment has created challenges in the operating environment particularly in eastern Europe. Due to the ongoing conflict in Ukraine and overt hostilities shown by Russia in the conflict, the Company determined to wind down its Russian operations in March 2022. The Russia operations did not have a material impact to the consolidated financial statements with net sales of $0.1 million and $0.2 million for the three-month periods ending March 31, 2022 and 2021, respectively, and annual sales of $1.0 million for the 2021 fiscal year. As a result of the decision to wind-down operations, asset impairment, one-time termination benefits and other impacts were recorded in the period ending March 31, 2022, as outlined below.

Our consolidated 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, 2022 had a $2.5 million unfavorable effect on net sales. There was an unfavorable effect of $0.2 million on net income for the three months ended March 31, 2022. On a reportable segment basis, the impact of foreign currency on net sales and net income for the three months ended March 31, 2022 was as follows:

| (Thousands of dollars) | Foreign Currency Translation Impact Three Months Ended March 31, 2022 Net Sales | Net Income |
| --- | ---: | ---: |
| The Americas | $(136) | $106 |
| EMEA | (1,668) | (363) |
| Asia-Pacific | (742) | 57 |
| Total | $(2,546) | $(200) |

The following table reflects the impact of foreign currency fluctuations on operating income for the three months ended March 31, 2022 and 2021:

| (Thousands of dollars) | Foreign Currency Impact Three Months Ended March 31 2022 | 2021 |
| --- | ---: | ---: |
| Operating income | $9,451 | $10,768 |
| Translation gain | (522) | 0 |
| Transaction (gain) loss | (1,883) | 615 |
| Net loss (gain) on forward currency contracts | 2,065 | (327) |
| Operating income excluding currency impact | $9,111 | $11,056 |

Despite the current geopolitical environment, and aside from the uncertainty created by the COVID-19 outbreak, we believe our business fundamentals and our financial position are sound and we are strategically well-positioned. We remain focused on assessing our business structure, global facilities and overall capacity in conjunction with the requirements of local manufacturing in the markets that we serve. The growth in PLP-USA net sales required additional investment within our PLP-USA facilities, both in the form of operational capacity as well as increased warehouse space. These investments in our U.S. operations will allow us to further enhance the service we provide to our U.S. customers beginning in late 2022. If necessary, we will modify redundant processes and further utilize our global manufacturing network to manage costs, increase sales volumes and deliver value to our customers. We have continued to invest in the business to expand into new markets for the Company, evaluate strategic mergers and acquisitions, improve efficiency, develop new products, and increase our capacity. We currently have a bank debt to equity ratio of 23.7% and have the continued ability to borrow needed funds at a competitive interest rate under the Facility.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2022 COMPARED TO THREE MONTHS ENDED MARCH 31, 2021

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, 2022 and 2021. The Company’s past operating results are not necessarily indicative of future operating results.

| (Thousands of dollars) | Three Months Ended March 31 2022 |  | 2021 |  | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net sales | $138,223 | 100.0% | $117,553 | 100.0% | $20,670 |
| Cost of products sold | 96,272 | 69.6 | 77,361 | 65.8 | 18,911 |
| **GROSS PROFIT** | 41,951 | 30.4 | 40,192 | 34.2 | 1,759 |
| Costs and expenses | 32,500 | 23.5 | 29,424 | 25.0 | 3,076 |
| **OPERATING INCOME** | 9,451 | 6.8 | 10,768 | 9.2 | (1,317) |
| Other income (expense), net | 4,690 | 3.4 | (214) | (0.2) | 4,904 |
| **INCOME BEFORE INCOME TAXES** | 14,141 | 10.2 | 10,554 | 9.0 | 3,587 |
| Income tax expense | 1,840 | 1.3 | 3,377 | 2.9 | (1,537) |
| **NET INCOME** | 12,301 | 8.9 | 7,177 | 6.1 | 5,124 |
| Net (gain) loss attributable to noncontrolling interests | (16) | (0.0) | 2 | 0.0 | (18) |
| **NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS** | $12,285 | 8.9% | $7,179 | 6.1% | $5,106 |

*Net sales.* Net sales were $138.2 million for the three months ended March 31, 2022, an increase of $20.7 million, or 18%, from the three months ended March 31, 2021. Excluding the unfavorable effect of currency translation, net sales for the three months ended March 31, 2022 increased $23.2 million compared to the same period in 2021, or 20%, as summarized in the following table:

| (Thousands of dollars) Net sales | Three Months Ended March 31 2022 | 2021 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $75,924 | $56,231 | $19,693 | $0 | $19,693 | 35% |
| The Americas | 18,963 | 17,521 | 1,442 | (136) | 1,578 | 9 |
| EMEA | 27,472 | 23,481 | 3,991 | (1,668) | 5,659 | 24 |
| Asia-Pacific | 15,864 | 20,320 | (4,456) | (742) | (3,714) | (18) |
| Consolidated | $138,223 | $117,553 | $20,670 | $(2,546) | $23,216 | 20% |

The year-over-year increase in PLP-USA net sales of $19.7 million, or 35%, was primarily due to a volume increase in energy and communication product sales. International net sales for the three months ended March 31, 2022 experienced an unfavorable impact of $2.5 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 $19.0 million increased $1.6 million, or 9%, primarily due to the contributions from the Company's acquisition of Maxxweld. EMEA net sales of $27.5 million increased $5.7 million, or 24%, primarily due to a volume increase in energy product sales within the region. Asia-Pacific net sales of $15.9 million decreased $3.7 million, or 18%, compared to 2021 primarily due to a volume decrease in energy products, partially resulting from the continuing effects of the disruption to the region's economy caused by the COVID-19 pandemic.

*Gross profit.* Gross profit was $42.0 million and $40.2 million for the three months ended March 31, 2022 and 2021, respectively. Excluding the unfavorable effect of currency translation, gross profit increased $2.0 million, or 5%, as summarized in the following table:

| (Thousands of dollars) Gross profit | Three Months Ended March 31 2022 | 2021 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $26,264 | $21,077 | $5,187 | $0 | $5,187 | 25% |
| The Americas | 5,365 | 5,544 | (179) | 25 | (204) | (4) |
| EMEA | 6,374 | 8,134 | (1,760) | (194) | (1,566) | (19) |
| Asia-Pacific | 3,948 | 5,437 | (1,489) | (115) | (1,374) | (25) |
| Consolidated | $41,951 | $40,192 | $1,759 | $(284) | $2,043 | 5% |

PLP-USA gross profit of $26.3 million increased $5.2 million compared to the same period in 2021 mainly as a result of increased sales volume of $19.7 million, offset by the negative impact of rising commodity prices, freight costs, and inflation. International gross profit for the three months ended March 31, 2022 was unfavorably impacted by $0.3 million when local currencies were translated to U.S. dollars. The following discussion of gross profit excludes the effects of currency translation. The Americas gross profit decrease of $0.2 million was primarily the result of an unfavorable shift in sales product mix. EMEA’s gross profit decreased $1.6 million, mainly due to inventory write-offs of $0.4 million related to the exit of Russia operations as well as higher freight and raw material costs. Asia-Pacific’s gross profit decrease was the result of a year-over-year reduction in sales of $3.7 million, partially offset by manufacturing cost savings.

*Costs and expenses.* Costs and expenses of $32.5 million for the three months ended March 31, 2022 increased $3.1 million, or 10%. Excluding the favorable effect of currency translation, costs and expenses increased $3.9 million, or 13%, as summarized in the following table:

| (Thousands of dollars) Costs and expenses | Three Months Ended March 31 2022 | 2021 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $15,750 | $13,134 | $2,616 | $0 | $2,616 | 20% |
| The Americas | 5,130 | 3,721 | 1,409 | (74) | 1,483 | 40 |
| EMEA | 6,741 | 6,464 | 277 | (563) | 840 | 13 |
| Asia-Pacific | 4,879 | 6,105 | (1,226) | (169) | (1,057) | (17) |
| Consolidated | $32,500 | $29,424 | $3,076 | $(806) | $3,882 | 13% |

PLP-USA costs and expenses of $15.8 million for the three months ended March 31, 2022 increased when compared to the same period in 2021 due to increases in commission and personnel-related expenses. International costs and expenses for the three months ended March 31, 2022 were favorably impacted by $0.8 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 $5.1 million increased by $1.5 million mainly due to purchase accounting adjustments of approximately $0.4 million, a one time asset write-off at the Company’s Argentina subsidiary of $0.3 million as well as higher personnel-related expenses. EMEA costs and expenses of $6.7 million increased $0.8 million mainly due to asset impairment and severance charges of $0.5 million related to the exit of Russia operations as well as higher personnel-related expenses. Asia-Pacific costs and expenses of $4.9 million decreased by $1.1 million primarily due to a gain recognized for the sale of capital assets and reduced personnel-related costs.

*Other income (expense), net.* Other income (expense), net for the three months ended March 31, 2022 and 2021 was $4.7 million and $0.2 million, respectively. The increase in Other income, net for the three months ended March 31, 2022 was primarily related to the settlement of a Company-owned life insurance policy that was maintained for Director Emeritus Barbara P. Ruhlman until her death in January 2022. The cash proceeds of approximately $6.9 million resulted in a gain of $4.4 million recorded in Other income, net.

*Income taxes.* Income taxes for the three months ended March 31, 2022 and 2021 were $1.8 million and $3.4 million, based on pre-tax income of $14.1 million and $10.6 million, respectively. The effective tax rate for the three months ended March 31, 2022 and 2021 was 13% and 32%, 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. For the period ending March 31, 2022, lower income tax expense was recorded primarily due to a non-taxable benefit of $4.4 million related to the proceeds from a settlement of a Company-owned life insurance policy that was maintained for Director Emeritus Barbara P. Ruhlman until her death in January 2022, in addition to a decrease in unfavorable permanent adjustments.

*Net income.* As a result of the preceding items, net income for the three months ended March 31, 2022 was $12.3 million, compared to $7.2 million for the three months ended March 31, 2021, an increase of $5.1 million as summarized in the following table:

| (Thousands of dollars) Net income | Three Months Ended March 31 2022 | 2021 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $13,239 | $5,576 | $7,663 | $0 | $7,663 | 137% |
| The Americas | (71) | 1,192 | (1,263) | 106 | (1,369) | (115) |
| EMEA | 282 | 1,195 | (913) | (363) | (550) | (46) |
| Asia-Pacific | (1,165) | (784) | (381) | 57 | (438) | 56 |
| Consolidated | $12,285 | $7,179 | $5,106 | $(200) | $5,306 | 74% |

PLP-USA’s net income for the three months ended March 31, 2022 increased $7.7 million compared to the same period in 2021, primarily due to an increase in operating income of $2.6 million driven by higher sales volumes combined with an increase in net other income of $3.9 million primarily related to the gain from proceeds on insurance settlement, as well as a decrease in income tax expense of $1.1 million. The following discussion of net income excludes the effect of currency translation. The Americas net income decreased $1.4 million mainly as a result of a decrease in operating income due to higher costs of $1.5 million, partially offset by a decrease in income tax expense of $0.3 million. EMEA net income decreased $0.6 million mainly as a result of a $2.0 million decrease in operating income due to the impact of the exit from our the Russian operations, partially offset by an increase in other income, net of $0.9 million and a decrease in income tax expense of $0.3 million. Asia-Pacific net income decreased $0.4 due to a decrease in operating income of $0.3 million from reduced sales volumes combined with an increase of income tax expense of $0.2 million.

POLICIES AND ESTIMATES

Our critical accounting policies are consistent with the information set forth in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K for the year ended December 31, 2021 filed on March 4, 2022 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 2022, we used cash of $8.0 million for capital expenditures and $13.0 million for acquisitions of businesses. We ended the first three months of 2022 with $34.6 million of cash, cash equivalents and restricted cash (collectively, “Cash”). Our Cash is held in various locations throughout the world. At March 31, 2022, the majority of our Cash was held outside the United States (“U.S.”). We expect most accumulated non-U.S. Cash balances will remain outside of the U.S. and that we will meet U.S. liquidity needs through future operating cash flows, use of U.S. Cash balances, external borrowings, or some combination of these sources. We complete comprehensive reviews of our significant customers and their creditworthiness by analyzing financial statements for customers where we have identified a measure of increased risk. We closely monitor payments and developments which may signal possible customer credit issues. We currently have not identified any potential material impact on our liquidity from customer credit issues.

Total debt, including notes payable, at March 31, 2022 was $78.1 million. At March 31, 2022, our unused availability under the Facility was $56.4 million and our bank debt to equity percentage was 23.7%. On March 2, 2022, we amended the Facility to increase the capacity from $65.0 million to $90.0 million. As part of this amendment, the index used to determine the interest rate changed from LIBOR to the Bloomberg Short Term Bank Yield Index (“BSBY”). The interest rate will now be defined as BSBY plus 1.125% unless the Company’s funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 2.25 to 1, at which point the BSBY spread becomes 1.500%. The amendment also allows the Company to change its rate from BSBY to the Secured Overnight Financing Rate (“SOFR”) at the Company’s discretion. The amendment extended the maturity from June 30, 2024 to March 2, 2026. All other terms remain the same. The Facility agreement contains, among other provisions, requirements for maintaining levels of net worth and profitability. At March 31, 2022 and December 31, 2021, we were in compliance with these covenants.

We expect that our major source of funding for 2022 and beyond will be our operating cash flows and our existing Cash as well as the Facility. We earn a significant amount of our operating income outside the U.S., which, except for current earnings in certain jurisdictions, is deemed to be indefinitely reinvested in foreign jurisdictions.

As we cannot predict the duration or scope of the continuing COVID-19 pandemic or long-term impacts of the conflict in Ukraine and the impacts on our customers and suppliers, the negative financial impact to our financial results and liquidity cannot be reasonably estimated but could be material. We are actively managing the business to maintain cash flow and a favorable liquidity position. We believe that our future cash flows, together with these factors, will be more than sufficient to cover debt repayments, other contractual obligations, capital expenditures and dividends for the next twelve months and thereafter for the foreseeable future. In addition, we believe our borrowing capacity provides substantial financial resources, if needed, to supplement funding of capital expenditures and/or acquisitions. We also believe that we can expand our borrowing capacity, if necessary, however, we do not believe we would increase our debt to a level that would have a material adverse impact upon results of operations or financial condition.

#### Sources and Uses of Cash

Cash decreased $1.8 million compared to December 31, 2021. Net Cash used in operating activities was $5.2 million. The most significant net investing and financing uses of Cash in the three months ended March 31, 2022 were payments of long-term debt, acquisitions of businesses and capital expenditures, partially offset by debt proceeds and proceeds from a company-owned life insurance policy. Currency had a negative $0.8 million impact on Cash when translating foreign denominated financial statements to U.S. dollars.

Net Cash used in operating activities for the three months ended March 31, 2022 was $5.2 million compared to $13.2 million provided by operating activities in the comparable prior year three-month period. The $18.8 million net decrease was primarily a result of an increase in Cash used by operating assets, net of operating liabilities, due to increases in accounts receivable and inventory partially offset by an increase in net income of $5.1 million.

Net Cash used in investing activities of $10.9 million for the three months ended March 31, 2022 increased $7.5 million when compared to Cash used in investing activities in the three months ended March 31, 2021. The change was primarily related to the acquisition of businesses in the three months ended March 31, 2022 as well as the year-over-year increase in capital expenditures.

Cash provided by financing activities for the three months ended March 31, 2022 was $15.1 million compared to cash used in financing activities of $20.5 million during the three months ended March 31, 2021. The $35.6 million increase was primarily the result of an increase in proceeds from debt, net of borrowings, in 2022 compared to 2021.

We have commitments under operating leases, primarily for office and manufacturing space, transportation equipment, office and computer equipment and capital leases primarily for equipment. See the Consolidated Balance Sheets for related operating lease assets and liabilities.

As of March 31, 2022, the Company had total outstanding guarantees of $9.6 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, 2022, the Company had total outstanding letters of credit of $0.9 million.

FORWARD LOOKING STATEMENTS

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

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

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

- The overall demand for cable anchoring and control hardware for electrical transmission and distribution lines on a worldwide basis, which has a slow growth rate in mature markets such as the 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 potential impact of global economic conditions on the Company’s ongoing profitability and future growth opportunities in the Company’s core markets in the U.S. and other foreign countries, which may experience continued or further instability due to political and economic conditions, social unrest, acts of war, military conflict (including the ongoing conflict between Russia and Ukraine), 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 and regulatory factors;
- The Company’s ability to identify, complete, obtain funding for and integrate acquisitions for profitable growth;
- The potential impact of consolidation, deregulation and bankruptcy among the Company’s suppliers, competitors and customers and of any legal or regulatory claims;
- The relative degree of competitive and customer price pressure on the Company’s products;
- The cost, availability and quality of raw materials required for the manufacture of products and any tariffs that may be associated with the purchase of these products. The Company’s supply chain could continue to be disrupted by the COVID-19 pandemic which could have a material, adverse effect on the ability to secure raw materials and supplies;
- Strikes, labor disruptions and other fluctuations in labor costs;
- Changes in significant government regulations affecting environmental compliances or other litigation matters;
- Security breaches or other disruptions to the Company’s information technology structure;
- The telecommunication market’s continued deployment of Fiber-to-the-Premises;
- The effects of the potential enactment of the U.S. Build Back Better Plan which could potentially increase the U.S. federal corporate income tax rate on U.S. income and, also, reduce tax credits from foreign sourced income; 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, 2021 which was filed on March 4, 2022. The impact of COVID-19 could potentially exacerbate other risks discussed, any of which could have a material impact on the Company. The situation continues to change and additional impacts may arise that the Company is not aware of currently.

## Market risk

As filed, 2,509 characters.

The Company operates manufacturing facilities and offices around the world and uses fixed and floating rate debt to finance the Company’s global operations. As a result, the Company is subject to business risks inherent in non-U.S. activities, including political and economic uncertainty, import and export limitations and market risk related to changes in interest rates and foreign currency exchange rates. The Company believes that the political and economic risks related to the Company’s international operations are mitigated due to the geographic diversity in which the Company’s international operations are located.

Effective July 1, 2018, Argentina was designated as a highly inflationary economy as the projected three-year cumulative inflation rate exceeded 100%. As such, beginning July 1, 2018, the functional currency for the Company’s Argentina subsidiary became the U.S. dollar. Revenue from operations in Argentina represented less than 1% of total consolidated net sales for three months ended March 31, 2022 and 2021.

As of March 31, 2022, the Company had $0.4 million in assets related to foreign currency forward exchange contracts outstanding. The Company does not hold derivatives for trading purposes.

The Company’s primary currency rate exposures are related to foreign denominated debt, intercompany debt, foreign denominated receivables and payables and cash and short-term investments. A hypothetical 10% change in currency rates would have a favorable/unfavorable impact on fair values on such instruments of $4.8 million and a $0.1 million favorable/unfavorable impact on income before income taxes at March 31, 2022.

The Company is exposed to market risk, including changes in interest rates and foreign exchange rates since we conduct business in a variety of foreign currencies. The Company is subject to interest rate risk on its variable rate revolving credit facilities and term notes, which consisted of long-term borrowings of $63.9 million at March 31, 2022. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $0.3 million for the three months ended March 31, 2022.

As discussed elsewhere in this report, the outbreak of COVID-19 could negatively impact the Company’s business and results of operations. Since we cannot predict the duration or scope of the COVID-19 pandemic, the potential negative financial impact to the Company’s results cannot be reasonably estimated but could be material.

## Controls and procedures

As filed, 749 characters.

### 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, 2022.

### Changes in Internal Control over Financial Reporting

There were no other changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)) of the Securities and Exchange Act of 1934, as amended, during the three months ended March 31, 2022 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

## Risk factors

As filed, 456 characters.

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, 2021 filed with the SEC on March 4, 2022. In addition, the impact of COVID-19 could potentially exacerbate other risks discussed, any of which could have a material adverse effect on the Company. The situation continues to change and additional impacts may arise that the Company is not aware of currently.

Filed May 6, 2022.
Source: SEC EDGAR, the filing index for accession 0000950170-22-008079. Last ingested by Listed: Nov 6, 2026, 07:10 ET. No prices; not investment advice.