# Preformed Line Products Co: Form 10-Q for the period ended Mar 31, 2016

- Company: [Preformed Line Products Co](/companies/plpc.md) (CIK 80035)
- Form: 10-Q
- Filed: 2016-05-06
- Accepted by EDGAR: May 6, 2016, 14:34 ET
- Period: 2016-03-31
- Accession: 0001193125-16-581741
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/80035/000119312516581741/d146096d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/80035/000119312516581741/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2016-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2016-01-01 to 2016-03-31 | $78.7m | us-gaap:SalesRevenueGoodsNet |
| Cost of revenue | 3 months, 2016-01-01 to 2016-03-31 | $54.4m | us-gaap:CostOfGoodsSold |
| Gross profit | 3 months, 2016-01-01 to 2016-03-31 | $24.3m | us-gaap:GrossProfit |
| Operating income | 3 months, 2016-01-01 to 2016-03-31 | $3.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2016-01-01 to 2016-03-31 | $158.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2016-01-01 to 2016-03-31 | $998.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2016-01-01 to 2016-03-31 | $2.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2016-01-01 to 2016-03-31 | $0.51 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2016-01-01 to 2016-03-31 | $0.51 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2016-01-01 to 2016-03-31 | 5,229,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2016-01-01 to 2016-03-31 | $1.2m | us-gaap:NetCashProvidedByUsedInOperatingActivitiesContinuingOperations |
| Capital expenditure | 3 months, 2016-01-01 to 2016-03-31 | $5.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2016-01-01 to 2016-03-31 | $1.1m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2016-01-01 to 2016-03-31 | $627.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2016-03-31 | $31.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2016-03-31 | $182.3m | us-gaap:AssetsCurrent |
| Total assets | at 2016-03-31 | $330.8m | us-gaap:Assets |
| Current liabilities | at 2016-03-31 | $50.5m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2016-03-31 | $35.8m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2016-03-31 | $117.0k | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2016-03-31 | $224.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 39,037 characters.

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.

The MD&A is organized as follows:

- Overview
- Recent Developments
- 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 29 sales and manufacturing operations in 17 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, which manufacture 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.

RECENT DEVELOPMENTS

In the fourth quarter of 2015, we reconfigured a product line in The Americas segment and consolidated its manufacturing processes into the PLP-USA segment operations. This action reduced infrastructure and manufacturing costs for the product line. As a result, certain reclassifications have been made to the 2015 financial results to be comparable to the 2016 financial results for The Americas and PLP-USA reporting segments.

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 weaken against the U.S. dollar, our sales and costs decrease as the foreign currency-denominated financial statements translate into fewer U.S. dollars. On average, foreign currencies weakened against the U.S. dollar in the first quarter of 2016; however, they did not weaken as significantly as they did in the first three months of 2015. The most significant currencies that contributed to this movement were the Australian dollar, the Brazilian real, the Canadian dollar and the South African rand. The fluctuations of foreign currencies during the quarter ended March 31, 2016 had an unfavorable impact on net sales of $6.0 million and $.6 million on net income as compared to the first quarter of 2015. On a reportable segment basis, the favorable (unfavorable) impact of foreign currency on net sales and net income for the three months ended March 31, 2016, was as follows:

| (Thousands of dollars) | Foreign Currency Impact Three Months Ended March 31, 2016 Net Sales | Net Income |
| --- | ---: | ---: |
| The Americas | $(3,173) | $(246) |
| EMEA | (1,351) | (324) |
| Asia-Pacific | (1,448) | 19 |
| Total | $(5,972) | $(551) |

19

The following table reflects the impact of foreign currency fluctuations on operating income for the three months ended March 31, 2016 and 2015:

| (Thousands of dollars) | Foreign Currency Impact Three Months Ended March 31 2016 | 2015 |
| --- | ---: | ---: |
| Operating income (loss) | $3,687 | $(85) |
| Translation loss | 726 | 0 |
| Transaction (gain) loss | (1,038) | 3,354 |
| Operating income excluding currency impact | $3,375 | $3,269 |

Despite 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, while driving increased sales volumes and delivering value to our customers. We have continued to invest in the business to 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 16.4% and can borrow needed funds at an attractive interest rate under our credit facility.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2016 COMPARED TO THREE MONTHS ENDED MARCH 31, 2015

The following table sets forth a summary of the Company’s consolidated income statements and the percentage of net sales for the three months ended March 31, 2016 and 2015. The Company’s past operating results are not necessarily indicative of future operating results.

| (Thousands of dollars) | Three Months Ended March 31 2016 |  | 2015 |  | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net sales | $78,682 | 100.0% | $85,790 | 100.0% | $(7,108) |
| Cost of products sold | 54,393 | 69.1 | 61,030 | 71.1 | (6,637) |
| **GROSS PROFIT** | 24,289 | 30.9 | 24,760 | 28.9 | (471) |
| Costs and expenses | 20,602 | 26.2 | 24,845 | 29.0 | (4,243) |
| **OPERATING INCOME (LOSS)** | 3,687 | 4.7 | (85) | (0.1) | 3,772 |
| Other income (expense) | (31) | 0.0 | 26 | 0.0 | (57) |
| **INCOME (LOSS) BEFORE INCOME TAXES** | 3,656 | 4.6 | (59) | (0.1) | 3,715 |
| Income taxes | 998 | 1.3 | 197 | 0.2 | 801 |
| **NET INCOME (LOSS)** | $2,658 | 3.4% | $(256) | (0.3)% | $2,914 |

20

*Net sales.* For the three months ended March 31, 2016, net sales were $78.7 million, a decrease of $7.1 million, or 8%, compared to the three months ended March 31, 2015. Excluding the unfavorable effect of currency translation, net sales decreased 1% as summarized in the following table:

| (Thousands of dollars) Net sales | Three Months Ended March 31 2016 | 2015 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $34,647 | $34,130 | $517 | $0 | $517 | 2% |
| The Americas | 12,452 | 13,974 | (1,522) | (3,173) | 1,651 | 12 |
| EMEA | 13,918 | 14,196 | (278) | (1,351) | 1,073 | 8 |
| Asia-Pacific | 17,665 | 23,490 | (5,825) | (1,448) | (4,377) | (19) |
| Consolidated | $78,682 | $85,790 | $(7,108) | $(5,972) | $(1,136) | (1)% |

The increase in PLP-USA net sales of $.5 million, or 2%, was primarily due to an increase in communication product sales. International net sales for the three months ended March 31, 2016 were unfavorably affected by $6.0 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 $12.5 million increased $1.7 million, or 12%, primarily due to a volume increase in transmission sales. EMEA net sales of $13.9 million increased $1.1 million, or 8%, primarily due to volume increases in distribution and transmission sales partially offset by a decrease in telecommunication product sales. The Asia-Pacific net sales of $17.7 million decreased $4.4 million, or 19%, compared to the first three months of 2015. The decrease in net sales was primarily related to volume decreases in solar, transmission and distribution sales.

*Gross Profit.* Gross profit of $24.3 million for the three months ended March 31, 2016 decreased $.5 million, or 2%, compared to the three months ended March 31, 2015. Excluding the unfavorable effect of currency translation, gross profit increased $1.7 million, or 7%, as summarized in the following table:

| (Thousands of dollars) Gross profit | Three Months Ended March 31 2016 | 2015 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $9,937 | $11,110 | $(1,173) | $0 | $(1,173) | (11)% |
| The Americas | 4,371 | 3,557 | 814 | (1,203) | 2,017 | 57 |
| EMEA | 5,434 | 5,367 | 67 | (651) | 718 | 13 |
| Asia-Pacific | 4,547 | 4,726 | (179) | (362) | 183 | 4 |
| Consolidated | $24,289 | $24,760 | $(471) | $(2,216) | $1,745 | 7% |

PLP-USA gross profit of $9.9 million decreased $1.2 million compared to the same period in 2015. PLP-USA’s $1.2 million decrease in gross profit was predominantly related to a change in sales mix coupled with an increase in personnel costs. International gross profit for the three months ended March 31, 2016 was unfavorably impacted by $2.2 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 increase of $2.0 million was primarily the result of the $1.7 million increase in sales along with product margin improvement in the region due to product sales mix. The EMEA gross profit increased $.7 million primarily as a result of the increase in sales in the region. Asia-Pacific gross profit increased $.2 million even though sales declined $4.4 million. The increase was primarily due to a shift in the product sales mix along with $1.0 million in cost savings associated with the 2015 reconfiguration of the operations of one of its locations within the segment.

*Costs and expenses.* Costs and expenses of $20.6 million for the three months ended March 31, 2016 decreased $4.2 million, or 17%, compared to the three months ended March 31, 2015. Excluding the favorable effect of currency translation, costs and expenses decreased $2.8 million, or 11%, as summarized in the following table:

| (Thousands of dollars) Costs and expenses | Three Months Ended March 31 2016 | 2015 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $9,961 | $12,487 | $(2,526) | $0 | $(2,526) | (20)% |
| The Americas | 2,769 | 3,859 | (1,090) | (845) | (245) | (6) |
| EMEA | 3,281 | 3,093 | 188 | (264) | 452 | 15 |
| Asia-Pacific | 4,591 | 5,406 | (815) | (381) | (434) | (8) |
| Consolidated | $20,602 | $24,845 | $(4,243) | $(1,490) | $(2,753) | (11)% |

PLP-USA costs and expenses decreased $2.5 million primarily due to a $3.0 million improvement in net foreign currency exchange. In the three months ended March 31, 2016, there was a gain recognized on foreign currency transactions while there was a loss for the same period in 2015. The foreign currency exchange gains were primarily related to translating into U.S. dollars its foreign denominated loans, trade receivables and royalty receivables from its foreign subsidiaries at the March 31, 2016 exchange rates. These decreases in currency expenses were partially offset with an increase primarily in personnel costs, which increased expense by $.5 million. International costs and expenses for the three months ended March 31, 2016 were favorably impacted by $1.5 million when local currencies were translated to U.S. dollars. The following discussions of costs and expenses exclude the effect of currency translation. The Americas costs and expenses decrease of $.2 million was primarily due to a change in foreign currency exchange gains of $1.0 million, partially offset by an increase in personnel costs, commissions and royalty expenses. The foreign currency exchange gains were principally related to sales denominated in U.S. currency. EMEA costs and expenses increased $.5 million due to continued expansion of recently added offices in the region of $.2 million along with additional personnel costs throughout the region. Asia-Pacific costs and expenses decreased $.4 million primarily due to net foreign currency exchange gains across the region in the three months ended March 31, 2016 compared to net losses for the same period in 2015.

*Other income (expense).* Other expense of less than $.1 million for the three months ended March 31, 2016 decreased $.1 million compared to the three months ended March 31, 2015.

*Income taxes.* Income taxes for the three months ending March 31, 2016 and 2015 were $1.0 million and $.2 million, respectively, based on pre-tax income of $3.7 million and pre-tax loss of $.1 million, respectively. The effective tax rate for the three months ended March 31, 2016 and 2015 was 27% and (334)%, respectively, compared to the U.S. federal statutory rate of 35%. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amount of income earned 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 35% and our effective tax rate:

2016

1\. A $.2 million, or 5%, decrease resulting from higher U.S. permanent items coupled with a low level pre-tax loss in the U.S.

2\. A $.1 million, or 3%, decrease resulting from earnings in jurisdictions with lower tax rates than the U.S. federal statutory rate where such earnings are permanently reinvested.

2015

1\. A $.3 million, or (581)%, increase resulting from losses in certain jurisdictions where no tax benefit is recognized.

2\. A $.1 million, or 212%, decrease resulting from earnings in jurisdictions with lower tax rates than the U.S. federal statutory rate where such earnings are permanently reinvested.

*Net income (loss).* As a result of the preceding items, net income for the three months ended March 31, 2016 was $2.7 million, compared to a loss of $.3 million for the three months ended March 31, 2015. Excluding the effect of currency translation, net income increased $3.5 million as summarized in the following table:

| (Thousands of dollars) Net income (loss) | Three Months Ended March 31 2016 | 2015 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $(123) | $(1,245) | $1,122 | $0 | $1,122 | 90% |
| The Americas | 1,095 | (184) | 1,279 | (246) | 1,525 | NM |
| EMEA | 1,694 | 1,804 | (110) | (324) | 214 | 12 |
| Asia-Pacific | (8) | (631) | 623 | 19 | 604 | 96 |
| Consolidated | $2,658 | $(256) | $2,914 | $(551) | $3,465 | NM% |

NM- Not Meaningful

PLP-USA net loss decreased $1.1 million due to a $1.3 million increase in operating income partially offset by a lower income tax benefit of $.2 million. International net income for the three months ended March 31, 2016 was unfavorably affected by $.6 million when local currencies were converted to U.S. dollars. The following discussion of net income excludes the effect of currency translation. The Americas net income increased $1.5 million as a result of a $2.3 million increase in operating income partially offset by a $.8 million increase in income taxes. EMEA net income increased $.2 million as a result of a $.3 million increase in operating income partially offset by an increase in income taxes of $.1 million. Asia-Pacific net loss decreased $.6 million as a result of a $.6 million decrease in operating loss while the net tax impact in the region was less than $.1 million.

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, 2015 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. In the first quarter of 2016, we used cash of $5.5 million for capital expenditures. We ended the first quarter of 2016 with $31.4 million of cash and cash equivalents. Our cash and cash equivalents are held in various locations throughout the world. At March 31, 2016, the majority of our cash and cash equivalents were held outside the U.S. We expect 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.

Our financial position remains strong and our current ratio at March 31, 2016 was 3.6 to 1. Total debt at March 31, 2016 was $36.8 million. At March 31, 2016, our unused availability under our line of credit was $12.7 million and our bank debt to equity percentage was 16.4%. The term of our credit facility extends through August 2017 at an interest rate of LIBOR plus 1.125%. 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. At March 31, 2016 and December 31, 2015, we were in compliance with these covenants.

We expect that our major source of funding for 2016 and beyond will be our operating cash flows, our existing cash and cash equivalents as well as our line of credit agreement. We earn a significant amount of our operating income outside the United States, which, except for current earnings in certain jurisdictions, 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 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 $1.0 million for the three months ended March 31, 2016. Net cash provided by operating activities was $1.2 million. The major investing and financing uses of cash were capital expenditures of $5.5 million, dividends of $1.1 million and common share repurchases of $.6 million. Currency had a negative $.6 million impact on cash and cash equivalents when translating foreign denominated financial statements to U.S. dollars.

Net cash provided by operating activities increased $.6 million compared to the three months ended March 31, 2015 primarily as a result of an increase in net income of $2.9 million and non-cash items of $.3 million that were partially offset by a decrease in cash used by operating assets (net of operating liabilities) of $2.6 million.

Net cash of $2.2 million used in investing activities for the three months ended March 31, 2016 represented a decrease of $2.8 million when compared to $.6 million of cash provided by investing activities for the three months ended March 31, 2015. The decrease was primarily related to an increase in capital expenditures of $3.2 million for the three months ended March 31, 2016 when compared to the same period in 2015 along with a decrease in proceeds from property disposals of $.5 million partially mitigated by a reduction in restricted cash of $.9 million in the three months ended March 31, 2016 compared to the same period in 2015. The increase in capital expenditures was due primarily to a $3.5 million deposit to purchase a corporate aircraft to replace the expiring lease of the current aircraft.

Cash provided by financing activities for the three months ended March 31, 2016 was $2.7 million compared to $2.0 million of cash used for the three months ended March 31, 2015. The $4.7 million increase was primarily a result of an increase in net debt borrowings in 2016 compared to 2015 of $5.1 million. These increases in cash were partially offset with a net increase in cash used in capital stock transactions of $.4 million. The 2016 borrowings were used primarily to make a deposit for the acquisition of the corporate aircraft.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In November 2015, the FASB issued Accounting Standards update (ASU) No. 2015-17, “Income Taxes - Balance Sheet Classification of Deferred Taxes” which requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. Prior to the issuance of the standard, deferred tax liabilities and assets were required to be separately classified into a current amount and a noncurrent amount in the balance sheet. The new accounting guidance represents a change in accounting principle and the standard is required to be adopted in annual periods beginning after December 15, 2016. Early adoption is permitted and we elected to early adopt this guidance as of March 31, 2016 and to apply the guidance retrospectively to all periods presented. Accordingly, we reclassified the prior period amount of $8.6 million related to our deferred tax assets and $.2 million related to our deferred tax liabilities from current to noncurrent. The reclassification resulted in an increase of $7.4 million to our noncurrent deferred tax assets and a decrease of $1.0 million to our noncurrent deferred income tax liabilities. Because the application of this guidance affects classification only, such reclassifications did not have a material effect on our consolidated financial position or results of our operations.

In January 2015, the FASB issued ASU 2015-01, “Income Statement-Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” This Update eliminates from GAAP the concept of extraordinary items. A material event or transaction that an entity considers to be of an unusual nature or of a type that indicates infrequency of occurrence or both shall be reported as a separate component of income from continuing operations. The nature and financial effects of each event or transaction shall be presented as a separate component of income from continuing operations or, alternatively, disclosed in notes to financial statements. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of ASU 2015-1 had no impact to the presentation of our consolidated financial statements for the three months ended March 31, 2016.

In April 2015, the FASB issued ASU 2015-04, “Compensation – Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets.” For an entity that has a significant event in an interim period that calls for a re-measurement of defined benefit plan assets and obligations, the amendments in this Update provide a practical expedient that permits the entity to re-measure defined benefit plan assets and obligations using the month-end that is closest to the date of the significant event. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Earlier application is permitted. Amendments in this Update should be applied prospectively. The adoption of ASU 2015-04 had no impact to the presentation of our consolidated financial statements for the three months ended March 31, 2016.

In April 2015, the FASB issued ASU 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Topic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” The amendments in this Update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of ASU 2015-5 had no impact to the presentation of our consolidated financial statements for the three months ended March 31, 2016 as we are currently not engaged in a cloud computing arrangement.

In September 2015, the FASB issued ASU No. 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement - Period Adjustments.” This Update requires an acquiring entity to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments also require an entity to record the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. An entity must present separately on the face of the statement of operations or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The amendments should be applied prospectively. The adoption of ASU 2015-16 had no impact to the presentation of our consolidated financial statements for the three months ended March 31, 2016.

NEW ACCOUNTING STANDARDS TO BE ADOPTED

In March 2016, the FASB issues ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 provides guidance in GAAP for the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company is required to adopt ASU 2016 – 09 for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. We are currently evaluating what impact, if any, its adoption will have to the presentation of our 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. 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, a lessee can make an accounting policy election by class of underlying asset to not recognize an asset and corresponding liability. Lessees will also be 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. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. We are currently evaluating what impact, if any, its adoption will have to the presentation of our consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” The amendments in this Update more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments in this Update are effective for fiscal years beginning after December 15, 2016 and interim periods within fiscal years beginning after December 15, 2017. The amendments in this Update should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently evaluating what impact, if any, its adoption will have to the presentation of our consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15 “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 provides guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The Company is required to adopt ASU 2014-15 prospectively for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. We are currently evaluating what impact, if any, its adoption will have to the presentation of our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” or ASU 2014-09. ASU 2014-09 requires an entity to recognize revenue in a matter that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the amendment provides five steps that an entity should apply when recognizing revenue. The amendment also specifies the accounting of some costs to obtain or fulfill a contract with a customer and expands the disclosure requirements around contracts with customers. An entity can either adopt this amendment retrospectively to each prior reporting period presented or retrospectively with cumulative effect of initially applying the update recognized at the date of initial application. In August 2015, the FASB issued ASU No. 2015-14 deferring the effective date of the amendment to annual reporting periods beginning after December 15, 2017. Early adoption is not permitted. We are currently evaluating what impact, if any, its adoption will have to the presentation of our 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 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 the global economic condition on the Company’s ongoing profitability and future growth opportunities in our core markets in the U.S. and other foreign countries where the financial situation is expected to be similar going forward;
- Decrease in infrastructure spending globally as a result of worldwide depressed spending;
- The impact of low oil and other commodity prices on our growth opportunities, particularly with respect to energy projects;
- The ability of our 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;
- 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;
- Strikes and other labor disruptions;
- Changes in significant government regulations affecting environmental compliances;
- 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, 2015 filed on March 11, 2016.

## Market risk

As filed, 1,608 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.

As of March 31, 2016, the Company had no 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, forward exchange contracts, foreign denominated receivables and payables and cash and short-term investments. A hypothetical 10% change in currency rates would have a favorable/unfavorable impact on fair values on such instruments of $5.8 million and on income before tax of $1.8 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 $36.8 million at March 31, 2016. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $.3 million for the three months ended March 31, 2016.

## Controls and procedures

As filed, 691 characters.

### Evaluation of Disclosure Controls and Procedures

The Company’s Principal Executive Officer and Principal Financial 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, 2016.

### Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)) during the quarter ended March 31, 2016 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

## Risk factors

As filed, 223 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, 2015 filed with the Securities and Exchange Commission on March 11, 2016.

Filed May 6, 2016.
Source: SEC EDGAR, the filing index for accession 0001193125-16-581741. Last ingested by Listed: Nov 6, 2026, 07:10 ET. No prices; not investment advice.