# Preformed Line Products Co: Form 10-Q for the period ended Jun 30, 2017

- Company: [Preformed Line Products Co](/companies/plpc.md) (CIK 80035)
- Form: 10-Q
- Filed: 2017-08-04
- Accepted by EDGAR: Aug 4, 2017, 10:42 ET
- Period: 2017-06-30
- Accession: 0001564590-17-015541
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/80035/000156459017015541/plpc-10q_20170630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/80035/000156459017015541/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2017-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Gross profit | 3 months, 2017-04-01 to 2017-06-30 | $29.7m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2017-01-01 to 2017-06-30 | $54.3m | us-gaap:GrossProfit |
| Operating income | 3 months, 2017-04-01 to 2017-06-30 | $6.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2017-01-01 to 2017-06-30 | $8.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2017-04-01 to 2017-06-30 | $277.0k | us-gaap:InterestExpense |
| Interest expense | 6 months, 2017-01-01 to 2017-06-30 | $577.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2017-04-01 to 2017-06-30 | $2.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2017-01-01 to 2017-06-30 | $2.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2017-04-01 to 2017-06-30 | $4.2m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2017-01-01 to 2017-06-30 | $5.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2017-04-01 to 2017-06-30 | $0.81 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2017-01-01 to 2017-06-30 | $1.11 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2017-04-01 to 2017-06-30 | $0.81 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2017-01-01 to 2017-06-30 | $1.11 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2017-04-01 to 2017-06-30 | 5,127,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2017-01-01 to 2017-06-30 | 5,132,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Capital expenditure | 6 months, 2017-01-01 to 2017-06-30 | $4.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2017-01-01 to 2017-06-30 | $2.1m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 6 months, 2017-01-01 to 2017-06-30 | $238.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2017-06-30 | $28.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2017-06-30 | $195.5m | us-gaap:AssetsCurrent |
| Total assets | at 2017-06-30 | $351.6m | us-gaap:Assets |
| Current liabilities | at 2017-06-30 | $59.1m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2017-06-30 | $36.6m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2017-06-30 | $1.4m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2017-06-30 | $236.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 40,380 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
- 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 27 sales and manufacturing operations in 18 different countries.

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

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

We evaluate segment performance and allocate resources based on several factors primarily based on sales and net income.

PREFACE

Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP). Our discussions of the financial results include non-GAAP measures (e.g., foreign currency impact) to provide additional information concerning our financial results and provide information that we believe is useful to the readers of our consolidated financial statements in the assessment of our performance and operating trends.

Our consolidated financial statements are subject to fluctuations in the exchange rates of foreign currencies in relation to the U.S. dollar. As foreign currencies strengthen against the U.S. dollar, our sales and costs increase as the foreign currency-denominated financial statements translate into more U.S. dollars. In total, foreign currencies strengthened against the U.S. dollar in the second quarter and first six months of 2017 in contrast to the foreign currencies weakening during the comparable periods in 2016. The fluctuations of foreign currencies during the three months ended June 30, 2017 had a less than a $.1 million favorable effect on sales and a $1.4 million favorable effect on the six months ended June 30, 2017 compared to the same periods in 2016. On a reportable segment basis, the impact of foreign currency on net sales and net income for the three and six months ended June 30, 2017 was as follows:

| (Thousands of dollars) | Foreign Currency Translation Impact Net Sales Three Months | Six Months | Net Income Three Months | Six Months |
| --- | ---: | ---: | ---: | ---: |
| The Americas | $(23) | $1,293 | $(72) | $28 |
| EMEA | 74 | (282) | 38 | (42) |
| Asia-Pacific | 38 | 426 | (19) | (30) |
| Total | $89 | $1,437 | $(53) | $(44) |

The operating results for the three months ended June 30, 2017 are compared to the same period in 2016. Net sales for the three months ended June 30, 2017 of $97.5 million increased $14.3 million, or 17%, compared to 2016. As a percentage of net sales, gross profit decreased to 30.4% in 2017 from 32.2% in 2016. Gross profit for the three months ended June 30, 2017 of $29.7 million increased $2.9 million compared to 2016. Gross profit increased $3.0 million, or 11%, compared to 2016, including a minimal impact from currency translation. Costs and expenses of $23.4 million increased $.7 million compared to 2016 with no impact from currency translation. Operating income for the three months ended June 30, 2017 was $6.3 million, an increase of $2.2 million compared to 2016. Net income for the three months ended June 30, 2017 of $4.2 million increased $1.4 million compared to the net income in 2016. The effect of currency translation had immaterial unfavorable impacts on both operating income and net income of less than $.1 million.

The operating results for the six months ended June 30, 2017 are compared to the same period in 2016. Net sales for the six months ended June 30, 2017 of $182.1 million increased $20.2 million, or 12%, compared to 2016. Excluding the favorable effect of currency translation, sales for the six months ended June 30, 2017 increased $18.8 million. As a percentage of net sales, gross profit decreased to 29.8% in 2017 from 31.6% in 2016. Gross profit for the six months ended June 30, 2017 of $54.3 million increased $3.2 million compared to 2016 with no measurable impact from currency translation. Costs and expenses of $45.8 million increased $2.5 million compared to 2016 with an unfavorable impact from currency translation of $.2 million. Operating income for the six months ended June 30, 2017 was $8.6 million, an increase of $.8 million compared to 2016. Net income for the six months ended June 30, 2017 of $5.7 million was an increase of $.3 million compared to the net income in 2016. The effect of currency translation had immaterial unfavorable impact on both operating income and net income of less than $.1 million.

The following table reflects the impact of foreign currency fluctuations on operating income for the three and six months ended June 30, 2017 and 2016:

| (Thousands of dollars) | Foreign Currency Translation Impact Three Months Ended June 30 2017 | 2016 | Six Months Ended June 30 2017 | 2016 |
| --- | ---: | ---: | ---: | ---: |
| Operating income | $6,294 | $4,079 | $8,552 | $7,766 |
| Translation gain | (65) | 0 | (50) | 0 |
| Transaction gain | (3) | (317) | (186) | (1,358) |
| Operating income excluding currency impact | $6,226 | $3,762 | $8,316 | $6,408 |

Despite the uncertainty in the current global economy, we believe our business fundamentals and our financial position are sound and that we are strategically well-positioned. We remain focused on assessing our business structure, global facilities and overall capacity in conjunction with the requirements of local manufacturing in the markets that we serve. If necessary, we will modify redundant processes and utilize our global manufacturing network to manage costs, increase sales volumes and deliver value to our customers. We have continued to invest in the business to 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 16.7% and can borrow needed funds at a competitive interest rate under our credit facility.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2017 COMPARED TO THREE MONTHS ENDED JUNE 30, 2016

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 June 30, 2017 and 2016. The Company’s past operating results are not necessarily indicative of future operating results.

| (Thousands of dollars) | Three Months Ended June 30 2017 |  | 2016 |  | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net sales | $97,512 | 100.0% | $83,220 | 100.0% | $14,292 |
| Cost of products sold | 67,839 | 69.6 | 56,414 | 67.8 | 11,425 |
| **GROSS PROFIT** | 29,673 | 30.4 | 26,806 | 32.2 | 2,867 |
| Costs and expenses | 23,379 | 24.0 | 22,727 | 27.3 | 652 |
| **OPERATING INCOME** | 6,294 | 6.5 | 4,079 | 4.9 | 2,215 |
| Other expense - net | (36) | (0.0) | (306) | (0.4) | 270 |
| **INCOME BEFORE INCOME TAXES** | 6,258 | 6.4 | 3,773 | 4.5 | 2,485 |
| Income taxes | 2,102 | 2.2 | 1,018 | 1.2 | 1,084 |
| **NET INCOME** | $4,156 | 4.3% | $2,755 | 3.3% | $1,401 |

*Net sales.* Net sales were $97.5 million for the three months ended June 30, 2017, an increase of $14.3 million, or 17%, from the three months ended June 30, 2016 as summarized in the following table:

| (Thousands of dollars) Net sales | Three Months Ended June 30 2017 | 2016 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $38,087 | $34,183 | $3,904 | $0 | $3,904 | 11% |
| The Americas | 16,827 | 14,515 | 2,312 | (23) | 2,335 | 16 |
| EMEA | 17,578 | 14,660 | 2,918 | 74 | 2,844 | 19 |
| Asia-Pacific | 25,020 | 19,862 | 5,158 | 38 | 5,120 | 26 |
| Consolidated | $97,512 | $83,220 | $14,292 | $89 | $14,203 | 17% |

The increase in PLP-USA net sales of $3.9 million, or 6%, was primarily due to a volume increase in transmission and communication sales, partially offset by a decrease in solar sales. International net sales for the three months ended June 30, 2017 were favorably affected by less than $.1 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 $16.8 million increased $2.3 million, or 16%, primarily due to a volume increase in transmission and communication sales. EMEA net sales of $17.6 million increased $2.8 million, or 19%, primarily due to a volume increase in telecommunications sales and transmission projects in the region, partially offset by a decline in solar sales. In Asia-Pacific, net sales of $25.0 million increased $5.1 million, or 26%, compared to 2016 primarily due to a sales volume increase in transmission products.

*Gross profit.* Gross profit of $29.7 million for the three months ended June 30, 2017 increased $2.9 million, or 11%, compared to the three months ended June 30, 2016, as summarized in the following table:

| (Thousands of dollars) Gross profit | Three Months Ended June 30 2017 | 2016 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $12,533 | $11,736 | $797 | $0 | $797 | 7% |
| The Americas | 5,676 | 4,749 | 927 | (97) | 1,024 | 22 |
| EMEA | 4,752 | 5,812 | (1,060) | 36 | (1,096) | (19) |
| Asia-Pacific | 6,712 | 4,509 | 2,203 | (29) | 2,232 | 50 |
| Consolidated | $29,673 | $26,806 | $2,867 | $(90) | $2,957 | 11% |

21

PLP-USA gross profit of $12.5 million increased $.8 million compared to the same period in 2016. International gross profit for the three months ended June 30, 2017 was unfavorably impacted by $.1 million when local currencies were translated to U.S. dollars. The following discussion of gross profit excludes the effects of currency translation. The Americas gross profit increase of $1.0 million was primarily the result of the sales increase of $2.3 combined with product margin improvement in the region due to sales mix. Although sales increased, EMEA gross profit decreased $1.1 million due to a shift in sales toward lower gross profit margin products. Asia-Pacific gross profit increased $2.2 million mainly as a result of a $5.1 million increase in sales, however, gross profit rate declined due to a shift in product sales mix in the region.

*Costs and expenses.* Costs and expenses of $23.4 million for the three months ended June 30, 2017 increased $.7 million, or 3%, as summarized in the following table:

| (Thousands of dollars) Costs and expenses | Three Months Ended June 30 2017 | 2016 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $10,877 | $11,193 | $(316) | $0 | $(316) | (3)% |
| The Americas | 3,262 | 3,023 | 239 | 15 | 224 | 7 |
| EMEA | 3,745 | 3,261 | 484 | (27) | 511 | 16 |
| Asia-Pacific | 5,495 | 5,250 | 245 | (13) | 258 | 5 |
| Consolidated | $23,379 | $22,727 | $652 | $(25) | $677 | 3% |

PLP-USA costs and expenses of $10.9 million for the three months ended June 30, 2017 decreased $.3 million, or 3%, compared to 2016 mainly due to a $1.0 million charge related to the 2016 lease expiration of the Company aircraft that did not recur in 2017 and an increase in foreign currency exchange gains of $.2 million, offset by higher employee related costs of $.6 million, which includes healthcare and benefits, and various other net operating expenses of $.1 million. The foreign currency exchange gains were primarily related to translating into U.S. dollars its foreign denominated loans, trade and royalty receivables from its foreign subsidiaries at the June 30, 2017 exchange rates. On a consolidated basis, costs and expenses for the three months ended June 30, 2017 were minimally impacted when local currencies were translated to U.S. dollars. The following discussion of costs and expenses excludes the effect of currency translation. The Americas costs and expenses of $3.3 million increased $.2 million for the three months ended June 30, 2017 compared to the same period in 2016 primarily due to a net loss on foreign currency exchange of $.4 million offset by $.1 million of lower bad debt expense and $.1 million of lower professional fees. EMEA costs and expenses of $3.7 million increased $.5 million due to a net loss on foreign currency exchange of $.2 million, increased personnel related costs of $.2 million and $.1 million of various other expense increases. Asia-Pacific costs and expenses of $5.5 million increased $.3 million. This increase was primarily due to higher personnel related expenses.

*Other income (expense).* Other expense for the three months ended June 30, 2017 decreased $.3 million.

*Income taxes.* Income taxes for the three months ended June 30, 2017 and 2016 were $2.1 million and $1.0 million, respectively, based on pre-tax income of $6.3 million and $3.8 million, respectively. The effective tax rate for the three months ended June 30, 2017 and 2016 was 34% and 27%, 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, which differ from the U.S., federal statutory income tax rate, and the relative amount of income earned in those jurisdictions. It is also affected by discrete items that may occur in any given period but are not consistent from year to year. In addition to the impact of 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:

2017

1\. A $.1 million, or 2%, increase resulting from losses in certain jurisdictions where no tax benefit is recognized.

2\. A $.3 million, or 4%, decrease resulting from earnings in jurisdictions with lower tax rates than the U.S. federal statutory rate where such earnings are permanently reinvested.

3\. A $.1 million, or 1%, increase resulting from a mix of U.S. permanent items and discrete items.

2016

1\. A $.1 million, or 2%, decrease resulting from U.S. permanent items, primarily related to the repatriation of foreign earnings.

2\. A $.3 million, or 7%, increase resulting from losses in certain jurisdictions where no tax benefit is recognized.

3\. A $.3 million, or 7%, decrease for the recognition of various discrete items, primarily related to the release of valuation allowance in the Asia Pacific Region.

4\. A $.2 million, or 6%, 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.* As a result of the preceding items, net income for the three months ended June 30, 2017 was $4.2 million, compared to $2.8 million for the three months ended June 30, 2016, an increase of $1.4 million as summarized in the following table:

| (Thousands of dollars) Net income (loss) | Three Months Ended June 30 2017 | 2016 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $949 | $(37) | $986 | $0 | $986 | NM% |
| The Americas | 1,789 | 1,107 | 682 | (72) | 754 | 68 |
| EMEA | 669 | 1,933 | (1,264) | 38 | (1,302) | (67) |
| Asia-Pacific | 749 | (248) | 997 | (19) | 1,016 | NM |
| Consolidated | $4,156 | $2,755 | $1,401 | $(53) | $1,454 | 53% |

NM - Not Meaningful

PLP-USA net income increased $1.0 million compared to 2016 due to a $1.1 million increase in operating income and a decrease in other expense of $.3 million, partially offset by an increase in income taxes of $.3 million and a net increase in net interest expense of $.1 million. The following discussion of net income excludes the effect of currency translation. The Americas net income increased $.8 million as a result of a $.8 million increase in operating income and higher interest income of $.1 million partially offset by higher income taxes of $.1 million. EMEA net income decreased $1.3 million as a result of a decrease in operating income of $1.9 million, partially offset with a decrease in income taxes of $.4 million. Asia-Pacific net income increased $1.0 million as a result of a $1.9 million increase in operating income, offset by an increase in income tax expense of $.9 million.

SIX MONTHS ENDED JUNE 30, 2017 COMPARED TO SIX MONTHS ENDED JUNE 30, 2016

The following table sets forth a summary of the Company’s Statements of Consolidated Income and the percentage of net sales for the six months ended June 30, 2017 and 2016. The Company’s past operating results are not necessarily indicative of future operating results.

| (Thousands of dollars) | Six Months Ended June 30 2017 |  | 2016 |  | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net sales | $182,081 | 100.0% | $161,903 | 100.0% | $20,178 |
| Cost of products sold | 127,743 | 70.2 | 110,807 | 68.4 | 16,936 |
| **GROSS PROFIT** | 54,338 | 29.8 | 51,096 | 31.6 | 3,242 |
| Costs and expenses | 45,786 | 25.1 | 43,330 | 26.8 | 2,456 |
| **OPERATING INCOME** | 8,552 | 4.7 | 7,766 | 4.8 | 786 |
| Other income (expense)—net | (176) | (0.1) | (337) | (0.2) | 161 |
| **INCOME BEFORE INCOME TAXES** | 8,376 | 4.6 | 7,429 | 4.6 | 947 |
| Income taxes | 2,702 | 1.5 | 2,016 | 1.2 | 686 |
| **NET INCOME** | $5,674 | 3.1% | $5,413 | 3.3% | $261 |

23

*Net sales.* For the six months ended June 30, 2017, net sales were $182.1 million, an increase of $20.2 million, or 12%, from the six months ended June 30, 2016. Excluding the favorable effect of currency translation, net sales for the six months ended June 30, 2017 increased $18.7 million, or 12%, compared to the same period in 2016 as summarized in the following table:

| (Thousands of dollars) Net sales | Six Months Ended June 30 2017 | 2016 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $72,949 | $68,830 | $4,119 | $0 | $4,119 | 6% |
| The Americas | 33,396 | 26,969 | 6,427 | 1,293 | 5,134 | 19 |
| EMEA | 31,430 | 28,578 | 2,852 | (282) | 3,134 | 11 |
| Asia-Pacific | 44,306 | 37,526 | 6,780 | 426 | 6,354 | 17 |
| Consolidated | $182,081 | $161,903 | $20,178 | $1,437 | $18,741 | 12% |

The increase in PLP-USA net sales of $4.1 million, or 6%, was primarily due to a volume increase in transmission and communication sales, partially offset by a decrease in solar sales. International net sales for the six months ended June 30, 2017 were favorably affected by $1.4 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 $33.4 million increased $5.1 million, or 19%, primarily due to a volume increase in transmission and communication sales. EMEA net sales of $31.4 million increased $3.1 million, or 11%, primarily due to a volume increase in telecommunications sales and transmission projects in the region, partially offset by a decline in solar sales. In Asia-Pacific, net sales of $44.3 million increased $6.4 million, or 17%, compared to 2016 primarily due to a sales volume increase in transmission products.

*Gross profit.* Gross profit of $54.3 million for the six months ended June 30, 2017 increased $3.2 million, or 6%, compared to the six months ended June 30, 2016. Excluding the effect of currency translation, gross profit increased $3.1 million, or 6%, as summarized in the following table:

| (Thousands of dollars) Gross profit | Six Months Ended June 30 2017 | 2016 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $22,471 | $21,674 | $797 | $0 | $797 | 4% |
| The Americas | 11,438 | 9,119 | 2,319 | 258 | 2,061 | 23 |
| EMEA | 9,018 | 11,246 | (2,228) | (156) | (2,072) | (18) |
| Asia-Pacific | 11,411 | 9,057 | 2,354 | 30 | 2,324 | 26 |
| Consolidated | $54,338 | $51,096 | $3,242 | $132 | $3,110 | 6% |

PLP-USA gross profit of $22.5 increased $.8 million in the six months ended June 30, 2017 compared to the same period in 2016. International gross profit for the six months ended June 30, 2017 was favorably impacted by $.1 million when local currencies were translated to U.S. dollars. The following discussion of gross profit excludes the effects of currency translation. The Americas gross profit increase of $2.1 million was primarily the result of the sales increase of $5.1 million combined with product margin improvement in the region due to sales mix. The EMEA gross profit decreased $2.1 million despite an increase in sales due to a shift in product sales mix to lower gross margin products. Asia-Pacific gross profit increased $2.3 million mainly as a result of a $6.4 million increase in sales primarily due to a shift to higher gross margin product sales mix in the region.

*Costs and expenses.* Costs and expenses of $45.8 million for the six months ended June 30, 2017 increased $2.5 million, or 6%, compared to the six months ended June 30, 2016. Excluding the favorable effect of currency translation, costs and expenses increased $2.3, million or 5%, as summarized in the following table:

24

| (Thousands of dollars) Costs and expenses | Six Months Ended June 30 2017 | 2016 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $21,600 | $21,155 | $445 | $0 | $445 | 2% |
| The Americas | 6,620 | 5,800 | 820 | 246 | 574 | 10 |
| EMEA | 7,228 | 6,538 | 690 | (134) | 824 | 13 |
| Asia-Pacific | 10,338 | 9,837 | 501 | 70 | 431 | 4 |
| Consolidated | $45,786 | $43,330 | $2,456 | $182 | $2,274 | 5% |

PLP-USA costs and expenses of $21.6 million for the six months ended June 30, 2017 increased $.4 million, or 2%, compared to 2016 primarily as a result of increased personnel related expense of $1.0 million, which includes healthcare and benefits expense, and higher commission expense of $.5 million. There was no impact from foreign currency exchange gains/losses for the six months ended June 30, 2017 versus the prior year. Offsetting the higher expenses was a $1.0 million charge in 2016 related to the lease expiration of the Company aircraft and lower advertising expense of $.1 million. Costs and expenses for the six months ended June 30, 2017 were favorably impacted by $.2 million when local currencies were translated to U.S. dollars. Excluding the unfavorable impact of currency translation, costs and expenses increased $2.3 million. The following discussion of costs and expenses excludes the effect of currency translation. The Americas costs and expenses of $6.6 million increased $.6 million for the six months ended June 30, 2017 compared to the same period in 2016 primarily due to a net loss on foreign currency transactional exchange of $.9 million offset by $.2 million of lower bad debt expense and higher interest income of $.1 million. EMEA costs and expenses of $7.2 million increased $.8 million mainly due to increased personnel related costs of $.2 million, a net loss on foreign currency transactional exchange of $.2 million and other various net expense increases of $.2 million. Asia-Pacific costs and expenses of $10.3 million increased $.4 million. This increase was primarily due to higher personnel related expenses.

*Other income (expense).* Other expense for the six months ended June 30, 2017 decreased $.2 million compared to 2016.

*Income taxes.* Income taxes for the six months ended June 30, 2017 and 2016 were $2.7 million and $2.0 million, respectively, based on pretax income of $8.4 million and $7.4 million, respectively. The effective tax rate for the six months ended June 30, 2017 and 2016 was 32% and 27%, 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, which differ from the U.S. federal statutory income tax rate, and the relative amount of income earned in those jurisdictions. It is also affected by discrete items that may occur in any given period but are not consistent from year to year. In addition to the impact of 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:

2017

1\. A $.2 million, or 2%, increase resulting from losses in certain jurisdictions where no tax benefit is recognized.

2\. A $.4 million, or 5%, decrease resulting from earnings in jurisdictions with lower tax rates than the U.S. federal statutory rate where such earnings are permanently reinvested.

2016

1\. A $.3 million, or 4%, increase resulting from losses in certain jurisdictions where no tax benefit is recognized.

2\. A $.6 million, or 7%, decrease resulting from earnings in jurisdictions with lower tax rates than the U.S. federal statutory rate where such earnings are permanently reinvested.

3\. A $.3 million, or 5%, decrease for the recognition of various discrete items, primarily related to the release of valuation allowance in the Asia Pacific Region.

*Net income.* As a result of the preceding items, net income for the six months ended June 30, 2017 was $5.7 million, compared to $5.4 million for the six months ended June 30, 2016. Excluding the effect of currency translation, net income increased $.3 million as summarized in the following table:

| (Thousands of dollars) Net income | Six Months Ended June 30 2017 | 2016 | Change | Change Due to Currency Translation | Change Excluding Currency Translation | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| PLP-USA | $317 | $(157) | $474 | $0 | $474 | NM |
| The Americas | 3,574 | 2,188 | 1,386 | 28 | 1,358 | 62 |
| EMEA | 1,288 | 3,632 | (2,344) | (42) | (2,302) | (63) |
| Asia-Pacific | 495 | (250) | 745 | (30) | 775 | NM |
| Consolidated | $5,674 | $5,413 | $261 | $(44) | $305 | 6% |

NM - Not Meaningful

PLP-USA net income increased $.5 million compared to 2016 due to a $.4 million increase in operating income and a decrease in income taxes of $.1 million. International net income for the six months ended June 30, 2017 was minimally impacted 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 $1.4 million as a result of a $1.5 million increase in operating income partially offset by an increase in income taxes of $.1 million. EMEA net income decreased $2.3 million as a result of a decrease in operating income of $2.9 million offset with a decrease in income taxes of $.6 million. Asia-Pacific net income increased $.8 million as a result of a $1.8 million increase in operating income, offset with an increase in income tax expense of $1.0 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, 2016 filed on March 10, 2017 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 six months of 2017, we used cash of $4.6 million for capital expenditures. We ended the first six months of 2017 with $28.0 million of cash and cash equivalents. Our cash and cash equivalents are held in various locations throughout the world. At June 30, 2017, the majority of our cash and cash equivalents were 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 cash flows, use of U.S. cash balances, external borrowings, or some combination of these sources. We complete comprehensive reviews of our significant customers and their creditworthiness by analyzing financial statements for customers where we have identified a measure of increased risk. We closely monitor payments and developments which may signal possible customer credit issues. We currently have not identified any potential material impact on our liquidity from customer credit issues.

Total debt at June 30, 2017 was $39.4 million. At June 30, 2017, our unused availability under our line of credit was $40.1 million and our bank debt to equity percentage was 16.7%. On August 22, 2016, we increased our borrowing capacity under our credit facility from $50 million to $65 million and extended the term to June 30, 2019. All other terms remain the same, including the interest rate at LIBOR plus 1.125% unless our funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 2.25 to 1, then the LIBOR spread becomes 1.500%. The line of credit agreement contains, among other provisions, requirements for maintaining levels of net worth and funded debt-to-earnings before interest, taxes, depreciation and amortization along with an interest coverage ratio. On June 27, 2016, we entered into a promissory note with PNC Bank, NA, pursuant to which we borrowed $14.5 million at a fixed rate of 2.71%, due July 1, 2026, which was used to purchase a corporate aircraft to replace the expiring lease of the previous aircraft. The loan is secured by the aircraft. The net worth and profitability requirements are calculated based on the line of credit agreement. At June 30, 2017 and December 31, 2016, we were in compliance with these covenants.

We expect that our major source of funding for 2017 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 decreased $2.7 million for the six months ended June 30, 2017. Net cash provided by operating activities was $2.0 million. The major investing and financing uses of cash were payments of long-term debt of $31.5 million and capital expenditures of $4.6 million, partially offset by debt proceeds of $25.0 million. Currency had a positive $1.6 million impact on cash and cash equivalents when translating foreign denominated financial statements to U.S. dollars.

Net cash provided by operating activities for the six months ended June 30, 2017 and 2016 was $2.0 million and $10.0 million, respectively. The $8.0 million decrease was primarily a result of an increase in cash used for operating assets (net of operating liabilities) of $9.6 million, offset by an increase in non-cash transactions of $1.3 million and an increase in net income of $.3 million.

Net cash provided by investing activities for the six months ended June 30, 2017 of $2.4 million represents an increase of $23.3 million when compared to cash used for investing activities in the six months ended June 30, 2016. The improvement is primarily related to lower capital expenditures of $15.1 million which was predominantly related to the 2016 purchase of a corporate aircraft to replace the expiring lease of the previous aircraft, combined with a net increase in restricted cash and fixed-term deposits of $8.2 million.

Cash used for financing activities for the six months ended June 30, 2017 was $8.8 million compared to cash provided by financing activities of $10.6 million for the six months ended June 30, 2016. The $19.4 million decrease was primarily the result of a decrease in debt borrowings in 2017 compared to 2016 of $18.4 million, higher payments in the six months ended June 30, 2017 versus the prior year of $2.6 million, partially offset by a decrease in share repurchases of $1.8 million.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

See Note I of the Notes to the Consolidated Financial Statements

NEW ACCOUNTING STANDARDS TO BE ADOPTED

See Note J of the Notes to the Consolidated Financial Statements

FORWARD LOOKING STATEMENTS

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

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

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

- The overall demand for cable anchoring and control hardware for electrical transmission and distribution lines on a worldwide basis, which has a slow growth rate in mature markets such as the 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 the Company’s 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 the Company’s growth opportunities, particularly with respect to energy projects;
- The ability of the Company’s customers to raise funds needed to build the facilities their customers require;
- Technological developments that affect longer-term trends for communication lines, such as wireless communication;
- The decreasing demand for product supporting copper-based infrastructure due to the introduction of products using new technologies or adoption of new industry standards;
- The Company’s success at continuing to develop proprietary technology and maintaining high quality products and customer service to meet or exceed new industry performance standards and individual customer expectations;
- The Company’s success in strengthening and retaining relationships with the Company’s customers, growing sales at targeted accounts and expanding geographically;
- The extent to which the Company is successful at expanding the Company’s product line or production facilities into new areas or implementing efficiency measures at existing facilities;
- The effects of fluctuation in currency exchange rates upon the Company’s foreign subsidiaries’ operations and reported results from international operations, together with non-currency risks of investing in and conducting significant operations in foreign countries, including those relating to political, social, economic and regulatory factors;
- The Company’s ability to identify, complete, obtain funding for and integrate acquisitions for profitable growth;
- The potential impact of consolidation, deregulation and bankruptcy among the Company’s suppliers, competitors and customers and of any legal or regulatory claims;
- The relative degree of competitive and customer price pressure on the Company’s products;
- The cost, availability and quality of raw materials required for the manufacture of products;
- 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 11 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 10, 2017.

## Market risk

As filed, 1,619 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 June 30, 2017, the Company had no foreign currency forward exchange contracts outstanding. The Company does not hold derivatives for trading or speculative purposes.

The Company’s primary currency rate exposures are related to foreign denominated debt, intercompany debt, 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 $0.9 million and on income before taxes of $.7 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 $26.2 million at June 30, 2017. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $.1 million for the six months ended June 30, 2017.

## Controls and procedures

As filed, 690 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 June 30, 2017.

### 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 June 30, 2017 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, 2016 filed with the Securities and Exchange Commission on March 10, 2017.

Filed Aug 4, 2017.
Source: SEC EDGAR, the filing index for accession 0001564590-17-015541. Last ingested by Listed: Nov 6, 2026, 07:10 ET. No prices; not investment advice.