UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Office) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of common shares outstanding as of October 19, 2022:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol |
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Name of exchange on which registered |
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Table of Contents
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Page |
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Item 1. |
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4 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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31 |
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Item 4. |
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31 |
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Item 1. |
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32 |
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Item 1A. |
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32 |
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Item 2. |
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32 |
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Item 3. |
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32 |
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Item 4. |
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32 |
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Item 5. |
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32 |
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Item 6. |
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33 |
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34 |
3
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PREFORMED LINE PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEETS
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September 30, 2022 |
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December 31, 2021 |
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(Thousands of dollars, except share and per share data) |
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(Unaudited) |
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ASSETS |
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Cash, cash equivalents and restricted cash |
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$ |
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$ |
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Accounts receivable, less allowances of $ |
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Inventories, net |
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Prepaid expenses |
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Other current assets |
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TOTAL CURRENT ASSETS |
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Property, plant and equipment, net |
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Operating lease, right-of-use assets |
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Goodwill |
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Other intangible assets, net |
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Deferred income taxes |
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Other assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Trade accounts payable |
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$ |
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$ |
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Notes payable to banks |
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Operating lease liabilities, current |
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Current portion of long-term debt |
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Accrued compensation and other benefits |
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Accrued expenses and other liabilities |
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Dividends payable |
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Income taxes payable |
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TOTAL CURRENT LIABILITIES |
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Long-term debt, less current portion |
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Pension obligation |
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Operating lease liabilities, non-current |
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Deferred income taxes |
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Other noncurrent liabilities |
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SHAREHOLDERS’ EQUITY |
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Shareholders’ equity: |
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Common shares - $ |
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Common shares issued to rabbi trust, |
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Deferred compensation liability |
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Paid-in capital |
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Retained earnings |
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Treasury shares, at cost, |
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Accumulated other comprehensive loss |
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TOTAL PREFORMED LINE PRODUCTS, COMPANY SHAREHOLDERS’ EQUITY |
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Noncontrolling interest |
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TOTAL SHAREHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
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$ |
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$ |
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See notes to consolidated financial statements (unaudited).
4
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
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Three Months Ended September 30 |
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Nine Months Ended September 30 |
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2022 |
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2021 |
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2022 |
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2021 |
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(Thousands of dollars, except earnings per share data) |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of products sold |
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GROSS PROFIT |
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Costs and expenses |
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Selling |
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General and administrative |
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Goodwill impairment |
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— |
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— |
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Research and engineering |
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Other operating expense, net |
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OPERATING INCOME |
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Other income (expense) |
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Interest income |
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Interest expense |
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Other income, net |
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INCOME BEFORE INCOME TAXES |
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Income tax expense |
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NET INCOME |
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$ |
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$ |
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$ |
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$ |
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Net (income) loss attributable to noncontrolling interests |
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( |
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NET INCOME ATTRIBUTABLE TO PREFORMED |
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$ |
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$ |
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$ |
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$ |
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AVERAGE NUMBER OF SHARES OF COMMON STOCK |
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Basic |
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Diluted |
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EARNINGS PER SHARE OF COMMON STOCK |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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See notes to consolidated financial statements (unaudited).
5
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(UNAUDITED)
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Three Months Ended September 30 |
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Nine Months Ended September 30 |
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2022 |
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2021 |
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2022 |
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2021 |
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(Thousands of dollars) |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive (loss) income, net of tax |
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Foreign currency translation adjustment |
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( |
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( |
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Recognized net actuarial loss(1) |
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Other comprehensive loss, net of tax |
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( |
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( |
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( |
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Comprehensive (income) loss attributable to noncontrolling interests |
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( |
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( |
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( |
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Comprehensive (loss) income attributable to Preformed Line Products Company shareholders |
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$ |
( |
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$ |
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$ |
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$ |
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(1)
See notes to consolidated financial statements (unaudited).
6
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
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Nine Months Ended September 30 |
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2022 |
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2021 |
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(Thousands of dollars) |
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OPERATING ACTIVITIES |
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Net income |
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$ |
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$ |
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Adjustments to net cash provided by (used in) operations: |
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Depreciation and amortization |
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Goodwill impairment |
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— |
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Deferred income taxes |
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( |
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Share-based compensation expense |
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Loss on exit of business |
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— |
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Gain on sale of property and equipment |
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Gain from company-owned life insurance policy |
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— |
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Other, net |
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Changes in operating assets and liabilities |
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NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES |
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INVESTING ACTIVITIES (1) |
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Capital expenditures |
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Proceeds from the sale of property and equipment |
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Proceeds from company-owned life insurance policy |
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— |
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Acquisition of businesses, net of cash |
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NET CASH USED IN INVESTING ACTIVITIES |
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FINANCING ACTIVITIES(1) |
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Increase in notes payable to banks |
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Proceeds from long-term debt |
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Payments of long-term debt |
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Dividends paid |
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Proceeds from issuance of common shares |
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Purchase of common shares for treasury |
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Purchase of common shares for treasury from related parties |
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
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Effects of exchange rate changes on cash, cash equivalents and restricted cash |
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Net decrease in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash at beginning of year |
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CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF |
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$ |
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$ |
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(1)
See notes to consolidated financial statements (unaudited).
7
PREFORMED LINE PRODUCTS COMPANY
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
(UNAUDITED)
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Accumulated Other |
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Common |
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Common |
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Deferred |
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Paid in |
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Retained |
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Treasury |
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Cumulative |
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Unrecognized |
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Total Preformed |
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Noncontrolling |
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Total |
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Balance at December 31, 2021 |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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Foreign currency translation adjustment |
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Recognized net actuarial gain, net of tax provision of $ |
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Total comprehensive income |
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Share-based compensation |
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Purchase of |
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Issuance of |
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Common shares issued to rabbi trust of |
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— |
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— |
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Cash dividends declared - $ |
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( |
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( |
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( |
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Balance at March 31, 2022 |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Net income |
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Foreign currency translation adjustment |
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( |
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( |
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( |
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Recognized net actuarial gain, net of tax provision of $ |
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Total comprehensive income |
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Share-based compensation |
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Issuance of |
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Common shares issued to rabbi trust of |
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( |
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— |
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— |
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Cash dividends declared - $ |
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( |
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( |
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( |
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Balance at June 30, 2022 |
$ |
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$ |
( |
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$ |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
) |
$ |
( |
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$ |
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$ |
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$ |
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Net income |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
||||||||
Recognized net actuarial gain, net of tax provision of $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
( |
) |
|||||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Purchase of |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
( |
) |
||||||||
Issuance of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common shares issued to rabbi trust of |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
||||||||
Cash dividends declared - $ |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
( |
) |
|
|
|
( |
) |
||||||||
Balance at September 30, 2022 |
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
$ |
|
See notes to consolidated financial statements (unaudited).
8
PREFORMED LINE PRODUCTS COMPANY
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other |
|
|
|
|
|
|
|
|||||||||||||
|
Common |
|
Common |
|
Deferred |
|
Paid in |
|
Retained |
|
Treasury |
|
Cumulative |
|
Unrecognized |
|
Total Preformed Line Products Company Equity |
|
Noncontrolling |
|
Total |
|
|||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2020 |
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
|
||||||
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
||||||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
||||||||
Recognized net actuarial gain, net of tax provision of $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
||||||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase of |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
( |
) |
||||||||
Issuance of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common shares distributed from rabbi trust of |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends declared - $ |
|
|
|
|
|
|
|
( |
) |
|
( |
) |
|
|
|
|
|
|
|
( |
) |
|
|
|
( |
) |
|||||||
Balance at March 31, 2021 |
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
|
||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Recognized net actuarial gain, net of tax provision of $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase of |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
( |
) |
||||||||
Issuance of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common shares issued to rabbi trust of |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends declared - $ |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
( |
) |
|
|
|
( |
) |
||||||||
Balance at June 30, 2021 |
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
$ |
|
|||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
||||||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
||||||||
Recognized net actuarial gain, net of tax provision of $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
||||||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase of |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
( |
) |
||||||||
Issuance of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common shares issued to rabbi trust of |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends declared - $ |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
( |
) |
|
|
|
( |
) |
||||||||
Balance at September 30, 2021 |
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
$ |
|
See notes to consolidated financial statements (unaudited).
9
PREFORMED LINE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands, except share and per share data, unless specifically noted)
NOTE A – BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Preformed Line Products Company and subsidiaries (the “Company” or “PLPC”) have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. This Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Form 10-K for the year ended December 31, 2021 filed on March 4, 2022 with the Securities and Exchange Commission. The interim period results are not necessarily indicative of the results to be expected for the full year. Management has evaluated subsequent events through the date this Form 10-Q was filed with the Securities and Exchange Commission.
The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from these estimates. In the opinion of management, these consolidated financial statements contain all estimates and adjustments, consisting of normal recurring accruals, required to fairly present the financial position, results of operations, and cash flows for the interim periods. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full-year ending December 31, 2022.
Noncontrolling interests are presented in the Company’s consolidated financial statements as if parent company investors (controlling interests) and other minority investors (noncontrolling interests) in partially-owned subsidiaries have similar economic interests in a single entity. As a result, investments in noncontrolling interests are reported as equity in the Company’s consolidated financial statements. Additionally, the Company’s consolidated financial statements include
Certain prior year amounts have been reclassified to conform to the current year presentation.
Recent accounting pronouncements and new accounting standards to be adopted
The Company considers the applicability and impact of all ASUs. In October 2021, the Financial Accounting Standards Board ("FASB") issued , “Business Combinations (Topic 805): Accounting for Contract Assets and Liabilities from Contracts with Customers.” This ASU requires an acquiring entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The ASU is effective for fiscal years and interim periods beginning after December 15, 2022, with early
No other recently issued or effective ASUs had, or are expected to have, a material impact on the Company's results of operations, financial condition or liquidity.
10
NOTE B – REVENUE
Revenue recognition
Sales are recognized when obligations under the terms of the contract are satisfied and control of promised goods or services has transferred to our customers. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services and is primarily based on shipping terms. Sales are measured as the amount of consideration the Company expects to receive in exchange for transferring products.
Disaggregated revenue
The Company’s revenues by segment and product type are as follows:
|
Three Months Ended September 30, 2022 |
|
|||||||||||||
Product Type |
PLP-USA |
|
The Americas |
|
EMEA |
|
Asia-Pacific |
|
Consolidated |
|
|||||
Energy |
|
% |
|
% |
|
% |
|
% |
|
% |
|||||
Communications |
|
|
|
|
|
|
|
|
|
|
|||||
Special Industries |
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
% |
|
% |
|
% |
|
% |
|
% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Three Months Ended September 30, 2021 |
|
|||||||||||||
Product Type |
PLP-USA |
|
The Americas |
|
EMEA |
|
Asia-Pacific |
|
Consolidated |
|
|||||
Energy |
|
% |
|
% |
|
% |
|
% |
|
% |
|||||
Communications |
|
|
|
|
|
|
|
|
|
|
|||||
Special Industries |
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
% |
|
% |
|
% |
|
% |
|
% |
|
Nine Months Ended September 30, 2022 |
|
|||||||||||||
Product Type |
PLP-USA |
|
The Americas |
|
EMEA |
|
Asia-Pacific |
|
Consolidated |
|
|||||
Energy |
|
% |
|
% |
|
% |
|
% |
|
% |
|||||
Communications |
|
|
|
|
|
|
|
|
|
|
|||||
Special Industries |
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
% |
|
% |
|
% |
|
% |
|
% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Nine Months Ended September 30, 2021 |
|
|||||||||||||
Product Type |
PLP-USA |
|
The Americas |
|
EMEA |
|
Asia-Pacific |
|
Consolidated |
|
|||||
Energy |
|
% |
|
% |
|
% |
|
% |
|
% |
|||||
Communications |
|
|
|
|
|
|
|
|
|
|
|||||
Special Industries |
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
% |
|
% |
|
% |
|
% |
|
% |
Credit losses for receivables
The Company maintains an allowance for credit losses for estimated losses resulting from the inability of its customers to make required payments. The Company uses a current expected credit loss model in order to immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments, mainly trade receivables. Additionally, the allowance is based upon identified delinquent accounts, customer payment patterns and other analyses of historical data trends. Receivable balances are written off against an allowance for credit losses after a final determination has been made.
|
|
Nine Months Ended September 30 |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Allowance for credit losses, beginning of period |
|
$ |
|
|
$ |
|
||
Additions charged to costs and expenses |
|
|
|
|
|
|
||
Write-offs |
|
|
( |
) |
|
|
( |
) |
Foreign exchange and other |
|
|
( |
) |
|
|
( |
) |
Allowance for credit losses, end of period |
|
$ |
|
|
$ |
|
11
NOTE C – INVENTORIES, NET
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Inventories, gross |
|
|
|
|
|
|
||
Excess of current cost over LIFO cost |
|
|
( |
) |
|
|
( |
) |
Inventories, net |
|
$ |
|
|
$ |
|
Cost of inventories for certain material is determined using the last-in-first-out (LIFO) method and totaled approximately $
NOTE D – PROPERTY, PLANT AND EQUIPMENT, NET
Major classes of property, plant and equipment are stated at cost and were as follows:
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
Land and improvements |
|
$ |
|
|
$ |
|
||
Buildings and improvements |
|
|
|
|
|
|
||
Machinery, equipment and aircraft |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Property, plant and equipment, gross |
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property, plant and equipment, net |
|
$ |
|
|
$ |
|
NOTE E – CONTINGENT LIABILITIES AND OTHER FINANCIAL STATEMENT INFORMATION
The Company can be party to a variety of pending legal proceedings and claims arising in the normal course of business, including, but not limited to, litigation relating to employment, workers’ compensation, product liability, environmental and intellectual property. The Company has liability insurance to cover many of these claims.
Although the outcomes of these matters are not predictable with certainty, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In the event the Company determines that a loss is not probable, but is reasonably possible, and the likelihood to develop what the Company believes to be a reasonable range of potential loss exists, the Company will include disclosure related to such matters. To the extent that there is a reasonable possibility the losses could exceed amounts already accrued, the Company will adjust the accrual in the period in which the determination is made, disclose an estimate of the additional loss or range of loss and if the amount of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made. As of September 30, 2022 and December 31, 2021, the Company has accrued approximately $
The Company and its subsidiaries Helix Uniformed Ltd. (“Helix”) and Preformed Line Products (Canada) Limited (“PLPC Canada”), were each named, jointly and severally, with each of SNC-Lavalin ATP, Inc. (“SNC ATP”), HD Supply Canada Inc., by its trade names HD Supply Power Solutions and HD Supply Utilities (“HD Supply”), and Anixter Power Solutions Canada Inc. (the corporate successor to HD Supply, “Anixter” and, together with the Company, PLPC Canada, Helix, SNC ATP and HD Supply, the “Defendants”) in a complaint filed by Altalink, L.P. (the “Plaintiff”) in the Court of Queen’s Bench of Alberta in Alberta, Canada in
12
The Complaint states that the Plaintiff engaged
The Company believes the claims against it are without merit and intends to vigorously defend against such claims. The Company is unable to predict the outcome of this case, however, it has recorded a reserve for the low end of the range for potential loss associated with this matter. If this matter is concluded in a manner adverse to the Company, it could have a material effect on the Company’s financial results.
The Company is not a party to any other pending legal proceedings that the Company believes would, individually or in the aggregate, have a material adverse effect on its financial condition, results of operations or cash flow.
The Company does
Insurance Settlement
On January 2, 2022, Director Emeritus Barbara P. Ruhlman passed away at the age of 89. Mrs. Ruhlman was member of the Company’s Board of Directors from 1988 to 2016, at which time she elected to resign and was appointed as the Company’s Director Emeritus. Mrs. Ruhlman was the daughter of the Company’s founder, Thomas F. Peterson, and was the mother of the Company’s current Chief Executive Officer, Robert G. Ruhlman. A Company-owned life insurance policy was maintained for Mrs. Ruhlman until her death. During the period ended March 31, 2022, the Company received approximately $
NOTE F – PENSION PLANS
The Company uses a December 31 measurement date for the Preformed Line Products Company Employees’ Retirement Plan (the “Plan”).
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recognized net actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net periodic pension benefit |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
13
The Company elected to make a $
NOTE G – ACCUMULATED OTHER COMPREHENSIVE INCOME ("AOCI")
The following tables set forth the total changes in AOCI by component, net of tax:
|
|
Three Months Ended September 30, 2022 |
|
|
Three Months Ended September 30, 2021 |
|
||||||||||||||||||
|
|
Unrecognized |
|
|
Currency |
|
|
Total |
|
|
Unrecognized |
|
|
Currency |
|
|
Total |
|
||||||
Balance at July 1 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss on foreign currency |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Amounts reclassified from AOCI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of defined benefit |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Net current period other |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Balance at September 30 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Nine Months Ended September 30, 2022 |
|
|
Nine Months Ended September 30, 2021 |
|
||||||||||||||||||
|
|
Unrecognized |
|
|
Currency |
|
|
Total |
|
|
Unrecognized |
|
|
Currency |
|
|
Total |
|
||||||
Balance at January 1 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss on foreign currency |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Amounts reclassified from AOCI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of defined benefit |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Net current period other |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Balance at September 30 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
14
NOTE H – COMPUTATION OF EARNINGS PER SHARE
Basic earnings per share were computed by dividing Net income by the weighted-average number of common shares outstanding for each respective period. Diluted earnings per share were calculated by dividing Net income by the weighted-average of all potentially dilutive common stock that was outstanding during the periods presented.
The calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2022 and 2021 was as follows:
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Determination of shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect – share-based awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
For the three and nine months ended September 30, 2022,
NOTE I – GOODWILL AND OTHER INTANGIBLES
The Company’s finite and indefinite-lived intangible assets consist of the following:
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Gross Carrying |
|
|
Accumulated |
|
||||
Finite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Patents |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Land use rights |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Trademarks |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Technology |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Customer relationships |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Indefinite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goodwill |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
The aggregate amortization expense for other intangibles with finite lives for the three and nine months ended September 30, 2022 was $
The Company’s measurement date for its annual impairment test for goodwill is October 1st of each year. The Company performs additional interim impairment assessments as circumstances warrant.
The Company may use both quantitative and qualitative approaches when testing goodwill for impairment. For selected reporting units where the qualitative approach is utilized, a qualitative evaluation of events and circumstances impacting the reporting unit is performed to determine if it is more likely than not that the fair value of the reporting unit exceeds its carrying amount. If that determination is made, no further evaluation is necessary. Otherwise, the Company performs a quantitative impairment test on the reporting unit.
15
For the quantitative approach, the Company uses a combination of the income approach, which uses a discounted cash flow methodology, and the market approach, which uses comparable market multiples in computing fair value by reporting unit. The Company then compares the fair value of the reporting unit with its carrying value to assess if goodwill has been impaired. The fair value estimates are subjective and sensitive to significant assumptions, such as revenue growth rates, operating margins, the weighted-average cost of capital, and estimated market multiples, of which are affected by expectations of future market or economic conditions. The Company believes that the methodologies, significant assumptions, and weightings used are reasonable and result in appropriate fair values of the reporting units.
Given the continued decline in the Company’s results in the Asia-Pacific region, the Company's reassessment of future forecasts and the rising interest rate environment, the Company concluded that an indicator of impairment was present and conducted an interim impairment review of its goodwill in the Asia-Pacific reporting unit as of September 30, 2022. The Company reviewed current results and reassessed its previous forecasts for this reporting unit and determined the market headwinds faced in the region, particularly China, would linger for longer than previously expected as the region began to emerge from the COVID-19 pandemic. The rising interest rate environment was also a factor in the decision to perform an interim impairment assessment, given the related impact to the discounted cash flow calculation. The interim impairment assessment was performed utilizing the same methodologies as the annual assessments discussed above and included revised projections, which are subject to various risks and uncertainties, including forecasted revenues, expenses and cash flows.
Based on the interim impairment assessment, the Asia-Pacific reporting unit’s carrying value exceeded its fair value by more than the carrying amount of goodwill, which was caused by both a reduction in forecasted results and an increase in the weighted average cost of capital due to rising interest rates. As a result, the Company recognized a non-cash impairment charge of $
No other indicators of impairment were identified for the Company’s other reporting units.
The Company’s only intangible asset with an indefinite life is goodwill. The changes in the carrying amount of goodwill, by segment, for the nine months ended September 30, 2022 are as follows:
|
|
USA |
|
|
The Americas |
|
|
EMEA |
|
|
Asia-Pacific |
|
|
Total |
|
|||||
Balance at January 1, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Currency translation |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance at December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Impairments |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Currency translation |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||
Balance at September 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
The 2022 additions to goodwill relate to the anticipated synergies of acquiring Maxxweld Conectores Eletricos Ltda. and Holplast, s.r.o., while the reduction in goodwill in Asia-Pacific is due to the impairment discussed above. See Note O for additional information about acquisitions of businesses.
NOTE J – FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The Company measures and records certain assets and liabilities at fair value. A fair value hierarchy is used for those assets and liabilities measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy prioritizes the inputs into three broad levels:
Level 1 Inputs - Quoted market prices in active markets for identical assets or liabilities.
Level 2 Inputs - Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3 Inputs - Unobservable inputs that are not corroborated by market data.
16
The following table summarizes the Company’s assets and liabilities, recorded and measured at fair value, on the Company’s Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021:
Description |
|
Balance as of |
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Supplemental profit sharing plan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total Liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Description |
|
Balance as of |
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Supplemental profit sharing plan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total Liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
The Company operates internationally and enters into intercompany transactions denominated in foreign currencies. Consequently, the Company is subject to market risk arising from exchange rate movements between the dates when foreign currency transactions occur and the dates they are settled. The Company currently uses foreign currency forward contracts to reduce the risk related to some of these transactions. These contracts usually have maturities of
The Company has a non-qualified Supplemental Profit Sharing Plan for its executives and directors. The liability for this unfunded Supplemental Profit Sharing Plan was $
17
NOTE K – BUSINESS SEGMENT INFORMATION
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing performance.
The following tables present a summary of the Company’s reportable operating segments for the three and nine months ended September 30, 2022 and 2021. Financial results for the PLP-USA segment include the elimination of all segments’ intercompany profit in inventory.
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
PLP-USA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Americas |
|
|
|
|
|
|
|
|
|
|
|
|
||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia-Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Intersegment sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
PLP-USA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Americas |
|
|
|
|
|
|
|
|
|
|
|
|
||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia-Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total intersegment sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
PLP-USA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Americas |
|
|
|
|
|
|
|
|
|
|
|
|
||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia-Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to Preformed Line Products Company shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
||||
PLP-USA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Americas |
|
|
|
|
|
|
|
|
|
|
|
|
||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia-Pacific |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total net income attributable to Preformed Line Products Company shareholders |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
NOTE L – INCOME TAXES
The Company’s effective tax rate was
There were
18
NOTE M – DEBT ARRANGEMENTS
On March 2, 2022, the Company amended its credit facility ("the Facility") to increase the capacity from $
On January 19, 2021, the Company received funding for a term loan from PNC Equipment Finance, LLC in the principal amount of $
The Company has borrowing facilities at certain of its foreign subsidiaries, which consist of overdraft lines, working capital credit lines, and facilities for the issuance of letters of credit and short-term borrowing needs. At September 30, 2022, and December 31, 2021, $
For both periods ended September 30, 2022 and December 31, 2021, the Company’s Asia-Pacific segment had $
NOTE N – PRODUCT WARRANTY RESERVE
The Company records an accrual for estimated warranty costs to Costs of products sold in the Statements of Consolidated Income. These amounts are recorded in Accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets. The Company records and accounts for its warranty reserve based on specific claim incidents. Should the Company become aware of a specific potential warranty claim for which liability is probable and reasonably estimable, a specific charge is recorded and accounted for accordingly. Adjustments are made quarterly to the accruals as claim information changes.
The following is a rollforward of the product warranty reserve:
|
|
Nine Months Ended September 30 |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Beginning of period balance |
|
$ |
|
|
$ |
|
||
Additions charged to income |
|
|
|
|
|
|
||
Warranty usage |
|
|
( |
) |
|
|
( |
) |
Currency translation |
|
|
( |
) |
|
|
( |
) |
End of period balance |
|
$ |
|
|
$ |
|
NOTE O – ACQUISITIONS OF BUSINESSES
Acquisition of Maxxweld Conectores Electricos Ltda.
On January 4, 2022, the Company acquired Maxxweld Conectores Eletricos Ltda.("Maxxweld"), a Brazilian entity headquartered in Curitiba, Brazil, from its shareholders. Maxxweld designs and manufactures substation connector systems and accessory hardware for high voltage AC systems. The acquisition of Maxxweld expands and strengthens the Company's operational and technical capabilities in the region while supporting its overall substation strategy. The purchase price was approximately $
19
The acquisition of Maxxweld has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date.
|
|
Preliminary Allocation |
|
Measurement Period Adjustments |
|
Adjusted Preliminary Allocation |
|
|||
Accounts receivable |
|
$ |
|
$ |
|
$ |
|
|||
Inventory |
|
|
|
|
|
|
|
|||
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|||
Equipment and other assets |
|
|
|
|
|
|
|
|||
Other intangible assets |
|
|
|
|
|
|
|
|||
Accounts payable |
|
|
( |
) |
|
|
|
( |
) |
|
Other current liabilities |
|
|
( |
) |
|
|
|
( |
) |
|
Other non-current liabilities |
|
|
( |
) |
|
( |
) |
|
( |
) |
Total identifiable net assets |
|
|
|
|
|
|
|
|||
Goodwill |
|
|
|
|
( |
) |
|
|
||
Total consideration, net of cash received |
|
$ |
|
$ |
|
$ |
|
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Maxxweld. As a result of the acquisition, goodwill of $
From the date of the acquisition through September 30, 2022, the Company’s Consolidated Financial Statements included Maxxweld sales of approximately $
20
Acquisition of Holplast, s.r.o.
On March 1, 2022, the Company acquired all issued and outstanding shares of Holplast, s.r.o. (“Holplast”), an entity headquartered in Prostejov, Czech Republic, from its shareholder. Holplast specializes in injection molding and expands the Company’s operational capabilities in the region and strengthens the Company’s position in the global communications market. The purchase price was approximately $
The acquisition of Holplast has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date.
|
|
Preliminary Allocation |
|
Measurement Period Adjustments |
|
Adjusted Preliminary Allocation |
|
|||
Cash |
|
$ |
|
|
|
$ |
|
|||
Accounts receivable |
|
|
|
|
|
|
|
|||
Inventory |
|
|
|
|
|
|
|
|||
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|||
Property, plant and equipment and other assets |
|
|
|
|
|
|
|
|||
Accounts payable |
|
|
( |
) |
|
|
|
( |
) |
|
Other current liabilities |
|
|
( |
) |
|
|
|
( |
) |
|
Other non-current liabilities |
|
|
( |
) |
|
( |
) |
|
( |
) |
Total identifiable net assets |
|
|
|
|
|
|
|
|||
Goodwill |
|
|
|
|
( |
) |
|
|
||
Total consideration, inclusive of cash and debt |
|
$ |
|
$ |
|
$ |
|
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Holplast. Other non-current liabilities assumed is mainly comprised of long-term debt totaling approximately $
From the date of the acquisition through September 30, 2022, the Company’s Consolidated Financial Statements included Holplast sales of approximately $
NOTE P – EXIT OF RUSSIAN OPERATIONS
Due to the ongoing conflict in Ukraine and overt hostilities shown by Russia in the conflict, the Company determined to exit its Russian operations in March 2022, which was completed during the third quarter. The Russian operations did not have a material impact to the consolidated financial statements with
NOTE Q – SUBSEQUENT EVENTS
On October 3, 2022, the Company acquired all issued and outstanding shares of Delta Conectores, S.A. de C.V. ("Delta"), a Mexico entity headquartered in Aguascalientes, Mexico, from its shareholders. Delta designs and manufactures substation connector systems and accessory hardware for high voltage AC systems and is a market leader in Mexico. The acquisition of Delta will expand the Company's operational and technical capabilities in the region while supporting its overall substation strategy. The purchase price was approximately $
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the readers of our consolidated financial statements better understand our results of operations, financial condition and present business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and related notes included elsewhere in this report.
The MD&A is organized as follows:
OVERVIEW
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. Our priority is responding to key infrastructure priorities around the world, including bolstering grid reliability, strengthening grid resilience to climate events, upgrading aging infrastructure, enhancing communication networks and assisting in the transition to renewable energy. We have 30 sales and manufacturing operations in 21 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 and nine months ended September 30, 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 has led to temporary project postponements and has continued to impact results in this segment. In light of the slow recovery, as well as rising interest rates, our interim impairment review as of September 30, 2022 resulted in a determination to record a $6.5 million goodwill impairment for the 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.
22
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 $165.4 million for the three months ended September 30, 2022, an increase of $30.0 million year-over-year and net sales of $467.1 million for the nine months ended September 30, 2022, an increase of $81.1 million year-over-year. However, we have also experienced inflationary pressures that has impacted our profit margins. Raw materials increases, specifically, plastic resins, aluminum, petroleum and sand (grit), coupled with increased ocean freight costs from the Asia-Pacific region and air freight costs were the contributing inflationary pressures. For PLP-USA, our largest business segment, the impacts of inflation on raw materials and transportation costs impacted cost of sales by approximately $6.1 million and $17.2 million for the three and nine months ended September 30, 2022. 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 increases in 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 2022. As a result of the decision to wind-down operations, charges of $1.0 million were recorded, mainly as a result of asset impairments, one-time termination benefits and other impacts during the nine-month period ending September 30, 2022.
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 and nine months ended September 30, 2022 had a $8.2 million unfavorable effect and a $16.2 million unfavorable effect on net sales, respectively. There was a favorable effect of $0.5 million and a favorable effect of $0.4 million on net income for the three and nine months ended September 30, 2022., respectively. On a reportable segment basis, the impact of foreign currency on net sales and net income for the three and nine months ended September 30, 2022 and 2021 was as follows:
|
|
Foreign Currency Translation Impact |
|
|||||||||||||
|
|
Three Months Ended September 30, 2022 |
|
|
Nine Months Ended September 30, 2022 |
|
||||||||||
|
|
Net Sales |
|
|
Net Income |
|
|
Net Sales |
|
|
Net Income |
|
||||
(Thousands of dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The Americas |
|
$ |
(1,030 |
) |
|
$ |
(235 |
) |
|
$ |
(950 |
) |
|
$ |
150 |
|
EMEA |
|
|
(5,373 |
) |
|
|
(133 |
) |
|
|
(11,052 |
) |
|
|
(593 |
) |
Asia-Pacific |
|
|
(1,765 |
) |
|
|
896 |
|
|
|
(4,189 |
) |
|
|
863 |
|
Total |
|
$ |
(8,168 |
) |
|
$ |
528 |
|
|
$ |
(16,191 |
) |
|
$ |
420 |
|
The following table reflects the impact of foreign currency fluctuations on operating income for the three and nine months ended September 30, 2022 and 2021:
|
|
Foreign Currency Impact |
|
|||||||||||||
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Operating income |
|
$ |
17,374 |
|
|
$ |
13,078 |
|
|
$ |
44,774 |
|
|
$ |
36,584 |
|
Translation gain |
|
|
(280 |
) |
|
|
(245 |
) |
|
|
(784 |
) |
|
|
(714 |
) |
Transaction (gain) loss |
|
|
(1,540 |
) |
|
|
(50 |
) |
|
|
(157 |
) |
|
|
124 |
|
Net loss (gain) on forward currency contracts |
|
|
1,207 |
|
|
|
(198 |
) |
|
|
158 |
|
|
|
740 |
|
Operating income excluding currency impact |
|
$ |
16,761 |
|
|
$ |
12,585 |
|
|
$ |
43,991 |
|
|
$ |
36,734 |
|
Despite the current geopolitical environment, and aside from the uncertainty created by the ongoing COVID-19 pandemic, 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 23.3% and have the continued ability to borrow needed funds at a competitive interest rate under the Facility.
23
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 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 September 30, 2022 and 2021. The Company’s past operating results are not necessarily indicative of future operating results.
|
|
Three Months Ended September 30 |
|
|||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|||||||||||
Net sales |
|
$ |
165,402 |
|
|
|
100.0 |
% |
|
$ |
135,380 |
|
|
|
100.0 |
% |
|
$ |
30,022 |
|
Cost of products sold |
|
|
107,109 |
|
|
|
64.8 |
|
|
|
92,217 |
|
|
|
68.1 |
|
|
|
14,892 |
|
GROSS PROFIT |
|
|
58,293 |
|
|
|
35.2 |
|
|
|
43,163 |
|
|
|
31.9 |
|
|
|
15,130 |
|
Costs and expenses |
|
|
40,919 |
|
|
|
24.7 |
|
|
|
30,085 |
|
|
|
22.2 |
|
|
|
10,834 |
|
OPERATING INCOME |
|
|
17,374 |
|
|
|
10.5 |
|
|
|
13,078 |
|
|
|
9.7 |
|
|
|
4,296 |
|
Other income (expense), net |
|
|
222 |
|
|
|
0.1 |
|
|
|
722 |
|
|
|
0.5 |
|
|
|
(500 |
) |
INCOME BEFORE INCOME TAXES |
|
|
17,596 |
|
|
|
10.6 |
|
|
|
13,800 |
|
|
|
10.2 |
|
|
|
3,796 |
|
Income tax expense |
|
|
5,707 |
|
|
|
3.5 |
|
|
|
3,097 |
|
|
|
2.3 |
|
|
|
2,610 |
|
NET INCOME |
|
|
11,889 |
|
|
|
7.2 |
|
|
|
10,703 |
|
|
|
7.9 |
|
|
|
1,186 |
|
Net (gain) loss attributable to noncontrolling interests |
|
|
(2 |
) |
|
|
(0.0 |
) |
|
|
5 |
|
|
|
0.0 |
|
|
|
(7 |
) |
NET INCOME ATTRIBUTABLE TO |
|
$ |
11,887 |
|
|
|
7.2 |
% |
|
$ |
10,708 |
|
|
|
7.9 |
% |
|
$ |
1,179 |
|
Net sales. Net sales were $165.4 million for the three months ended September 30, 2022, an increase of $30.0 million, or 22.2%, from the three months ended September 30, 2021. Excluding the unfavorable effect of currency translation, net sales for the three months ended September 30, 2022 increased $38.2 million compared to the same period in 2021, or 28.2%, as summarized in the following table:
|
|
Three Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
88,960 |
|
|
$ |
66,891 |
|
|
$ |
22,069 |
|
|
$ |
— |
|
|
$ |
22,069 |
|
|
|
33 |
% |
The Americas |
|
|
23,780 |
|
|
|
18,084 |
|
|
|
5,696 |
|
|
|
(1,030 |
) |
|
|
6,726 |
|
|
|
37 |
|
EMEA |
|
|
31,139 |
|
|
|
26,619 |
|
|
|
4,520 |
|
|
|
(5,373 |
) |
|
|
9,893 |
|
|
|
37 |
|
Asia-Pacific |
|
|
21,523 |
|
|
|
23,786 |
|
|
|
(2,263 |
) |
|
|
(1,765 |
) |
|
|
(498 |
) |
|
|
(2 |
) |
Consolidated |
|
$ |
165,402 |
|
|
$ |
135,380 |
|
|
$ |
30,022 |
|
|
$ |
(8,168 |
) |
|
$ |
38,190 |
|
|
|
28 |
% |
The year-over-year increase in PLP-USA net sales of $22.1 million, or 33%, was primarily due to price and volume increases in energy and communication product sales from increased demand. International net sales for the three months ended September 30, 2022 experienced an unfavorable impact of $8.2 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 $23.8 million increased $6.7 million, or 37%, primarily due to volume increases related to the Company's acquisition of Maxxweld. EMEA net sales of $31.1 million increased $9.9 million, or 37%, primarily due to a volume increase in communications and energy product sales within the region. Asia-Pacific net sales of $21.5 million decreased $0.5 million, or 2%, compared to 2021 primarily due to volume decreases in energy products, special industries and communications and headwinds related to China's buy local policies.
24
Gross profit. Gross profit was $58.3 million and $43.2 million for the three months ended September 30, 2022 and 2021, respectively. Excluding the unfavorable effect of currency translation, gross profit increased $17.3 million, or 40%, as summarized in the following table:
|
|
Three Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
34,547 |
|
|
$ |
22,589 |
|
|
$ |
11,958 |
|
|
$ |
— |
|
|
$ |
11,958 |
|
|
|
53 |
% |
The Americas |
|
|
10,124 |
|
|
|
6,283 |
|
|
|
3,841 |
|
|
|
(401 |
) |
|
|
4,242 |
|
|
|
68 |
|
EMEA |
|
|
7,445 |
|
|
|
7,522 |
|
|
|
(77 |
) |
|
|
(1,250 |
) |
|
|
1,173 |
|
|
|
16 |
|
Asia-Pacific |
|
|
6,177 |
|
|
|
6,769 |
|
|
|
(592 |
) |
|
|
(498 |
) |
|
|
(94 |
) |
|
|
(1 |
) |
Consolidated |
|
$ |
58,293 |
|
|
$ |
43,163 |
|
|
$ |
15,130 |
|
|
$ |
(2,149 |
) |
|
$ |
17,279 |
|
|
|
40 |
% |
PLP-USA gross profit of $34.5 million increased $12.0 million compared to the same period in 2021 mainly as a result of increased sales volume of $22.1 million and operational efficiencies, partially offset by the impacts of inflation on raw materials and transportation costs. International gross profit for the three months ended September 30, 2022 was unfavorably impacted by $2.1 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 $4.2 million was primarily due to the Company's acquisition of Maxxweld. EMEA’s gross profit increased $1.2 million, mainly due to an increase in sales volume, partially offset by higher operating costs. Asia-Pacific’s gross profit decreased $0.1 million was primarily due to unfavorable sales volume discussed above.
Costs and expenses. Costs and expenses of $40.9 million for the three months ended September 30, 2022 increased $10.8 million, or 36.0%. Excluding the favorable effect of currency translation, costs and expenses increased $13.3 million, or 44%, as summarized in the following table:
|
|
Three Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
20,106 |
|
|
$ |
14,506 |
|
|
$ |
5,600 |
|
|
$ |
— |
|
|
$ |
5,600 |
|
|
|
39 |
% |
The Americas |
|
|
3,238 |
|
|
|
3,607 |
|
|
|
(369 |
) |
|
|
(150 |
) |
|
|
(219 |
) |
|
|
(6 |
) |
EMEA |
|
|
6,022 |
|
|
|
6,299 |
|
|
|
(277 |
) |
|
|
(907 |
) |
|
|
630 |
|
|
|
10 |
|
Asia-Pacific |
|
|
11,553 |
|
|
|
5,673 |
|
|
|
5,880 |
|
|
|
(1,373 |
) |
|
|
7,253 |
|
|
|
128 |
|
Consolidated |
|
$ |
40,919 |
|
|
$ |
30,085 |
|
|
$ |
10,834 |
|
|
$ |
(2,430 |
) |
|
$ |
13,264 |
|
|
|
44 |
% |
PLP-USA costs and expenses of $20.1 million for the three months ended September 30, 2022 increased when compared to the same period in 2021, primarily due to increases in professional services and sales-related expenses. International costs and expenses for the three months ended September 30, 2022 were favorably impacted by $2.4 million when local currencies were translated to U.S. dollars. The following discussion of costs and expenses excludes the effect of currency translation. The Americas costs and expenses of $3.2 million decreased by $0.2 million mainly due to decreases in salary-related expenses. EMEA costs and expenses of $6.0 million increased $0.6 million mainly due to higher salary-related and travel expenses. Asia-Pacific costs and expenses of $11.6 million increased by $7.3 million primarily due to the effect of a $6.5 million goodwill impairment charge and expenses incurred to streamline operations.
Other income (expense), net. Other income (expense), net for the three months ended September 30, 2022 and 2021 was $0.2 million and $0.7 million respectively. The decrease in other income (expense), net for the three months ended September 30, 2022 was primarily related to the prior year recognition of a pre-tax recovery of approximately $1.0 million related to a Brazilian Supreme Court decision that granted the Company the right to recover, through offset of federal tax liabilities, certain tax overpayments collected by the Brazilian government.
Income taxes. Income taxes for the three months ended September 30, 2022 and 2021 were $5.7 million and $3.1 million, based on pre-tax income of $17.5 million and $13.8 million, respectively. The effective tax rate for the three months ended September 30, 2022 and 2021 was 33% and 22%, respectively, compared to the U.S. federal statutory rate of 21%. The increase in effective tax rate was primarily related to a non-deductible goodwill impairment charge recorded in the Asia-Pacific region, partially offset by the release of the valuation allowance on deferred tax assets for the Company’s Australian subsidiary of approximately $1.4 million as the Company determined these deferred tax assets are now more likely than not to be realized. 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, such as the goodwill impairment charge recorded in the third quarter of 2022.
25
Net income. As a result of the preceding items, net income for the three months ended September 30, 2022 was $11.9 million, compared to $10.7 million for the three months ended September 30, 2021, an increase of $1.2 million as summarized in the following table:
|
|
Three Months Ended September 30 |
|||||||||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
10,802 |
|
|
$ |
6,688 |
|
|
$ |
4,114 |
|
|
$ |
— |
|
|
$ |
4,114 |
|
|
|
62 |
|
% |
The Americas |
|
|
5,450 |
|
|
|
2,474 |
|
|
|
2,976 |
|
|
|
(235 |
) |
|
|
3,211 |
|
|
|
130 |
|
|
EMEA |
|
|
1,218 |
|
|
|
697 |
|
|
|
521 |
|
|
|
(133 |
) |
|
|
654 |
|
|
|
94 |
|
|
Asia-Pacific |
|
|
(5,583 |
) |
|
|
849 |
|
|
|
(6,432 |
) |
|
|
896 |
|
|
|
(7,328 |
) |
|
|
(863 |
) |
|
Consolidated |
|
$ |
11,887 |
|
|
$ |
10,708 |
|
|
$ |
1,179 |
|
|
$ |
528 |
|
|
$ |
651 |
|
|
|
6 |
|
% |
PLP-USA’s net income for the three months ended September 30, 2022 increased $4.1 million compared to the same period in 2021, primarily due to an increase in operating income of $6.4 million driven by higher sales volumes, partially offset by higher income tax expense of $2.3 million. The following discussion of net income excludes the effect of currency translation. The Americas net income increased $3.2 million mainly as a result of an increase in operating income, partially offset by current year income tax expense. EMEA net income increased $0.7 million primarily from higher sales volume, partially offset by higher operating costs. Asia-Pacific net income decreased $7.3 million due to the effect of a $6.5 million goodwill impairment charge, higher operating costs and expenses incurred to streamline operations.
NINE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2021
The following table sets forth a summary of the Company’s Statements of Consolidated Income and the percentage of net sales for the nine months ended September 30, 2022 and 2021. The Company’s past operating results are not necessarily indicative of future operating results.
|
|
Nine Months Ended September 30 |
|
|||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|||||||||||
Net sales |
|
$ |
467,097 |
|
|
|
100.0 |
% |
|
$ |
385,971 |
|
|
|
100.0 |
% |
|
$ |
81,126 |
|
Cost of products sold |
|
|
314,147 |
|
|
|
67.3 |
|
|
|
259,577 |
|
|
|
67.3 |
|
|
|
54,570 |
|
GROSS PROFIT |
|
|
152,950 |
|
|
|
32.7 |
|
|
|
126,394 |
|
|
|
32.7 |
|
|
|
26,556 |
|
Costs and expenses |
|
|
108,176 |
|
|
|
23.2 |
|
|
|
89,810 |
|
|
|
23.3 |
|
|
|
18,366 |
|
OPERATING INCOME |
|
|
44,774 |
|
|
|
9.6 |
|
|
|
36,584 |
|
|
|
9.5 |
|
|
|
8,190 |
|
Other income, net |
|
|
4,727 |
|
|
|
1.0 |
|
|
|
347 |
|
|
|
0.1 |
|
|
|
4,380 |
|
INCOME BEFORE INCOME TAXES |
|
|
49,501 |
|
|
|
10.6 |
|
|
|
36,931 |
|
|
|
9.6 |
|
|
|
12,570 |
|
Income tax expense |
|
|
11,590 |
|
|
|
2.5 |
|
|
|
10,161 |
|
|
|
2.6 |
|
|
|
1,429 |
|
NET INCOME |
|
$ |
37,911 |
|
|
|
8.1 |
|
|
$ |
26,770 |
|
|
|
6.9 |
|
|
$ |
11,141 |
|
Net (gain) loss attributable to noncontrolling interests |
|
|
(27 |
) |
|
|
(0.0 |
) |
|
|
(15 |
) |
|
|
(0.0 |
) |
|
|
(12 |
) |
NET INCOME ATTRIBUTABLE TO |
|
$ |
37,884 |
|
|
|
8.1 |
% |
|
$ |
26,755 |
|
|
|
6.9 |
% |
|
$ |
11,129 |
|
Net sales. Net sales were $467.1 million for the nine months ended September 30, 2022, an increase of $81.1 million, or 21.0%, from the nine months ended September 30, 2021. Excluding the unfavorable effect of currency translation, net sales for the nine months ended September 30, 2022 increased $97.3 million compared to the same period in 2021, or 25%, as summarized in the following table:
|
|
Nine Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
248,307 |
|
|
$ |
185,208 |
|
|
$ |
63,099 |
|
|
$ |
— |
|
|
|
63,099 |
|
|
|
34 |
% |
The Americas |
|
|
65,179 |
|
|
|
54,230 |
|
|
|
10,949 |
|
|
|
(950 |
) |
|
|
11,899 |
|
|
|
22 |
|
EMEA |
|
|
91,456 |
|
|
|
77,452 |
|
|
|
14,004 |
|
|
|
(11,052 |
) |
|
|
25,056 |
|
|
|
32 |
|
Asia-Pacific |
|
|
62,155 |
|
|
|
69,081 |
|
|
|
(6,926 |
) |
|
|
(4,189 |
) |
|
|
(2,737 |
) |
|
|
(4 |
) |
Consolidated |
|
$ |
467,097 |
|
|
$ |
385,971 |
|
|
$ |
81,126 |
|
|
$ |
(16,191 |
) |
|
$ |
97,317 |
|
|
|
25 |
% |
26
The year-over-year increase in PLP-USA net sales of $63.1 million, or 34%, was primarily due to price and volume increases in energy and communication product sales from increased demand. International net sales for the nine months ended September 30, 2022 experienced an unfavorable impact of $16.2 million when local currencies were converted to U.S. dollars. The following discussion of net sales excludes the net effect of currency translation. The Americas net sales of $65.2 million increased $11.9 million or 22%, primarily due to contributions from the Maxxweld acquisition. EMEA net sales of $91.5 million increased $25.1 million, or 32%, primarily due to volume increases in communication and energy product sales within the region. Asia-Pacific net sales of $62.2 million decreased $2.7 million, or 4%, compared to 2021 primarily due to a year-over-year volume decrease in energy product sales, special industries and headwinds related to China's buy local policies.
Gross profit. Gross profit was $153.0 million and $126.4 million for the nine months ended September 30, 2022 and 2021, respectively. Excluding the unfavorable effect of currency translation, gross profit increased $30.1 million, or 24%, as summarized in the following table:
|
|
Nine Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
90,751 |
|
|
$ |
66,493 |
|
|
$ |
24,258 |
|
|
$ |
— |
|
|
$ |
24,258 |
|
|
|
36 |
% |
The Americas |
|
|
23,456 |
|
|
|
17,719 |
|
|
|
5,737 |
|
|
|
(115 |
) |
|
|
5,852 |
|
|
|
33 |
|
EMEA |
|
|
21,777 |
|
|
|
23,981 |
|
|
|
(2,204 |
) |
|
|
(2,420 |
) |
|
|
216 |
|
|
|
1 |
|
Asia-Pacific |
|
|
16,966 |
|
|
|
18,201 |
|
|
|
(1,235 |
) |
|
|
(1,056 |
) |
|
|
(179 |
) |
|
|
(1 |
) |
Consolidated |
|
$ |
152,950 |
|
|
$ |
126,394 |
|
|
$ |
26,556 |
|
|
$ |
(3,591 |
) |
|
$ |
30,147 |
|
|
|
24 |
% |
PLP-USA gross profit of $90.8 million increased $24.3 million compared to the same period in 2021 as a result of increased sales volume of $63.1 million, partially offset by the negative impact of inflationary pressures unfavorably impacting cost of sales as discussed above. International gross profit for the nine months ended September 30, 2022 was unfavorably impacted by $3.6 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 $5.9 million was largely the result of an increased sales volume of $11.0 million. EMEA’s gross profit increased $0.2 million, primarily as a result of increased sales volume, partially offset by the impacts from the exit of our Russia operations. Despite the year-over-year decrease in sales, Asia-Pacific’s gross profit remained relatively flat, partially as a result of continued cost containment measures.
Costs and expenses. Costs and expenses of $108.2 million for the nine months ended September 30, 2022 increased $18.4 million, or 20.4%. Excluding the favorable effect of currency translation, costs and expenses increased $22.7 million, or 25%, as summarized in the following table:
|
|
Nine Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
53,556 |
|
|
$ |
41,649 |
|
|
$ |
11,907 |
|
|
$ |
— |
|
|
$ |
11,907 |
|
|
|
29 |
% |
The Americas |
|
|
12,499 |
|
|
|
10,652 |
|
|
|
1,847 |
|
|
|
(274 |
) |
|
|
2,121 |
|
|
|
20 |
|
EMEA |
|
|
19,251 |
|
|
|
19,549 |
|
|
|
(298 |
) |
|
|
(2,221 |
) |
|
|
1,923 |
|
|
|
10 |
|
Asia-Pacific |
|
|
22,870 |
|
|
|
17,960 |
|
|
|
4,910 |
|
|
|
(1,879 |
) |
|
|
6,789 |
|
|
|
38 |
|
Consolidated |
|
$ |
108,176 |
|
|
$ |
89,810 |
|
|
$ |
18,366 |
|
|
$ |
(4,374 |
) |
|
$ |
22,740 |
|
|
|
25 |
% |
PLP-USA costs and expenses of $53.6 million for the nine months ended September 30, 2022 increased $11.9 million when compared to the same period in 2021 primarily due to increased sales-related expense, salary-related expense, and professional services. International costs and expenses for the nine months ended September 30, 2022 were favorably impacted by $4.4 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 $12.5 million increased $2.1 million for the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to an increase in salary-related expense, and incremental costs and expenses and purchase price adjustments related to the Maxxweld acquisition. EMEA costs and expenses of $19.3 million increased $1.9 million mainly due to higher salary-related expenses, travel expenses and professional services. Asia-Pacific costs and expenses of $22.9 million increased $6.8 million primarily due to the effect of a $6.5 million goodwill impairment charge.
27
Other income (expense), net. Other income (expense), net for the nine months ended September 30, 2022 and 2021 was $4.7 million and $0.3 million, respectively. The increase in other income (expense), net for the nine months ended September 30, 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 the insurance settlement of approximately $6.9 million resulted in a gain of $4.4 million recorded in Other income, net.
Income taxes. Income taxes for the nine months ended September 30, 2022 and 2021 were $11.6 million and $10.2 million, respectively, based on pre-tax income of $49.5 million and $36.9 million, respectively. The effective tax rate for the nine months ended September 30, 2022 and 2021 was 23% and 28%, respectively, compared to the U.S. federal statutory rate of 21%. The higher effective tax rate compared to the U.S. statutory rate was primarily related to a non-deductible goodwill impairment charge in the Asia-Pacific region and from the mix of earned income in jurisdictions with tax rates higher than the U.S, partially offset by 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 and the release of the valuation allowance on deferred tax assets for the Company’s Australian subsidiary of approximately $1.4 million as the Company determined these deferred tax assets are now more likely than not to be realized. 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, such as the goodwill impairment charge recorded in the third quarter of 2022.
Net income. As a result of the preceding items, net income for the nine months ended September 30, 2022 was $37.9 million, compared to $26.8 million for the nine months ended September 30, 2021, an increase of $11.1 million as summarized in the following table:
|
|
Nine Months Ended September 30 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
33,404 |
|
|
$ |
18,583 |
|
|
$ |
14,821 |
|
|
$ |
— |
|
|
$ |
14,821 |
|
|
|
80 |
% |
The Americas |
|
|
8,016 |
|
|
|
5,627 |
|
|
|
2,389 |
|
|
|
150 |
|
|
|
2,239 |
|
|
|
40 |
|
EMEA |
|
|
2,794 |
|
|
|
2,935 |
|
|
|
(141 |
) |
|
|
(593 |
) |
|
|
452 |
|
|
|
15 |
|
Asia-Pacific |
|
|
(6,330 |
) |
|
|
(390 |
) |
|
|
(5,940 |
) |
|
|
863 |
|
|
|
(6,803 |
) |
|
NM |
|
|
Consolidated |
|
$ |
37,884 |
|
|
$ |
26,755 |
|
|
$ |
11,129 |
|
|
$ |
420 |
|
|
$ |
10,709 |
|
|
|
40 |
% |
PLP-USA’s net income for the nine months ended September 30, 2022 increased $14.8 million, or 80%, compared to the same period in 2021, primarily due to an increase in operating income of $12.4 million driven by higher sales volumes and the gain from proceeds on insurance settlement, partially offset by higher tax expense. The following discussion of net income excludes the effect of currency translation. The Americas net income increased $2.2 million, primarily due to an increase in operating income. EMEA net income decreased $0.5 million primarily as a result of higher operating costs and charges recorded to exit the Russia business. Asia-Pacific net income decreased $6.8 million, primarily due to the effect of a $6.5 million goodwill impairment charge.
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, 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.
28
Our investments include expenditures required for equipment and facilities as well as expenditures in support of our strategic initiatives. During the first nine months of 2022, we used cash of $25.2 million for capital expenditures and $13.0 million for acquisitions of businesses. We ended the first nine months of 2022 with $30.1 million of cash, cash equivalents and restricted cash (collectively, “Cash”). Our Cash is held in various locations throughout the world. At September 30, 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 September 30, 2022 was $77.0 million. At September 30, 2022, our unused availability under the Facility was $58.8 million and our bank debt to equity percentage was 23.4%. 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 is 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. On August 31, 2022, the Company amended the Facility and elected to change its rate from BSBY to SOFR, all other terms remain the same. The Facility agreement contains, among other provisions, requirements for maintaining levels of net worth and profitability. At September 30, 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 portion 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
A summary of cash flows is as follows:
|
|
Nine Months Ended September 30 |
|
|||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|||
Net cash provided by operating activities |
|
$ |
9,122 |
|
|
$ |
24,086 |
|
|
$ |
(14,964 |
) |
Net cash used in investing activities |
|
|
(28,099 |
) |
|
|
(12,573 |
) |
|
|
(15,526 |
) |
Net cash provided by (used in) financing activities |
|
|
14,646 |
|
|
|
(19,112 |
) |
|
|
33,758 |
|
Effects of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
(1,126 |
) |
|
|
750 |
|
|
|
(1,876 |
) |
Net decrease in cash, cash equivalents and restricted cash |
|
$ |
(5,457 |
) |
|
$ |
(6,849 |
) |
|
$ |
1,392 |
|
Net cash provided by operating activities for the nine months ended September 30, 2022 was $9.2 million compared to $24.1 million provided by operating activities in the comparable prior year nine-month period. The $15.0 million decrease was primarily a result of increases in accounts receivable and inventory, partially offset by an increase in accounts payable, and net income.
Net cash used in investing activities for the nine months ended September 30, 2022 was $28.1 million compared to $12.6 million in the comparable prior year nine-month period. The $15.5 million increase was primarily a result of increased capital expenditures and acquisition of businesses, partially offset by proceeds from the settlement of a Company-owned life insurance policy and sale of property and equipment.
Net cash provided by financing activities for the nine months ended September 30, 2022 was $14.6 million compared to cash used in financing activities of $19.1 million in the comparable prior year nine-month period. The $33.8 million increase was primarily the result of an increase in proceeds from long-term debt, net of borrowings and notes payable to banks.
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.
29
As of September 30, 2022, the Company had total outstanding guarantees of $10.7 million. Additionally, certain domestic and foreign customers require the Company to issue letters of credit or performance bonds as a condition of placing an order. As of September 30, 2022, the Company had total outstanding letters of credit of $0.1 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:
30
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company operates manufacturing facilities and offices around the world and uses fixed and floating rate debt to finance the Company’s global operations. As a result, the Company is subject to business risks inherent in non-U.S. activities, including political and economic uncertainty, import and export limitations and market risk related to changes in interest rates and foreign currency exchange rates. The Company believes that the political and economic risks related to the Company’s international operations are mitigated due to the geographic diversity in which the Company’s international operations are located.
Effective July 1, 2018, Argentina was designated as a highly inflationary economy as the projected three-year cumulative inflation rate exceeded 100%. As such, beginning July 1, 2018, the functional currency for the Company’s Argentina subsidiary became the U.S. dollar. Revenue from operations in Argentina represented less than 1% of total consolidated net sales for nine months ended September 30, 2022 and 2021.
As of September 30, 2022, the Company had $0.1 million in assets and $0.1 million in liabilities 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 $6.9 million and a $0.9 million favorable/unfavorable impact on income before income taxes at September 30, 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 $59.2 million at September 30, 2022. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $0.6 million for the nine months ended September 30, 2022.
As discussed elsewhere in this report, the outbreak of COVID-19 could negatively impact the Company’s business and results of operations. Since the Company 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.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s Principal Executive Officer and Principal Accounting Officer have concluded that the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended, were effective as of September 30, 2022.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)) of the Securities and Exchange Act of 1934, as amended, during the nine months ended September 30, 2022 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
31
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information regarding the Company’s current legal proceedings is presented in Note E of the Notes to the Consolidated Financial Statements.
ITEM 1A. RISK FACTORS
There were no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 4, 2022. In addition, the impact of COVID-19 and ongoing conflict between Russia and Ukraine 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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 28, 2021, the Board of Directors authorized a plan to repurchase up to an additional 191,163 of Preformed Line Products Company common shares, resulting in a total of 250,000 shares available for repurchase with no expiration date. The following table reflects repurchases for the three-month period ended September 30, 2022.
Period |
|
Total |
|
|
Average |
|
|
Total Number of |
|
|
Maximum Number |
|
||||
July |
|
|
— |
|
|
N/A |
|
|
|
— |
|
|
|
213,495 |
|
|
August |
|
|
— |
|
|
N/A |
|
|
|
— |
|
|
|
213,495 |
|
|
September |
|
|
26,904 |
|
|
$ |
79.52 |
|
|
|
— |
|
|
|
186,591 |
|
Total |
|
|
26,904 |
|
|
|
|
|
|
|
|
|
|
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
32
ITEM 6. EXHIBITS
10.1 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document. |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
104 |
|
Cover Page Interactive Data (embedded with the Inline XBRL document). |
33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
November 1, 2022 |
|
/s/ Robert G. Ruhlman |
|
|
Robert G. Ruhlman |
|
|
Chairman, President and Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
November 1, 2022 |
|
/s/ Andrew S. Klaus |
|
|
Andrew S. Klaus |
|
|
Chief Financial Officer |
|
|
(Principal Accounting Officer) |
34
Exhibit 10.1
CHG DRAFT OF 8/11/22
THIRTEENTH AMENDED AND RESTATED LINE OF CREDIT NOTE
$90,000,000 |
|
August |
|
, 2022 |
FOR VALUE RECEIVED, PREFORMED LINE PRODUCTS COMPANY, a corporation incorporated under the laws of the State of Ohio (“PLP”) with an address at 660 Beta Drive, Mayfield Village, Ohio 44143, PREFORMED LINE PRODUCTS (AUSTRALIA) PTY LTD, a corporation incorporated under the laws of the Commonwealth of Australia (“PLP Australia”) with an address at 190 Power Street, Glendenning NSW 2761, Australia, BELOS-PLP S.A., a company organized under the laws of Poland (“PLP Poland”), with an address at 43-301 Bielsko-Biała, ul. Gen. J. Kustronia 74, Poland, PLP SUBCON GMBH, a limited liability company established and existing under the laws of Austria (“PLP Austria”) with an address at Schwefel 93/7, 6850 Dornbirn, Austria, ELECTROPAR LTD., a limited liability company established and existing under the laws of New Zealand (“PLP New Zealand”) with an address at [ ] (PLP, PLP Australia, PLP Poland, PLP Austria and PLP New Zealand are each a “Borrower” and collectively, the “Borrowers”), jointly and severally, promise to pay to the order of PNC BANK, NATIONAL ASSOCIATION (the “Bank”), in lawful money of the United States of America in immediately available funds at its offices located at 1900 East Ninth Street, Cleveland, Ohio 44114, or at such other location as the Bank may designate from time to time, the principal sum of NINETY MILLION DOLLARS ($90,000,000) (the “Facility”) or such lesser amount as may be advanced to or for the benefit of the Borrowers hereunder, together with interest accruing on the outstanding principal balance from the date hereof, all as provided below.
Certain loans, advances and/or other extensions of credit denominated in U.S. Dollars under the Existing Note bear interest or are permitted to bear interest, and have fees, commissions or other amounts based on the London Interbank Offered Rate administered by the ICE Benchmark Administration (“LIBOR”) or the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) in accordance with the terms and conditions of the Existing Note (the “Affected Loans”).
Capitalized terms used in this Note but not otherwise defined herein or in Exhibit A shall have the meanings assigned to such terms in the Existing Note. Capitalized terms used in Exhibit A hereto that are also used in the Existing Note (as defined below) shall supplement (but not replace) the defined terms in the Existing Note with respect to Affected Loans, unless otherwise stated therein.
The Existing Note is hereby amended as set forth on Exhibit A attached hereto. Notwithstanding any provision of the Existing Note or any agreements, instruments, documents and obligations related to the Original Note prior to the date hereof (collectively, the “Existing Documents”) to the contrary, the Parties hereby agree that the terms set forth on Exhibit A apply solely to Affected Loans on and after the Effective Date. For the avoidance of doubt, to the extent provisions in the Existing Note apply to Affected Loans and such provisions are not specifically addressed by Exhibit A, such provisions in the Existing Note shall continue to apply to Affected Loans from and after the Effective Date. In the event of a conflict between the terms of this Note and the terms of the Existing Note or any other Existing Document, the terms of this Note shall govern and control. For the further avoidance of doubt, the provisions of this Note supersede and govern any provisions of the Existing Note relating to benchmark replacements as they apply on and after the Effective Date with respect to the Affected Loans.
This Thirteenth Amended and Restated Line of Credit Note evidences, but does not extinguish or satisfy, and is not a novation of, the pre-existing indebtedness of PLP, PLP Australia, PLP Austria and PLP Poland to the Bank under, and amends and restates that certain Twelfth Amended and Restated Line of Credit Note,
4860-5705-5533, v.3
dated March 2, 2022, in the original principal amount of $90,000,000, made by the Borrowers (the “Existing Note”), amending and restating that certain Eleventh Amended and Restated Line of Credit Note, dated December 28, 2021, in the original principal amount of $65,000,000, made by PLP, PLP Australia, PLP Austria and PLP Poland in favor of Bank, amending and restating that certain Tenth Amended and Restated Line of Credit Note, dated April 17, 2020, in the original principal amount of $65,000,000, made by PLP, PLP Australia, and PLP Poland in favor of Bank, amending and restating that certain Ninth Amended and Restated Line of Credit Note, dated August 26, 2019, in the original principal amount of $65,000,000, made by PLP, PLP Australia, and PLP Poland in favor of Bank, amending and restating that certain Eighth Amended and Restated Line of Credit Note, dated November 30, 2018, in the original principal amount of $65,000,000, made by PLP, PLP Australia, and PLP Poland in favor of Bank, amending and restating that certain Seventh Amended and Restated Line of Credit Note, dated March 13, 2018, in the original principal amount of $65,000,000, made by PLP, PLP Australia, and PLP Poland in favor of Bank, amending and restating that certain Sixth Amended and Restated Line of Credit Note, dated as of August 22, 2016, in the original principal amount of $65,000,000, made by PLP and PLP Australia in favor of the Bank, amending and restating that certain Fifth Amended and Restated Line of Credit Note, dated as of September 24, 2015, in the original principal amount of $50,000,000, made by PLP and PLP Australia in favor of the Bank, amending and restating that certain Fourth Amended and Restated Line of Credit Note, dated as of January 23, 2014, in the original principal amount of $50,000,000, made by PLP in favor of the Bank, amending and restating that certain Third Amended and Restated Line of Credit Note, dated as of May 24, 2012, in the original principal amount of $90,000,000, made by PLP in favor of the Bank, amending and restating that certain Second Amended and Restated Line of Credit Note, dated as of November 7, 2011, in the original principal amount of $70,000,000, made by PLP in favor of the Bank, amending and restating that certain Amended and Restated Line of Credit Note, dated as of May 31, 2011, in the original principal amount of $35,000,000, made by PLP in favor of the Bank, amending and restating that certain Line of Credit Note, dated as of February 5, 2010, in the original principal amount of $30,000,000, made by PLP in favor of the Bank (collectively, the “Original Note”). All agreements, instruments, documents and obligations related to the Original Note remain in full force and effect.
2
4860-5705-5533, v.3
Payment under this Note and the other Loan Documents shall be made in the relevant Agreed Foreign Currency or Dollars, as the case may be, at 1900 East Ninth Street, Cleveland, Ohio 44114 or such other location as may be designated by the Bank from time to time, is of the essence hereof. If payment is not made in the currency due hereunder or under any other Loan Document (the “Contractual Currency”) or if any court or tribunal shall render a judgment or order for the payment of amounts due hereunder or under any other Loan Document and such judgment is expressed in a currency other than the Contractual Currency, each Borrower shall indemnify and hold the Bank harmless against any deficiency in terms of the amount received by the Bank arising or resulting from any variation as between (i) the rate of exchange at which the Contractual Currency is converted into the currency actually received or the currency in which the judgment is expressed (the “Received Currency”) and (ii) the rate of exchange at which the Bank would, in accordance with normal banking procedures, be able to purchase the Contractual Currency with the Received Currency by the Bank on the Business Day following receipt of the Received Currency. If the court or tribunal has fixed the date on which the rate of exchange is determined for the conversion of the judgment currency into the Contractual Currency (the “Conversion Date”) and if there is a change in the
3
4860-5705-5533, v.3
rate of exchange prevailing between the Conversion Date and the date of receipt by the Bank, then the Borrowers will, notwithstanding such judgment or order, pay such additional amount as may be necessary to ensure that the amount paid in the Received Currency when converted at the rate of exchange prevailing on the date of receipt will produce the amount then due to the Bank from the Borrowers hereunder in the Contractual Currency.
If a Borrower shall wind up, liquidate, dissolve or become bankrupt while there remains outstanding (i) any amounts owing to the Bank under this Note or under any other Loan Document, (ii) any damages owing to the Bank in respect of a breach of any of the terms hereof or (iii) any judgment or order rendered in respect of such amounts or damages, each Borrower shall indemnify and hold the Bank harmless against any deficiency in terms of the Contractual Currency in the amounts received by the Bank arising or resulting from any variation as between (a) the rate of exchange at which the Contractual Currency is converted into another currency (the “Liquidation Currency”) for purposes of such winding-up, liquidation, dissolution or bankruptcy with regard to the amount in the Contractual Currency due or contingently due hereunder or under any other Loan Document or under any judgment or order into which the relevant obligations hereunder or under any other Loan Document shall have been merged and (b) the rate of exchange at which the Bank could, in accordance with normal banking procedures be able to purchase the Contractual Currency with the Liquidation Currency at the earlier of (1) the date of payment of such amounts or damages and (2) the final date or dates for the filing of proofs of a claim in a winding- up, liquidation, dissolution or bankruptcy. As used in the preceding sentence, the “final date” or “dates for the filing of proofs of a claim in a winding-up, liquidation, dissolution or bankruptcy” shall be the date fixed by the liquidator or other appropriate person or otherwise applicable under the applicable law as being the last practicable date as of which the liabilities of a Borrower may be ascertained for such winding-up, liquidation, dissolution or bankruptcy before payment by the liquidator or other appropriate person in respect thereof.
4
4860-5705-5533, v.3
5
4860-5705-5533, v.3
then the Bank shall have the rights specified in Section 2(vii)(c) [Bank’s Rights].
then the Bank shall have the rights specified in Section 2(vii)(c) [Bank’s Rights].
6
4860-5705-5533, v.3
7
4860-5705-5533, v.3
8
4860-5705-5533, v.3
9
4860-5705-5533, v.3
For purposes hereof, the following terms shall have the following meanings:
“Adjustment Date” means the date, with respect to each fiscal quarter of PLP in each fiscal year, commencing with the first (1st) fiscal quarter end immediately following the date hereof, that is the first day of the first calendar month after the date on which PLP delivers the financial statements required hereunder to be delivered with respect to such fiscal quarter, together with a Compliance Certificate.
“Applicable Margin” shall mean, for any day, with respect to any advance made under the Facility, (i) from the date hereof until the first Adjustment Date thereafter, (x) the percentage per annum applicable to subject LCs, Base Rate Option, Daily BSBY Floating Rate Option, Benchmark Option, Australian Dollar Loans or Polish Zloty Loans, as the case may be in Tier 1 in the table set forth below, and (ii) from and after such first Adjustment Date and any subsequent Adjustment Date, the percentage per annum applicable to subject LCs, Base Rate Option, Daily BSBY Floating Rate Option, Benchmark Option, Australian Dollar Loans or Polish Zloty Loans, as the case may be, corresponding to the level of the Funded Debt to EBITDA Ratio in the table set forth below for the trailing twelve month period ending on the last day of the most recently completed fiscal quarter prior to the applicable Adjustment Date, provided, however, that notwithstanding clauses (i) and (ii) above, to the extent that either (A) the financial statements or the Compliance Certificate required to be delivered following any fiscal quarter are not delivered by the due date therefor, or (B) any Event of Default has occurred and is continuing, then the Applicable Margin shall be, from and after such due date or the date of such Event of Default (as applicable) until the date on which
10
4860-5705-5533, v.3
such financial statements and Compliance Certificate are delivered or such Event of Default is no longer continuing (as applicable), the percentage per annum applicable to subject LCs, Base Rate Option, Daily BSBY Floating Rate Option, Benchmark Option, Australian Dollar Loans or Polish Zloty Loans, as the case may be, set forth in Tier 2; provided, further, however, that nothing in herein shall limit the applicability of Section 6 with respect to the imposition of a default rate of interest:
|
Funded Debt to EBITDA Ratio |
Applicable Margin for Base Rate Option (bps) |
Applicable Margin for Daily Simple SOFR Rate Option (bps)** |
Applicable Margin for Euro Loans (bps) |
Applicable Margin for Australian Dollar Loans (bps) |
Applicable Margin for subject LCs (bps) |
Applicable Margin For Polish Zloty Loans (bps) |
Applicable Margin for New Zealand Dollar Loans (bps) |
Tier 1 |
Less than or equal to 2.25x |
0 |
122.5 |
112.5 |
112.5 |
112.5 |
112.5 |
112.5 |
Tier 2 |
Greater than 2.25x |
37.5 |
160 |
150 |
150 |
150 |
150 |
150 |
** Includes a 10 bps SOFR adder.
“Australian Bank Bill Swap Bid Rate” shall mean the bank bill interest rate, the wholesale interbank rate within Australia as published by the Australian Financial Markets Association (AFMA). It is the borrowing rate among the country’s top market makers, and is widely used as the benchmark interest rate for financial instruments.
“Australian Dollar Loan Interest Period” shall mean, as to any advance to which the Australian Bank Bill Swap Bid Rate applies, the period of thirty (30) days, commencing on the date of disbursement of an advance (or the date of conversion of an advance to the Australian Bank Bill Swap Bid Rate, as the case may be) and each successive period of thirty (30) days thereafter; provided that, if an Australian Dollar Loan Interest Period would end on a day which is not a Business Day, it shall end on the next succeeding Business Day unless such day falls in the next succeeding calendar month in which case the Australian Dollar Loan Interest Period shall end on the next preceding Business Day.
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark for any Currency, as applicable, (x) if such Benchmark for such Currency is a term rate or is based on a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Agreement or (y) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) for such Currency, that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark pursuant to this Agreement, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to clause (iv) of
11
4860-5705-5533, v.3
this Section. For the avoidance of doubt, the Available Tenor for the a Daily Simple RFR or Daily BSBY Floating Rate is one month.
“Base Rate” shall mean the highest of (A) the Prime Rate, and (B) the sum of the Federal Funds Open Rate plus fifty (50) basis points (0.50%), and (C) the sum of the Daily BSBY Floating Rate plus one hundred (100) basis points (1.0%), so long as the Daily BSBY Floating Rate is offered, ascertainable and not unlawful.
“Benchmark” means, initially, with respect to Obligations, interest, fees, commissions, or other amounts denominated in, or calculated with respect to, (a) Dollars, Daily BSBY Floating Rate, (b) Euros, the Daily Simple RFR or Term RFR, or (c) Australian Dollars, the Eurocurrency Rate; provided that if a Benchmark Transition Event has occurred with respect to the then-current Benchmark, or upon the occurrence of a Term RFR Transition Event, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to this Section. Any reference to “Benchmark” shall include, as applicable, the published component used in the calculation thereof.
“Benchmark Replacement” means, for any Available Tenor, the first applicable alternative set forth in the order below that can be determined by the Bank for the applicable Benchmark Replacement Date:
provided that any such Benchmark Replacement shall be administratively feasible as determined by the Bank in its sole discretion. If the Benchmark Replacement as determined above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then- current Benchmark for any Currency with an Unadjusted Benchmark Replacement for any
12
4860-5705-5533, v.3
applicable Available Tenor for any setting of such Unadjusted Benchmark Replacement, the first alternative set forth in the order below that can be determined by the Bank:
provided that, if the then-current Benchmark is a term rate, more than one tenor of such Benchmark is available as of the applicable Benchmark Replacement Date and the applicable Unadjusted Benchmark Replacement that will replace such Benchmark in accordance with this Section will not be a term rate, the Available Tenor of such Benchmark for purposes of this definition of “Benchmark Replacement Adjustment” shall be deemed to be the Available Tenor that has approximately the same length (disregarding business day adjustments) as the payment period for interest calculated with reference to such Unadjusted Benchmark Replacement.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback periods, the applicability of breakage provisions and other technical, administrative or operational matters) that the Bank decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Bank in a manner substantially consistent with market practice (or, if the Bank decides that adoption of any portion of such market practice is not administratively feasible or if the Bank determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Bank decides is reasonably necessary in connection with the administration of the Facility and the Loan Documents).
“Benchmark Replacement Date” means a date and time determined by the Bank, which date shall be no later than the earliest to occur of the following events with respect to the then-current Benchmark for any Currency:
13
4860-5705-5533, v.3
For the avoidance of doubt, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clauses (1) and (2) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark available hereunder (or the published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark for any Currency:
“Benchmark Unavailability Period” means, so long as a Benchmark Transition Event has occurred, the period (if any) (x) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for any Currency for all purposes hereunder and under any Loan Document in accordance with this Section titled “Benchmark Replacement Setting” and (y) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for such Currency for all purposes hereunder and under any Loan Document in accordance with this Section titled “Benchmark Replacement Setting.”
“Bloomberg” means Bloomberg Index Services Limited (or a successor administrator of the BSBY Screen Rate).
“Borrowing Date” means, with respect to any Revolving Loan, the date of the making, renewal, or conversion thereof, which shall be a Business Day.
“Borrowing Tranche” means specified portions of advanced outstanding under this Note as follows: (i) any Daily BSBY Floating Rate Option advances or Benchmark Option advances which
14
4860-5705-5533, v.3
have the same Interest Period under the same advance shall constitute one Borrowing Tranche, and (ii) all Base Rate Loans shall constitute one Borrowing Tranche.
“BSBY Final Step Event” means, for any Available Tenor, either (i) the twentieth (20th) consecutive U.S. Government Securities Business Day or (ii) the thirtieth (30th) U.S. Government Securities Business Day within a rolling ninety (90)-day period, on which the BSBY Screen Rate is calculated in accordance with “Level 6” (or any successor final step) of the “Alternative Calculation Waterfall” defined or set forth in the BSBY Screen Rate’s index methodology and rulebook, as published on the BSBY Website.
“BSBY Long-Term Spread Adjustment” means the most recently dated “BSBY SOFR 5Y Spread Adjustment” published on the BSBY Website.
“BSBY Website” means the “Bloomberg Short-Term Bank Yield Index” website at https://www.bloomberg.com/professional/product/ indices/bsby/ (or any successor website).
“BSBY Reserve Percentage” shall mean, as of any day, the maximum effective percentage in effect on such day, if any, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including, without limitation, supplemental, marginal and emergency reserve requirements) with respect to BSBY Screen Rate funding.
“BSBY Screen Rate” means the Bloomberg Short-Term Bank Yield Index rate administered by Bloomberg and published by Bloomberg (or such other commercially available source providing such quotations as may be designated by the Bank from time to time).
“Business Day” shall mean any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized or required by law to be closed for business in Cleveland, Ohio; provided that for purposes of any direct or indirect calculation or determination of, or when used in connection with any interest rate settings, fundings, disbursements, settlements, payments, or other dealings with respect to any (i) Daily BSBY Floating Rate Loan, the term “Business Day” means any such day that is also a U.S. Government Securities Business Day; (ii) Eurocurrency Rate Loan, the term “Business Day” means any such day that is also a Eurocurrency Banking Day; and (iii) RFR Loan, the term “Business Day” means any such day that is also an RFR Business Day.
“CEA” means the Commodity Exchange Act (7 U.S.C. §1 et seq.), as amended from time to time, and any successor statute.
“Change of Control” shall mean (a) the Ruhlman Family shall cease to own directly or beneficially at least 25% of the outstanding voting Equity Interests of PLP on a fully diluted basis, in each case free and clear of all liens or other encumbrances; (b) PLP shall cease to own, free and clear of all liens or other encumbrances, at least the percentage of the outstanding voting Equity Interests of each of its subsidiaries on a fully diluted basis as is indicated on the corporate structure chart delivered to Bank in connection with the initial closing of the Loan Agreement (as hereinafter defined); (c) occupation of a majority of the seats (other than vacant seats) on the board of directors of PLP or any of its subsidiaries, as the case may be, by Persons who were neither (i) nominated by the board of directors of such entity nor (ii) appointed by directors so nominated; (d) the acquisition of direct or indirect Control of PLP by any Person or group other than the Ruhlman Family; or (e) PLP shall cease to own, free and clear of all liens or other encumbrances 100% of the outstanding voting Equity Interests of PLP Australia, PLP New Zealand, PLP Poland, and PLP Austria.
15
4860-5705-5533, v.3
“Company” shall have the meaning ascribed thereto in the Loan Agreement (as hereinafter defined).
“Conforming Changes” means, with respect to Daily BSBY Floating Rate or any Benchmark Replacement in relation thereto, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” the definition of “U.S. Government Securities Business Day,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Bank decides may be appropriate to reflect the adoption and implementation of Daily BSBY Floating Rate, Daily Simple RFR or Term RFR or such Benchmark Replacement and to permit the administration thereof by the Bank in a manner substantially consistent with market practice (or, if the Bank decides that adoption of any portion of such market practice is not administratively feasible or if the Bank determines that no market practice for the administration of the Daily BSBY Floating Rate, Daily Simple RFR or Term RFR or the Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Note and the other Loan Documents).
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
“Corresponding Tenor” with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or an interest payment period having approximately the same length (disregarding business day adjustment) as such Available Tenor, provided that, (i) if any Available Tenor does not correspond to a tenor applicable to the Unadjusted Benchmark Replacement, the closest corresponding tenor of the Unadjusted Benchmark Replacement shall be applied, and (ii) if applicable, if a tenor of the Unadjusted Benchmark Replacement corresponds equally to two tenors of the then-current Benchmark, the corresponding tenor of the shorter duration shall be applied.
“Daily BSBY Floating Rate” means, for any day, a rate of interest per annum determined by the Bank by dividing (the resulting quotient rounded upwards, at the Bank’s discretion, to the nearest 1/100th of 1%) (a) the BSBY Screen Rate for such day for a term of one (1) month, by (b) a
number equal to 1.00 minus the BSBY Reserve Percentage; provided, that if the Daily BSBY Floating Rate, determined as provided above, would be less than the Floor, then the Daily BSBY Floating Rate shall be deemed to be the Floor. The rate of interest will be adjusted automatically as of each Business Day based on changes in the Daily BSBY Floating Rate without notice to the Borrower Representative.
“Daily BSBY Floating Rate Loan” means a Loan that bears interest at a rate based on the Daily BSBY Floating Rate.
“Daily BSBY Floating Rate Option” means the option of the Borrowers to have Loans bear interest at the rate and under the terms specified in Section 2(ii).
“Daily Simple RFR” means, for any day (an “RFR Day”), a rate per annum determined by the Bank, for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to any applicable Daily Simple RFR below by dividing (the resulting quotient rounded upwards, at the Bank’s discretion, to the nearest 1/100 of 1%) (a) the applicable
16
4860-5705-5533, v.3
Daily Simple RFR set forth below by (b) a number equal to 1.00 minus the RFR Reserve Percentage:
provided that if the adjusted rate as determined above would be less than the Floor, such rate shall be deemed to be the Floor for purposes of this Note. The adjusted Daily Simple RFR rate for each outstanding Daily Simple RFR Loan shall be adjusted automatically as of the effective date of any change in the RFR Reserve Percentage. The Bank shall give prompt notice to the Borrower Representative of the adjusted Daily Simple RFR Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.
If by 5:00 pm (local time for the applicable RFR) on the second (2nd) Business Day immediately following any Daily Simple RFR Lookback Day, the RFR in respect of such Daily Simple RFR Lookback Day has not been published on the applicable RFR Administrator’s Website and a Benchmark Replacement Date with respect to the applicable Daily Simple RFR has not occurred, then the RFR for such Daily Simple RFR Lookback Day will be the RFR as published in respect of the first preceding Business Day for which such RFR was published on the RFR Administrator’s Website; provided that any RFR determined pursuant to this sentence shall be utilized for purposes of calculation of Daily Simple RFR for no more than three (3) consecutive RFR Days. Any change in Daily Simple RFR due to a change in the applicable RFR shall be effective from and including the effective date of such change in the RFR without notice to the Borrower Representative.
“Daily Rate Loan” means a Loan that bears interest at a rate based on the (i) Base Rate, (ii) Daily Simple RFR or (iii) Daily BSBY Floating Rate.
“Daily Simple RFR Lookback Days” means, €STR Lookback Day.
“Daily Simple RFR Option” means the option of the Borrowers to have Loans bear interest at the rate and under the terms specified in Section 2(e)(B) [Daily Simple RFR Option].
“Daily Simple SOFR” means, for any day (a “SOFR Rate Day”), the interest rate per annum determined by the Bank by dividing (the resulting quotient rounded upwards, at the Bank’s discretion, to the nearest 1/100th of 1%) (A) SOFR for the day (the “SOFR Determination Date”) that is 2 Business Days prior to (i) such SOFR Rate Day if such SOFR Rate Day is a Business Day or (ii) the Business Day immediately preceding such SOFR Rate Day if such SOFR Rate Day is not a Business Day, by (B) a number equal to 1.00 minus the SOFR Reserve Percentage, in each case, as such SOFR is published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) on the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source identified by the Federal Reserve Bank of New York or its successor administrator for the secured overnight financing rate from time to time. If Daily Simple SOFR as determined above would be less than the SOFR Floor, then Daily Simple SOFR shall be deemed to be the SOFR Floor. If SOFR for any SOFR Determination Date has not been published or replaced with a Benchmark Replacement by 5:00 p.m. (Pittsburgh, Pennsylvania time) on the second Business Day immediately following such SOFR Determination Date, then SOFR for such SOFR Determination Date will be SOFR for the first Business Day preceding such SOFR Determination Date for which SOFR was published in
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accordance with the definition of “SOFR”; provided that SOFR determined pursuant to this sentence shall be used for purposes of calculating Daily Simple SOFR for no more than 3 consecutive SOFR Rate Days. If and when Daily Simple SOFR as determined above changes, any applicable rate of interest based on Daily Simple SOFR will change automatically without notice to the Borrower, effective on the date of any such change.
“Dollar”, “Dollars”, “U.S. Dollars” and the symbol “$” means, in each case, the lawful money of the Unites States of America.
“Dollar Equivalent” means, for any amount, at the time of determination thereof, (a) if such amount is expressed in Dollars, such amount, (b) if such amount is expressed in an Agreed Foreign Currency, the equivalent of such amount in Dollars determined by using the rate of exchange for the purchase of Dollars with the Agreed Foreign Currency last provided (either by publication or otherwise provided to the Bank by the applicable Bloomberg source (or such other publicly available source for displaying exchange rates as determined by the Bank from time to time) on the date that is the applicable Daily RFR Lookback Day (for amounts relating to Daily RFR Simple RFR Loans and letters of credit denominated in an Agreed Foreign Currency to which a Daily Simple RFR would apply) immediately preceding the date of determination, or otherwise on the date which is two (2) Business Days immediately preceding the date of determination or otherwise with respect to Loans to which any other Interest Rate Option applies, the lookback date applicable thereto (or if such service ceases to be available or ceases to provide such rate of exchange, the equivalent of such amount in Dollars as determined by the Bank using any method of determination it deems appropriate in its sole discretion) and (c) if such amount is denominated in any other currency, the equivalent of such amount in Dollars as determined by the Bank using any method of determination it deems appropriate in its sole discretion. Any determination by the Banka pursuant to clauses (b) or (c) above shall be conclusive absent manifest error..
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.
“€STR” means a rate equal to the Euro Short Term Rate as administered by the €STR Administrator.
“€STR Administrator” means the European Central Bank (or any successor administrator of the Euro Short Term Rate).
“€STR Administrator’s Website” means the European Central Bank’s website, currently at http://www.ecb.europa.eu, or any successor source for the Euro Short Term Rate identified as such by the €STR Administrator from time to time.
“Euro” or “€” mean the single currency of the Participating Member States.
“Eurocurrency Banking Day” means any day which is, as applicable, for Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to (i) Euros, a TARGET Day and (ii) Australian Dollars, any day on which banks are open for business in Australia.
“Eurocurrency Rate” means, with respect to any Eurocurrency Rate Borrowing for any Interest Period, an interest rate per annum determined by Bank by dividing (the resulting quotient rounded
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upwards, at the Bank’s discretion, to the nearest 1/100 of 1%)(a) the applicable Eurocurrency Rate below for such Interest Period by (b) a number equal to 1.00 minus the Eurocurrency Reserve Percentage:
(a) denominated in Australian Dollars, the rate per annum equal to the Australian Bank Bill Swap Bid Rate or the successor thereto as approved by the Bank as published by Bloomberg (or on any successor or substitute service providing rate quotations comparable to those currently provided by such service, as determined by the Bank from time to time) for the applicable Interest Period, rounded upwards, at the Bank’s discretion, to the nearest 1/100th of 1% per annum at approximately 10:00 a.m. (Sydney, Australia time), two (2) Eurocurrency Banking Days prior to the commencement of such Interest Period, as the rate for deposits in Australian Dollars with a maturity comparable to such Interest Period; provided, that if by such time the Australian Bank Bill Swap Bid Rate in respect of such day has not been so published, or such day is not a Business Day, then the Australian Bank Bill Swap Bid Rate for such day will be the Australian Bank Bill Swap Bid Rate as published in respect of the first preceding Business Day for which such Australian Bank Bill Swap Bid Rate was published thereon; provided further that any Australian Bank Bill Swap Bid Rate so determined based on the first preceding Business Day shall be utilized for purposes of calculation of the Eurocurrency Rate for no more than three (3) consecutive Business Days (any such day, collectively, the “Australian Rate Lookback Day”);
provided that if the adjusted Eurocurrency Rate as determined above would be less than the Floor, such rate shall be deemed to be the Floor for purposes of this Note. The Eurocurrency Rate for any Loans shall be based upon the Eurocurrency Rate for the Currency in which such Loans are requested. The Eurocurrency Rate for each outstanding Eurocurrency Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurocurrency Reserve Percentage. The Bank shall give prompt notice to the Borrower Representative of the Eurocurrency Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.
“Eurocurrency Rate Lookback Days” means, collectively, Australian Rate Lookback Day and New Zealand Rate Lookback Day and each such day is a “Eurocurrency Rate Lookback Day”,
“Eurocurrency Rate Borrowing” means, as to any Borrowing Tranche, a Eurocurrency Rate Loan comprising such Borrowing Tranche.
“Eurocurrency Rate Loan” means a Loan that bears interest at a rate based on the Eurocurrency Rate.
“Eurocurrency Rate Option” means the option of the Borrower to have Loans bear interest at the rate and under the terms specified in Section 2(iv) [Australian Dollar Loans].
“Eurocurrency Reserve Percentage” means, for any day during any Interest Period, the reserve percentage in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, special, supplemental or other marginal reserve requirement) with respect to eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D) or any other reserve ratio or analogous requirement of any central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of the Loans.
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“Excluded Hedge Liability or Liabilities” means, with respect to each Borrower, each of its Swap Obligations if, and only to the extent that, all or any portion of this Agreement or any other Loan Document that relates to such Swap Obligation is or becomes illegal under the CEA, or any rule, regulation or order of the CFTC, solely by virtue of such Loan Party’s failure to qualify as an Eligible Contract Participant on the Eligibility Date for such Swap. Notwithstanding anything to the contrary contained in the foregoing or in any other provision of this Agreement or any other Loan Document, the foregoing is subject to the following provisos: (a) if a Swap Obligation arises under a master agreement governing more than one Swap, this definition shall apply only to the portion of such Swap Obligation that is attributable to Swaps for which such guaranty or security interest is or becomes illegal under the CEA, or any rule, regulations or order of the CFTC, solely as a result of the failure by such Loan Party for any reason to qualify as an Eligible Contract Participant on the Eligibility Date for such Swap, (b) if a guarantee of a Swap Obligation would cause such obligation to be an Excluded Hedge Liability but the grant of a security interest would not cause such obligation to be an Excluded Hedge Liability, such Swap Obligation shall constitute an Excluded Hedge Liability for purposes of the guaranty but not for purposes of the grant of the security interest, and (c) if there is more than one Loan Party executing this Agreement or the other Loan Documents and a Swap Obligation would be an Excluded Hedge Liability with respect to one or more of such Persons, but not all of them, the definition of Excluded Hedge Liability or Liabilities with respect to each such Person shall only be deemed applicable to (i) the particular Swap Obligations that constitute Excluded Hedge Liabilities with respect to such Person, and (ii) the particular Person with respect to which such Swap Obligations constitute Excluded Hedge Liabilities.
“Fallback Rate” means the Base Rate.
“Federal Funds Open Rate” shall mean, for any day, the rate per annum (based on a year of 360 days and actual days elapsed) which is the daily federal funds open rate as quoted by ICAP North America, Inc. (or any successor) as set forth on the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such other substitute Bloomberg Screen that displays such rate), or as set forth on such other recognized electronic source used for the purpose of displaying such rate as selected by the Bank (an “Alternate Source”) (or if such rate for such day does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on any Alternate Source, or if there shall at any time, for any reason, no longer exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate Source, a comparable replacement rate determined by the Bank at such time (which determination shall be conclusive absent manifest error); provided however, that if such day is not a Business Day, the Federal Funds Open Rate for such day shall be the “open” rate on the immediately preceding Business Day. The rate of interest charged shall be adjusted as of each Business Day based on changes in the Federal Funds Open Rate without notice to the Borrowers.
“Floor” means a rate of interest per annum equal to zero basis points (0%).
“Foreign Currency Hedge” means any foreign exchange transaction, including spot and forward foreign currency purchases and sales, listed or over-the-counter options on foreign currencies, non-deliverable forwards and options, foreign currency swap agreements, currency exchange rate price hedging arrangements, and any other similar transaction providing for the purchase of one currency in exchange for the sale of another currency.
“Foreign Currency Hedge Liabilities” means as is specified in the definition of Lender Provided Foreign Currency Hedge.
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“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
“Interest Period” means the period of time selected by the Borrower Representative in connection with (and to apply to) any election permitted hereunder by the Borrower Representative to have advances under this Note bear interest under a Term Rate Loan Option. Subject to the last sentence of this definition and subject to availability for the interest rate applicable to the relevant Currency, such period shall be one, three or six months. Such Interest Period shall commence on the effective date of such Term Rate Loan Option, which shall be (i) the Borrowing Date if the Borrower Representative is requesting new advances under this Note, or (ii) the date of renewal of or conversion to a Term Rate Loan Option if the Borrower Representative is renewing or converting to a Term Rate Loan Option applicable to outstanding advances under this Note. Notwithstanding the second sentence hereof: (A) any Interest Period which would otherwise end on a date which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (B) the Borrower Representative shall not select, convert to or renew an Interest Period for any portion of the advances under this Note that would end after the Expiration Date.
“IOSCO Principles” means the International Organization of Securities Commissions’ (IOSCO) Principles for Financial Benchmarks, as the same may be amended or supplemented from time to time.
“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto.
“Lender Provided Foreign Currency Hedge” means a Foreign Currency Hedge which is entered into between any Borrower and Bank that: (a) is documented in a standard International Swaps and Derivatives Association Master Agreement or another reasonable and customary manner, (b) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner, and (c) is entered into for hedging (rather than speculative) purposes. The liabilities owing to Bank providing any Lender Provided Foreign Currency Hedge (the “Foreign Currency Hedge Liabilities”) by any Borrower that is party to such Lender Provided Foreign Currency Hedge shall, for purposes of this Note and all other Loan Documents be “Obligations” of such Person and of each other Borrower, be guaranteed obligations under this Note and otherwise treated as Obligations for purposes of the other Loan Documents, except to the extent constituting Excluded Hedge Liabilities of such Person.
“Lender Provided Interest Rate Hedge” means an Interest Rate Hedge which is entered into between any Loan Party and any Hedge Bank that: (a) is documented in a standard International Swaps and Derivatives Association Master Agreement or another reasonable and customary manner, (b) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner, and (c) is entered into for hedging (rather than speculative) purposes. The liabilities owing to the Hedge Bank providing any Lender Provided Interest Rate Hedge (the “Interest Rate Hedge Liabilities”) by any Loan Party that is party to such
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Lender Provided Interest Rate Hedge shall, for purposes of this Agreement and all other Loan Documents, be “Obligations” of such Person and of each other Loan Party, be guaranteed obligations under any Guaranty Agreement and secured obligations under any other Loan Document, as applicable, except to the extent constituting Excluded Hedge Liabilities of such Person. The Liens securing the Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the other Loan Documents, subject to the express provisions of Section 10.3 [Application of Proceeds].
“Loans” means, collectively, and “Loan” means, separately, all Revolving Credit Loans.
“NZFMA Bank Bill Reference Rate” shall mean the bank bill benchmark rate published by the New Zealand Financial Markets Association (NZFMA). It is the borrowing rate among the country’s top market makers, and is widely used as the benchmark interest rate for financial instruments.
“Obligation” means any obligation or liability of any of the Borrowers or other credit support providers specified in the Loan Documents, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, under or in connection with (a) this Note or any other Loan Document whether to the Bank or its affiliates or other persons provided for under such Loan Documents and (b) any Other Lender Provided Financial Service Product. Notwithstanding anything to the contrary contained in the foregoing, the Obligations shall not include any Excluded Hedge Liabilities.
“Official Body” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).
“Participating Member State” means any member state of the European Union that has the euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Polish Zloty Loan Interest Period” shall mean, as to any advance to which WIBOR applies, the period of thirty (30) days, commencing on the date of disbursement of an advance (or the date of conversion of an advance to WIBOR, as the case may be) and each successive period of thirty (30) days thereafter; provided that, if a Polish Zloty Loan Interest Period would end on a day which is not a Business Day, it shall end on the next succeeding Business Day unless such day falls in the next succeeding calendar month in which case the Polish Zloty Loan Interest Period shall end on the next preceding Business Day.
“Prime Rate” shall mean the rate publicly announced by the Bank from time to time as its prime rate. The Prime Rate is determined from time to time by the Bank as a means of pricing some loans to its borrowers. The Prime Rate is not tied to any external rate of interest or index, and does not
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necessarily reflect the lowest rate of interest actually charged by the Bank to any particular class or category of customers.
“Published Rate” shall mean the one-month Bloomberg Short-Term Bank Yield Index rate administered by Bloomberg and published by Bloomberg or another commercially available source providing such quotations as may be designated by the Bank from time to time.
“Reference Time” means, with respect to any setting of the then-current Benchmark, the time determined by the Bank in its reasonable discretion.
“Revolving Credit Loans” means, collectively, and Revolving Credit Loan means, separately, all advances made by Bank to Borrowers pursuant to Section 1 [Advances] of this Note.
“RFR” means, for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to Euro, €STR.
“RFR Adjustment” means with respect to Daily Simple RFR Loans or Term RFR Rate Loans, the adjustment set forth in the table below corresponding to such Currency for the corresponding Daily Simple RFR Option or Term RFR Option:
Currency |
Adjustment to Daily Simple RFR |
Adjustment to Term RFR |
Euros |
0.0456% |
0.0456% |
“RFR Administrator” means the €STR Administrator.
“RFR Administrator’s Website” means the €STR Administrator’s Website.
“RFR Business Day” means as applicable, for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to Euro, a TARGET Day.
“RFR Loan” means a Loan that bears interest at a rate based on a Daily Simple RFR or, after the replacement of the then-current Benchmark for any Currency for all purposes hereunder or under any Loan Document with a Term RFR pursuant to Section 2(vii)(P) [Term RFR Transition Event], the Term RFR for such Currency, as the context may require.
“RFR Reserve Percentage” means as of any day, the maximum effective percentage in effect on such day, if any, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including, without limitation, supplemental, marginal and emergency reserve requirements) with respect to RFR Loans.
“Ruhlman Family” shall mean Barbara P. Ruhlman Irrevocable Trust Dated July 29, 2008, Barbara P. Ruhlman, Robert G. Ruhlman, Abigail Ruhlman, Randall M. Ruhlman, J. Ryan Ruhlman, Maegan A. R. Cross, and each of such individual’s offspring.
“SOFR” means, for any day, a rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“Swap” means any “swap” as defined in Section 1a(47) of the CEA and regulations thereunder, other than (a) a swap entered into, or subject to the rules of, a board of trade designated as a contract
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market under Section 5 of the CEA, or (b) a commodity option entered into pursuant to CFTC Regulation 32.3(a).
“Swap Obligation” means any obligation to pay or perform under any agreement, contract or transaction that constitutes a Swap which is also a Lender Provided Interest Rate Hedge or a Lender Provided Foreign Currency Hedge.
“TARGET2” means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilizes a single shared platform and which was launched on November 19, 2007.
“TARGET Day” means any day on which TARGET2 is open for the settlement of payments in Euros.
“Term Rate Loan” means a Loan that bears interest at a rate based on the Eurocurrency Rate or Term RFR.
“Term Rate Loan Option” means the option of the Borrowers to have Loans bear interest at the rate and under the terms specified in Section 2(vi)(B).sto
“Term RFR” means, with respect to Euros for any Interest Period, a rate per annum determined by the Bank, for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to any applicable Term RFR Forward Looking Rate by dividing (the resulting quotient rounded upwards, at the Bank’s discretion, to the nearest 1/100 of 1%) (a) the applicable Term RFR Forward Looking Rate by (b) a number equal to 1.00 minus the Term RFR Reserve Percentage; provided that if the adjusted rate as determined above would be less than the Floor, such rate shall be deemed to be the Floor for purposes of this Note. The adjusted Term RFR for each outstanding Term RFR Loan shall be adjusted automatically as of the effective date of any change in the Term RFR Reserve Percentage. The Bank shall give prompt notice to the Borrower Representative of the adjusted Term RFR Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.
“Term RFR Forward Looking Rate” means, with respect to Euros for any Interest Period, the forward-looking term rate for a period comparable to such Interest Period based on the RFR for such Currency that is published by an authorized benchmark administrator and is displayed on a screen or other information service, each as identified or selected by the Bank in its reasonable discretion at approximately a time and as of a date prior to the commencement of such Interest Period determined by the Bank.
“Term RFR Notice” means a notification by the Bank to the Borrower Representative of the occurrence of a Term RFR Transition Event.
“Term RFR Option” means the option of the Borrower Representative to have advanced under this Note bear interest at the rate and under the terms specified in Section 2(e)(A) [Term RFR Option].
“Term RFR Rate Loan” means a Loan in Euros that bears interest at a rate based on Term RFR.
“Term RFR Transition Date” means, in the case of a Term RFR Transition Event, the date that is set forth in the Term RFR Notice provided to the Borrowers pursuant to Section 2(vii)(P) [Term
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RFR Transition Event], which date shall be at least 30 (thirty) calendar days from the date of the Term RFR Notice.
“Term RFR Transition Event” means, with respect to Euros for any Interest Period, the determination by the Bank that (a) the applicable Term RFR for such Currency is determinable for each Available Tenor, (b) the administration of such Term RFR is administratively feasible for the Bank, and (c) the RFR Administrator publishes, publicly announces or makes publicly available that such Term RFR is administered in accordance with the IOSCO Principles, and (d) such Term RFR is used as a benchmark rate in at least five currently outstanding syndicated credit facilities denominated in the applicable Currency (and such syndicated credit facilities are identified and are publicly available for review), and (e) such Term RFR is recommended for use by a Relevant Governmental Body.
“U.S. Government Securities Business Day” means any day except for (A) a Saturday or Sunday or (B) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
“WIBOR” shall mean, in relation to any Advance denominated in Zloty and any Polish Zloty Loan Interest Period:
“WIBOR Screen Rate” shall mean the percentage rate per annum determined by the Polish Association of Banking Dealers (Stowarzyszenie Dealerow Bankowych ACI Polska), as displayed on the appropriate page of the Reuters screen (and, if such page is replaced or service ceases to be available, the Bank may specify another page or service displaying the appropriate rate).
“Zloty” shall mean the lawful currency of Poland.
The foregoing notwithstanding, it is understood that the Borrowers may select different Options to apply simultaneously to different portions of the advances and may select up to six (6) different Borrowing Tranches to apply simultaneously to different portions of the advances bearing interest under the Daily BSBY Floating Rate Option or Benchmark Option. Interest hereunder will be calculated based on the actual number of days that principal is outstanding over a year of 360 days. In no event will the rate of interest hereunder exceed the maximum rate allowed by law.
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If any payment under this Note shall become due on a Saturday, Sunday or public holiday under the laws of the State where the Bank’s office indicated above is located, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing interest in connection with such payment. Each Borrower hereby authorizes the Bank to charge such Borrower’s deposit account at the Bank for any payment when due hereunder. Payments received will be applied to charges, fees and expenses (including attorneys’ fees), accrued interest and principal in any order the Bank may choose, in its sole discretion.
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The Borrowers shall pay to the Bank quarterly in arrears, on the last day of each calendar quarter, a commitment fee in the amount of the product of twenty (20) basis points (0.20%) per annum multiplied by the average daily unused amount of the Facility during the most recently ended quarter.
Notwithstanding anything to the contrary set forth herein or in any of the other Loan Documents, if, after the making of any Revolving Loan in any currency other than Dollars, currency control or exchange regulations are imposed in the country which issues such currency with the result that the type of currency in which such advance was made (the "Original Currency") no longer exists or a Borrower is not able to make payment to the Bank in such Original Currency, then all payments to be made by such Borrower hereunder in such currency shall instead be made when due in Dollars in an amount equal to the Dollar Amount (as of the date of repayment) of such payment due, it being the intention of the parties hereto that the Borrowers take all risks of the imposition of any such currency control or exchange regulations.
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Upon the occurrence and during the continuance of an Event of Default: (a) the Bank shall be under no further obligation to make advances hereunder; (b) if an Event of Default specified in clause (iii) or (iv) above shall occur, the outstanding principal balance and accrued interest hereunder together with any additional amounts payable hereunder shall be immediately due and payable without demand or notice of any kind; (c) if any other Event of Default shall occur, the outstanding principal balance and accrued interest hereunder together with any additional amounts payable hereunder, at the Bank’s option and without demand or notice of any kind, may be accelerated and become immediately due and payable; (d) at the Bank’s option, this Note will bear interest at the Default Rate from the date of the occurrence of the Event of Default; and (e) the Bank may exercise from time to time any of the rights and remedies available under the Loan Documents or under applicable law.
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If for the purposes of obtaining judgment in any court it is necessary to convert a sum due from any Borrower hereunder in the currency expressed to be payable herein (the "specified currency") into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Bank could purchase the specified currency with such other currency at the Bank’s main office on the Business Day
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preceding that on which final, non-appealable judgment is given. The obligations of the Borrowers in respect of any sum due to the Bank hereunder shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by Bank of any sum adjudged to be so due in such other currency Bank may in accordance with normal, reasonable banking procedures purchase the specified currency with such other currency. If the amount of the specified currency so purchased is less than the sum originally due to Bank in the specified currency, the Borrowers agree, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify Bank against such loss, and if the amount of the specified currency so purchased exceeds the sum originally due to Bank in the specified currency Bank agrees to remit such excess to the Borrowers.
If, as a result of the implementation of the European monetary union, (i) any Agreed Foreign Currency ceases to be lawful currency of the nation issuing the same and is replaced by the Euro, or (ii) any Agreed Foreign Currency and the Euro are at the same time recognized by any Governmental Authority of the nation issuing such currency as lawful currency of such nation and the Bank shall so request in a notice delivered to the Borrower Representative, then any amount payable hereunder by any party hereto in such Agreed Foreign Currency shall instead be payable in the Euro and the amount so payable shall be determined by translating the amount payable in such Agreed Foreign Currency to the Euro at the exchange rate recognized by the European Central Bank for the purpose of implementing European monetary union. Prior to the occurrence of the event or events described in clauses (i) and (ii) of the preceding sentence, each amount payable hereunder in any Agreed Foreign Currency will, except as otherwise provided herein, continue to be payable only in that Agreed Foreign Currency.
Each Borrower agrees, at the request of the Bank to compensate the Bank for any loss, cost, expense or reduction in return that the Bank shall reasonably determine shall be incurred or sustained by Bank as a result of the implementation of European monetary union and that would not have been incurred or sustained but for the transactions provided for herein. A certificate of the Bank setting forth the Bank’s determination of the amount or amounts necessary to compensate the Bank shall be delivered to the Borrower Representative and shall be conclusive absent manifest error so long as such determination is made on a reasonable basis. The Borrowers shall pay the Bank the amount shown as due on any such certificate within ten (10) days after receipt thereof.
Each Borrower agrees, at the time of or at any time following the implementation of any changes to the European monetary union, to use reasonable efforts to enter into an agreement amending this Note in order to reflect the implementation of such changes, and to place the Bank and the Borrowers in the position with respect to the settlement of payments of the Euro as they would have been with respect to the settlement of the Agreed Foreign Currency it replaced.
This Note has been delivered to and accepted by the Bank and will be deemed to be made in the State where the Bank’s office indicated above is located. THIS NOTE WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE BANK AND THE BORROWERS DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE BANK’S OFFICE INDICATED ABOVE IS LOCATED, EXCLUDING ITS CONFLICT OF LAWS RULES. Each Borrower hereby irrevocably consents to the exclusive jurisdiction of any state or federal court in the county or judicial district where the Bank’s office indicated above is located; provided that nothing contained in this Note will prevent the Bank from bringing any action, enforcing any award or judgment or exercising any rights against any Borrower individually, against any security or against any property of any Borrower within any other county, state or other foreign or domestic jurisdiction. Each Borrower acknowledges and agrees that the venue provided above is the most convenient forum for both the Bank and the Borrowers. Each Borrower waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Note.
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As used herein: “Anti-Terrorism Laws” means any laws relating to terrorism, trade sanctions programs and embargoes, import/export licensing, money laundering, or bribery, all as amended, supplemented or replaced from time to time; “Compliance Authority” means each and all of the (a) U.S. Treasury Department/Office of Foreign Assets Control, (b) U.S. Treasury Department/Financial Crimes Enforcement Network, (c) U.S. State Department/Directorate of Defense Trade Controls, (d) U.S. Commerce Department/Bureau of Industry and Security, (e) U.S. Internal Revenue Service, (f) U.S. Justice Department, and (g) U.S. Securities and Exchange Commission; “Covered Entity” means each Borrower, its affiliates and subsidiaries, all guarantors, pledgors of collateral, all owners of the foregoing, and all brokers or other agents of each Borrower acting in any capacity in connection with the Facility; “Reportable Compliance Event” means that any Covered Entity becomes a Sanctioned Person, or is indicted, arraigned, investigated or custodially detained, or receives an inquiry from regulatory or law enforcement officials, in connection with any Anti-Terrorism Law or any predicate crime to any Anti- Terrorism Law, or self-discovers facts or circumstances implicating any aspect of its operations with the actual or possible violation of any Anti-Terrorism Law; “Sanctioned Country” means a country subject to a sanctions program maintained by any Compliance Authority; and “Sanctioned Person” means any individual person, group, regime, entity or thing listed or otherwise recognized as a specially designated, prohibited, sanctioned or debarred person or entity, or subject to any limitations or prohibitions (including but not limited to the blocking of property or rejection of transactions), under any order or directive of any Compliance Authority or otherwise subject to, or specially designated under, any sanctions program maintained by any Compliance Authority.
Each Borrower acknowledges that it has read and understood all the provisions of this Note, including the confession of judgment and the waiver of jury trial, and has been advised by counsel as necessary or appropriate.
[Remainder of Page Intentionally Left Blank]
32
4860-5705-5533, v.3
EXHIBIT A TO
THIRTEENTH AMENDED AND RESTATED LINE OF CREDIT NOTE
SOFR REPLACEMENT RIDER
Article I. Definitions, Etc.
Section 1.1 Defined Terms. The following terms shall have the following meanings for purposes of the Thirteenth Amended and Restated Line of Credit Note, including without limitation, this Exhibit A, and the provisions contained herein:
“Amended Agreement” means the Existing Note, as amended pursuant to the Thirteenth Amended and Restated Line of Credit Note.
“Amended Documents” means the Existing Documents, as amended pursuant to the Thirteenth Amended and Restated Line of Credit Note.
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if such Benchmark is a term rate or is based on a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Amended Agreement or (y) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark pursuant to this Amended Agreement, in each case, as of such date and not including, for the avoidance of doubt, any tenor of such Benchmark that is then- removed from the available interest periods pursuant to clause (iv) of Section 5.1(d) of this Exhibit A. For the avoidance of doubt, the Available Tenor for Daily Simple SOFR is one month.
“Base Rate Credit Extension” means a Credit Extension nominally based on a “Base Rate”, “Alternate Base Rate”, “Alternative Base Rate”, “ABR”, “BSBY Screen Rate” or other analogous or similar term generally indicating use of a benchmark rate other than, immediately prior to giving effect to the provisions of Article III of this Exhibit A, USD LIBOR or BSBY Screen Rate, as applicable, but which term, immediately prior to giving effect to the provisions of Article III of this Exhibit A, would have included a component based on USD LIBOR or BSBY Screen Rate, as applicable.
“Benchmark” means, initially, SOFR; provided that if a Benchmark Transition Event has occurred with respect to a then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 5.1(d) of this Exhibit A. Any reference to “Benchmark” shall include, as applicable, the published component used in the calculation thereof.
“Benchmark Replacement” means, the sum of (a) the alternate benchmark rate and (b) an adjustment (which may be a positive or negative value or zero), in each case, that has been selected by the Bank, giving due consideration to (x) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (y) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for U.S. dollar- denominated syndicated or bilateral commercial credit facilities at such time; provided that if the Benchmark Replacement as determined pursuant to the foregoing would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Amended Agreement and the other Amended Documents.
4860-5705-5533, v.3
WITNESS the due execution hereof as a document under seal, as of the date first written above, with the intent to be legally bound hereby.
WARNING-BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. |
WITNESS /ATTEST: PREFORMED LINE PRODUCTS COMPANY By: [ANDREW S. KLAUS SIGNATURE] By: [ROBERT G. RUHLMAN SIGNATURE] Name: Andrew S. Klaus Name: Robert G. Ruhlman Title: President, CEO, Chairman
WARNING-BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. |
WITNESS /ATTEST: PREFORMED LINE PRODUCTS (AUSTRALIA) PTY LTD By: [ANDREW S. KLAUS SIGNATURE] By: [ROBERT G. RUHLMAN SIGNATURE] Name: Andrew S. Klaus Name: Robert G. Ruhlman Title: Chairman
Signature Page to Thirteenth Amended and Restated Line of Credit Note
4860-5705-5533, v.3
WARNING-BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. |
WITNESS /ATTEST: BELOS-PLP S.A. By: [ANDREW S. KLAUS SIGNATURE] By: [ROBERT G. RUHLMAN SIGNATURE] Name: Andrew S. Klaus Name: Robert G. Ruhlman Title: Chairman
WARNING-BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. |
WITNESS /ATTEST: PLP SUBCON GMBH By: [ANDREW S. KLAUS SIGNATURE] By: [ROBERT G. RUHLMAN SIGNATURE] Name: Andrew S. Klaus Name: Robert G. Ruhlman Title: Chairman
35
Signature Page to Thirteenth Amended and Restated Line of Credit Note
4860-5705-5533, v.3
WARNING-BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. |
WITNESS /ATTEST: ELECTROPAR By: [ANDREW S. KLAUS SIGNATURE] By: [ROBERT G. RUHLMAN SIGNATURE] Name: Andrew S. Klaus Name: Robert G. Ruhlman Title: Chairman
36
Signature Page to Thirteenth Amended and Restated Line of Credit Note
4860-5705-5533, v.3
“Benchmark Replacement Date” means a date and time determined by the Bank, which date shall be no later than the earliest to occur of the following events with respect to the then-current Benchmark:
For the avoidance of doubt, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark available under the Amended Agreement (or the published component used in the calculation thereof).
“Benchmark Transition Event” means, the occurrence of one or more of the following events, with respect to the then-current Benchmark:
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
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“Benchmark Unavailability Period” means the period (if any) (x) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then- current Benchmark for all purposes under the Amended Agreement and under any Amended Document in accordance with Section 5.1(d) of this Exhibit A and (y) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes under the Amended Agreement and under any Amended Document in accordance with Section 5.1(d) of this Exhibit A.
“BSBY Screen Rate Related Definition” means any term defined in the Existing Note or any other Existing Document (or any partial definition thereof) as in effect immediately prior to giving effect to the provisions of the Thirteenth Amended and Restated Line of Credit Note on the Effective Date, however phrased, solely relating to the determination, administration or calculation of BSBY Screen Rate, including by way of example any instances of the BSBY Rate and other applicable terms. “BSBY Screen Rate Related Definition” does not include any term such as “Base Rate”, “Alternate Base Rate”, “Alternative Base Rate”, “ABR” or other analogous or similar term generally indicating use of a benchmark rate other than, immediately prior to giving effect to the provisions of Article III of this Exhibit A, BSBY Screen Rate, even if such term, immediately prior to giving effect to the provisions of Article III of this Exhibit A, would have included a component based on BSBY Screen Rate.
“Conforming Changes” means, with respect to Daily Simple SOFR or any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “Interest Period” (or other applicable provision regarding interest periods available), the definition of “U.S. Government Securities Business Day,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Bank decides may be appropriate to reflect the adoption and implementation of Daily Simple SOFR or such Benchmark Replacement and to permit the administration thereof by the Bank in a manner substantially consistent with market practice (or, if the Bank decides that adoption of any portion of such market practice is not administratively feasible or if the Bank determines that no market practice for the administration of Daily Simple SOFR or the Benchmark Replacement exists, in such other manner of administration as the Bank decides is reasonably necessary in connection with the administration of the Amended Agreement and the other Amended Documents).
“Credit Extension” means any extension of credit of any type denominated in U.S. Dollars under the Existing Note, the Amended Agreement, any other Existing Document or any other Amended Document, whether characterized as a loan, term loan, revolving loan, swingline loan, daylight overdraft loan, bid loan, advance, borrowing, credit extension, letter of credit or other financial accommodation, and whether constituting a new extension of credit, the renewal, extension of the expiry date or reinstatement or increase in the amount of an existing extension of credit or a conversion or continuation of an existing extension of credit.
“Daily Simple SOFR” means, for any day (a “SOFR Rate Day”), the interest rate per annum determined by the Bank by dividing (the resulting quotient rounded upwards, at the Bank’s discretion, to the nearest 1/100th of 1%) (A) SOFR for the day (the “SOFR Determination Date”) that is 2 Business Days prior to (i) such SOFR Rate Day if such SOFR Rate Day is a Business Day or (ii) the Business Day immediately preceding such SOFR Rate Day if such SOFR Rate Day is not a Business Day, by (B) a number equal to 1.00 minus the SOFR Reserve Percentage, in each case, as such SOFR is published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) on the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source identified by the Federal Reserve Bank of New York or its successor administrator for the secured overnight financing rate from time to time. If Daily Simple SOFR as determined above would be less than the SOFR Floor, then Daily Simple SOFR shall be deemed to be the SOFR Floor. If SOFR for any SOFR Determination Date has not been published or replaced with a Benchmark Replacement by 5:00 p.m. (Pittsburgh, Pennsylvania time) on the second Business Day immediately following such SOFR Determination Date, then SOFR for such SOFR Determination Date will be SOFR for the first Business Day preceding such SOFR Determination Date for which SOFR was published
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in accordance with the definition of “SOFR”; provided that SOFR determined pursuant to this sentence shall be used for purposes of calculating Daily Simple SOFR for no more than 3 consecutive SOFR Rate Days. If and when Daily Simple SOFR as determined above changes, any applicable rate of interest based on Daily Simple SOFR will change automatically without notice to the Borrower, effective on the date of any such change.
“Effective Date” means the date of the Thirteenth Amended and Restated Line of Credit Note.
“Floor” means the benchmark rate floor, if any, provided in the Amended Agreement with respect to Daily Simple SOFR or if no floor is specified, zero.
“Interest Period” means “Interest Period”, “LIBOR Period” or any other analogous or similar term set forth in the Existing Note or any other applicable Existing Document describing the period during which a Credit Extension bears interest with reference to a specific setting, calculation or determination of a benchmark rate; provided that such term shall be modified on the Effective Date so that (a) such term shall refer to the Term SOFR Rate in lieu of the LIBOR Rate and (b) the only tenors, periods or intervals available pursuant to such term shall be those tenors, periods or intervals that were available under the Existing Note prior to such modification.
“Law” means any law(s) (including common law), constitution, statute, treaty, regulation, rule, ordinance, opinion, issued guidance, release, ruling, order, executive order, injunction, writ, decree, bond, judgment, authorization or approval, lien or award of or any settlement arrangement, by agreement, consent or otherwise, with any Official Body, foreign or domestic.
“LIBOR Rate” means any term defined in the Existing Note or any other Existing Document (or any partial definition thereof) as in effect immediately prior to giving effect to the provisions of the Thirteenth Amended and Restated Line of Credit Note, however phrased, referring to USD LIBOR, including by way of example applicable terms phrased as “Adjusted LIBO Rate”, “Adjusted LIBOR Rate”, “LIBO Base Rate”, “LIBO Rate”, “LIBOR Rate”, “LIBOR”, “Eurodollar Rate”, “Eurodollar Base Rate”, “Eurocurrency Rate”, “One-Month LIBOR” or “Daily LIBOR Rate”.
“Official Body” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System of the United States and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System of the United States and/or the Federal Reserve Bank of New York, or any successor thereto.
“SOFR” means, for any day, a rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Daily Credit Extension” means any Credit Extension bearing interest or incurring fees, commissions or other amounts based upon Daily Simple SOFR, but excluding any Base Rate Credit Extension.
“SOFR Floor” means a rate of interest per annum equal to zero basis points (0.00%).
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“SOFR Reserve Percentage” means, for any day, the maximum effective percentage in effect on such day, if any, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including, without limitation, supplemental, marginal and emergency reserve requirements) with respect to SOFR funding.
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Bank in its reasonable discretion).
“Term SOFR Rate” means, for any calculation with respect to any SOFR Credit Extension, for any Interest Period, the interest rate per annum determined by the Bank by dividing (the resulting quotient rounded upwards, at the Bank’s discretion, to the nearest 1/100th of 1%) (A) the Term SOFR Reference Rate for a tenor comparable to such Interest Period, as such rate is published by the Term SOFR Administrator on the day (the “Term SOFR Determination Date”) that is two (2) Business Days prior to the first day of such Interest Period, by (B) a number equal to 1.00 minus the SOFR Reserve Percentage. If the Term SOFR Reference Rate for the applicable tenor has not been published or replaced with a Benchmark Replacement by 5:00 p.m. (Pittsburgh, Pennsylvania time) on the Term SOFR Determination Date, then the Term SOFR Reference Rate, for purposes of clause (A) in the preceding sentence, shall be the Term SOFR Reference Rate for such tenor on the first Business Day preceding such Term SOFR Determination Date for which such Term SOFR Reference Rate for such tenor was published in accordance herewith, so long as such first preceding Business Day is not more than three (3) Business Days prior to such Term SOFR Determination Date. If the Term SOFR Rate, determined as provided above, would be less than the SOFR Floor, then the Term SOFR Rate shall be deemed to be the SOFR Floor. The Term SOFR Rate shall be adjusted automatically without notice to the Borrower on and as of (i) the first day of each Interest Period, and (ii) the effective date of any change in the SOFR Reserve Percentage.
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
“USD LIBOR” means the London interbank offered rate for U.S. Dollars
“USD LIBOR Daily Credit Extension” means a Credit Extension bearing interest or incurring fees, commissions or other amounts based on a USD LIBOR rate that is reset on a daily or substantially daily basis, but excluding any Base Rate Credit Extension.
“USD LIBOR Related Definition” means any term defined in the Existing Note or any other Existing Document (or any partial definition thereof) as in effect immediately prior to giving effect to the provisions of the Thirteenth Amended and Restated Line of Credit Note on the Effective Date, however phrased, solely relating to the determination, administration or calculation of USD LIBOR, including by way of example any instances of the LIBOR Rate and other applicable terms phrased as “Eurodollar Reserve Percentage”, “LIBOR Determination Date” and “LIBOR Reset Date”. “USD LIBOR Related Definition” does not include any term such as “Base Rate”, “Alternate Base Rate”, “Alternative Base Rate”, “ABR” or other analogous or similar term generally indicating use of a benchmark rate other than, immediately prior to giving effect to the provisions of Article III of this Exhibit A, USD LIBOR, even if such term, immediately prior to giving effect to the provisions of Article III of this Exhibit A, would have included a component based on USD LIBOR.
“U.S. Dollars” means the lawful currency of the United States of America.
“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or
Section 1.2 Definitions. The Existing Note and each other applicable Existing Document (if any) are each hereby amended to incorporate the definitions set forth in Section 1.1 of this Exhibit A, mutatis mutandis, including as a result
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of the effectiveness of the Thirteenth Amended and Restated Line of Credit Note. If the Existing Note or any other Existing Document as in effect immediately prior to giving effect to the provisions of the Thirteenth Amended and Restated Line of Credit Note already defines any term defined in Section 1.1 of this Exhibit A, the definition in Section 1.1 of this Exhibit A shall (x) to the extent that such definition also relates to Loans other than Affected Loans, supplement such definition in the Existing Note or such other Existing Document; and (y) to the extent that such definition relates solely to Affected Loans, supersede such definition in the Existing Note or such other Existing Document solely with respect to Affected Loans.
Section 1.3 Rules of Construction. For the avoidance of doubt, if and to the extent that the Existing Note or any other Existing Document does not, immediately prior to the effectiveness of the Thirteenth Amended and Restated Line of Credit Note, include any provision or term that would be modified pursuant to any provision of Article II or Article III of this Exhibit A, such provision of Article II or Article III of this Exhibit A shall be disregarded to such extent. Any reference in the Thirteenth Amended and Restated Line of Credit Note to the “Borrower” shall be deemed to refer to (a) “the Borrowers”, “the applicable Borrower”, “each Borrower”, “such Borrower” or “any Borrower”, as applicable, if the “Borrower” identified above constitutes more than one person or (b) the “Borrowers’ Agent”, “Administrative Borrower” or other analogous or similar entity, as applicable, if the Existing Note includes a mechanism for such entity to act for or on behalf of the Borrower.
Section 1.4 SOFR Notification. Section 5.1(d) of this Exhibit A provides a mechanism for determining an alternative rate of interest in the event that SOFR is no longer available or in certain other circumstances. The Bank does not warrant or accept any responsibility for and shall not have any liability with respect to, the administration, submission or any other matter related to SOFR or with respect to any alternative or successor rate thereto, or replacement rate therefor.
Section 1.5 Conforming Changes Relating to SOFR. With respect to Daily Simple SOFR, the Bank will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary in the Amended Agreement or any other Amended Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to the Existing Note, Amended Agreement, the Thirteenth Amended and Restated Line of Credit Note, the Amended Documents, or any other Existing Document; provided that, the Bank shall provide notice to the Borrower of each such amendment implementing such Conforming Changes reasonably promptly after such amendment becomes effective.
Article II. Discontinuance of USD LIBOR.
Section 2.1 Credit Extensions.
Section 2.2 USD LIBOR Related Definitions and BSBY Screen Rate Related Definitions. Notwithstanding any provision of the Existing Note or any other Existing Document to the contrary, subject to the provisions of Article IV of this Exhibit A, from and after the Effective Date, the USD LIBOR Related Definitions and the BSBY Screen Rate
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Related Definitions shall be deleted from the Existing Note and each other applicable Existing Document and of no further force or effect.
Article III. New Credit Extensions.
Section 3.1 Modification to LIBOR Rate and BSBY Screen Rate Definitions. Notwithstanding any provision of the Existing Note or any other Existing Document to the contrary, subject to the provisions of Article IV of this Exhibit A, from and after the Effective Date:
Section 3.2 Modification to Base Rate Credit Extension. Notwithstanding any provision of the Existing Note or any other Existing Document to the contrary, whether or not USD LIBOR is operational, reported, published on a synthetic basis or otherwise available in the market as of the Effective Date, from and after the Effective Date, any usage of USD LIBOR in a component of a Base Rate Credit Extension (excluding the related spread) shall be deleted and of no further force or effect, and Daily Simple SOFR shall be inserted in lieu thereof.
Section 3.3 SOFR Conventions and Provisions. Notwithstanding any provision of the Existing Note or any other Existing Document to the contrary, from and after the Effective Date, subject to Article IV of this Exhibit A, the Existing Note and each other applicable Existing Document are each hereby amended to incorporate the following provisions:
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Article IV. Delayed Rate Switch for Prior Periodic USD LIBOR or BSBY Screen Rate Credit Extensions.
Section 4.1 The provisions in the other Articles of this Exhibit A shall not apply with respect to any retroactive margin, yield, fee or commission increases available to the Bank as a result of any inaccuracy in any financial statement or compliance certificate that, if corrected, would have led to the application of a higher interest margin or yield with respect to any USD LIBOR Daily or BSBY Screen Rate Credit Extension or any higher fee or commission for any applicable period.
Section 4.2 The USD LIBOR Related Definitions, the BSBY Screen Rate Related Definitions and provisions with respect to items described in Section 4.1 of this Exhibit A (as in effect immediately prior to giving effect to the provisions of the Thirteenth Amended and Restated Line of Credit Note on the Effective Date) shall not be deleted and shall continue in effect solely as necessary to effect the provisions set forth in Section 4.1.
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Article V. Additional Provisions.
Section 5.1 Rate Unascertainable; Increased Costs; Illegality; Benchmark Replacement Setting.
then the Bank shall have the rights specified in Section 5.1(c) of this Exhibit A.
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Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert G. Ruhlman, certify that:
Date: November 1, 2022 |
|
/s/ Robert G. Ruhlman |
|
|
Robert G. Ruhlman |
|
|
Chairman, President and Chief Executive Officer |
|
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Andrew S. Klaus, certify that:
Date: November 1, 2022 |
|
/s/ Andrew S. Klaus |
|
|
Andrew S. Klaus |
|
|
Chief Financial Officer (Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert G. Ruhlman, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
November 1, 2022 |
|
/s/ Robert G. Ruhlman |
|
|
Robert G. Ruhlman |
|
|
Chairman, President and Chief Executive Officer |
|
|
(Principal Executive Officer) |
A signed original of this written statement required by Section 906 has been provided to Preformed Line Products Company and will be retained by Preformed Line Products Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Andrew S. Klaus, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
November 1, 2022 |
|
/s/ Andrew S. Klaus |
|
|
Andrew S. Klaus |
|
|
Chief Financial Officer |
|
|
(Principal Accounting Officer) |
A signed original of this written statement required by Section 906 has been provided to Preformed Line Products Company and will be retained by Preformed Line Products Company and furnished to the Securities and Exchange Commission or its staff upon request.
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