Filed by Bowne Pure Compliance
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2008
Commission file number: 0-31164
Preformed Line Products Company
(Exact Name of Registrant as Specified in Its Charter)
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Ohio
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34-0676895 |
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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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660 Beta Drive |
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Mayfield Village, Ohio
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44143 |
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(Address of Principal Executive Office)
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(Zip Code) |
(440) 461-5200
(Registrants 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.
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See definition of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange act.
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting Company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
The number of common shares outstanding as of November 3, 2008: 5,223,180.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PREFORMED LINE PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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September 30, |
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December 31, |
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Thousands of dollars, except share data |
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2008 |
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2007 |
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(restated) |
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ASSETS |
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Cash and cash equivalents |
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$ |
24,775 |
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$ |
23,392 |
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Accounts receivable, less allowances of $1,177 ($1,199 in 2007) |
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46,752 |
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37,002 |
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Inventories net |
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47,020 |
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43,788 |
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Deferred income taxes |
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3,218 |
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2,982 |
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Prepaids and other |
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5,811 |
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4,098 |
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Current assets of discontinued operations |
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12,188 |
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TOTAL CURRENT ASSETS |
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127,576 |
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123,450 |
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Property and equipment net |
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60,934 |
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58,506 |
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Patents and other intangibles net |
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4,287 |
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5,637 |
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Goodwill |
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6,140 |
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3,928 |
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Deferred income taxes |
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4,213 |
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3,744 |
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Other assets |
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8,193 |
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8,601 |
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TOTAL ASSETS |
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$ |
211,343 |
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$ |
203,866 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Notes payable to banks |
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$ |
2,858 |
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$ |
4,076 |
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Current portion of long-term debt |
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948 |
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1,949 |
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Trade accounts payable |
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19,041 |
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15,178 |
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Accrued compensation and amounts withheld from employees |
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9,742 |
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6,995 |
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Accrued expenses and other liabilities |
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9,223 |
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6,829 |
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Accrued profit-sharing and other benefits |
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3,330 |
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3,577 |
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Dividends payable |
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1,053 |
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1,076 |
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Income taxes payable |
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2,089 |
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772 |
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Current liabilities of discontinued operations |
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1,897 |
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TOTAL CURRENT LIABILITIES |
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48,284 |
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42,349 |
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Long-term debt, less current portion |
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2,854 |
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3,010 |
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Unfunded pension obligation |
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3,122 |
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2,787 |
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Income taxes payable, noncurrent |
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1,270 |
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1,837 |
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Deferred income taxes |
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1,147 |
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1,486 |
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Other noncurrent liabilities |
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1,962 |
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1,772 |
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Minority interests |
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1,381 |
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904 |
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SHAREHOLDERS EQUITY |
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Common stock $2 par value, 15,000,000 shares authorized,
5,223,180 and 5,380,956 issued and outstanding, net of 551,059
and 378,333 treasury shares at par, respectively |
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10,446 |
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10,762 |
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Paid in capital |
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3,402 |
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2,720 |
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Retained earnings |
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144,917 |
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140,339 |
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Accumulated other comprehensive loss |
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(7,442 |
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(4,100 |
) |
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TOTAL SHAREHOLDERS EQUITY |
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151,323 |
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149,721 |
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TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY |
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$ |
211,343 |
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$ |
203,866 |
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See notes to consolidated financial statements.
3
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
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Three month periods ended September 30, |
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Nine month periods ended September 30, |
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In thousands, except per share data |
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2008 |
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2007 |
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2008 |
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2007 |
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(restated) |
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(restated) |
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Net sales |
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$ |
73,952 |
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$ |
60,413 |
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$ |
209,179 |
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$ |
170,464 |
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Cost of products sold |
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48,489 |
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38,974 |
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141,034 |
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111,743 |
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GROSS PROFIT |
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25,463 |
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21,439 |
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68,145 |
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58,721 |
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Costs and expenses |
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Selling |
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6,119 |
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5,462 |
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17,879 |
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16,516 |
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General and administrative |
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7,506 |
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6,347 |
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22,553 |
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17,999 |
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Research and engineering |
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2,218 |
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1,731 |
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6,545 |
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5,185 |
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Other operating expenses (income) net |
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462 |
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(169 |
) |
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605 |
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141 |
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Goodwill impairment |
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199 |
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16,305 |
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13,371 |
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47,582 |
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40,040 |
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OPERATING INCOME |
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9,158 |
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8,068 |
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20,563 |
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18,681 |
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Other income (expense) |
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Interest income |
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225 |
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264 |
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655 |
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805 |
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Interest expense |
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(138 |
) |
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(140 |
) |
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(415 |
) |
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(437 |
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Other income (expense) |
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176 |
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(9 |
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196 |
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(22 |
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263 |
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115 |
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436 |
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346 |
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INCOME BEFORE INCOME TAXES, MINORITY
INTERESTS AND DISCONTINUED OPERATIONS |
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9,421 |
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8,183 |
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20,999 |
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19,027 |
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Income taxes |
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2,807 |
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2,663 |
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6,604 |
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6,838 |
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INCOME BEFORE MINORITY INTERESTS
AND DISCONTINUED OPERATIONS |
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6,614 |
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5,520 |
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14,395 |
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12,189 |
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Minority interests, net of tax |
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(157 |
) |
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(24 |
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(268 |
) |
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(24 |
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INCOME FROM CONTINUING OPERATIONS |
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6,457 |
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5,496 |
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14,127 |
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12,165 |
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Income (loss) from discontinued operations, net of tax |
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(34 |
) |
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|
96 |
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|
735 |
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143 |
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NET INCOME |
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$ |
6,423 |
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$ |
5,592 |
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$ |
14,862 |
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$ |
12,308 |
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Income per share from continuing operations basic |
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$ |
1.24 |
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$ |
1.02 |
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$ |
2.67 |
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$ |
2.27 |
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Income (loss) per share from discontinued operations basic |
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$ |
(0.01 |
) |
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$ |
0.02 |
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$ |
0.14 |
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$ |
0.03 |
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Total net income per share basic |
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$ |
1.23 |
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$ |
1.04 |
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$ |
2.81 |
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$ |
2.30 |
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Income per share from continuing operations diluted |
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$ |
1.23 |
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$ |
1.01 |
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$ |
2.64 |
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$ |
2.25 |
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Income (loss) per share from discontinued operations diluted |
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$ |
(0.01 |
) |
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$ |
0.02 |
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$ |
0.14 |
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$ |
0.02 |
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Total net income per share diluted |
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$ |
1.22 |
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$ |
1.03 |
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$ |
2.78 |
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$ |
2.27 |
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Cash dividends declared per share |
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$ |
0.20 |
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$ |
0.20 |
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$ |
0.60 |
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$ |
0.60 |
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Weighted-average number of shares outstanding basic |
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5,218 |
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5,379 |
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5,298 |
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5,369 |
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Weighted-average number of shares outstanding diluted |
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5,269 |
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5,437 |
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5,345 |
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|
5,418 |
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See notes to consolidated financial statements.
4
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
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Nine Month Periods Ended September 30, |
|
Thousands of dollars |
|
2008 |
|
|
2007 |
|
|
|
|
|
|
(restated) |
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES |
|
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|
|
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|
|
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Net income |
|
$ |
14,862 |
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|
$ |
12,308 |
|
Less: income from discontinued operations |
|
|
735 |
|
|
|
143 |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
14,127 |
|
|
|
12,165 |
|
|
|
|
|
|
|
|
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Adjustments to reconcile net income to net cash provided by operating activities: |
|
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Depreciation and amortization |
|
|
6,054 |
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|
|
5,164 |
|
Provision for accounts receivable allowances |
|
|
395 |
|
|
|
626 |
|
Provision for inventory reserves |
|
|
1,236 |
|
|
|
743 |
|
Deferred income taxes |
|
|
(1,044 |
) |
|
|
45 |
|
Stock-based compensation expense |
|
|
196 |
|
|
|
188 |
|
Excess tax benefits from stock-based awards |
|
|
(74 |
) |
|
|
(193 |
) |
Goodwill impairment |
|
|
|
|
|
|
199 |
|
Net investment in life insurance |
|
|
(281 |
) |
|
|
71 |
|
Minority interest |
|
|
268 |
|
|
|
24 |
|
Other net |
|
|
51 |
|
|
|
50 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(11,663 |
) |
|
|
(9,120 |
) |
Inventories |
|
|
(6,447 |
) |
|
|
(6,876 |
) |
Trade accounts payables and accrued liabilities |
|
|
9,269 |
|
|
|
4,015 |
|
Income taxes payable |
|
|
2,060 |
|
|
|
1,259 |
|
Other net |
|
|
(60 |
) |
|
|
(622 |
) |
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES |
|
|
14,087 |
|
|
|
7,738 |
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(9,002 |
) |
|
|
(6,593 |
) |
Business acquisitions net of cash acquired |
|
|
(644 |
) |
|
|
(8,443 |
) |
Proceeds from the sale of discontinued operations |
|
|
10,486 |
|
|
|
|
|
Proceeds from the sale of property and equipment |
|
|
201 |
|
|
|
152 |
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES |
|
|
1,041 |
|
|
|
(14,884 |
) |
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Decrease in notes payable to banks |
|
|
(800 |
) |
|
|
(111 |
) |
Proceeds from the issuance of long-term debt |
|
|
6,500 |
|
|
|
1,311 |
|
Payments of long-term debt |
|
|
(7,810 |
) |
|
|
(1,309 |
) |
Dividends paid net |
|
|
(3,195 |
) |
|
|
(2,469 |
) |
Excess tax benefits from stock-based awards |
|
|
74 |
|
|
|
193 |
|
Proceeds from issuance of common shares |
|
|
442 |
|
|
|
487 |
|
Purchase of common shares for treasury |
|
|
(7,458 |
) |
|
|
(328 |
) |
|
|
|
|
|
|
|
NET CASH USED IN FINANCING ACTIVITIES |
|
|
(12,247 |
) |
|
|
(2,226 |
) |
|
|
|
|
|
|
|
|
|
Effects of exchange rate changes on cash and cash equivalents |
|
|
(860 |
) |
|
|
777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
2,021 |
|
|
|
(8,595 |
) |
|
|
|
|
|
|
|
|
|
NET CASH USED IN DISCONTINUED OPERATIONS |
|
|
|
|
|
|
|
|
Operating cash flows |
|
|
958 |
|
|
|
333 |
|
Investing cash flows |
|
|
(1,596 |
) |
|
|
(365 |
) |
Financing cash flows |
|
|
|
|
|
|
(750 |
) |
Effects of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
NET CASH USED IN DISCONTINUED OPERATIONS |
|
|
(638 |
) |
|
|
(780 |
) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
|
23,392 |
|
|
|
29,949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
$ |
24,775 |
|
|
$ |
20,574 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
5
PREFORMED LINE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In thousands, except share and per share data
NOTE A BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Preformed Line Products Company
(the Company) have been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X.
The preparation of these consolidated financial statements requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and the accompanying
notes. Actual results could differ from these estimates. However, 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 month periods ended
September 30, 2008 are not necessarily indicative of the results to be expected for the year ending
December 31, 2008.
The consolidated balance sheet at December 31, 2007 has been derived from the audited consolidated
financial statements, but does not include all of the information and notes required by U.S.
generally accepted accounting principles for complete financial statements. For further
information, refer to the consolidated financial statements and notes to consolidated financial
statements included in the Companys 2007 Annual Report on Form 10-K filed on April 7, 2008 with
the Securities and Exchange Commission.
Reclassifications
Certain prior period amounts have been reclassified to conform to current year presentation.
Restatement
Subsequent to the issuance of the consolidated financial statements for the three and nine month
periods ended September 30, 2007, the Company determined that (a) the write-off of goodwill related
to its Thailand operations of $.2 million should have been recorded during the first quarter of
2007, (b) the $.2 million charge related to the step-up in inventory valuation in the purchase
price allocation for the acquisition of Direct Power and Water Corporation (DPW) on March 22, 2007
should have been recorded during the second quarter of 2007, and (c) intercompany profit of $.9
million in inventory at September 30, 2007 should not have been recognized in earnings until the
inventory was sold to a third party. The $.9 million adjustment consisted of $.6 million of profit
in inventory remaining at the end of the first quarter, $.2 million of profit in inventory
remaining at the end of the second quarter and $.1 million of profit in inventory remaining at the
end of the third quarter. As a result, the Company has restated the accompanying consolidated
financial statements for the three and nine month periods ended September 30, 2007.
6
The effect of the restatement is as follows:
|
|
|
|
|
|
|
|
|
|
|
As previously reported |
|
|
|
Three month periods |
|
|
Nine month periods |
|
|
|
ended September 30, 2007 |
|
|
ended September 30, 2007 |
|
Cost of products sold |
|
$ |
43,316 |
|
|
$ |
123,631 |
|
Gross profit |
|
|
22,783 |
|
|
|
62,752 |
|
Goodwill impairment |
|
|
|
|
|
|
|
|
Operating income |
|
|
8,327 |
|
|
|
20,199 |
|
Income before income tax and minority interest |
|
|
8,457 |
|
|
|
20,593 |
|
Income tax |
|
|
2,769 |
|
|
|
7,371 |
|
Income before minority interest |
|
|
5,688 |
|
|
|
13,222 |
|
Minority interest |
|
|
(24 |
) |
|
|
(24 |
) |
Net income |
|
|
5,664 |
|
|
|
13,198 |
|
|
|
|
|
|
|
|
|
|
Net income per share basic |
|
$ |
1.05 |
|
|
$ |
2.46 |
|
|
|
|
|
|
|
|
Net income per share diluted |
|
$ |
1.04 |
|
|
$ |
2.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Cash Flows: |
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
$ |
13,198 |
|
Goodwill impairment |
|
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
(7,275 |
) |
Income Taxes |
|
|
|
|
|
|
1,412 |
|
|
|
|
|
|
|
|
|
|
|
|
As restated |
|
|
|
Three month periods |
|
|
Nine month periods |
|
|
|
ended September 30, 2007 |
|
|
ended September 30, 2007 |
|
Cost of products sold |
|
$ |
43,431 |
|
|
$ |
124,724 |
|
Gross profit |
|
|
22,668 |
|
|
|
61,659 |
|
Goodwill impairment |
|
|
|
|
|
|
199 |
|
Operating income |
|
|
8,213 |
|
|
|
18,907 |
|
Income before income tax and minority interest |
|
|
8,343 |
|
|
|
19,301 |
|
Income tax |
|
|
2,727 |
|
|
|
6,969 |
|
Income before minority interest |
|
|
5,616 |
|
|
|
12,332 |
|
Minority interest |
|
|
(24 |
) |
|
|
(24 |
) |
Net income |
|
|
5,592 |
|
|
|
12,308 |
|
|
|
|
|
|
|
|
|
|
Net income per share basic |
|
$ |
1.04 |
|
|
$ |
2.30 |
|
|
|
|
|
|
|
|
Net income per share diluted |
|
$ |
1.03 |
|
|
$ |
2.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Cash Flows: |
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
$ |
12,308 |
|
Goodwill impairment |
|
|
|
|
|
|
199 |
|
Inventories |
|
|
|
|
|
|
(6,182 |
) |
Income Taxes |
|
|
|
|
|
|
1,010 |
|
Certain of the restated amounts above do not agree with the statements of consolidated income due
to the sale of discontinued operations in May 2008, as discussed in Note L Discontinued
Operations.
7
NOTE B OTHER FINANCIAL STATEMENT INFORMATION
Inventories net
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Finished products |
|
$ |
21,673 |
|
|
$ |
20,417 |
|
Work-in-process |
|
|
2,618 |
|
|
|
2,363 |
|
Raw materials |
|
|
32,541 |
|
|
|
29,860 |
|
|
|
|
|
|
|
|
|
|
|
56,832 |
|
|
|
52,640 |
|
Excess of current cost over LIFO cost |
|
|
(5,038 |
) |
|
|
(3,733 |
) |
Noncurrent portion of inventory |
|
|
(4,774 |
) |
|
|
(5,119 |
) |
|
|
|
|
|
|
|
|
|
$ |
47,020 |
|
|
$ |
43,788 |
|
|
|
|
|
|
|
|
During the first quarter of 2008, management determined that $.5 million of its current inventory
balance should have been classified as noncurrent at December 31, 2007. In addition to this
reclassification from current to noncurrent, management also identified and corrected the
classification of certain inventory balances between the categories of inventory at December 31,
2007. Although management determined that these adjustments were not material, quantitatively or
qualitatively, to the consolidated balance sheet at December 31, 2007, the reclassifications are
included in the December 31, 2007 column in the above table. Noncurrent inventory is included in
other assets on the consolidated balance sheets.
Property and equipment net
Major classes of property and equipment are stated at cost and were as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Land and improvements |
|
$ |
5,875 |
|
|
$ |
6,223 |
|
Buildings and improvements |
|
|
47,589 |
|
|
|
44,537 |
|
Machinery and equipment |
|
|
95,435 |
|
|
|
91,376 |
|
Construction in progress |
|
|
4,981 |
|
|
|
6,053 |
|
|
|
|
|
|
|
|
|
|
|
153,880 |
|
|
|
148,189 |
|
Less accumulated depreciation |
|
|
92,946 |
|
|
|
89,683 |
|
|
|
|
|
|
|
|
|
|
$ |
60,934 |
|
|
$ |
58,506 |
|
|
|
|
|
|
|
|
Property and equipment includes $.4 million of purchases in trade accounts payable at September 30,
2008 and $.8 million at December 31, 2007.
Comprehensive income
The components of comprehensive income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month periods ended September 30, |
|
|
Nine month periods ended September 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
6,423 |
|
|
$ |
5,592 |
|
|
$ |
14,862 |
|
|
$ |
12,308 |
|
Other comprehensive income
(loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation
adjustments |
|
|
(8,458 |
) |
|
|
2,521 |
|
|
|
(3,354 |
) |
|
|
5,596 |
|
Recognized net
actuarial loss
(gain) |
|
|
4 |
|
|
|
(78 |
) |
|
|
12 |
|
|
|
(78 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
(2,031 |
) |
|
$ |
8,035 |
|
|
$ |
11,520 |
|
|
$ |
17,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
Legal proceedings
From time to time, the Company may be subject to litigation incidental to its business. The
Company is not a party to any 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 flows.
NOTE C PENSION PLANS
PLP-USA hourly employees of the Company who meet specific requirements as to age and service are
covered by a defined benefit pension plan. The Company uses a December 31 measurement date for
this plan. Net periodic benefit cost for the Companys PLP-USA plan included the following
components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month periods ended September 30, |
|
|
Nine month periods ended September 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Service cost |
|
$ |
167 |
|
|
$ |
177 |
|
|
$ |
502 |
|
|
$ |
531 |
|
Interest cost |
|
|
256 |
|
|
|
235 |
|
|
|
768 |
|
|
|
704 |
|
Expected return on plan assets |
|
|
(261 |
) |
|
|
(235 |
) |
|
|
(783 |
) |
|
|
(704 |
) |
Recognized net actuarial loss
(gain) |
|
|
6 |
|
|
|
(26 |
) |
|
|
18 |
|
|
|
(78 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
168 |
|
|
$ |
151 |
|
|
$ |
505 |
|
|
$ |
453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the nine month period ended September 30, 2008, $.2 million of contributions have been made
to the plan. The Company does not anticipate contributing any additional money to fund its
pension plan in 2008.
NOTE D COMPUTATION OF EARNINGS PER SHARE
Basic earnings per share were computed by dividing net income by the weighted-average number of
shares of common stock outstanding for each respective period. Diluted earnings per share were
calculated by dividing net income by the weighted-average of all potentially dilutive shares of
common stock that were outstanding during the periods presented.
9
The calculation of basic and diluted earnings per share for the three and nine month periods ended
September 30, 2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month periods ended September 30, |
|
|
Nine month periods ended September 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
6,457 |
|
|
$ |
5,496 |
|
|
$ |
14,127 |
|
|
$ |
12,165 |
|
Income (loss) from discontinued operations |
|
|
(34 |
) |
|
|
96 |
|
|
|
735 |
|
|
|
143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
6,423 |
|
|
$ |
5,592 |
|
|
$ |
14,862 |
|
|
$ |
12,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Determination of shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
5,218 |
|
|
|
5,379 |
|
|
|
5,298 |
|
|
|
5,369 |
|
Dilutive effect stock-based awards |
|
|
51 |
|
|
|
58 |
|
|
|
47 |
|
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average common shares outstanding |
|
|
5,269 |
|
|
|
5,437 |
|
|
|
5,345 |
|
|
|
5,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
1.24 |
|
|
$ |
1.02 |
|
|
$ |
2.67 |
|
|
$ |
2.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations |
|
$ |
(0.01 |
) |
|
$ |
0.02 |
|
|
$ |
0.14 |
|
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net income |
|
$ |
1.23 |
|
|
$ |
1.04 |
|
|
$ |
2.81 |
|
|
$ |
2.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
1.23 |
|
|
$ |
1.01 |
|
|
$ |
2.64 |
|
|
$ |
2.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations |
|
$ |
(0.01 |
) |
|
$ |
0.02 |
|
|
$ |
0.14 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net income |
|
$ |
1.22 |
|
|
$ |
1.03 |
|
|
$ |
2.78 |
|
|
$ |
2.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three and nine month periods ended September 30, 2008, 13,000 stock options were
excluded from the calculation of diluted earnings per share due to the average market price being
lower than the exercise price, and as such they are anti-dilutive. For the nine month period ended
September 30, 2007, 5,000 stock options were excluded from the calculation of diluted earnings per
share due to the average market price being lower than the exercise price, and as such they are
anti-dilutive.
NOTE E GOODWILL AND OTHER INTANGIBLES
The Company performed its annual impairment test for goodwill pursuant to SFAS No. 142, Goodwill
and Intangible Assets as of January 1, 2008, and determined that no adjustment to the carrying
value of goodwill was required. The aggregate amortization expense for other intangibles with
finite lives for each of the three and nine month periods ended September 30, 2008 was $.1 million
and $.4 million, and for the three and nine month periods ended September 30, 2007 was $.1 million
and $.2 million. Amortization expense is estimated to be $.5 million annually for 2008 through
2011 and $.4 million for 2012.
The Companys addition of $2.3 million to goodwill is related to the acquisition of DPW in the
amount of $.5 million, the joint venture formed between the Companys Australian subsidiary and
BlueSky Energy Pty Ltd in the amount of $.5 million and $1.4 million related to the acquisition of
Belos SA (Belos) (see Note K Business Combinations for further details). The changes in the
carrying amount of goodwill, by segment, for the nine month period ended September 30, 2008, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia |
|
|
South Africa |
|
|
Belos |
|
|
All Other |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2008 |
|
$ |
1,782 |
|
|
$ |
57 |
|
|
$ |
|
|
|
$ |
2,089 |
|
|
$ |
3,928 |
|
Additions |
|
|
462 |
|
|
|
|
|
|
|
1,370 |
|
|
|
489 |
|
|
|
2,321 |
|
Currency translation |
|
|
(181 |
) |
|
|
(10 |
) |
|
|
57 |
|
|
|
25 |
|
|
|
(109 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30,
2008 |
|
$ |
2,063 |
|
|
$ |
47 |
|
|
$ |
1,427 |
|
|
$ |
2,603 |
|
|
$ |
6,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
The Companys patents and other intangibles consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008 |
|
|
December 31, 2007 |
|
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Gross Carrying |
|
|
Accumulated |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents |
|
$ |
4,810 |
|
|
$ |
(2,822 |
) |
|
$ |
4,812 |
|
|
$ |
(2,585 |
) |
Land use rights |
|
|
1,653 |
|
|
|
(30 |
) |
|
|
1,259 |
|
|
|
(8 |
) |
Customer relationships |
|
|
1,003 |
|
|
|
(327 |
) |
|
|
985 |
|
|
|
(154 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,466 |
|
|
$ |
(3,179 |
) |
|
$ |
7,056 |
|
|
$ |
(2,747 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks |
|
$ |
|
|
|
|
|
|
|
$ |
1,328 |
|
|
|
|
|
Goodwill |
|
|
6,140 |
|
|
|
|
|
|
|
3,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,140 |
|
|
|
|
|
|
$ |
5,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE F STOCK BASED COMPENSATION
The 1999 Stock Option Plan
The 1999 Stock Option Plan (the Plan) permits the grant of 300,000 options to buy common shares of
the Company to certain employees at not less than fair market value of the shares on the date of
grant. At September 30, 2008 there were 9,000 options remaining available for issuance under the
Plan. Options issued to date under the Plan vest 50% after one year following the date of the
grant, 75% after two years, and 100% after three years, and expire ten years from the date of
grant. Shares issued as a result of stock option exercises will be funded with the issuance of new
shares.
There were 13,000 options granted during the nine month period ended September 30, 2008 and 20,000
options granted during the nine month period ended September 30, 2007 under the Plan. The fair
value for the stock options granted in 2008 and 2007 were estimated at the date of grant using the
Black-Scholes option-pricing model with the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Risk-free interest rate |
|
|
4.2 |
% |
|
|
4.3 |
% |
Dividend yield |
|
|
2.8 |
% |
|
|
2.9 |
% |
Expected life (years) |
|
|
6 |
|
|
|
6 |
|
Expected volatility |
|
|
34.4 |
% |
|
|
37.9 |
% |
Activity in the Companys stock option plan for the nine month period ended September 30, 2008 was
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Number |
|
|
Exercise |
|
|
Remaining |
|
|
Aggregate |
|
|
|
of |
|
|
Price per |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
Shares |
|
|
Share |
|
|
Term (Years) |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2008 |
|
|
110,942 |
|
|
$ |
25.25 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
13,000 |
|
|
$ |
51.62 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(14,950 |
) |
|
$ |
29.56 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(1,250 |
) |
|
$ |
32.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding (vested and expected
to vest) at September 30, 2008 |
|
|
107,742 |
|
|
$ |
27.75 |
|
|
|
5.4 |
|
|
$ |
3,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2008 |
|
|
83,742 |
|
|
$ |
22.91 |
|
|
|
4.4 |
|
|
$ |
2,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
The weightedaverage grant-date fair value of options granted during 2008 and 2007 was $15.52 and
$11.93, respectively. The total intrinsic value of stock options exercised during the nine month
periods ended September 30, 2008 and 2007 was $.3 million and $.7 million, respectively. Cash
received for the exercise of stock options during 2008 was $.4 million. The total fair value of
stock options vested during the nine month periods ended September 30, 2008 and 2007 was $.2
million and $.1 million, respectively.
For the nine month periods ended September 30, 2008 and 2007, the Company recorded compensation
expense related to the stock options of $.1 million and $.2 million, respectively. The total
compensation cost related to nonvested awards not yet recognized at September 30, 2008 is expected
to be $.2 million over principally one year.
The excess tax benefits from stock-based awards for the nine month period ended September 30, 2008
was less than $.1 million and represents the reduction in income taxes otherwise payable during the
period, attributable to actual gross tax benefits in excess of the expected tax benefits for
options exercised in the current period.
Long Term Incentive Plan of 2008
The Companys Shareholders approved the Preformed Line Products Company Long Term Incentive Plan of
2008 at the 2008 Annual Meeting of Shareholders on April 28, 2008. Under the Preformed Line
Products Company Long Term Incentive Plan of 2008 (the LTIP Plan), certain employees, officers,
and directors will be eligible to receive awards of options and restricted shares. The purpose of
this LTIP Plan is to give the Company and its subsidiaries a competitive advantage in attracting,
retaining, and motivating officers, employees, and directors and to provide an incentive to those
individuals to increase shareholder value through long-term incentives directly linked to the
Companys performance. The total number of Company common shares reserved for awards under the
LTIP Plan is 400,000. Of the 400,000 common shares, 300,000 common shares have been reserved for
full-value awards and 100,000 common shares have been reserved for share options. The LTIP Plan
expires on April 17, 2018.
On August 21, 2008, there were 43,639 restricted stock awards granted under the LTIP Plan to the
Companys CEO and six other executives. Of the 43,639 restricted shares granted, 4,273 were
time-based awards and 39,366 were performance-based awards. All 43,639 shares were restricted and
entitles the participant to one share of common stock. For all of the participants except the CEO,
a portion of the restricted stock is subject to time-based cliff vesting and a portion will be
subject to vesting based upon the Companys performance over a three year period. All of the CEOs
restricted stock is subject to vesting based upon the Companys performance over a three year
period.
The restricted shares are offered at no cost to the employees; however, the participant must remain
employed with the Company until the restrictions on the restricted stock lapse. The fair value of
restricted stock awards is based on the market price of an unrestricted share on the grant date,
which was $54.24. The Company currently estimates that no awards will be forfeited. The Company
recognizes stock-based compensation expense on a straight-line basis over the requisite service
period of the award in General and administrative expense in the accompanying statement of
consolidated income. Compensation expense related to the time-based restricted stock for the three
and nine months ended September 30, 2008 was deminimus. Dividends will be reinvested in additional
restricted stock, and held subject to the same vesting requirements as the underlying restricted
stock.
Time-based awards will be expensed over a three-year period commencing September 1, 2008 and ending
August 31, 2011. As of September 30, 2008, there was $.2 of total unrecognized compensation cost
related to time-based restricted stock awards that is expected to be recognized over a period of
2.92 years.
For the performance-based awards, the number of shares of restricted stock in which the
participants will vest depends on the Companys level of performance measured by growth in pretax
income and sales growth over a three-year performance period from January 1, 2008 and ending
December 31, 2010. Depending on the extent to which the performance criterion are satisfied under
the LTIP Plan, the participants are eligible to earn shares of common stock over the vesting
period. The maximum potential payout for performance-based compensation costs is $2.1 million at
the end of the performance period. Under the LTIP Plan, the performance-based awards measurement
period begins on January 1, 2008, with the vesting period beginning September 1, 2008 and ending
December 31, 2010. As of September 30, 2008, performance-based compensation cost for the three and
nine month periods ended was less than $.1 million. As of September 30, 2008, performance-based
restricted stock awards are expected to be recognized over a period of 2.25 years. In the event of
a Change in Control, vesting of the restricted stock will be accelerated and all restrictions will
lapse. Unvested performance-based awards are based on a maximum potential payout. Actual shares
awarded at the end of the performance period may be less than the maximum potential payout level
depending on achievement of performance-based award objectives.
12
To satisfy the vesting of its restricted stock awards, the Company has reserved new shares from its
authorized but unissued shares. Any additional granted awards will also be issued from the
Companys authorized but unissued shares. Under the LTIP Plan there are 356,361 common shares
currently available for additional grants.
NOTE G FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 157, Fair Value Measurements (SFAS 157). This standard defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. This standard does not require new fair
value measurements; however, the application of this standard may change current practice for an
entity. This standard was effective for financial statements issued for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal periods. This standard enables the
reader of the financial statements to assess the inputs used to develop those measurements by
establishing a hierarchy for ranking the quality and reliability of the information used to
determine fair values. The standard requires that assets and liabilities carried at fair value to
be classified and disclosed in one of the following three categories: Level 1: Quoted market prices
in active markets for identical assets or liabilities; Level 2: Observable market based inputs or
unobservable inputs that are corroborated by market data; or Level 3: Unobservable inputs that are
not corroborated by market data.
In February 2008, the FASB issued FAS No. 157-1, Application of FASB Statement No. 157 to FASB
Statement No. 13 and Other Accounting Pronouncements that Address Fair Value Measurements for
Purposes of Lease Classification or Measurement under Statement 13 (FSP 157-1). This FSP 157-1
amends SFAS No. 157, Fair Value Measurements, to exclude FASB Statement No. 13, Accounting for
Leases, and other accounting pronouncements that address fair value measurements for purposes of
lease classification or measurement under Statement 13. This FSP was effective upon the
initial adoption of SFAS No. 157.
In February 2008, the FASB issued FASB Staff Position No. 157-2 , Effective Date of FASB Statement
No. 157 (FSP 157-2), which delays the effective date of SFAS 157 for all nonrecurring fair value
measurements of nonfinancial assets and nonfinancial liabilities until fiscal years beginning after
November 15, 2008. FSP 157-2 states that a measurement is recurring if it happens at least
annually and defines nonfinancial assets and nonfinancial liabilities as all assets and liabilities
other than those meeting the definition of a financial asset or financial liability in SFAS No.
159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment
to FAS No. 115 (SFAS 159). The Company adopted FSP 157-2 as of January 1, 2008 as it relates to
financial assets and financial liabilities and its adoption did not have an impact on its
consolidated financial statements. The Company is currently evaluating the impact that the
adoption of SFAS 157, as it relates to nonfinancial assets and liabilities, will have on its
consolidated financial results.
In February 2007, the FASB issued SFAS 159. This standard permits entities to measure certain
financial instruments and certain other items at fair value. The fair value option established by
this standard permits all entities to choose to measure eligible items at fair value at specified
election dates. A business entity shall report unrealized gains and losses on items for which the
fair values option has been elected at each subsequent reporting period. The fair value option
election is irrevocable, unless a new election date occurs. SFAS 159 establishes presentation and
disclosure requirements to help financial statement users understand the effect of the entitys
election on earnings, but does not eliminate disclosure requirements of other accounting standards.
This standard is effective as of the beginning of the first fiscal year that begins after November
15, 2007. The Company adopted this standard on January 1, 2008 and did not elect to measure any
additional financial instruments or other items at fair value.
NOTE H RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In October 2008, the FASB issued FSP 157-3 Determining Fair Value of a Financial Asset in a Market
That Is Not Active (FSP 157-3). FSP 157-3 clarified the application of SFAS No. 157 in an inactive
market. It demonstrated how the fair value of a financial asset is determined when the market for
that financial asset is inactive. FSP 157-3 was effective upon issuance, including prior periods
for which financial statements had not been issued. The implementation of this standard did not
have an impact on the Companys consolidated financial position and results of operations.
13
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles (SFAS 162). SFAS 162 identifies the sources of accounting principles and the framework
for selecting the principles used in the preparation of financial statements. SFAS 162 will be
effective 60 days following the Securities and Exchange Commissions approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles. The Company does not expect the
adoption of this standard to have an impact on its financial position, results of operations, or
cash flows.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities (SFAS 161). SFAS 161 requires companies with derivative instruments to disclose
information on how derivative instruments and related hedged items are accounted for under SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, and how derivative instruments
and related hedged items affect a Companys financial position, financial performance and cash
flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. The Company is currently evaluating the potential impact, if
any, of the adoption of SFAS 161 on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51 (SFAS 160). This standard amends ARB No. 51 to establish
accounting and reporting for the noncontrolling interest in a subsidiary and for deconsolidation of
a subsidiary. It also amends certain of ARB No. 51s consolidation procedures for consistency with
the requirements of FASB Statement No. 141 (revised 2007), Business Combinations. This standard
is effective for financial statements issued for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008.
In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS 141R). SFAS 141R
revises the principles and requirements for how the acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree, and the goodwill acquired in a business combination or gain from a
bargain purchase. SFAS 141R also revises the principles and requirements for how the acquirer
determines what information to disclose to enable users of the financial statements to evaluate the
nature and financial effects of the business combination. This pronouncement is effective for the
Company as of January 1, 2009.
Both standards, SFAS 160 and 141R, will be applied prospectively to future business combinations
entered into beginning in 2009. Certain provisions of SFAS 160 relating to presentation of
noncontrolling interests in consolidated balance sheets and statements of consolidated income are
required to be adopted retrospectively.
In April 2008, the FASB issued FASB Staff Position No. FAS 142-3, Determination of the Useful Life
of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142). The intent
of FSP 142-3 is to improve the consistency between the useful life of a recognized intangible asset
under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset
under SFAS 141R and other U.S. generally accepted accounting principles. FSP 142-3 applies
prospectively to business combinations for which the acquisition date is on or after the beginning
of the first annual reporting period beginning December 15, 2008.
NOTE I SEGMENT INFORMATION
The following table presents a summary of the Companys reportable segments for the three and nine
month periods ended September 30, 2008 and 2007. During the second quarter of 2008, the Company
sold its Superior Modular Products (SMP) segment. Therefore the Company has reevaluated its
reportable segments. Accordingly, the Company has added Poland, as a reportable segment, which is
comprised of the Companys Belos SA (Belos) operation in Poland. Current year and prior year
amounts have been restated to reflect the seven reportable segments. Financial results for the
PLP-USA segment include the elimination of all segments intercompany profit in inventory.
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month periods ended September 30, |
|
|
Nine month periods ended September 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLP-USA |
|
$ |
30,021 |
|
|
$ |
24,995 |
|
|
$ |
85,725 |
|
|
$ |
79,001 |
|
Australia |
|
|
7,754 |
|
|
|
7,956 |
|
|
|
22,442 |
|
|
|
21,721 |
|
Brazil |
|
|
8,244 |
|
|
|
7,396 |
|
|
|
24,183 |
|
|
|
18,738 |
|
South Africa |
|
|
3,416 |
|
|
|
2,562 |
|
|
|
7,553 |
|
|
|
5,832 |
|
Canada |
|
|
2,613 |
|
|
|
2,781 |
|
|
|
7,685 |
|
|
|
7,721 |
|
Poland |
|
|
6,984 |
|
|
|
1,595 |
|
|
|
16,358 |
|
|
|
1,595 |
|
All Other |
|
|
14,920 |
|
|
|
13,128 |
|
|
|
45,233 |
|
|
|
35,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
73,952 |
|
|
$ |
60,413 |
|
|
$ |
209,179 |
|
|
$ |
170,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLP-USA |
|
$ |
1,774 |
|
|
$ |
1,470 |
|
|
$ |
6,005 |
|
|
$ |
4,511 |
|
Australia |
|
|
454 |
|
|
|
15 |
|
|
|
1,083 |
|
|
|
98 |
|
Brazil |
|
|
517 |
|
|
|
335 |
|
|
|
801 |
|
|
|
1,262 |
|
South Africa |
|
|
80 |
|
|
|
205 |
|
|
|
139 |
|
|
|
637 |
|
Canada |
|
|
492 |
|
|
|
21 |
|
|
|
1,716 |
|
|
|
54 |
|
Poland |
|
|
(3 |
) |
|
|
12 |
|
|
|
212 |
|
|
|
12 |
|
All Other |
|
|
1,720 |
|
|
|
2,408 |
|
|
|
5,193 |
|
|
|
7,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intersegment sales |
|
$ |
5,034 |
|
|
$ |
4,466 |
|
|
$ |
15,149 |
|
|
$ |
13,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLP-USA |
|
$ |
2,935 |
|
|
$ |
2,200 |
|
|
$ |
5,284 |
|
|
$ |
5,085 |
|
Australia |
|
|
245 |
|
|
|
491 |
|
|
|
478 |
|
|
|
1,089 |
|
Brazil |
|
|
327 |
|
|
|
762 |
|
|
|
903 |
|
|
|
1,607 |
|
South Africa |
|
|
706 |
|
|
|
369 |
|
|
|
1,620 |
|
|
|
992 |
|
Canada |
|
|
435 |
|
|
|
448 |
|
|
|
1,276 |
|
|
|
1,128 |
|
Poland |
|
|
764 |
|
|
|
117 |
|
|
|
1,369 |
|
|
|
117 |
|
All Other |
|
|
1,045 |
|
|
|
1,109 |
|
|
|
3,197 |
|
|
|
2,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income from continuing operations |
|
$ |
6,457 |
|
|
$ |
5,496 |
|
|
$ |
14,127 |
|
|
$ |
12,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued
operations, net of tax |
|
|
(34 |
) |
|
|
96 |
|
|
|
735 |
|
|
|
143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
6,423 |
|
|
$ |
5,592 |
|
|
$ |
14,862 |
|
|
$ |
12,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
Identifiable assets |
|
|
|
|
|
|
|
|
PLP-USA |
|
$ |
76,818 |
|
|
$ |
70,535 |
|
Australia |
|
|
23,947 |
|
|
|
25,122 |
|
Brazil |
|
|
19,745 |
|
|
|
18,022 |
|
South Africa |
|
|
6,801 |
|
|
|
4,901 |
|
Canada |
|
|
9,493 |
|
|
|
8,672 |
|
Poland |
|
|
17,880 |
|
|
|
13,238 |
|
All Other |
|
|
56,659 |
|
|
|
51,188 |
|
Discontinued operations |
|
|
|
|
|
|
12,188 |
|
|
|
|
|
|
|
|
Total identifiable assets |
|
$ |
211,343 |
|
|
$ |
203,866 |
|
|
|
|
|
|
|
|
NOTE J INCOME TAXES
The Companys effective tax rate was 30% and 33% for the three month periods ended September 30,
2008 and 2007, respectively, and 31% and 36% for nine month periods ended September 30, 2008 and
2007, respectively. The lowered effective tax rate for both periods ending September 30, 2008 is
primarily due to increased earnings in foreign jurisdictions with lower tax rates and a decrease in
unrecognized tax benefits for uncertain tax positions.
The Company provides valuation allowances against deferred tax assets when it is more likely than
not that some portion, or all of its deferred tax assets will not be realized.
As of September 30, 2008, the Company has gross unrecognized tax positions including the accrual of
interest and penalties of approximately $1.3 million. Under the provisions of FASB Interpretation
No. 48, Accounting for Uncertainty in Income Taxes the Company may decrease its unrecognized tax
benefits by $.4 million within the next twelve months due to the potential expiration of statutes
of limitations. The Company recognized $.7 million of tax benefits as a result in the lapse of
statutes of limitations for three month period ended September 30, 2008.
15
NOTE K BUSINESS COMBINATIONS
On March 22, 2007, the Company acquired all of the issued and outstanding shares of Direct Power
and Water Corporation (DPW) for $3 million, subject to a holdback of $.4 million. DPW is a New
Mexico company that designs and installs solar systems and manufactures, mounting hardware,
battery, and equipment enclosures. The holdback of $.4 million is held as security for the sellers
indemnity obligations. Depending on the post-closing performance of DPW, earn outs may be paid to
the sellers for each of the three years following the closing date of acquisition. The Company has
recorded an earn out payment of $.4 million as a liability in the purchase price allocation.
The Companys consolidated balance sheets reflect the acquisition of DPW under the purchase method
of accounting. The following table summarizes the estimated fair values of the assets acquired and
liabilities assumed at the date of acquisition. The purchase price allocation has been finalized.
|
|
|
|
|
Current assets |
|
$ |
1,474 |
|
Property and equipment |
|
|
289 |
|
Goodwill |
|
|
1,756 |
|
Other intangibles |
|
|
944 |
|
|
|
|
|
Total assets acquired |
|
|
4,463 |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
(1,045 |
) |
Deferred income taxes |
|
|
(418 |
) |
|
|
|
|
Total liabilities assumed |
|
|
(1,463 |
) |
|
|
|
|
|
|
|
|
|
Net assets acquired |
|
$ |
3,000 |
|
|
|
|
|
On September 6, 2007, the Company acquired approximately 83.74% of the issued and outstanding
shares of Belos for $6 million plus contingent consideration depending on the post-closing
performance of Belos in the year following the closing. The Company recorded a current liability of
$2.7 million related to contingent consideration. Belos is a Polish company that manufactures and
supplies fittings for low, medium, and high voltage power networks in its domestic and export
markets.
16
The Companys consolidated balance sheets reflect the acquisition of Belos under the purchase
method of accounting. Since the cost of the acquired business including the contingent
consideration exceeded the fair value assigned to assets acquired and liabilities assumed, the
Company recorded goodwill of $1.2 million as part of the final purchase price allocation. The
following table summarizes the assigned fair values of the assets acquired and liabilities assumed
at the date of acquisition. The purchase price allocation has been finalized.
|
|
|
|
|
Current assets |
|
$ |
6,088 |
|
Property and equipment |
|
|
5,341 |
|
Goodwill |
|
|
1,196 |
|
Other intangibles |
|
|
1,041 |
|
Other assets |
|
|
437 |
|
|
|
|
|
Total assets acquired |
|
|
14,103 |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
(2,744 |
) |
Long term debt, less current portion |
|
|
(112 |
) |
Other non-current liabilities and deferred taxes |
|
|
(1,585 |
) |
Minority interest |
|
|
(850 |
) |
|
|
|
|
Total liabilities assumed |
|
|
(5,291 |
) |
|
|
|
|
|
|
|
|
|
Net assets acquired |
|
$ |
8,812 |
|
|
|
|
|
Of the acquired intangibles, $1 million consists of land use rights with a useful life of 82.25
years and less than $.1 million for certain customer contracts with a useful life of one year.
On May 21, 2008, the Company entered into a Joint Venture Agreement for $.3 million to form a joint
venture between the Companys Australian subsidiary, Preformed Line Products Australia Pty Ltd
(PLP-AU) and BlueSky Energy Pty Ltd, a solar systems integration and installation business based in
Sydney, Australia. PLP-AU holds a 50% ownership interest in the new joint venture company, which
will operate under the name BlueSky Energy Australia (BlueSky), with the option to acquire the
remaining 50% ownership interest from BlueSky Energy Pty Ltd over the next five years. BlueSky
Energy Pty Ltd has transferred technology and assets to the joint venture. The Companys
consolidated balance sheet as of September 30, 2008 reflects the acquisition of the joint venture
under the purchase method of accounting. The allocation of the purchase price has not yet been
finalized as the valuation of intangibles has not been completed.
NOTE L DISCONTINUED OPERATIONS
On May 30, 2008, the Company sold its SMP subsidiary for $11.7 million and recognized a $.5 million
gain, net of tax, which includes expenses incurred related to the divestiture of SMP, subject to
the finalization of working capital adjustments and a holdback of $1.5 million to be held in escrow
for a period of one year. The Company does not provide any significant continuing involvement in
the operations of SMP.
The sale of SMP has been accounted for in accordance with SFAS No. 144, Accounting for the
Impairment or Disposal of Long- Lived Assets. Accordingly, operating results of SMP are presented
in the Companys consolidated statements of operations as discontinued operations, net of tax, and
all periods presented have been reclassified. The operation had been reported within the SMP
reporting segment, which is comprised of the U.S. operations supporting the Companys data
communication products. The operating results of the business unit for the three and nine month
periods ended September 30, 2008, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month periods ended September 30, |
|
|
Nine month periods ended September 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
|
|
|
$ |
5,686 |
|
|
$ |
8,308 |
|
|
$ |
15,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
|
|
|
|
160 |
|
|
|
456 |
|
|
|
274 |
|
Provision for income taxes |
|
|
|
|
|
|
(64 |
) |
|
|
(182 |
) |
|
|
(131 |
) |
Gain on sale, net of tax |
|
|
(34 |
) |
|
|
|
|
|
|
461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from discontinued
operations |
|
$ |
(34 |
) |
|
$ |
96 |
|
|
$ |
735 |
|
|
$ |
143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Restatement of third quarter 2007
After the filing of the Companys third quarter 2007 Form 10-Q which included the consolidated
financial statements for the three and nine month periods ended September 30, 2007, the Company
determined that (a) the write-off of goodwill related to its Thailand operations of $.2 million
should have been recorded during the first quarter of 2007, (b) the $.2 million charge related to
the step-up in inventory valuation in the purchase price allocation for the acquisition of Direct
Power and Water Corporation (DPW) on March 22, 2007 should have been recorded during the second
quarter of 2007, and (c) intercompany profit of $.9 million in inventory at September 30, 2007
should not have been recognized in earnings until the inventory was sold to a third party. The $.9
million adjustment consists of $.6 million of profit in inventory remaining at the end of the first
quarter, $.2 million of profit in inventory remaining at the end of the second quarter, and $.1
million of profit in inventory remaining at the end of third quarter. As a result, the Company has
restated the accompanying consolidated financial statements for the three and nine month periods
ended September 30, 2007.
OVERVIEW
Preformed Line Products Company and its subsidiaries (the Company, PLPC, we, us, or our)
is 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 and mounting hardware for a variety of solar power applications. Our goal is to continue to
achieve profitable growth as a leader in the innovation, development, manufacture, and marketing of
technically advanced products and services related to energy, communications, and cable systems and
to take advantage of this leadership position to sell additional quality products in familiar
markets.
The reportable segments are PLP-USA, Australia, Brazil, South Africa, Canada, Poland, and All
Other. Our PLP-USA segment is comprised of our U.S. operations primarily supporting our domestic
energy and telecommunications products. The Australia segment is comprised of all of our operations
in Australia supporting energy, telecommunications, data communications and solar products. Our
Brazil, South Africa, and Canada segments are comprised of the manufacturing and sales operations
from those locations which meet at least one of the criteria of a reportable segment. Our final
segment is Poland, which is comprised of a manufacturing and sales operation, and has been included
as a segment to comply with reporting segments for 75% of consolidated sales. Our remaining
operations are included in All Other as none of these operations meet the criteria for a reportable
segment and individually represent less that 10% for each of our combined net sales, net income,
and assets.
DISCONTINUED OPERATION
Our consolidated financial statements were impacted by the divestiture of Superior Modular Products
(SMP) on May 30, 2008. We sold our SMP subsidiary for
$11.7 million and recognized a $.5 million gain, net of tax, on the sale of the business, which includes
expenses incurred related to the divestiture of SMP, and a holdback of $1.5 million to be held in
escrow for a period of one year. We have not provided any significant continuing involvement in the
operations of SMP after the closing of the sale. For tax purposes, the sale of SMP generated a
capital loss, which was not deductible except for amounts used to offset capital gains in the
current year and from a preceding year. A full valuation allowance was provided against the
deferred tax asset on the remaining portion of the capital loss carryover.
The operating results of SMP are presented in our consolidated statements of operations as
discontinued operations, net of tax, and all periods presented have been reclassified. For the
three month period ended September 30, 2008, income (loss) from discontinued operations was less
than $(.1) million, or $(.01) per diluted share, compared to income of $.1 million, or $.02 per
diluted share, for the same period in 2007. Income from discontinued operations for the nine month
period ended September 30, 2008 was $.7 million, or $.14 per diluted share, compared to income from
discontinued operations of $.1 million, or $.02 per diluted share, for the same period in 2007.
18
Preface
Our net sales for the three month period ended September 30, 2008 increased $13.5 million, or 22%,
and gross profit increased $4 million, or 19%, compared to the same period in 2007. The favorable
impact of the change in the conversion rate of local currencies to U.S. dollars for the three month
period ended September 30, 2008 compared to the same period in 2007 contributed $1.7 million to the
increase in net sales. Our net sales for the three month period ended September 30, 2008 increased
$5.4 million as a result of the acquisition of Belos SA (Belos) located in Poland in the third
quarter of 2007. Additionally, PLP-USA net sales increased $5 million for the three month period
ended September 30, 2008 compared to the same period in 2007. Gross profit for the three month
period ended September 30, 2008 increased $4 million, or 19%, primarily as a result of increased
sales but was partially offset by a $2.9 million, a 22% increase in costs and expenses when
compared to the same period in 2007. As a result, income from continued operations of $6.5
million, or $1.23 per diluted share, increased $1 million, or $.22 per diluted share, compared to
the three month period ended September 30, 2007.
Our net sales for the nine month period ended September 30, 2008 increased $38.7 million, or 23%,
and gross profit increased $9.4 million, or 16%, compared to the same period in 2007. The
favorable impact of the change in the conversion rate of local currencies to U.S. dollars for the
nine month period ended September 30, 2008 compared to the same period in 2007, contributed $8.4
million to the increase in net sales. Our net sales were affected by the acquisition of Belos late
in the third quarter of 2007, resulting in an increase in net sales of $14.8 million.
Additionally, PLP-USA and South Africa net sales combined increased $9 million for the nine month
period ended September 30, 2008 compared to the same period in 2007. Gross profit for the nine
month period ended September 30, 2008 increased $9.4 million as a result of increased sales but was
partially offset by a $7.5 million, or 19%, increase in costs and expenses. As a result, income
from continued operations of $14.1 million, or $2.64 per diluted share, increased $2 million, $.39
per diluted share, compared to the nine month period ended September 30, 2007.
THREE MONTH PERIOD ENDED SEPTEMBER 30, 2008 COMPARED TO THREE MONTH PERIOD ENDED SEPTEMBER 30, 2007
Net Sales. For the three month period ended September 30, 2008, net sales were $74 million, an
increase of $13.5 million, or 22%, from the same period in 2007 as summarized in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month periods ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion |
|
|
Net |
|
|
Net |
|
thousands of dollars |
|
2008 |
|
|
2007 |
|
|
Change |
|
|
rate changes |
|
|
change |
|
|
change |
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLP-USA |
|
$ |
30,021 |
|
|
$ |
24,995 |
|
|
$ |
5,026 |
|
|
$ |
|
|
|
$ |
5,026 |
|
|
|
20 |
% |
Australia |
|
|
7,754 |
|
|
|
7,956 |
|
|
|
(202 |
) |
|
|
422 |
|
|
|
(624 |
) |
|
|
(8 |
) |
Brazil |
|
|
8,244 |
|
|
|
7,396 |
|
|
|
848 |
|
|
|
1,114 |
|
|
|
(266 |
) |
|
|
(4 |
) |
South Africa |
|
|
3,416 |
|
|
|
2,562 |
|
|
|
854 |
|
|
|
(273 |
) |
|
|
1,127 |
|
|
|
44 |
|
Canada |
|
|
2,613 |
|
|
|
2,781 |
|
|
|
(168 |
) |
|
|
6 |
|
|
|
(174 |
) |
|
|
(6 |
) |
Poland |
|
|
6,984 |
|
|
|
1,595 |
|
|
|
5,389 |
|
|
|
|
|
|
|
5,389 |
|
|
NM |
|
All Other |
|
|
14,920 |
|
|
|
13,128 |
|
|
|
1,792 |
|
|
|
478 |
|
|
|
1,314 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
73,952 |
|
|
$ |
60,413 |
|
|
$ |
13,539 |
|
|
$ |
1,747 |
|
|
$ |
11,792 |
|
|
|
20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM not meaningful
The increase in PLP-USA net sales of $5 million, or 20%, was due to sales volume increases of $4.5
million and price/mix increases of $.5 million primarily related to our energy sales. We
anticipate a slight increase in sales for the remainder of 2008, although we believe PLP-USA sales
for the year will continue to be impacted by the slowing economy and housing market. Excluding the
effect of currency conversion, Australia net sales decreased $.6 million, or 8%, primarily as a
result of lower energy volume sales compared to the same period in 2007. Excluding the effect of
currency conversion, Brazil net sales decreased $.3 million, or 4%, primarily as a result of
decreased energy and data communication sales offset by
increased telecommunication sales. Excluding the effect of currency conversion, South Africa net
sales increased $1.1 million, or 44%, due to increased sales volume in the energy market. Canada
net sales decreased $.2 million, or 6%, due to lower sales volume within their markets. Poland net
sales of $7 million increased $5.4 million due to the inclusion of Belos in our consolidated
results for the three month period ended September 30, 2008, as compared to inclusion of less than one month
in the same period of 2007. Excluding the effect of currency conversion, All Other net sales
increased $1.3 million, or 10%, compared to 2007, primarily as a result of a $.5 million favorable
impact of the change in the conversion rate of local currencies to U.S. dollars for the three month
period ended September 30, 2008 compared to the same period in 2007 and an increase in energy sales
volume. We continue to see competitive pricing pressures globally which will continue to impact
sales and profitability.
19
Gross profit. Gross profit of $25.5 million for the three month period ended September 30, 2008
increased $4 million, or 19%, compared to the same period in 2007 as summarized in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month periods ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion |
|
|
Net |
|
|
Net |
|
thousands of dollars |
|
2008 |
|
|
2007 |
|
|
Change |
|
|
rate changes |
|
|
change |
|
|
change |
|
|
|
|
|
|
(restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLP-USA |
|
$ |
10,730 |
|
|
$ |
9,171 |
|
|
$ |
1,559 |
|
|
$ |
|
|
|
$ |
1,559 |
|
|
|
17 |
% |
Australia |
|
|
2,603 |
|
|
|
2,599 |
|
|
|
4 |
|
|
|
144 |
|
|
|
(140 |
) |
|
|
(5 |
) |
Brazil |
|
|
2,484 |
|
|
|
2,375 |
|
|
|
109 |
|
|
|
331 |
|
|
|
(222 |
) |
|
|
(9 |
) |
South Africa |
|
|
1,456 |
|
|
|
1,044 |
|
|
|
412 |
|
|
|
(117 |
) |
|
|
529 |
|
|
|
51 |
|
Canada |
|
|
1,144 |
|
|
|
1,264 |
|
|
|
(120 |
) |
|
|
2 |
|
|
|
(122 |
) |
|
|
(10 |
) |
Poland |
|
|
2,174 |
|
|
|
360 |
|
|
|
1,814 |
|
|
|
|
|
|
|
1,814 |
|
|
NM |
|
All Other |
|
|
4,872 |
|
|
|
4,625 |
|
|
|
247 |
|
|
|
209 |
|
|
|
38 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
25,463 |
|
|
$ |
21,438 |
|
|
$ |
4,025 |
|
|
$ |
569 |
|
|
$ |
3,456 |
|
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM not meaningful
PLP-USA gross profit of $10.7 million for the three month period ended September 30, 2008 increased
$1.6 million, or 17%, compared to the same period in 2007. PLP-USA gross profit increased $2.4
million due to higher net sales and lower per unit manufacturing costs partially offset by $.8
million in increased product costs primarily as a result of higher material costs. Australia gross
profit remained flat as a result of the favorable impact of converting local currency into U.S.
dollars compared to the third quarter 2007 conversion rates and a decrease in gross profit due to
lower net sales. Brazil gross profit increased $.1 million as a result of a $.3 million favorable
impact when local currency was converted to U.S. dollars compared to the third quarter 2007
conversion rates. Excluding the effect of currency conversion, South Africa gross profit increased
$.5 million due to increased sales partially offset by higher material costs. Excluding the effect
of currency conversion, Canada gross profit decreased $.1 million primarily due to lower net sales.
An increase of $1.8 million of our consolidated gross profit is as a result of the inclusion of
Poland gross profit for the full three month period ended September 30, 2008. All Other gross
profit increased $.2 million primarily due to increased sales and a favorable impact due to the
change in conversion rates compared to the same period in 2007 when certain currencies were
converted to U.S. dollars.
20
Cost and expenses. Cost and expenses for the three month period ended September 30, 2008 increased
$2.9 million, or 22%, compared to the same period in 2007 as summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month periods ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion |
|
|
Net |
|
|
Net |
|
thousands of dollars |
|
2008 |
|
|
2007 |
|
|
Change |
|
|
rate changes |
|
|
change |
|
|
change |
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLP-USA |
|
$ |
8,117 |
|
|
$ |
7,032 |
|
|
$ |
1,085 |
|
|
$ |
|
|
|
$ |
1,085 |
|
|
|
15 |
% |
Australia |
|
|
1,921 |
|
|
|
1,469 |
|
|
|
452 |
|
|
|
95 |
|
|
|
357 |
|
|
|
24 |
|
Brazil |
|
|
1,750 |
|
|
|
1,284 |
|
|
|
466 |
|
|
|
224 |
|
|
|
242 |
|
|
|
19 |
|
South Africa |
|
|
345 |
|
|
|
373 |
|
|
|
(28 |
) |
|
|
(27 |
) |
|
|
(1 |
) |
|
|
|
|
Canada |
|
|
407 |
|
|
|
441 |
|
|
|
(34 |
) |
|
|
2 |
|
|
|
(36 |
) |
|
|
(8 |
) |
Poland |
|
|
894 |
|
|
|
192 |
|
|
|
702 |
|
|
|
|
|
|
|
702 |
|
|
NM |
|
All Other |
|
|
2,871 |
|
|
|
2,580 |
|
|
|
291 |
|
|
|
86 |
|
|
|
205 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
16,305 |
|
|
$ |
13,371 |
|
|
$ |
2,934 |
|
|
$ |
380 |
|
|
$ |
2,554 |
|
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM not meaningful
The increase in PLP-USA costs and expenses of $1.1 million was primarily due to an increase in
personnel related costs and professional fees partially offset by a reduction in advertising and
promotional expense. Australia costs and expenses primarily changed due to higher personnel
expenses and additional personnel due to the BlueSky Energy Pty Ltd (BlueSky) acquisition on May
21, 2008. Brazil and South Africas costs and expenses increased primarily due to higher personnel
related costs. Canada costs and expenses primarily changed due to the impact when certain local
currencies were converted to U.S. dollars compared to the third quarter 2007 conversion rates.
Poland costs and expenses increased $.7 million due to the acquisition of Belos in the third
quarter of 2007. All Other costs and expenses increased primarily due to a $.2 million increase in
personnel related expenses.
Operating income. Our operating income of $9.2 million for the three month period ended September
30, 2008 increased $1.1 million, or 14%, compared to the same period in 2007 primarily due to the
$4 million increase in gross profit partially offset by the $2.9 million increase in costs and
expenses. PLP-USA operating income of $3.8 million increased $.5 million, or 15%, primarily due to
the increase in gross profit of $1.6 million partially offset by an increase in costs and expenses.
Australia operating income of $.3 million decreased $.4 million due primarily to an increase in
costs and expenses. Brazil operating income of $.7 million decreased $.3 million as a result of an
increase of $.5 million in costs and expenses partially offset by an increase in gross profit.
South Africa operating income of $1 million increased $.4 million primarily as a result of the $.4
million increase in gross profit. Canada operating income of $.6 million decreased $.1 million
primarily as a result of the $.1 million decrease in gross profit. Poland operating income of $1.3
million was a result of their $2.2 million of gross profit being offset by $.9 million in costs and
expenses. All Other operating income of $1.5 million remained relatively unchanged compared to the
same period in 2007.
Other income. Other income (expense) for the three month period ended September 30, 2008 of $.3
million remains relatively flat compared to the same period in 2007.
Income
taxes. Income tax expenses from continuing operations for the
three month period ended September
30, 2008 of $2.8 million were $.1 million higher than the same period in 2007. The effective tax
rate for the three month period ended September 30, 2008 was 30% compared to 33% in 2007. The effective
tax rate for three month period ended September 30, 2008 is lower than the statutory federal rate of 34%
primarily due to increased earnings in jurisdictions with lower tax rates and a decrease in
unrecognized tax benefits for uncertain tax positions.
21
Income from continuing operations. As a result of the preceding items, income from continuing
operations for the three month period ended September 30, 2008 was $6.5 million, or $1.23 per
diluted share, compared to income from continuing operations of $5.5 million, or $1.01 per diluted
share, for the same period in 2007 as summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month periods ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion |
|
|
Net |
|
|
Net |
|
thousands of dollars |
|
2008 |
|
|
2007 |
|
|
Change |
|
|
rate changes |
|
|
change |
|
|
change |
|
|
|
|
|
|
(restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLP-USA |
|
$ |
2,935 |
|
|
$ |
2,200 |
|
|
$ |
735 |
|
|
$ |
|
|
|
$ |
735 |
|
|
|
33 |
% |
Australia |
|
|
245 |
|
|
|
491 |
|
|
|
(246 |
) |
|
|
19 |
|
|
|
(265 |
) |
|
|
(54 |
) |
Brazil |
|
|
327 |
|
|
|
762 |
|
|
|
(435 |
) |
|
|
51 |
|
|
|
(486 |
) |
|
|
(64 |
) |
South Africa |
|
|
706 |
|
|
|
369 |
|
|
|
337 |
|
|
|
(57 |
) |
|
|
394 |
|
|
|
107 |
|
Canada |
|
|
435 |
|
|
|
448 |
|
|
|
(13 |
) |
|
|
|
|
|
|
(13 |
) |
|
|
(3 |
) |
Poland |
|
|
764 |
|
|
|
117 |
|
|
|
647 |
|
|
|
|
|
|
|
647 |
|
|
NM |
|
All Other |
|
|
1,045 |
|
|
|
1,109 |
|
|
|
(64 |
) |
|
|
84 |
|
|
|
(148 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
6,457 |
|
|
$ |
5,496 |
|
|
$ |
961 |
|
|
$ |
97 |
|
|
$ |
864 |
|
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM not meaningful
PLP-USA income from continuing operations of $2.9 million increased $.7 million compared to the
same period in 2007 as a result of the $.5 million increase in operating income and a reduction in
income tax expense. Australia income from continuing operations of $.2 million decreased $.2
million primarily due to the $.4 million decrease in operating income being partially offset by
lower income tax expense. Brazil income from continuing operations of $.3 million decreased $.4
primarily as a result of a decrease in operating income. South Africa income from continuing
operations of $.7 million increased $.3 million as a result of the $.4 million increase in
operating profit being partially off set by higher income tax expense. Canada income from
continuing operations remained flat as a result of the $.1 million decrease in operating income
with a corresponding reduction in income tax expense. Poland income from continuing operations of
$.8 million is a result of $1.3 million in operating income being partially offset by income tax
expense and minority interest of $.5 million. All Other income from continuing operations of $1
million decreased $.1 million primarily as a result of a decrease in operating income compared to
the same period in 2007.
22
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2008 COMPARED TO NINE MONTH PERIOD ENDED SEPTEMBER 30, 2007
Net Sales. For the nine month period ended September 30, 2008, net sales were $209.2 million, an
increase of $38.7 million, or 23%, from the same period in 2007 as summarized in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine month periods ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion |
|
|
Net |
|
|
Net |
|
thousands of dollars |
|
2008 |
|
|
2007 |
|
|
Change |
|
|
rate changes |
|
|
change |
|
|
change |
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLP-USA |
|
$ |
85,725 |
|
|
$ |
79,001 |
|
|
$ |
6,724 |
|
|
$ |
|
|
|
$ |
6,724 |
|
|
|
9 |
% |
Australia |
|
|
22,442 |
|
|
|
21,721 |
|
|
|
721 |
|
|
|
2,281 |
|
|
|
(1,560 |
) |
|
|
(7 |
) |
Brazil |
|
|
24,183 |
|
|
|
18,738 |
|
|
|
5,445 |
|
|
|
3,814 |
|
|
|
1,631 |
|
|
|
9 |
|
South Africa |
|
|
7,553 |
|
|
|
5,832 |
|
|
|
1,721 |
|
|
|
(627 |
) |
|
|
2,348 |
|
|
|
40 |
|
Canada |
|
|
7,685 |
|
|
|
7,721 |
|
|
|
(36 |
) |
|
|
564 |
|
|
|
(600 |
) |
|
|
(8 |
) |
Poland |
|
|
16,358 |
|
|
|
1,595 |
|
|
|
14,763 |
|
|
|
|
|
|
|
14,763 |
|
|
NM |
|
All Other |
|
|
45,233 |
|
|
|
35,856 |
|
|
|
9,377 |
|
|
|
2,353 |
|
|
|
7,024 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
209,179 |
|
|
$ |
170,464 |
|
|
$ |
38,715 |
|
|
$ |
8,385 |
|
|
$ |
30,330 |
|
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM not meaningful
PLP-USA net sales increased $6.7 million, or 9%. The increase in PLP-USA sales is due to both
volume and price/mix increases related primarily to energy sales. This increase in energy sales
volume was partially offset by a decrease in the communications market. Excluding the effect of
currency conversion, Australia net sales decreased $1.6 million, or 7%, primarily due to lower
energy sales volume. Excluding the effect of currency conversion, Brazil net sales increased $1.6
million, or 9% primarily due to increased volume in the energy and telecommunication markets.
Excluding the effect of currency conversion, South Africa net sales increased $2.3 million, or 40%,
primarily due to a result of increased sales volume in the energy market. Excluding the effect of
currency conversion, Canada net sales decreased $.6 million as a result of lower communication
sales volume. Belos, our Polish operation, was acquired in September 2007. Poland net sales of
$16.4 million were included in our consolidated results for the nine month period ended September
30, 2008, but only $1.6 million was included in the nine month period ended in 2007. Excluding the
effect of currency conversion, All Other net sales increased $7 million primarily a result of a $2
million increase in energy sales volume compared to the same period in 2007 and the inclusion of
DPW sales in our consolidated results for the entire nine month period ended September 30, 2008
versus just four months in the nine month period ended September 30, 2007.
23
Gross profit. Gross profit of $68.1 million for the nine month period ended September 30, 2008
increased $9.4 million, or 16%, compared to the same period in 2007 as summarized in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine month periods ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion |
|
|
Net |
|
|
Net |
|
thousands of dollars |
|
2008 |
|
|
2007 |
|
|
Change |
|
|
rate changes |
|
|
change |
|
|
change |
|
|
|
|
|
|
(restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLP-USA |
|
$ |
28,414 |
|
|
$ |
27,078 |
|
|
$ |
1,336 |
|
|
$ |
|
|
|
$ |
1,336 |
|
|
|
5 |
% |
Australia |
|
|
6,976 |
|
|
|
7,020 |
|
|
|
(44 |
) |
|
|
697 |
|
|
|
(741 |
) |
|
|
(11 |
) |
Brazil |
|
|
5,998 |
|
|
|
5,790 |
|
|
|
208 |
|
|
|
927 |
|
|
|
(719 |
) |
|
|
(12 |
) |
South Africa |
|
|
3,444 |
|
|
|
2,585 |
|
|
|
859 |
|
|
|
(288 |
) |
|
|
1,147 |
|
|
|
44 |
|
Canada |
|
|
3,425 |
|
|
|
3,336 |
|
|
|
89 |
|
|
|
248 |
|
|
|
(159 |
) |
|
|
(5 |
) |
Poland |
|
|
4,605 |
|
|
|
360 |
|
|
|
4,245 |
|
|
|
|
|
|
|
4,245 |
|
|
NM |
|
All Other |
|
|
15,283 |
|
|
|
12,552 |
|
|
|
2,731 |
|
|
|
838 |
|
|
|
1,893 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
68,145 |
|
|
$ |
58,721 |
|
|
$ |
9,424 |
|
|
$ |
2,422 |
|
|
$ |
7,002 |
|
|
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM not meaningful
PLP-USA gross profit of $28.4 million for the nine month period ended September 30, 2008 increased
$1.3 million, or 5%, compared to the same period in 2007. PLP-USA gross profit increased due to
higher net sales and lower per unit manufacturing costs partially offset by higher material costs.
Excluding the effect of currency conversion, Australia gross profit decreased $.7 million due to a
decrease in net sales and higher per unit manufacturing costs offset by lower material costs.
Brazil gross profit increased $.2 million as a result of a $.9 million favorable impact when local
currency was converted to U.S. dollars compared to 2007 conversion rates and increased sales volume
of $1.3 million. These gross profit increases were offset by higher material costs, an increase in
per unit manufacturing related costs, and a favorable excess and obsolescence reserve adjustment of
$.6 million included in the nine month period ended September 30, 2007.
During 2007, managements comprehensive review of the components of our Brazilian operations
excess and obsolescence reserve calculation revealed that the details of the reserve account
included an inappropriate reserve of $.6 million at December 31, 2006. Based on the timing of the
completion of certain aspects of this review, we recorded a $.4 million adjustment in the first
quarter of 2007 and an additional adjustment of $.2 million in the second quarter of 2007 related
to the excess and obsolete reserve at December 31, 2006. Excluding the effect of currency
conversion, South Africa gross profit of $3.4 million increased $1.1 million due to increased sales
and improved product margins. Excluding the effect of currency conversion, Canada gross profit of
$3.4 million decreased $.2 million primarily due to a decrease in sales of $.3 million offset by
lower material costs. Our consolidated gross profit increased $4.3 million as a result of the of
the Poland acquisition, Belos, in September of 2007. Excluding the effect of currency conversion,
All Other gross profit increased $1.9 million primarily as a result of increased sales of $7
million partially offset by increased manufacturing costs.
24
Costs and expenses. Costs and expenses for the nine month period ended September 30, 2008
increased $7.5 million, or 19%, compared to the same period in 2007 as summarized in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine month periods ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion |
|
|
Net |
|
|
Net |
|
thousands of dollars |
|
2008 |
|
|
2007 |
|
|
Change |
|
|
rate changes |
|
|
change |
|
|
change |
|
|
|
|
|
|
(restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLP-USA |
|
$ |
24,405 |
|
|
$ |
22,199 |
|
|
$ |
2,206 |
|
|
$ |
|
|
|
$ |
2,206 |
|
|
|
10 |
% |
Australia |
|
|
5,240 |
|
|
|
4,300 |
|
|
|
940 |
|
|
|
512 |
|
|
|
428 |
|
|
|
10 |
|
Brazil |
|
|
4,281 |
|
|
|
3,293 |
|
|
|
988 |
|
|
|
654 |
|
|
|
334 |
|
|
|
10 |
|
South Africa |
|
|
935 |
|
|
|
931 |
|
|
|
4 |
|
|
|
(75 |
) |
|
|
79 |
|
|
|
8 |
|
Canada |
|
|
1,262 |
|
|
|
1,244 |
|
|
|
18 |
|
|
|
100 |
|
|
|
(82 |
) |
|
|
(7 |
) |
Poland |
|
|
2,375 |
|
|
|
192 |
|
|
|
2,183 |
|
|
|
|
|
|
|
2,183 |
|
|
NM |
|
All Other |
|
|
9,084 |
|
|
|
7,881 |
|
|
|
1,203 |
|
|
|
455 |
|
|
|
748 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
47,582 |
|
|
$ |
40,040 |
|
|
$ |
7,542 |
|
|
$ |
1,646 |
|
|
$ |
5,896 |
|
|
|
15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM not meaningful
PLP-USA costs and expenses increased $2.2 million primarily due to $1.6 million related to an
increase in personnel related expenses, $.8 million in professional fees, and a $.3 million
increase in research and engineering expenses partially offset by a $.5 million decrease in
advertising and sales promotional expense. Excluding the effect of currency conversion, Australia
costs and expenses increased $.4 million due to increased personnel related costs. Excluding the
effect of currency conversion, Brazil costs and expenses increased $.3 million primarily due to
personnel related expenses. Excluding the effect of currency conversion, South Africa costs and
expenses increased primarily due to increased personnel related expenses and travel costs. Poland
costs and expenses increased $2.2 million due to the inclusion of Belos in our consolidated results
for the nine month period ended September 30, 2008 compared to one month for the nine month period
ended September 30, 2007. Excluding the effect of currency conversion, All Other costs and expenses
increased $.7 million, primarily due to $.3 million increase in personnel related expenses and a
$.4 million increase related to the inclusion of DPWs costs and expenses for the nine month period
ended September 30, 2008 compared to the inclusion of only six months in the nine month period
ended September 30, 2007.
Operating income. Operating income of $20.6 million for the nine month period ended September 30,
2008 increased $1.9 million, or 10%, compared to the same period in 2007. This increase was
primarily a result of the $9.4 million increase in gross profit being partially offset by the $7.5
million increase in costs and expenses. PLP-USA operating income of $7.6 million decreased $.6
million primarily as a result of the $2.2 million increase in costs and expenses offset by an
increase in gross profit of $1.3 million and a $.3 million increase in intercompany royalty income.
Australia operating income of $.7 million decreased $1 million compared to the same period in 2007
primarily as a result a decrease in gross profit of $.1 million coupled with an increase of $.9
million in costs and expenses. Brazil operating income of $1.5 million decreased $.8 million
primarily as a result of the $.2 million increase in gross profit offset by an increase of $1
million in costs and expenses. South Africa operating income of $2.2 million increased $.8 million
primarily as a result of the $.9 million improvement in gross profit compared to the same period in
2007. Canada operating income of $1.8 million for the nine month period ended September 30, 2008
remained flat compared to the same period in 2007. Poland operating income of $2.2 million
increased $2.1 million due to Belos being acquired in September 2007. All other operating income
of $4.5 million increased $1.4 million compared to the same period in 2007 primarily as a result of
the $2.7 million increase in gross profit being partially offset by $1.3 million in increased costs
and expenses and $.2 million in intercompany royalty expense.
Other income. Other income of $.4 million for the nine month period ended September 30, 2008
remains relatively flat compared to the same period in 2007.
Income taxes. Income tax expenses from continuing operations for the nine month period ended September
30, 2008 of $6.6 million were $.2 million lower than the same period in 2007. The effective tax
rate for the nine month period ended September 30, 2008 was 31% compared to 36% in 2007. The effective
tax rate for nine month period ended September 30, 2008 is lower than the statutory federal rate of 34%
primarily due to increased earnings in jurisdictions with lower tax rates and to the decrease in
unrecognized tax benefits for uncertain tax positions.
25
Income from continuing operations. As a result of the preceding items, income from continued
operations for the nine month period ended September 30, 2008 was $14.1 million, or $2.64 per
diluted share, compared to income from continuing operations of $12.2 million, or $2.25 per diluted
share, for the same period in 2007 as summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine month periods ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency |
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion |
|
|
Net |
|
|
Net |
|
thousands of dollars |
|
2008 |
|
|
2007 |
|
|
Change |
|
|
rate changes |
|
|
change |
|
|
change |
|
|
|
|
|
|
(restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLP-USA |
|
$ |
5,284 |
|
|
$ |
5,085 |
|
|
$ |
199 |
|
|
$ |
|
|
|
$ |
199 |
|
|
|
4 |
% |
Australia |
|
|
478 |
|
|
|
1,089 |
|
|
|
(611 |
) |
|
|
2 |
|
|
|
(613 |
) |
|
|
(56 |
) |
Brazil |
|
|
903 |
|
|
|
1,607 |
|
|
|
(704 |
) |
|
|
146 |
|
|
|
(850 |
) |
|
|
(53 |
) |
South Africa |
|
|
1,620 |
|
|
|
992 |
|
|
|
628 |
|
|
|
(137 |
) |
|
|
765 |
|
|
|
77 |
|
Canada |
|
|
1,276 |
|
|
|
1,128 |
|
|
|
148 |
|
|
|
83 |
|
|
|
65 |
|
|
|
6 |
|
Poland |
|
|
1,369 |
|
|
|
117 |
|
|
|
1,252 |
|
|
|
|
|
|
|
1,252 |
|
|
NM |
|
All Other |
|
|
3,197 |
|
|
|
2,147 |
|
|
|
1,050 |
|
|
|
205 |
|
|
|
845 |
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
14,127 |
|
|
$ |
12,165 |
|
|
$ |
1,962 |
|
|
$ |
299 |
|
|
$ |
1,663 |
|
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM not meaningful
PLP-USA income from continuing operations of $5.3 million increased $.2 million compared to the
same period in 2007 primarily as a result of the $.6 million decrease in operating income partially
offset by a $.8 million reduction in tax expense. Australia income from continuing operations of
$.5 million decreased $.6 million primarily due to the $1 million decrease in operating income
being partially offset by lower other expenses and income taxes. Brazil income from continuing
operations of $.9 million decreased $.7 million as a result of the $.8 million decrease in
operating income being partially offset by $.1 million in lower income taxes. South Africa income
from continuing operations of $1.6 million increased $.6 million as a result of the $.8 million
increase in operating profit being partially offset by a $.2 million increase in income taxes.
Canada income from continuing operations of $1.3 million increased $.1 million as a result of the
$.1 million increase in operating income. Poland income from continuing operations of $1.4 million
is a result of $2.2 million in operating income being partially offset by other expense, income
taxes, and minority interest. All Other income from continuing operations of $3.2 million
increased $1 million primarily as a result of the $1.3 million increase in operating income
partially offset by a $.3 million increase in income taxes compared to the same period in 2007.
APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our critical accounting policies are consistent with the information set forth in Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations, included in
our Form 10-K for the year ended December 31, 2007 and are, therefore, not presented herein.
WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES
Cash increased $2 million for the nine month period ended September 30, 2008. Net cash provided by
operating activities was $14.1 million primarily because of the net income,
depreciation and the increase in payables and accrued liabilities
compared to year-end net of the increase in accounts receivable. The major investing and financing uses of cash were $9 million in capital
expenditures, $3.2 million in dividend payments, $7.5 million for repurchases of common shares, and
$2.1 million in net debt repayments offset by cash proceeds of $10.5 million from the sale of SMP,
net of transaction expenses.
26
Net cash provided by investing activities of $1 million represents an increase of $15.9 million
when compared to the cash used for investing activities in 2007. In May 2008, we sold SMP for
$11.7 million, net of transaction expenses, with an after-tax gain of $.5 million and a holdback of
$1.5 million held in escrow for a period of one year. Also in May 2008, we formed a joint venture
with BlueSky Energy Pty Ltd for an initial cash payment of $.3 million. In March 2007, we acquired
all the issued and outstanding shares of DPW for an initial cash payment of $2.6 million. In
September 2007, we acquired 83.74% of the issued and outstanding shares of Belos for an initial
cash payment of $6 million. Capital expenditures increased $3.8 million in the nine month period
ended September 30, 2008 when compared to the same period in 2007 due mostly to a solar
installation project at our Spain subsidiary, additional machinery investment at our Brazil and
Poland subsidiaries and PLP-USA locations, and a building expansion at our China subsidiary.
Cash used in financing activities was $12.2 million compared to $2.2 million in the previous year.
This increase was primarily a result of $7.5 million cash used to repurchase common shares
outstanding and $2.1 million in net debt repayments when compared to the same period in 2007.
Our current ratio was 2.6 to 1 at September 30, 2008 and 2.9 to 1 at December 31, 2007. At
September 30, 2008, our unused balance under our main credit facility was $20 million and our bank
debt to equity percentage was 4%. Our main revolving credit agreement contains, among other
provisions, requirements for maintaining levels of working capital, net worth, and profitability.
At September 30, 2008, we were in compliance with these covenants. We believe our future operating
cash flows will be more than sufficient to cover debt repayments, other contractual obligations,
capital expenditures and dividends. In addition, we believe our existing cash position, together
with our available borrowing capacity, provides adequate financial resources. If we were to incur
additional indebtedness, we expect to be able to continue to meet liquidity needs under our credit
facilities.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In October 2008, the FASB issued FSP 157-3 Determining Fair Value of a Financial Asset in a Market
That Is Not Active (FSP 157-3). FSP 157-3 clarified the application of SFAS No. 157 in an inactive
market. It demonstrated how the fair value of a financial asset is determined when the market for
that financial asset is inactive. FSP 157-3 was effective upon issuance, including prior periods
for which financial statements had not been issued. The implementation of this standard did not
have an impact on our consolidated financial position and results of operations.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles (SFAS 162). SFAS 162 identifies the sources of accounting principles and the framework
for selecting the principles used in the preparation of financial statements. SFAS 162 will be
effective 60 days following the Securities and Exchange Commissions approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles. The Company does not expect the
adoption of this standard to have an impact on its financial position, results of operations, or
cash flows.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities (SFAS 161). SFAS 161 requires companies with derivative instruments to disclose
information on how derivative instruments and related hedged items are accounted for under SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, and how derivative instruments
and related hedged items affect a Companys financial position, financial performance and cash
flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. The Company is currently evaluating the potential impact, if
any, of the adoption of SFAS 161 on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51 (SFAS 160). This standard amends ARB No. 51 to establish
accounting and reporting for the noncontrolling interest in a subsidiary and for deconsolidation of
a subsidiary. It also amends certain of ARB No. 51s consolidation procedures for consistency with
the requirements of FASB Statement No. 141 (revised 2007), Business Combinations. This standard
is effective for financial statements issued for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008.
In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS 141R). SFAS 141R
revises the principles and requirements for how the acquirer recognizes and measures in its
financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the acquiree, and the goodwill
acquired in a business combination or gain from a bargain purchase. SFAS 141R also revises the
principles and requirements for how the acquirer determines what information to disclose to enable
users of the financial statements to evaluate the nature and financial effects of the business
combination. This pronouncement is effective for the Company as of January 1, 2009.
27
Both standards, SFAS 160 and 141R, will be applied prospectively to future business combinations
entered into beginning in 2009. Certain provisions of SFAS 160 relating to presentation of
noncontrolling interests in consolidated balance sheets and statements of consolidated income are
required to be adopted retrospectively.
In April 2008, the FASB issued FASB Staff Position No. FAS 142-3, Determination of the Useful Life
of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142) The intent
of FSP 142-3 is to improve the consistency between the useful life of a recognized intangible asset
under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset
under SFAS 141R and other U.S. generally accepted accounting principles. This Statement applies
prospectively to business combinations for which the acquisition date is on or after the beginning
of the first annual reporting period beginning on or after December 15, 2008.
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 Companys 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 the political and economic risks related to the
Companys foreign operations are mitigated due to the stability of the countries in which the
Companys largest foreign operations are located.
The Company has no foreign currency forward exchange contracts outstanding at September 30, 2008.
The Company does not hold derivatives for trading purposes.
The Company is exposed to market risk, including changes in interest rates. The Company is subject
to interest rate risk on its variable rate revolving credit facilities and term notes, which
consisted of borrowings of $6.7 million at September 30, 2008. A 100 basis point increase in the
interest rate would have resulted in an increase in interest expense of less than $.1 million for
the nine month period ended September 30, 2008.
The Companys primary currency rate exposures are related to foreign denominated debt, intercompany
debt, foreign exchange contracts, foreign denominated receivables, and cash and short-term
investments. A hypothetical 10% change in currency rates would have a favorable/unfavorable impact
on fair values of $2.4 million and on income before income taxes of less than $.1 million.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of the Companys
management, including the Chief Executive Officer and Vice President Finance and Treasurer, of
the effectiveness of the Companys disclosure controls and procedures (as defined in Securities and
Exchange Act Rules 13a-15(e) and 15-d-15(e)) as of September 30, 2008. Based on that evaluation,
the Companys management including the Chief Executive Officer and Vice President Finance and
Treasurer, concluded that the Companys disclosure controls and procedures were not effective as of
September 30, 2008 solely because of the material weakness in the Companys internal controls over
financial reporting identified as of December 31, 2007 relating to not having sufficient resources
with the appropriate technical accounting knowledge in the finance organization and the late filing
of the Form 8-k in August 2008. In light of the foregoing, the Company performed additional
analysis and post-closing procedures as deemed necessary to ensure that the accompanying Unaudited
Consolidated Financial Statements were prepared in accordance with U.S. generally accepted
accounting principles for interim financial information and the instructions to Form 10-Q.
Accordingly, management believes that the Unaudited Consolidated Financial Statements included in
this report present fairly, in all material aspects, the Companys financial position as of
September 30, 2008, and the results of its operations for the three and nine month periods than
ended and cash flows for the nine month periods then ended.
28
Changes in Internal Control over Financial Reporting
The Company has engaged an outside consultant to assist in preparing and reviewing the accounting
for income taxes. A Manager of Internal Audit, Technical Accounting Manager and part-time
financial analyst have been hired subsequent to December 31, 2007. These actions are being taken
to remedy the material weakness in internal control over financial reporting identified as of
December 31, 2007. However, the improvements in controls have not all been implemented or
operating effectively for a period of time sufficient for the Company to fully evaluate their
operating effectiveness. Other than these actions, there have not been any changes in the
Companys internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f))
during the quarter ended September 30, 2008 that materially affected or are reasonably likely to
materially affect the Companys internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to various legal proceedings and claims that arise in the ordinary course of
business. In the opinion of management, the amount of any ultimate liability with respect to these
actions will not materially affect our financial condition or results of operations.
ITEM 1A. RISK FACTORS
In addition to the risk factors previously disclosed in the Companys Annual Report on Form 10-K
for the year ended December 31, 2007 filed on April 7, 2008, the Company has added a risk related
to the uncertainty in the world economy.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On February 15, 2007, the Board of Directors authorized a plan to repurchase up to 200,000 shares
of Preformed Line Products Company, superseding any previously authorized plan, including the
December 2004 plan. The repurchase plan does not have an expiration date. The following table
includes repurchases for the three-month periods ended September 30, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
Total Number of Shares |
|
|
Maximum Number of |
|
|
|
Number of |
|
|
Average |
|
|
Purchased as Part of |
|
|
Shares that may yet be |
|
|
|
Shares |
|
|
Price Paid |
|
|
Publicly Announced Plans |
|
|
Purchased under the |
|
Period (2008) |
|
Purchased |
|
|
per Share |
|
|
or Programs |
|
|
Plans or Programs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July |
|
|
|
|
|
$ |
|
|
|
|
169,326 |
|
|
|
14,252 |
|
August |
|
|
|
|
|
|
|
|
|
|
169,326 |
|
|
|
14,252 |
|
September |
|
|
|
|
|
|
|
|
|
|
169,326 |
|
|
|
14,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
29
ITEM 6. EXHIBITS
10.1 |
|
Long-Term Incentive Plan of 2008 (incorporated by reference to the Companys 8-K current
report filing dated May 1, 2008). |
|
10.2 |
|
Deferred Shares Plan (incorporated by reference to the Companys 8-K current report filing
dated August 21, 2008). |
|
10.3 |
|
Form of Restricted Shares Grant Agreement, attached herewith. |
|
31.1 |
|
Certifications of the Principal Executive Officer, Robert G. Ruhlman, pursuant to Section 302
of the Sarbanes-Oxley Act of 2002, filed herewith. |
|
31.2 |
|
Certifications of the Principal Financial Officer, Eric R. Graef, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, filed herewith. |
|
32.1 |
|
Certification of the Principal Executive Officer, Robert G. Ruhlman, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, furnished. |
|
32.2 |
|
Certification of the Principal Accounting Officer, Eric R. Graef, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, furnished. |
30
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 the Company files with the Securities and Exchange Commission
contain forward-looking statements regarding the Companys and managements 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 Companys
operations and business environment, all of which are difficult to predict and many of which are
beyond the Companys control. Such uncertainties and factors could cause the Companys 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 Companys future performance and cause the
Companys actual results to differ materially from those expressed or implied by forward-looking
statements made in this report:
|
|
|
The overall demand for cable anchoring and control hardware for electrical transmission
and distribution lines on a worldwide basis, which has a slow growth rate in mature markets
such as the United States, Canada, and Western Europe; |
|
|
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|
The ability of our customers to raise the funds needed to build the facilities their
customers require; |
|
|
|
|
Technological developments that affect longer-term trends for communication lines such
as wireless communication; |
|
|
|
|
The decreasing demands for product supporting copper-based infrastructure due to the
introduction of products using new technologies or adoption of new industry standards; |
|
|
|
|
The Companys success at continuing to develop proprietary technology to meet or exceed
new industry performance standards and individual customer expectations; |
|
|
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The Companys success at implementing price increases to offset rising material costs; |
|
|
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|
The Companys success in strengthening and retaining relationships with the Companys
customers, growing sales at targeted accounts and expanding geographically; |
|
|
|
|
The extent to which the Company is successful in expanding the Companys product line
into new areas; |
|
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|
|
The Companys ability to identify, complete and integrate acquisitions for profitable
growth; |
|
|
|
|
The potential impact of consolidation, deregulation and bankruptcy among the Companys
suppliers, competitors and customers; |
|
|
|
|
The relative degree of competitive and customer price pressure on the Companys
products; |
|
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|
|
The cost, availability and quality of raw materials required for the manufacture of
products; |
|
|
|
|
The effects of fluctuation in currency exchange rates upon the Companys reported
results from international operations, together with non-currency risks of investing in and
conducting significant operations in foreign countries, including those relating to
political, social, economic and regulatory factors; |
|
|
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Changes in significant government regulations affecting environmental compliances; |
|
|
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|
The telecommunication markets continued deployment of Fiber-to-the-Premises; |
|
|
|
|
Those factors described under the heading Risk Factors on page 12 of the Companys
Annual Report on Form 10-K for the year ended December 31, 2007 filed on April 7, 2008. |
31
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.
|
|
|
|
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November 6, 2008 |
/s/ Robert G. Ruhlman
|
|
|
Robert G. Ruhlman |
|
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Chairman, President and Chief Executive Officer
(Principal Executive Officer) |
|
|
|
|
November 6, 2008 |
/s/ Eric R. Graef
|
|
|
Eric R. Graef |
|
|
Vice President Finance and Treasurer
(Principal Accounting Officer) |
|
32
EXHIBIT INDEX
10.1 |
|
Long-Term Incentive Plan of 2008 (incorporated by reference to the Companys 8-K current
report filing dated May 1, 2008). |
|
10.2 |
|
Deferred Shares Plan (incorporated by reference to the Companys 8-K current report filing
dated August 21, 2008). |
|
10.3 |
|
Form of Restricted Shares Grant Agreement, attached herewith. |
|
31.1 |
|
Certifications of the Principal Executive Officer, Robert G. Ruhlman, pursuant to Section 302
of the Sarbanes-Oxley Act of 2002, filed herewith. |
|
31.2 |
|
Certifications of the Principal Financial Officer, Eric R. Graef, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, filed herewith. |
|
32.1 |
|
Certification of the Principal Executive Officer, Robert G. Ruhlman, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, furnished. |
|
32.2 |
|
Certification of the Principal Accounting Officer, Eric R. Graef, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, furnished. |
33