Edgar Filing: PREFORMED LINE PRODUCTS CO

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

Form 10-Q

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 March 31, 2012

Commission file number: 0-31164

Preformed Line Products Company

(Exact Name of Registrant as Specified in Its Charter)


Ohio		34-0676895
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

660 Beta Drive Mayfield Village, Ohio		44143
(Address of Principal Executive Office)		(Zip Code)

(440) 461-5200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of common shares outstanding as of May 3, 2012: 5,331,009.

Table of Contents


	Page
Part I - Financial Information

Item 1. Financial Statements		3

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		16

Item 3. Quantitative and Qualitative Disclosures About Market Risk		23

Item 4. Controls and Procedures		24

Part II - Other Information

Item 1. Legal Proceedings		24

Item 1A. Risk Factors		24

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		24

Item 3. Defaults Upon Senior Securities		24

Item 4. Mine Safety Disclosures		24

Item 5. Other Information		24

Item 6. Exhibits		25

SIGNATURES		26

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

PREFORMED LINE PRODUCTS COMPANY

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	March 31			December 31
	2012			2011
Thousands of dollars, except share and per share data
ASSETS
Cash and cash equivalents	$	29,186		$	32,126
Accounts receivable, less allowances of $1,674 ($1,627 in 2011)		74,534			68,949
Inventories—net		91,862			88,613
Deferred income taxes		4,754			5,263
Prepaids		5,824			6,321
Prepaid taxes		1,570			1,933
Other current assets		2,341			2,285

TOTAL CURRENT ASSETS		210,071			205,490

Property, plant and equipment—net		93,102			82,860
Patents and other intangibles—net		15,129			11,352
Goodwill		14,776			12,199
Deferred income taxes		5,813			5,585
Other assets		10,097			9,862

TOTAL ASSETS	$	348,988		$	327,348

LIABILITIES AND SHAREHOLDERS’ EQUITY
Notes payable to banks	$	1,500		$	2,030
Current portion of long-term debt		584			601
Trade accounts payable		26,256			25,630
Accrued compensation and amounts withheld from employees		14,137			11,472
Accrued expenses and other liabilities		14,287			12,510
Accrued profit-sharing and other benefits		2,699			4,686
Dividends payable		1,104			1,095
Income taxes payable and deferred income taxes		2,810			3,809

TOTAL CURRENT LIABILITIES		63,377			61,833

Long-term debt, less current portion		33,652			27,991
Unfunded pension obligation		15,866			15,786
Income taxes payable, noncurrent		1,905			1,835
Deferred income taxes		4,548			3,255
Other noncurrent liabilities		3,942			3,790

SHAREHOLDERS’ EQUITY
PLPC Shareholders’ equity:
Common shares—$2 par value per share, 15,000,000 shares authorized, 5,332,454 and 5,333,630 issued and outstanding, net of 640,638 and 639,138 treasury shares at par, respectively, at March 31, 2012 and December 31, 2011		10,665			10,667
Common shares issued to rabbi trust		(3,807	)		(3,812	)
Deferred compensation liability		3,807			3,812
Paid in capital		13,239			12,718
Retained earnings		213,451			206,512
Accumulated other comprehensive loss		(11,657	)		(17,039	)

TOTAL SHAREHOLDERS’ EQUITY		225,698			212,858

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	348,988		$	327,348

See notes to consolidated financial statements (unaudited).

PREFORMED LINE PRODUCTS COMPANY

STATEMENTS OF CONSOLIDATED INCOME

(UNAUDITED)


	Three month periods ended March 31
	2012			2011
	(Thousands, except per share data)
Net sales	$	108,846		$	95,088
Cost of products sold		72,834			62,697

GROSS PROFIT		36,012			32,391

Costs and expenses
Selling		8,896			8,036
General and administrative		12,007			10,962
Research and engineering		3,655			3,362
Other operating (income) expense		(651	)		(94	)

		23,907			22,266

OPERATING INCOME		12,105			10,125
Other income (expense)
Interest income		137			151
Interest expense		(196	)		(211	)
Other income		145			184

		86			124

INCOME BEFORE INCOME TAXES		12,191			10,249

Income taxes		4,058			3,395

NET INCOME		8,133			6,854

Net loss attributable to noncontrolling interest, net of tax		—			(144	)

NET INCOME ATTRIBUTABLE TO PLPC	$	8,133		$	6,998

BASIC EARNINGS PER SHARE
Net income attributable to PLPC common shareholders	$	1.52		$	1.33

DILUTED EARNINGS PER SHARE
Net income attributable to PLPC common shareholders	$	1.50		$	1.30

Cash dividends declared per share	$	0.20		$	0.20

Weighted-average number of shares outstanding—basic		5,334			5,272

Weighted-average number of shares outstanding—diluted		5,438			5,400

See notes to consolidated financial statements (unaudited).

PREFORMED LINE PRODUCTS COMPANY

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(UNAUDITED)


	Three month periods ended March 31
	2012		2011
	(Thousands of dollars)
Net income	$	8,133	$	6,854

Other comprehensive income, net of tax
Currency translation adjustment		5,273		2,511
Recognized net acturial loss (net of tax provision $67 thousand and $31 thousand for the three months ended March 31, 2012 and 2011)		109		52

Other comprehensive income, net of tax		5,382		2,563

Comprehensive income		13,515		9,417
Less: comprehensive income attributable to noncontrolling interest		—		(13	)

Comprehensive income attributable to PLPC	$	13,515	$	9,404

See notes to consolidated financial statements (unaudited).

PREFORMED LINE PRODUCTS COMPANY

STATEMENTS OF CONSOLIDATED CASH FLOWS

(UNAUDITED)


	Three month periods ended March 31
	2012			2011
	(Thousands of dollars)
OPERATING ACTIVITIES
Net income	$	8,133		$	6,854

Adjustments to reconcile net income to net cash provided by (used in) operations:
Depreciation and amortization		2,684			2,521
Provision for accounts receivable allowances		172			335
Provision for inventory reserves		944			493
Deferred income taxes		1,550			(517	)
Share-based compensation expense		498			645
Excess tax benefits from share-based awards		—			(47	)
Other—net		(9	)		(69	)
Changes in operating assets and liabilities:
Accounts receivable		(3,778	)		(5,977	)
Inventories		(724	)		(8,902	)
Trade accounts payables and accrued liabilities		917			1,373
Income taxes payable		(1,644	)		1,721
Other—net		(549	)		(1,372	)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		8,194			(2,942	)

INVESTING ACTIVITIES
Capital expenditures		(9,442	)		(2,358	)
Business acquisitions, net of cash acquired		(6,176	)		—
Proceeds from the sale of property and equipment		3			113
Restricted cash		—			(198	)

NET CASH USED IN INVESTING ACTIVITIES		(15,615	)		(2,443	)

FINANCING ACTIVITIES
Increase in notes payable to banks		5,163			7,847
Payments of long-term debt		(158	)		(199	)
Dividends paid		(1,095	)		(1,087	)
Excess tax benefits from share-based awards		—			47
Proceeds from issuance of common shares		24			79
Purchase of common shares for treasury		(93	)		—

NET CASH PROVIDED BY FINANCING ACTIVITIES		3,841			6,687

Effects of exchange rate changes on cash and cash equivalents		640			189

Net increase (decrease) in cash and cash equivalents		(2,940	)		1,491

Cash and cash equivalents at beginning of year		32,126			22,655

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	29,186		$	24,146

See notes to consolidated financial statements (unaudited).

PREFORMED LINE PRODUCTS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share data, unless specifically noted

NOTE A—BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Preformed Line Products Company and subsidiaries (the “Company” or “PLPC”) have been prepared in accordance with United States of America (U.S.) generally accepted accounting principles (GAAP) 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 month period ended March 31, 2012 are not necessarily indicative of the results to be expected for the full year ending December 31, 2012.

The consolidated balance sheet at December 31, 2011 has been derived from the audited consolidated financial statements, but does not include all of the information and notes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes to consolidated financial statements included in the Company’s 2011 Annual Report on Form 10-K filed on March 14, 2012 with the Securities and Exchange Commission.

NOTE B—OTHER FINANCIAL STATEMENT INFORMATION

Inventories—net


	March 31			December 31
	2012			2011
Finished products	$	44,348		$	42,382
Work-in-process		8,802			9,196
Raw materials		48,502			46,700

		101,652			98,278
Excess of current cost over LIFO cost		(5,767	)		(5,611	)
Noncurrent portion of inventory		(4,023	)		(4,054	)

	$	91,862		$	88,613

Cost of inventories for certain material are determined using the last-in-first-out (LIFO) method and totaled approximately $29.2 million at March 31, 2012 and $28.3 million at December 31, 2011. An actual valuation of inventories under the LIFO method can be made only at the end of the year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected year-end inventory levels and costs. Because these estimates are subject to change and may be different than the actual inventory levels and costs at the end of the year, interim results are subject to the final year-end LIFO inventory valuation. During the three month period ended March 31, 2012, the net increase in LIFO inventories resulted in a $.2 million charge to income before income taxes. During the three month period ended March 31, 2011, the net reduction in LIFO inventories resulted in less than a $.1 million benefit to income before income taxes.

Noncurrent inventory is included in other assets on the consolidated balance sheets.

Property, plant and equipment—net

Major classes of property, plant and equipment are stated at cost and were as follows:


	March 31		December 31
	2012		2011
Land and improvements	$	14,566	$	10,283
Buildings and improvements		59,821		56,303
Machinery and equipment		130,448		125,668
Construction in progress		7,979		6,447

		212,814		198,701
Less accumulated depreciation		119,712		115,841

	$	93,102	$	82,860

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 this plan included the following components:


	Three month period ended March 31
	2012			2011
Service cost	$	299		$	230
Interest cost		344			327
Expected return on plan assets		(298	)		(272	)
Recognized net actuarial loss		176			83

Net periodic benefit cost	$	521		$	368

During the three month period ended March 31, 2012, $.3 million of contributions were made to the plan. The Company presently anticipates contributing an additional $1.9 million to fund the plan in 2012.

NOTE D—COMPUTATION OF EARNINGS PER SHARE

Basic earnings per share were computed by dividing net income attributable to PLPC common shareholders by the weighted-average number of common stock outstanding for each respective period. Diluted earnings per share were calculated by dividing net income attributable to PLPC common shareholders by the weighted-average of all potentially dilutive common stock that were outstanding during the periods presented.

The calculation of basic and diluted earnings per share for the three month periods ended March 31, 2012 and 2011 were as follows:


	For the three month period ended March 31
	2012		2011
Numerator
Amount attributable to PLPC shareholders
Net income attributable to PLPC	$	8,133	$	6,998

Denominator
Determination of shares
Weighted-average common shares outstanding		5,334		5,272
Dilutive effect—share-based awards		104		128

Diluted weighted-average common shares outstanding		5,438		5,400

Earnings per common share attributable to PLPC shareholders
Basic	$	1.52	$	1.33

Diluted	$	1.50	$	1.30

For the three month period ended March 31, 2012 and 2011, 14,500 and 9,500, stock options, respectively, were excluded from the calculation of diluted earnings per shares due to the average market price being lower than the exercise price plus any unearned compensation on unvested options, and as such they are anti-dilutive. For the three month periods ended March 31, 2012 and 2011, 1,311 and zero restricted shares, respectively, were excluded from the calculation of diluted earnings per shares due to the average market price being lower than the exercise price plus any unearned compensation on unvested options, and as such they are anti-dilutive.

NOTE E—GOODWILL AND OTHER INTANGIBLES

The Company’s finite and indefinite-lived intangible assets consist of the following:


	March 31, 2012					December 31, 2011
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Finite-lived intangible assets
Patents	$	4,819	$	(3,910	)	$	4,819	$	(3,836	)
Land use rights		1,329		(107	)		1,259		(97	)
Trademark		1,657		(379	)		965		(364	)
Customer backlog		548		(526	)		504		(504	)
Technology		2,907		(183	)		1,784		(77	)
Customer relationships		10,715		(1,741	)		8,450		(1,551	)

	$	21,975	$	(6,846	)	$	17,781	$	(6,429	)

Indefinite-lived intangible assets
Goodwill	$	14,776				$	12,199

The aggregate amortization expense for other intangibles with finite lives for the three month periods ended March 31, 2012 and 2011 was $.4 million for each period. Amortization expense is estimated to be $1.1 million for 2012, $1.5 million for 2013, $1.4 million for 2014, $1.1 million for 2015 and $1 million for 2016. The weighted-average remaining amortization period by intangible asset class is as follows: patents, 3.2 years: land use rights, 64.3 years; trademark, 13.6 years; technology, 18.8 years and customer relationships, 15.8 years.

The Company’s measurement date for its annual impairment test for goodwill is October 1st of each year. There were no trigger events during the three month period ended March 31, 2012. The Company performs its annual impairment test for goodwill utilizing a discounted cash flow methodology, market comparables, and an overall market capitalization reasonableness test in computing fair value by reporting unit. The Company then compares the fair value of the reporting unit with its carrying value to assess if goodwill has been impaired. Based on the assumptions as to growth, discount rates and the weighting used for each respective valuation methodology, results of the valuations could be significantly different. However, the Company believes that the methodologies and weightings used are reasonable and result in appropriate fair values of the reporting units.

The Company’s only intangible asset with an indefinite life is goodwill. The change to goodwill is related to foreign currency translation and two acquisitions. The changes in the carrying amount of goodwill, by segment, for the three month period ended March 31, 2012, are as follows:


	The Americas		EMEA		Asia-Pacific		Total
Balance at January 1, 2012	$	3,078	$	1,029	$	8,092	$	12,199
Additions		—		271		1,873		2,144
Currency translation		—		90		343		433

Balance at March 31, 2012	$	3,078	$	1,390	$	10,308	$	14,776

NOTE F—SHARE-BASED COMPENSATION

The 1999 Stock Option Plan

The 1999 Stock Option Plan (the “Plan”) permitted 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 March 31, 2012 there were no shares remaining to be issued 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 from five to 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.

The Company has elected to use the simplified method of calculating the expected term of the stock options and historical volatility to compute fair value under the Black-Scholes option-pricing model. The risk-free rate for periods within the contractual life of the option is based on the U.S. zero coupon Treasury yield in effect at the time of grant. Forfeitures have been estimated to be zero.

There were no shares granted for the three month periods ended March 31, 2012 and 2011.

Activity in the Plan for the three month period ended March 31, 2012 was as follows:


	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2012		49,907	$	34.18
Granted		—		—
Exercised		—		—
Forfeited		—		—

Outstanding (vested and expected to vest) at March 31, 2012		49,907	$	34.39		4.3	$	1,553

Exercisable at March 31, 2012		47,782	$	34.18		4.1	$	1,497

There were zero and 1,500 stock options exercised during the three month period ended March 31, 2012 and 2011, respectively. The total intrinsic value of stock options exercised during the three month period ended March 31, 2011 was less than $.1 million. Cash received for the exercise of stock options during the three month period ended March 31, 2011 was $.1 million. Excess tax benefits from share-based awards for the three month period ended March 31, 2011 was $0.

For the three month periods ended March 31, 2012 and 2011, the Company recorded compensation expense related to the stock options currently vesting, reducing income before taxes and net income by less than $.1 million for each period. The total compensation cost related to nonvested awards not yet recognized at March 31, 2012 is expected to be less than $.1 million over a weighted-average period of .6 years.

Long Term Incentive Plan of 2008

Under the Preformed Line Products Company Long Term Incentive Plan of 2008 (the “LTIP”), certain employees, officers, and directors are eligible to receive awards of options and restricted shares. The purpose of this LTIP 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 Company’s performance. As of March 31, 2012, the total number of common shares reserved for awards under the LTIP is 900,000. Of the 900,000 common shares, 800,000 common shares have been reserved for restricted share awards and 100,000 common shares have been reserved for share options. The LTIP expires on April 17, 2018.

Restricted Share Awards

For all of the participants except the CEO, a portion of the restricted share award is subject to time-based cliff vesting and a portion is subject to vesting based upon the Company’s performance over a three year period. All of the CEO’s restricted shares are subject to vesting based upon the Company’s 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 shares lapse. The fair value of restricted share awards is based on the market price of a common share on the grant date. The Company currently estimates that no awards will be forfeited. Dividends declared are accrued in cash dividends.

A summary of the restricted share awards under the LTIP for the three month period ended March 31, 2012 is as follows:


	Restricted Share Awards
	Performance and Service Required		Service Required		Total Restricted Awards		Weighted-Average Grant-Date Fair Value
Nonvested as of January 1, 2012		128,567		14,078		142,645	$	37.75
Granted		41,627		4,588		46,215		61.52
Vested		—		—		—		—
Forfeited		—		—		—		—

Nonvested as of March 31, 2012		170,194		18,666		188,860	$	43.57

For time-based restricted shares, 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 shares for the three month periods ended March 31, 2012 and 2011 was $.1 million for both periods. As of March 31, 2012, there was $.5 million of total unrecognized compensation cost related to time-based restricted share awards that is expected to be recognized over the weighted-average remaining period of approximately 2.2 years.

For the performance-based awards, the number of restricted shares that will vest depends on the Company’s level of performance measured by growth in pretax income and sales growth over a requisite performance period. Depending on the extent to which the performance criterions are satisfied under the LTIP, the participants are eligible to earn common shares over the vesting period. Performance-based compensation expense for the three month periods ended March 31, 2012 and 2011 was $.5 million for each period. As of March 31, 2012, the remaining performance-based restricted share awards compensation expense of $4.6 million is expected to be recognized over a period of approximately 2.2 years.

The excess tax benefits from restricted share awards for the three month periods ended March 31, 2012 and 2011 was $0 and less than $.1 million, as reported on the consolidated statements of cash flows in financing activities, and represent the reduction in income taxes otherwise payable during the period, attributable to the actual gross tax benefits in excess of the expected tax benefits for restricted shares vested in the current period.

In the event of a Change in Control, vesting of the restricted shares 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.

To satisfy the vesting of its restricted share awards, the Company has reserved new shares from its authorized but unissued shares. Any additional awards granted will also be issued from the Company’s authorized but unissued shares. As of March 31, 2012, under the LTIP there were 483,319 common shares available for additional restricted share grants.

Deferred Compensation Plan

The Company maintains a trust, commonly referred to as a rabbi trust, in connection with the Company’s deferred compensation plan. This plan allows for two deferrals. First, Directors make elective deferrals of Director fees payable and held in the rabbi trust. The deferred compensation plan allows the Directors to elect to receive Director fees in shares of common stock of the Company at a later date instead of fees paid each quarter in cash. Assets of the rabbi trust are consolidated, and the value of the Company’s stock held in the rabbi trust is classified in Shareholders’ equity and generally accounted for in a manner similar to treasury stock. The Company recognizes the original amount of the deferred compensation (fair value of the deferred stock award at the date of grant) as the basis for recognition in common shares issued to the rabbi trust. Changes in the fair value of amounts owed to certain employees or Directors are not recognized as the Company’s deferred compensation plan does not permit diversification and must be settled by the delivery of a fixed number of the Company’s common shares. Second, this plan allows certain Company employees to defer LTIP restricted shares for future distribution in the form of common shares. As of March 31, 2012, 109,031 LTIP shares have been deferred and are being held by the rabbi trust.

Share Option Awards

The LTIP permits the grant of 100,000 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 March 31, 2012 there were 65,000 shares remaining available for issuance under the LTIP. Options issued to date under the LTIP vest 50% after one year following the date of the grant, 75% after two years, and 100% after three years and expire from five to 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 no options granted for the three month periods ended March 31, 2012 and 2011.

Activity in the Company’s LTIP for the three month period ended March 31, 2012 was as follows:


	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2012		27,000	$	48.21
Granted		—		—
Exercised		—		—
Forfeited		—		—

Outstanding (vested and expected to vest) at March 31, 2012		27,000	$	48.21		9.1	$	1,224

Exercisable at March 31, 2012		7,500	$	42.76		8.2	$	171

There were no stock options exercised under the LTIP Plan during the three month periods ended March 31, 2012 and 2011. There were no excess tax benefits from share-based options for the three month periods ended March 31, 2012 and 2011.

For the three month periods ended March 31, 2012 and 2011, the Company recorded compensation expense related to the stock options currently vesting, reducing income before taxes and net income by $.1 million and less than $.1 million, respectively. The total compensation cost related to nonvested awards not yet recognized at March 31, 2012 is expected to be a combined total of $.3 million over a weighted-average period of approximately 2.4 years.

NOTE G—FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The carrying value of the Company’s current financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable, notes payable, and short-term debt, approximates its fair value because of the short-term maturity of these instruments. At March 31, 2012, the fair value of the Company’s long-term debt was estimated using discounted cash flows analysis, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements which are considered to be level two inputs. There have been no transfers in or out of level two for the three month period ended March 31, 2012. Based on the analysis performed, the fair value and the carrying value of the Company’s long-term debt are as follows:


	March 31, 2012				December 31, 2011
	Fair Value		Carrying Value		Fair Value		Carrying Value
Long-term debt and related current maturities	$	34,303	$	34,236	$	28,659	$	28,592

As a result of being a global company, the Company’s earnings, cash flows and financial position are exposed to foreign currency risk. The Company’s primary objective for holding derivative financial instruments is to manage foreign currency risks. The Company accounts for derivative instruments and hedging activities as either assets or liabilities in the consolidated balance sheet and carries these instruments at fair value. The Company does not enter into any trading or speculative positions with regard to derivative instruments. At March 31, 2012, the Company had one immaterial derivative outstanding.

Foreign currency derivative instruments outstanding are not designated as hedges for accounting purposes. The gains and losses related to mark-to-market adjustments are recognized as other operating (income) expense on the statement of consolidated income during the period in which the derivative instruments were outstanding.

As part of the January 31, 2012 Purchase Agreement to acquire Australian Electricity Systems PTY Ltd (AES), the Company may be required to make an additional earn-out consideration payment of AUD $1.1 million or $1.2 million US dollar. This amount represents the fair value of the earn-out consideration based on AES achieving a financial performance target over twelve months ending June 30, 2012. The calculation of the fair value of the earn-out consideration is based upon seven months (June 1, 2011 through January 31, 2012) of actual Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and five months (February 1, 2012 through June 30, 2012) of estimated EBITDA and will be paid based on actual EBITDA for the twelve month period. The fair value of the contingent consideration arrangement is determined by estimating the expected (probability-weighted) earn-out payment which is discounted to present value and is considered a level three input. The discounted cash flow utilized weighted average inputs, including a risk-based discount rate of 11.5%. Based upon our initial evaluation of the range of outcomes for this contingent consideration, we have accrued $1.2 million for the additional earn-out consideration payment as of the acquisition date, and as part of the purchase price. The Company accrued the additional earn-out consideration as of the acquisition date in the Accrued expenses and other liabilities line of the consolidated balance sheet.

NOTE H—RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In September 2011, the Financial Accounting Standards Board (FASB) issued accounting standards updates (ASU) 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company’s measurement date for its annual impairment test is October 1 of each year. The adoption of this ASU is not expected to impact the Company’s consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards (IFRSs) to provide a consistent definition of fair value and ensure that fair value measurements and disclosure requirements are similar between GAAP and IFRS. This guidance changes certain fair value measurement principles and enhances the disclosure requirements for fair value measurements. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2011 and are applied prospectively. The adoption of ASU 2011-04 did not have a material impact on the Company’s financial position, results of operations, cash flows or disclosures.

In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). The amendments in ASU 2011-05 allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both instances, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in ASU 2011-05 do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. In December 2011, the FASB issued ASU 2011-12, Comprehensive Income, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05, to defer the effective date of the specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income. The Company adopted this guidance on January 1, 2012, presenting other comprehensive income in a separate statement following the Statement of Consolidated Income. The adoption of this guidance concerns disclosure only and did not have an impact on the Company’s consolidated financial position or results of operations.

NOTE I—RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Changes to GAAP are established by the FASB in the form of ASU’s to the FASB’s Accounting Standards Codification (ASC).

The Company considers the applicability and impact of all ASU’s. We assessed the ASU’s and determined each to be either not applicable or have minimal impact on the Company’s consolidated financial position and results of operations.

NOTE J—SEGMENT INFORMATION

The following tables present a summary of the Company’s reportable segments for the three month periods ended March 31, 2012 and 2011. Financial results for the PLP-USA segment include the elimination of all segments’ intercompany profit in inventory.


	Three month period ended March 31
	2012		2011
Net sales
PLP-USA	$	41,162	$	31,937
The Americas		23,902		20,539
EMEA		13,878		15,279
Asia-Pacific		29,904		27,333

Total net sales	$	108,846	$	95,088

Intersegment sales
PLP-USA	$	2,891	$	2,291
The Americas		2,208		2,081
EMEA		932		417
Asia-Pacific		2,927		3,218

Total intersegment sales	$	8,958	$	8,007

Income taxes
PLP-USA	$	2,636	$	1,340
The Americas		901		640
EMEA		427		541
Asia-Pacific		94		874

Total income taxes	$	4,058	$	3,395

Net income
PLP-USA	$	4,233	$	1,988
The Americas		2,094		1,334
EMEA		1,620		1,491
Asia-Pacific		186		2,041

Total net income		8,133		6,854
Loss attributable to noncontrolling interest, net of tax		—		(144	)

Net income attributable to PLPC	$	8,133	$	6,998


	March 31		December 31
	2012		2011
Assets
PLP-USA	$	88,027	$	82,478
The Americas		74,600		72,908
EMEA		50,977		47,098
Asia-Pacific		135,068		124,541

		348,672		327,025
Corporate assets		316		323

Total assets	$	348,988	$	327,348

NOTE K—INCOME TAXES

The Company’s effective tax rate was 33% for the three month periods ended March 31, 2012 and 2011, respectively. The lower effective tax rate for the three month period ended March 31, 2012 compared to the U.S. federal statutory tax rate of 35% is primarily due to increased earnings in jurisdictions with lower tax rates than the U.S. federal statutory rate in jurisdictions where such earnings are permanently reinvested.

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. No significant changes to the valuation allowance were reflected for the period ended March 31, 2012.

As of March 31, 2012, the Company had gross unrecognized tax benefits of approximately $1 million and there were no significant changes during the period ended March 31, 2012. Under the Provisions of ASC 740 Income Taxes, the Company may decrease its unrecognized tax benefits by $.2 million within the next twelve months due to expiration of statutes of limitations.

NOTE L—PRODUCT WARRANTY RESERVE

The Company records an accrual for estimated warranty costs to costs of products sold in the consolidated statements of income. These amounts are recorded in accrued expenses and other liabilities in the consolidated balance sheets. The Company records and accounts for its warranty reserve based on specific claim incidents. Should the Company become aware of a specific potential warranty claim for which liability is probable and reasonably estimable, a specific charge is recorded and accounted for accordingly. Adjustments are made quarterly to the accruals as claim information changes.

The following is a rollforward of the product warranty reserve:


	March 31, 2012			December 31, 2011
Balance at the beginning of period	$	824		$	536
Additions charged to income		422			1,968
Warranty usage		(182	)		(1,467	)
Currency translation		40			(213	)

End of period balance	$	1,104		$	824

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help investors better understand our results of operations, financial condition and present business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited condensed consolidated financial statements and related notes included elsewhere in this report. The MD&A is organized as follows:

•

Overview

•

Preface

•

Results of Operations

•

Application of Critical Accounting Policies and Estimates

•

Working Capital, Liquidity and Capital Resources

•

Recently Adopted Accounting Pronouncements

•

Recently Issued Accounting Pronouncements

OVERVIEW

Preformed Line Products Company (the “Company”, “PLPC”, “we”, “us”, or “our”) was incorporated in Ohio in 1947. We are an international designer and manufacturer of products and systems employed in the construction and maintenance of overhead and underground networks for the energy, telecommunication, cable operators, information (data communication), and other similar industries. Our primary products support, protect, connect, terminate, and secure cables and wires. We also provide solar hardware systems 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. We have 17 sales and manufacturing operations in 14 different countries.

Our business operations are aligned into four operating segments to better capitalize on business development opportunities, improve ongoing services, enhance the utilization of our worldwide resources and global sourcing initiatives and manage the Company better. We report our segments in four geographic regions: PLP-USA, The Americas (includes operations in North and South America without PLP-USA), EMEA (Europe, Middle East & Africa) and Asia-Pacific in accordance with accounting standards codified in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 280, Segment Reporting. Each segment distributes a full range of our primary products. Our PLP-USA segment is comprised of our U.S. operations manufacturing our traditional products primarily supporting our domestic energy and telecommunications products. Our other three segments, The Americas, EMEA and Asia-Pacific, support our energy, telecommunications, data communication and solar products in each respective geographical region.

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

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

PREFACE

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

Highlights:

•

Net sales increased 14% to $108.8 million, compared to $95.1 million in 2011.

•

Year to date operating income increased $2 million to $12.1 million from $10.1 million in 2011.

•

Net income was $8.1 million for the three month period ended March 31, 2012 compared to $6.9 million for the three month period ended March 31, 2011.

•

Diluted earnings per share were $1.50 per share in 2012 compared to $1.30 per share in 2011.

•

Bank debt to equity ratio is 16%.

Our financial statements are subject to fluctuations in the exchange rates of foreign currencies in relation to the U.S. dollar. As foreign currencies weaken against the U.S. dollar, our revenues and costs decrease as the foreign currency-denominated financial statements translate into less dollars. The fluctuations of foreign currencies during the three month period ended March 31, 2012 had an unfavorable impact on net sales of $.8 million as compared to 2011. For the three month period ended March 31, 2012, net sales of $108.8 million increased $13.8 million, or 14%, compared to 2011. As the U.S. dollar strengthened against most currencies, the net sales increase for the three month period ended March 31, 2012 was primarily attributable to global business combinations, new business, and higher demand levels. As a percentage of net sales, gross profit was 33.1% and 34.1% of net sales for the three month periods ended March 31, 2012 and 2011, respectively. Excluding the effect of currency translation, gross profit increased $3.6 million, or 11%, compared to 2011. Excluding the effect of currency translation, costs and expenses of $23.9 million increased $1.6 million, or 7%, compared to 2011. Excluding the effect of currency translation and as a result of the preceding factors, operating income for the three month period ended March 31, 2012 of $12.1 million increased $2 million compared to 2011. Net income for the three month period ended March 31, 2012 of $8.1 million increased $1.3 million compared to 2011. Excluding the effect of currency translation, net income increased $1.5 million compared to 2011.

Despite the global economic conditions, we are seeing an improvement in our global marketplace and our financial condition continues to remain strong. We have continued to invest in the business to improve efficiency, develop new products, increase our capacity and become an even stronger supplier to our customers. We currently have a bank debt to equity ratio of 16% and can borrow needed funds at an attractive interest rate under our credit facility.

THREE MONTH PERIOD ENDED MARCH 31, 2012 COMPARED TO THREE MONTH PERIOD ENDED MARCH 31, 2011

The following table sets forth a summary of the Company’s consolidated income statements and the percentage of net sales for the three month periods ended March 31, 2012 and 2011. The Company’s past operating results are not necessarily indicative of future operating results.


	Three month period ended March 31
Thousands of dollars	2012				2011				Change
Net sales	$	108,846	100	%	$	95,088	100	%	$	13,758
Cost of products sold		72,834	67	%		62,697	66	%		10,137

GROSS PROFIT		36,012	33	%		32,391	34	%		3,621
Costs and expenses		23,907	22	%		22,266	23	%		1,641

OPERATING INCOME		12,105	11	%		10,125	11	%		1,980
Other income (expense)		86	0	%		124	0	%		(38	)

INCOME BEFORE INCOME TAXES		12,191	11	%		10,249	11	%		1,942
Income taxes		4,058	4	%		3,395	4	%		663

NET INCOME	$	8,133	7	%	$	6,854	7	%	$	1,279

Net sales. For the three month period ended March 31, 2012, net sales were $108.8 million, an increase of $13.8 million, or 14%, from the three month period ended March 31, 2011. Excluding the effect of currency translation, net sales increased 15% as summarized in the following table:


	Three month period ended March 31
								Change			Change
thousands of dollars								due to			excluding
								currency			currency			%
	2012		2011		Change			translation			tranlation			change
Net sales
PLP-USA	$	41,162	$	31,937	$	9,225		$	—		$	9,225			29	%
The Americas		23,902		20,539		3,363			(1,133	)		4,496			22
EMEA		13,878		15,279		(1,401	)		(912	)		(489	)		(3	)
Asia-Pacific		29,904		27,333		2,571			1,224			1,347			5

Consolidated	$	108,846	$	95,088	$	13,758		$	(821	)	$	14,579			15	%

The increase in PLP-USA net sales of $9.2 million, or 29%, was primarily due to price/mix increases of $3.9 million and volume increases of $5.3 million. International net sales for the three month period ended March 31, 2012 were unfavorably affected by $.8 million when local currencies were converted to U.S. dollars. The following discussions of changes in net sales exclude the effect of currency translation. The Americas net sales of $23.9 million increased $4.5 million, or 22%, primarily related to a stronger overall market demand in the region related to energy and telecommunication sales partially offset by a decrease in solar sales of $.8 million. EMEA net sales of $13.9 million decreased $.5 million, or 3%, primarily due to a one-off solar related sale in 2011 at our Spain facility partially offset by an increase in sales volume in the region. In Asia-Pacific, net sales of $29.9 million increased $1.4 million, or 5%, compared to 2011. The increase in net sales was primarily due to the net sales of $1.7 million related to an acquisition entered into on January 31, 2012 partially offset by slightly lower sales volume in the region.

Gross profit. Gross profit of $36 million for the three month period ended March 31, 2012 increased $3.6 million, or 11%, compared to the three month period ended March 31, 2011. Excluding the effect of currency translation, gross profit increased 12% as summarized in the following table:


	Three month period ended March 31
								Change			Change
thousands of dollars								due to			excluding
								currency			currency			%
	2012		2011		Change			translation			translation			change
Gross profit
PLP-USA	$	15,397	$	11,308	$	4,089		$	—		$	4,089			36	%
The Americas		7,451		6,199		1,252			(380	)		1,632			26
EMEA		4,859		5,129		(270	)		(290	)		20			—
Asia-Pacific		8,305		9,755		(1,450	)		302			(1,752	)		(18	)

Consolidated	$	36,012	$	32,391	$	3,621		$	(368	)	$	3,989			12	%

PLP-USA gross profit of $15.4 million increased $4.1 million compared to 2011. PLP-USA gross profit increased $4.1 million due to higher net sales coupled with an improvement in production margins partially offset by higher material costs and an increase in employee related costs of $.5 million, of which $.2 million related to higher pension costs for the three month period ended March 31, 2012. International gross profit for the three month period ended March 31, 2012 was unfavorably impacted by $.4 million when local currencies were translated to U.S. dollars. The following discussion of gross profit changes excludes the effect of currency translation. The Americas gross profit increase of $1.6 million was primarily the result of $1.8 million from higher net sales partially offset by lower production margins of $.2 million. The EMEA gross profit remained relatively unchanged as a result of $.3 million from lower net sales offset by better product margins in the region. Asia-Pacific gross profit of $8.3 million decreased $1.8 million compared to 2011. Asia-Pacific’s gross profit decreased due to a lower product margins of $4 million partially offset by $2.2 million from higher net sales.

Costs and expenses. Costs and expenses of $23.9 million for the three month period ended March 31, 2012 increased $1.6 million, or 7%, compared to 2011. Excluding the effect of currency translation, costs and expenses increased 8% as summarized in the following table:


	Three month period ended March 31
								Change			Change
thousands of dollars								due to			excluding
								currency			currency		%
	2012		2011		Change			translation			translation		change
Costs and expenses
PLP-USA	$	10,317	$	9,832	$	485		$	—		$	485		5	%
The Americas		4,002		3,880		122			(167	)		289		7
EMEA		2,519		2,711		(192	)		(193	)		1		—
Asia-Pacific		7,069		5,843		1,226			300			926		16

Consolidated	$	23,907	$	22,266	$	1,641		$	(60	)	$	1,701		8	%

PLP-USA costs and expenses increased $.5 million primarily due to an increase in employee related costs of $.3 million, commissions of $.4 million, higher travel expenses of $.2 million, and an increase in repairs and maintenance of $.1 million partially offset by changes in net foreign currency exchange of $.5 million. International costs and expenses for the three month period ended March 31, 2012 were favorably impacted by less than $.1 million when local currencies were translated to U.S. dollar. The following discussions of costs and expenses exclude the effect of currency translation. The Americas costs and expenses increased $.3 million primarily due to an increase in personnel related costs in the region partially offset by $.1 million related to lower sales commissions coupled with $.1 million related to net foreign currency exchange gains in 2011. EMEA costs and expenses were unchanged compared to 2011. Asia-Pacific costs and expenses increased $.9 million compared to 2011. An acquisition on January 31, 2012 added $.4 million to costs and expenses compared to 2011. The remaining increase in Asia-Pacific costs and expenses were due to personnel related costs in the region partially offset by a net foreign currency exchange gain of $.1 million. Overall, costs and expenses for the three month periods ended March 31, 2012 and 2011 included $.3 million and $.2 million, respectively, related to aggregate amortization expense of intangible assets acquired in our business combinations.

Other income (expense). Other income (expense) for the three month period ended March 31, 2012 of $.1 million remained relatively unchanged compared to 2011.

Income taxes. Income taxes for the three month period ended March 31, 2012 of $4.1 million was $.7 million higher than 2011. The effective tax rate for the three month periods ended March 31, 2012 and March 31, 2011 was 33%. The effective tax rate for three month periods ended March 31, 2012 and 2011 is lower than the U.S. federal statutory rate of 35% primarily due to earnings in jurisdictions with lower tax rates than the U.S. federal statutory rate in jurisdictions where such earnings are permanently reinvested.

Net income. As a result of the preceding items, net income for the three month period ended March 31, 2012 was $8.1 million, compared to $6.9 million for the three month period ended March 31, 2011. Excluding the effect of currency translation, net income increased $1.5 million as summarized in the following table:


	Three month period ended March 31
								Change			Change
thousands of dollars								due to			excluding
								currency			currency			%
	2012		2011		Change			translation			translation			change
Net income
PLP-USA	$	4,233	$	1,988	$	2,245		$	—		$	2,245			113	%
The Americas		2,094		1,334		760			(113	)		873			65
EMEA		1,620		1,491		129			(57	)		186			12
Asia-Pacific		186		2,041		(1,855	)		(35	)		(1,820	)		(89	)

Consolidated	$	8,133	$	6,854	$	1,279		$	(205	)	$	1,484			22	%

PLP-USA net income increased $2.2 million due to a $3.7 million increase in operating income partially offset by an increase in income taxes of $1.3 million and a decrease in other income. International net income for the three month period ended March 31, 2012 was unfavorably affected by $.2 million when local currencies were converted to U.S. dollars. The following discussion of net income excludes the effect of currency translation. The Americas net income increased $.9 million as a result of an increase in operating income of $1.2 million partially offset by an increase in income taxes. EMEA net income increased $.2 million primarily as a result of an increase in operating income of $.1 million coupled with lower income taxes. Asia-Pacific net income decreased $1.8 million primarily as a result of a decrease in operating income of $2.7 million partially offset by a decrease in income taxes.

APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our critical accounting policies are consistent with the information set forth in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K for the year ended December 31, 2011 and are, therefore, not presented herein.

WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES

Cash decreased $2.9 million for the three month period ended March 31, 2012. Net cash provided by operating activities was $8.2 million. The major investing and financing uses of cash were capital expenditures of $9.4 million, dividends of $1.1 million and acquisitions, net of cash, of $6.2 million offset by net borrowings of $5.2 million.

Net cash provided by operating activities for the three month period ended March 31, 2012 increased $11.1 million compared to the three month period ended March 31, 2011 primarily as a result of lower increases in operating assets (net of operating liabilities) of $7.4 million, increase in non-cash items of $2.4 million and an increase in net income of $1.3 million.

Net cash used in investing activities for the three month period ended March 31, 2012 of $15.6 million represents an increase of $13.2 million when compared to cash used in investing activities in the three month period ended March 31, 2011. The increase was primarily related to business acquisitions payments of $6.2 million and capital expenditure increases of $7.1 million in the three month period ended March 31, 2012 when compared to the same period in 2011. In January 2012, we purchased Australian Electricity Systems PTY Ltd for $5.3 million, net of cash received and working capital adjustments. In March 2012, we purchased all of the assets of Forma Line Industries CC in South Africa for $.8 million, net of cash received and working capital adjustments. Capital expenditures increased due mostly to purchase of land and building and an information technology system implementation at our Asia-Pacific segment, purchase of building and land at our EMEA segment and building and land and machinery and equipment at our PLP-USA segment

Cash provided by financing activities for the three month period ended March 31, 2012 was $3.8 million compared to $6.7 million for the three month period ended March 31, 2011. The decrease of $2.8 million was primarily a result of lower debt borrowings in 2012 compared to 2011.

Our financial position remains strong and our current ratio was 3.3 to 1 at March 31, 2012 and December 31, 2011. At March 31, 2012, our unused availability under our main credit facility was $36.6 million and our bank debt to equity ratio was 16%. The revolving credit agreement contains, among other provisions, requirements for maintaining levels of working capital, net worth and profitability. At March 31, 2012, we were in compliance with these covenants.

We expect that our major sources of funding for 2012 and beyond will be our operating cash flows and our existing cash and cash equivalents. 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 borrowing capacity provides substantial financial resources. We do not believe we would increase our debt to a level that would have a material adverse impact upon results of operations or financial condition.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In September 2011, the FASB issued accounting standards updates (ASU) 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Our measurement date for our annual impairment test is October 1 of each year. The adoption of this ASU is not expected to impact our consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards (IFRSs) to provide a consistent definition of fair value and ensure that fair value measurements and disclosure requirements are similar between GAAP and IFRS. This guidance changes certain fair value measurement principles and enhances the disclosure requirements for fair value measurements. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2011 and are applied prospectively. The adoption of ASU 2011-04 did not have a material impact on our financial position, results of operations, cash flows or disclosures.

In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). The amendments in ASU 2011-05 allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both instances, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in ASU 2011-05 do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. In December 2011, the FASB issued ASU 2011-12, Comprehensive Income, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05, to defer the effective date of the specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income. We adopted this guidance on January 1, 2012, presenting other comprehensive income in a separate statement following the Statement of Consolidated Income. The adoption of this guidance concerns disclosure only and did not have an impact on our consolidated financial position or results of operations.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Changes to GAAP are established by the FASB in the form of ASU’s to the FASB’s Accounting Standards Codification (ASC).

We consider the applicability and impact of all ASU’s. We assessed the ASU’s and determined each to be either not applicable or have minimal impact on our consolidated financial position and results of operations.

FORWARD LOOKING STATEMENTS

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

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

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

•

The overall demand for cable anchoring and control hardware for electrical transmission and distribution lines on a worldwide basis, which has a slow growth rate in mature markets such as the United States (U.S.), Canada, and Western Europe and may not grow as expected in developing regions;

•

The ability of our customers to raise funds needed to build the facilities their customers require;

•

Technological developments that affect longer-term trends for communication lines such as wireless communication;

•

The decreasing demands for product supporting copper-based infrastructure due to the introduction of products using new technologies or adoption of new industry standards;

•

The Company’s success at continuing to develop proprietary technology and maintaining high quality products and customer service to meet or exceed existing or new industry performance standards and individual customer expectations;

•

The Company’s success in strengthening and retaining relationships with the Company’s customers, growing sales at targeted accounts and expanding geographically;

•

The extent to which the Company is successful in expanding the Company’s product line or production facilities into new areas;

•

The Company’s ability to identify, complete and integrate acquisitions for profitable growth;

•

The potential impact of consolidation, deregulation and bankruptcy among the Company’s suppliers, competitors and customers;

•

The relative degree of competitive and customer price pressure on the Company’s products;

•

The cost, availability and quality of raw materials required for the manufacture of products;

•

The effects of fluctuation in currency exchange rates upon the Company’s 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;

•

Changes in significant government regulations affecting environmental compliances;

•

The telecommunication market’s continued deployment of Fiber-to-the-Premises;

•

The Company’s ability to obtain funding for future acquisitions;

•

The potential impact of the global economic condition and the depressed U.S. housing market on the Company’s ongoing profitability and future growth opportunities in our core markets in the U.S. and other foreign countries where the financial situation is expected to be similar going forward;

•

The continued support by Federal, State, Local and Foreign Governments in incentive programs for upgrading electric transmission lines and promoting renewable energy deployment;

•

Those factors described under the heading “Risk Factors” on page 13 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed on March 14, 2012.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

As of March 31, 2012, the Company had one immaterial foreign currency forward exchange contract outstanding. 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 $35.7 million at March 31, 2012. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $.3 million for the three month period ended March 31, 2012.

The Company’s primary currency rate exposures are related to foreign denominated debt, intercompany debt, forward 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 on such instruments of $6.2 million and on income before tax of less than $.1 million.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s Principal Executive Officer and Principal Financial Officer have concluded that the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended, were effective as of March 31, 2012.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)) during the quarter ended March 31, 2012 that materially affected or are reasonably likely to materially affect the Company’s 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, results of operations or cash flows.

ITEM 1A.

RISK FACTORS

There were no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission on March 14, 2012.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On August 4, 2010, the Company announced that the Board of Directors authorized a plan to repurchase up to 250,000 of Preformed Line Products common shares. The repurchase plan does not have an expiration date. The following table includes repurchases for the three month period ended March 31, 2012.


Period (2012)	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that may yet be Purchased under the Plans or Programs
January		—		—		73,827		176,173
February		—		—		73,827		176,173
March		1,500	$	62.01		75,327		174,673

Total		1,500

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

None.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS



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 Executive Officer, Eric R. Graef, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.1		Certifications of the Principal Executive Officer, Robert G. Ruhlman, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished.

32.2		Certifications of the Principal Executive Officer, Eric R. Graef, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished.

101.INS		XBRL Instance Document.*

101.SCH		XBRL Taxonomy Extension Schema Document.*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.*

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.*

In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.

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.


May 8, 2012								/s/ Robert G. Ruhlman
								Robert G. Ruhlman
								Chairman, President and Chief Executive Officer (Principal Executive Officer)


May 8, 2012								/s/ Eric R. Graef
								Eric R. Graef
								Chief Financial Officer and Vice President—Finance (Principal Accounting Officer)

EXHIBIT INDEX



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 Executive Officer, Eric R. Graef, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.1		Certifications of the Principal Executive Officer, Robert G. Ruhlman, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished.

32.2		Certifications of the Principal Executive Officer, Eric R. Graef, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished.

101.INS		XBRL Instance Document.*

101.SCH		XBRL Taxonomy Extension Schema Document.*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.*

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.*