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

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

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, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange act.

Large accelerated filer o      Accelerated filer þ      Non-accelerated filer o

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 May 7, 2007: 5,365,477.

 

 

Table of Contents

		Page
Part I — Financial Information
Item 1. Financial Statements and Supplementary Data			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3. Quantitative and Qualitative Disclosures About Market Risk			17
Item 4. Controls and Procedures			17
Part II — Other Information
Item 1. Legal Proceedings			17
Item 1A. Risk Factors			17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			17
Item 3. Defaults Upon Senior Securities			18
Item 4. Submission of Matters to a Vote of Security Holders			18
Item 5. Other Information			18
Item 6. Exhibits			18
SIGNATURES			20
EX-2.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our independent registered public accounting firm has not completed its review of our interim financial statements included in this Form 10-Q, as required by Rule 10-01(d) of Regulation S-X. The Company is cooperating fully to ensure that the review of the Company’s quarterly financial statements by the Company’s independent registered public accounting firm is completed as quickly as possible.

PREFORMED LINE PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

		March 31,				December 31,
Thousands of dollars, except share data		2007				2006
ASSETS
Cash and cash equivalents		$	21,392			$	29,949
Accounts receivable, less allowances of $1,088 ($1,209 in 2006)			38,336				30,029
Inventories — net			44,183				40,415
Deferred income taxes			3,380				2,528
Prepaids and other			4,760				2,504
TOTAL CURRENT ASSETS			112,051				105,425
Property and equipment — net			54,016				52,810
Deferred income taxes			3,914				5,145
Goodwill — net			4,793				2,166
Patents and other intangibles — net			2,465				2,546
Other assets			2,653				2,760
TOTAL ASSETS		$	179,892			$	170,852
LIABILITIES AND SHAREHOLDERS’ EQUITY
Notes payable to banks		$	4,816			$	3,738
Current portion of long-term debt			2,168				2,157
Trade accounts payable			14,865				11,606
Accrued compensation and amounts withheld from employees			6,218				5,556
Accrued expenses and other liabilities			4,865				4,225
Accrued profit-sharing and other benefits			2,332				3,596
Dividends payable			1,072				1,072
Income taxes			1,041				1,129
TOTAL CURRENT LIABILITIES			37,377				33,079
Long-term debt, less current portion			1,740				2,204
Deferred income taxes			639				439
Unfunded pension liabilities			4,185				3,982
Unrecognized tax benefits			1,875				—
Other non-current liabilities			375				—
SHAREHOLDERS’ EQUITY
Common shares — $2 par value, 15,000,000 shares authorized, 5,358,437 and 5,360,259 issues and outstanding, net of 367,333 and 365,311 treasury shares at par, respectively			10,717				10,721
Paid in capital			1,629				1,562
Retained earnings			133,686				131,949
Accumulated other comprehensive loss			(12,331	)			(13,084	)
TOTAL SHAREHOLDERS’ EQUITY			133,701				131,148
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	179,892			$	170,852

See notes to consolidated financial statements.

PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)

		Three month periods ended March 31,
In thousands, except per share data		2007				2006
Net sales		$	56,531			$	52,635
Cost of products sold			37,623				36,164
GROSS PROFIT			18,908				16,471
Costs and expenses
Selling			5,963				5,767
General and administrative			5,816				5,796
Research and engineering			1,946				1,873
Other operating expenses — net			186				61
			13,911				13,497
Royalty income — net			381				346
OPERATING INCOME			5,378				3,320
Other income (expense)
Interest income			305				402
Interest expense			(165	)			(102	)
Other expense — net			(6	)			(19	)
			134				281
INCOME BEFORE INCOME TAXES			5,512				3,601
Income taxes			1,794				1,102
NET INCOME		$	3,718			$	2,499
Net income per share — basic		$	0.69			$	0.44
Net income per share — diluted		$	0.69			$	0.43
Cash dividends declared per share		$	0.20			$	0.20
Weighted average number of shares outstanding — basic			5,360				5,731
Weighted average number of shares outstanding — diluted			5,406				5,792

See notes to consolidated financial statements.

PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)

		Three Month Periods Ended March 31,
Thousands of dollars		2007				2006
OPERATING ACTIVITIES
Net income		$	3,718			$	2,499
Adjustments to reconcile net income to net cash used in operations:
Depreciation and amortization			1,816				1,669
Deferred income taxes			558				(132	)
Stock based compensation expense			64				74
Net investment in life insurance			124				—
Other — net			32				(3	)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable			(8,681	)			(7,300	)
Inventories			(2,335	)			(43	)
Trade accounts payables and accrued liabilities			2,371				636
Income taxes			269				331
Other — net			(709	)			(841	)
NET CASH USED IN OPERATING ACTIVITIES			(2,773	)			(3,110	)
INVESTING ACTIVITIES
Capital expenditures			(2,054	)			(2,899	)
Business acquisitions, net of cash received			(2,550	)			—
Proceeds from the sale of property and equipment			22				15
NET CASH USED IN INVESTING ACTIVITIES			(4,582	)			(2,884	)
FINANCING ACTIVITIES
Increase in notes payable to banks			460				—
Proceeds from the issuance of long-term debt			—				2,534
Payments of long-term debt			(550	)			(2,160	)
Dividends paid			(1,072	)			(1,147	)
Issuance of common shares			3				10
Purchase of common shares for treasury			(68	)			(641	)
NET CASH USED IN FINANCING ACTIVITIES			(1,227	)			(1,404	)
Effects of exchange rate changes on cash and cash equivalents			25				249
Decrease in cash and cash equivalents			(8,557	)			(7,149	)
Cash and cash equivalents at beginning of year			29,949				39,592
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	21,392			$	32,443

See notes to consolidated financial statements.

PREFORMED LINE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Tables in thousands, except per share data

NOTE A – BASIS OF PRESENTATION

The accompanying unaudited 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. However, the Company‘s independent registered public accounting firm has not completed its timely review of our interim financial statements included in this Form 10-Q, as required by Rule 10-01(d) of Regulation S-X. These consolidated financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. Certain amounts in the prior year financial statements have been adjusted for the retrospective application of Financial Accounting Standards Board (FASB) Staff Position AUG AIR – 1, “Accounting for Planned Major Maintenance Activities,” and the beginning of the year retained earnings has been reduced for the cumulative effect of adopting FASB Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes” (see Note H). 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 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, 2007 are not necessarily indicative of the results to be expected for the year ending December 31, 2007.

The consolidated balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements, but does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. For further information, refer to the consolidated financial statements and notes to consolidated financial statements included in the Company’s Form 10-K for 2006 filed with the Securities and Exchange Commission.

NOTE B – OTHER FINANCIAL STATEMENT INFORMATION

Inventories

		March 31,				December 31,
		2007				2006
Finished goods		$	18,104			$	17,044
Work-in-process			2,506				1,844
Raw material			27,382				25,431
			47,992				44,319
Excess of current cost over LIFO cost			(3,809	)			(3,904	)
		$	44,183			$	40,415

Property and equipment

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

		March 31,				December 31,
		2007				2006
Land and improvements		$	8,577			$	8,422
Buildings and improvements			42,306				41,941
Machinery and equipment			101,339				101,339
Construction in progress			4,159				2,629
			156,381				154,331
Less accumulated depreciation			102,365				101,521
		$	54,016			$	52,810

Comprehensive Income

The components of comprehensive income are as follows:

		Three month periods ended March 31,
		2007				2006
Net income		$	3,718			$	2,499
Other comprehensive income:
Foreign currency adjustments			753				527
Comprehensive income		$	4,471			$	3,026

Guarantees

Product warranty balance at January 1, 2007		$	82
Additions charged to Cost of products sold			2
Deductions			(20	)
Product warranty balance at March 31, 2007		$	64

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

Net periodic benefit cost for the Company’s domestic plan included the following components:

		Three month periods ended March 31,
		2007				2006
Service cost		$	177			$	181
Interest cost			235				214
Expected return on plan assets			(235	)			(205	)
Recognized net actuarial loss			26				55
Net periodic benefit cost		$	203			$	245

The first quarterly contribution was made on April 13, 2007 in the amount of $.1 million. The Company presently anticipates contributing an additional $.2 million to fund its pension plan in 2007 for a total of $.3 million.

NOTE D – COMPUTATION OF EARNINGS PER SHARE

		Three month periods ended March 31,
		2007				2006
Numerator
Net income		$	3,718			$	2,499
Denominator
Determination of shares
Weighted average common shares outstanding			5,360				5,731
Dilutive effect — employee stock options			46				61
Diluted weighted average common shares outstanding			5,406				5,792
Earnings per common share
Basic		$	0.69			$	0.44
Diluted		$	0.69			$	0.43

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 2007 and had determined that no adjustment to the carrying value of goodwill was required. The Company’s only intangible asset with an indefinite life is goodwill. The aggregate amortization expense for other intangibles with finite lives for each of the three-months ended March 31, 2007 and 2006 was $.1 million. Amortization expense is estimated to be $.3 million annually for 2007 through 2011.

The following table sets forth the carrying value and accumulated amortization of intangibles, including the effect of foreign currency translation, by segment at March 31, 2007:

		Domestic				Foreign				Total
Amortized intangible assets
Gross carrying amount — patents and other intangibles		$	4,947			$	79			$	5,026
Accumulated amortization — patents and other intangibles			(2,502	)			(59	)			(2,561	)
Total		$	2,445			$	20			$	2,465

The changes in the carrying amount of goodwill for the three-month period ended March 31, 2007, is as follows:

Balance at January 1, 2007		$	2,166
Additions			2,565
Currency translation			62
Balance at March 31, 2007		$	4,793

NOTE F – STOCK OPTIONS

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 March 31, 2007 there were 27,000 shares 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 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 15,000 options granted during the three months ended March 31, 2007. There were no options granted during the three months ended March 31, 2006. The fair value for the stock options granted in 2007 was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

		2007
Risk-free interest rate			4.3	%
Dividend yield			3.1	%
Expected life			6
Expected volatility			40.7	%

Activity in the Company’s stock option plan for the three months ended March 31, 2007 was as follows:

										Weighted
						Weighted				Average
						Average				Remaining				Aggregate
		Number of				Exercise Price				Contractual				Intrinsic
		Shares				per Share				Term (Years)				Value
Outstanding at January 1, 2007			130,811			$	23.43
Granted			15,000			$	35.50
Exercised			(200	)		$	15.13
Forfeited			—
Outstanding (vested and expected to vest) at March 31, 2007			145,611			$	21.02				6.4			$	1,747
Exercisable at March 31, 2007			102,611			$	20.73				5.4			$	1,620

The weighted–average grant-date fair value of options granted during 2007 was $11.76. The total intrinsic value of stock options exercised during the three months ended March 31, 2007 and 2006 was $4 thousand and $17 thousand, respectively. There were no stock options that vested during the three months ended March 31, 2007 and 2006.

For the three months ended March 31, 2007 and 2006, the Company recorded compensation expense related to the stock options recognized over the requisite service period, reducing income before taxes and net income by $.1 million. For the three months ended March 31, 2007 and 2006, the impact on earnings per share was a reduction of $.01 per share, basic and diluted. The total compensation cost related to nonvested awards not yet recognized at March 31, 2007 is expected to be a combined total of $.3 million over a weighted-average period of 2 years.

Activity for nonvested stock options for the three months ended March 31, 2007 was as follows:

						Weighted-
						average grant-
		Number of				date fair value
		Shares				per share
Nonvested at January 1, 2007			28,000			$	10.61
Granted			15,000			$	11.76
Vested			—				—
Forfeited			—				—
Nonvested at March 31, 2007			43,000			$	11.01

NOTE G –RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Statement of Financial Account Standards (SFAS) No. 157, “Fair Value Measurements.” 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 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal periods. The Company is evaluating the impact this standard will have on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment to FASB No. 115.” This standard permits entities to measure certain financial assets and liabilities 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 No. 159 establishes presentation and disclosure requirements to help financial statement users understand the effect of the entity’s election on earnings, but does not eliminate disclosure requirements of other accounting standards. Assets and liabilities that are measured at fair value must be displayed on the face of the balance sheet. This standard is effective as of the beginning of the first fiscal year that begins after November 15, 2007. The Company is evaluating the impact this standard will have on its consolidated financial statements.

NOTE H – NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income taxes” an interpretation of FASB Statement No. 109, “Accounting for Income Taxes” (FIN 48). This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under FIN 48, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective for the Company starting January 1, 2007.

The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $.8 million increase in the liability for unrecognized tax benefits which was accounted for as a reduction in retained earnings. The total amount of unrecognized tax benefits, including the accrual for interest and penalties, as of the date of adoption was $1.8 million, all of which would affect the effective tax rate if recognized.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income taxes. The Company had $.1 million accrued for the payment of interest and penalties at December 31, 2006. Upon adoption of FIN 48 on January 1, 2007, the Company increased its accrual for interest and penalties to $.2 million.

The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for years before 2003.

The Company does not expect that the unrecognized tax benefit will change significantly within the next twelve months.

In September 2006, the FASB issued FASB Staff Position AUG AIR-1, “Accounting for Planned Major Maintenance Activities.” This staff position amends certain provisions in the AICPA Industry Audit Guide, Audits of Airlines (Airline Guide), and APB No. 28, Interim Financial Reporting. This staff position prohibits the use of the accrue-in-advance method of accounting for planned major maintenance activities in annual and interim financial reporting periods. The Company adopted the direct expense method effective January 1, 2007, and has retrospectively applied this new accounting principle to prior periods.

The cumulative effect of the retrospective application of the new accounting principle to the carrying value of assets and liabilities and the offsetting adjustment to opening January 1, 2006 retained earnings was a decrease in deferred tax assets of $.1 million, a decrease in accrued liabilities of $.3 million and an increase in beginning retained earnings of $.2 million. The effect on the results of operations for the quarter ended March 31, 2006 was an increase to net income of $15 thousand in our domestic segment.

NOTE I – BUSINESS SEGMENTS

		Three month periods ended March 31,
		2007				2006
Net sales
Domestic		$	32,041			$	27,961
Foreign			24,490				24,674
Total net sales		$	56,531			$	52,635
Intersegment sales
Domestic		$	1,698			$	1,494
Foreign			1,667				808
Total intersegment sales		$	3,365			$	2,302
Operating income
Domestic		$	2,369			$	916
Foreign			3,009				2,404
			5,378				3,320
Interest income
Domestic			185				242
Foreign			120				160
			305				402
Interest expense
Domestic			(35	)			(6	)
Foreign			(130	)			(96	)
			(165	)			(102	)
Other expense — net			(6	)			(19	)
Income before income taxes		$	5,512			$	3,601

		March 31,				December 31,
		2007				2006
Identifiable assets
Domestic		$	88,641			$	85,814
Foreign			91,251				85,038
Total assets		$	179,892			$	170,852

NOTE J – BUSINESS COMBINATIONS

On March 22, 2007, the Company entered into and closed a Stock Purchase Agreement (Agreement) for $3 million, subject to a holdback of $.4 million, acquiring all of the issued and outstanding shares of Direct Power and Water Corporation (DPW), a New Mexico company that designs and installs solar systems and manufactures mounting hardware, battery, and equipment enclosures. The hold back of $.4 million is to be held as security for any liability of the sellers pursuant to the indemnity obligations set forth in the Agreement. Depending on the post-closing performance of DPW, certain earn out consideration may be paid for the three years following the closing.

The Company’s consolidated balance sheet as of March 31, 2007 reflects the acquisition of DPW under the purchase method of accounting. The Company recorded various assets acquired and liabilities assumed, primarily the working capital accounts of DPW. The allocation of the purchase price has not yet been finalized as the valuation of inventories, long lived assets and intangibles is not yet completed. The purchase price allocation remains subject to revision.

The preliminary value of assets acquired and liabilities assumed in connection with the DPW acquisition as of March 31, 2007 is as follows:

		Preliminary Value
		of Net Assets
		Acquired
Cash		$	75
Accounts receivable			475
Inventories			697
Prepaids and other			5
Property and equipment			223
Goodwill			2,565
Total assets			4,040
Notes payable to bank			244
Trade accounts payable			492
Accrued compensation and amounts withheld from employees			31
Accrued expenses and other liabilities			20
Deferred income taxes			132
Income taxes payable			121
Total liabilities			1,040
Increase in net assets from acquisition		$	3,000

Annualized unaudited 2006 net revenues of DPW were approximately $7.1 million. The Company will begin including the results of DPW in its consolidated financial statements in April 2007. The reported results of operations are not materially different from the proforma amounts that would include the impact of the acquisition from the beginning of the periods presented. DPW is included in the domestic segment.

NOTE K – SUBSEQUENT EVENTS

On April 22, 2007, the Company entered into a Stock Purchase Agreement to acquire approximately 84% of the issued and outstanding shares of Belos SA (“Belos”), a joint stock company located in Bielsko – Biala, Poland, for $6 million, subject to a holdback of $1 million. Belos is a manufacturer and supplier of fittings and equipment for low, medium and high voltage power networks and mining applications in its domestic and export markets. The closing of this agreement is contingent upon clearance from the Polish Minister of Internal Affairs and Administration as required under the Act on Acquisition of Real Estates by Foreigners of 20 March 1920, which is expected to take eight weeks. Depending on the post-closing performance of Belos, certain earn out consideration may be paid for the year following the closing.

ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXECUTIVE SUMMARY

Our net sales for the quarter ended March 31, 2007 increased 7% and gross profit increased 15% compared to the same period in 2006. Net sales increased as a result of increased domestic sales coupled with the favorable impact of the conversion of local currencies to U.S. dollars partially offset by a decrease in sales within our South American and European markets. Gross profit increased as a result of increased sales while manufacturing fixed costs remained relatively unchanged. The increased gross profit partially offset by a 3% increase in costs and expenses resulted in an increase in net income of 49%, or $.26 per diluted share, when compared to the same period in 2006.

THREE MONTHS ENDED MARCH 31, 2007 COMPARED TO THREE MONTHS ENDED MARCH 31, 2006

For the three months ended March 31, 2007, net sales were $56.5 million, an increase of $3.9 million, or 7%, from the same period in 2006. Domestic net sales increased $4.1 million, or 15%. The increase in domestic net sales was due primarily to sales increases in the domestic energy markets. We anticipate the domestic energy market to show

continued strength for the remainder of 2007 as long as the general economy remains strong. Our first quarter net sales in the domestic telecommunications market increased 7% while our net sales in the data communications market decreased 13%. We expect an increase in demand for our communication products for the remainder of 2007 as a result of increasing investments by cable television companies to defend their market share as well as the investment by communication companies in Fiber-to-the-Premises (FTTP) installations. Foreign net sales of $24.5 million decreased $.2 million, or 1%. Foreign net sales were favorably impacted by $1 million when converted to U.S. dollars as a result of the weaker U.S. dollar compared to certain foreign currencies when compared to the first quarter 2006 conversion rates. Excluding the effect of currency conversion, foreign net sales decreased $1.2 million primarily as a result of decreased sales in the energy markets in Latin America and Europe. Despite our first quarter foreign net sales not being at levels anticipated, we expect that growth in the energy markets will continue for the foreseeable future not only as new construction projects are added in developing markets but also due to the need to rebuild and refurbish much of the foreign energy transmission and distribution infrastructure in developed countries.

Gross profit of $18.9 million for the three months ended March 31, 2007 increased $2.4 million, or 15%, compared to the same period in 2006. Domestic gross profit of $9.8 million increased $1.6 million, or 20%. Domestic gross profit increased $1.2 million due to increased net sales and $.4 million as a result of lower per unit manufacturing cost being realized as a result of higher production volumes when compared to 2006. Foreign gross profit of $9.1 million increased $.8 million, or 10%. Foreign gross profit increased $.7 million due to a $.4 million adjustment to cost of sales as a result of an adjustment to correct a certain inventory reserve balance, lower fixed manufacturing expenses and a $.3 million favorable impact resulting from converting native currency to U.S. dollars partially offset by the decrease in gross profits due to lower foreign net sales. We expect continued pressure on gross profit percentage as a result of the anticipated increases in our raw material costs. However, we expect the use of alternative new materials and a new production process to partially offset this impact.

Effective January 1, 2007, we applied FASB Staff Position AUG AIR – 1 retrospectively. As a result, domestic general and administrative cost and expenses for the three months ended March 31, 2006 were decreased by $22 thousand.

Costs and expenses of $13.9 million for the three month period ended March 31, 2007 increased $.4 million, or 3%, compared to the previous year, as summarized in the following table:

														%
										Increase				Increase
thousands of dollars		2007				2006				(decrease)				(decrease)
Costs and expenses
Domestic:
Selling		$	4,072			$	3,963			$	109				3	%
General and administrative			3,282				3,310				(28	)			-1	%
Research and engineering			1,297				1,312				(15	)			-1	%
Other operating expense — net			176				—				176			NM
		$	8,827			$	8,585			$	242				3	%
Foreign:
Selling		$	1,891			$	1,804			$	87				5	%
General and administrative			2,534				2,508				26				1	%
Research and engineering			649				561				88				16	%
Other operating expense — net			10				61				(51	)		NM
		$	5,084			$	4,934			$	150				3	%
		$	13,911			$	13,519			$	392				3	%

Domestic costs and expenses of $8.8 million for the three month period ended March 31, 2007 increased $.3 million, or 3%, compared to the same period in 2006. Domestic selling expenses of $4.1 million increased $.1 million primarily as a result of an increase in advertising and promotional expense. General and administrative expenses of $3.3 million

and research and engineering expenses of $1.3 million remained relatively unchanged from the same period in 2006. Other operating expense increased $.2 million primarily as a result of an adjustment to the carrying value of certain insurance policies.

Foreign costs and expenses of $5.1 million for the three months ended March 31, 2007 increased $.1 million, or 3%, compared to the same period in 2006. Net of the unfavorable impact on foreign cost and expenses when foreign costs in local currencies were translated into U.S. dollars, foreign costs and expenses remained relatively unchanged from the same period in 2006.

Royalty income — net for the quarter ended March 31, 2007 of $.4 million improved slightly compared to 2006.

Operating income of $5.4 million for the quarter ended March 31, 2007 increased $2.1 million, or 62%, compared to the same period in 2006. This increase was primarily a result of the $2.4 million increase in gross profit partially offset by the $.4 million increase in costs and expenses. Domestic operating income increased $1.5 million compared to the same period in 2006 as a result of the increase in gross profit of $1.6 million and the increase in royalty income being partially offset by a $.3 million increase in costs and expenses. Foreign operating income of $3 million increased $.6 million, compared to the same period in 2006, as a result of the increase in gross profit of $.8 million partially offset by a $.1 million increase in costs and expenses and a $.1 million increase in intercompany royalty expense.

Other income of $.1 million for the three months ended March 31, 2007 decreased $.1 million as a result of a decrease in interest income.

Income taxes for the three months ended March 31, 2007 of $1.8 million increased $.7 million compared to the same period in 2006 as a result of $1.9 million of additional income before taxes. The effective tax rate for the quarter ended March 31, 2007 was 33% compared to 31% in 2006. The effective tax rate for 2007 is lower than the statutory federal rate of 34% due primarily to foreign tax rate differences.

As a result of the preceding items, net income for the three month period ended March 31, 2007 was $3.7 million, or $.69 per diluted share, compared to net income of $2.5 million, or $.43 per diluted share, for the same period in 2006.

WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES

Cash decreased $8.6 million for the three months ended March 31, 2007. Net cash used in operating activities was $2.8 million primarily because accounts receivable increased as a result of higher sales in the quarter compared to year-end. The major investing and financing uses of cash were capital expenditures of $2.1 million, a cash outlay of $2.6 million for a business acquisition and $1.1 million in dividend payments.

Net cash used for investing activities of $4.6 million represents an increase of $1.7 million when compared to the cash used for investing activities in 2006. In March 2007, we acquired all the issued and outstanding shares of Direct Power and Water Corporation (DPW) for an initial cash payment of $2.6 million. Capital expenditures decreased $.8 million in the three months ended March 31, 2007 when compared to the same period in 2006.

Cash used in financing activities was $1.2 million compared to $1.4 million in the previous year. This decrease was primarily a result of lower dividends paid on fewer outstanding shares.

Our current ratio was 3.0 to 1 at March 31, 2007 compared to 3.2 to 1 at December 31, 2006. Our current ratio decreased primarily due to the $4.6 million cash used in the quarter to acquire property and equipment and the acquisition of a business. At March 31, 2007, our unused balance under our main credit facility was $20 million and our bank debt to equity percentage was 7%. Our main revolving credit agreement contains, among other provisions, requirements for maintaining levels of working capital, net worth and profitability. At March 31, 2007, 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 untapped borrowing capacity, provides substantial financial resources. If we were to incur significant indebtedness, we expect to be able to continue to meet liquidity needs under the credit facilities but possibly at an increased cost for interest and commitment fees. We would not increase our debt to a level that we believe would have a material adverse impact upon the results of operations or financial condition.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Statement of Financial Account Standards (SFAS) No. 157, “Fair Value Measurements.” 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 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal periods. The Company is evaluating the impact this standard will have on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment to FASB No. 115.” This standard permits entities to measure certain financial assets and liabilities 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 No. 159 establishes presentation and disclosure requirements to help financial statement users understand the effect of the entity’s election on earnings, but does not eliminate disclosure requirements of other accounting standards. Assets and liabilities that are measured at fair value must be displayed on the face of the balance sheet. This standard is effective as of the beginning of the first fiscal year that begins after November 15, 2007. The Company is evaluating the impact this standard will have on its consolidated financial statements.

NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income taxes” an interpretation of FASB Statement No. 109, “Accounting for Income Taxes” (FIN 48). This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under FIN 48, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective for the Company starting January 1, 2007.

The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $.8 million increase in the liability for unrecognized tax benefits which was accounted for as a reduction in retained earnings. The total amount of unrecognized tax benefits, including the accrual for interest and penalties, as of the date of adoption was $1.8 million, all of which would affect the effective tax rate if recognized.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income taxes. The Company had $.1 million accrued for the payment of interest and penalties at December 31, 2006. Upon adoption of FIN 48 on January 1, 2007, the Company increased its accrual for interest and penalties to $.2 million.

The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for years before 2003.

The Company does not expect that the unrecognized tax benefit will change significantly within the next twelve months.

In September 2006, the FASB issued FASB Staff Position AUG AIR-1, “Accounting for Planned Major Maintenance Activities.” This staff position amends certain provisions in the AICPA Industry Audit Guide, Audits of Airlines (Airline Guide), and APB No. 28, Interim Financial Reporting. This staff position prohibits the use of the accrue-in-advance method of accounting for planned major maintenance activities in annual and interim financial reporting periods. The Company adopted the direct expense method effective January 1, 2007, and has retrospectively applied this new accounting principle to prior periods.

The cumulative effect of the retrospective application of the new accounting principle to the carrying value of assets and liabilities and the offsetting adjustment to opening January 1, 2006 retained earnings was a decrease in deferred tax assets of $.1 million, a decrease in accrued liabilities of $.3 million and an increase in beginning retained earnings

of $.2 million. The effect on the results of operations for the quarter ended March 31, 2006 was an increase to net income of $15 thousand in our domestic segment.

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 foreign operations are mitigated due to the stability of the countries in which the Company’s largest foreign operations are located.

The Company has no foreign currency forward exchange contracts outstanding at March 31, 2007. 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 $8.7 million at March 31, 2007. 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 three-month period ended March 31, 2007.

The Company’s 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 $1.5 million and on income before income taxes of less than $.1 million.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Vice President of Finance, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Securities and Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2007. Based on the evaluation, the Company’s management, including the Chief Executive Officer and Vice President of Finance, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2007.

There were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2007 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 or results of operations.

ITEM 1A. RISK FACTORS

There were no material changes from the risk factors previously disclosed in the Company’s 10-K for the fiscal year ended December 31, 2006 filed on March 15, 2007.

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 period ending March 31, 2007.

		Company Purchases of Equity Securities
										Total Number of Shares				Maximum Number of
		Total Number								Purchased as Part of				Shares that may yet be
		of Shares				Average Price				Publicly Announced				Purchased under the
Period		Purchased				Paid per Share				Plans or Programs				Plans or Programs
January			—				—				—				200,000
February			—				—				—				200,000
March			2,022			$	33.63				2,022				197,978
Total			2,022

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

2.1		Stock Purchase Agreement, dated March 22, 2007, by and among the Company and Claudia W. Goodreau, Kevin M. Goodreau, Dora Ely Randall and Jeffrey J. Randall to acquire Direct Power and Water Corporation.
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.

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 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, Canada, and Western Europe;
	•		The effect on the Company’s business resulting from economic uncertainty within Latin American regions;
	•		Technology developments that affect longer-term trends for communication lines such as wireless communication;
	•		The Company’s success at continuing to develop proprietary technology to meet or exceed new industry performance standards and individual customer expectations;
	•		The rate of progress in continuing to modify the Company’s cost structure to maintain and enhance the Company’s competitiveness;
	•		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 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 Company’s ability to compete in the domestic data communication market;
	•		The telecommunication market’s continued deployment of Fiber-to-the-Premises;
	•		Those factors described under the heading “Risk Factors” on page 12 of the Company’s Form 10-K for the fiscal year ended December 31, 2006 filed on March 15, 2007.

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.

EXHIBIT INDEX

2.1		Stock Purchase Agreement, dated March 22, 2007, by and among the Company and Claudia W. Goodreau, Kevin M. Goodreau, Dora Ely Randall and Jeffrey J. Randall to acquire Direct Power and Water Corporation.
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.