Quarterly Report for Quarter Ending March 31, 2024 (Form 10-Q)

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Note 1 - Significant Accounting Policies

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 ("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. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. This Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Form 10-K for the year ended December 31, 2023 filed on March 8, 2024 with the Securities and Exchange Commission. The interim period results are not necessarily indicative of the results to be expected for the full year. Management has evaluated subsequent events through the date this Form 10-Q was filed with the Securities and Exchange Commission.

The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from these estimates. In the opinion of management, these consolidated financial statements contain all estimates and adjustments, consisting of normal recurring accruals, required to fairly present the financial position, results of operations, and cash flows for the interim periods. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full-year ending December 31, 2024.

Noncontrolling interests are presented in the Company's consolidated financial statements as if parent company investors (controlling interests) and other minority investors (noncontrolling interests) in partially-owned subsidiaries have similar economic interests in a single entity. As a result, investments in noncontrolling interests are reported as equity in the Company's consolidated financial statements. Additionally, the Company's consolidated financial statements include 100% of a controlled subsidiary's earnings, rather than only its share. Transactions between the parent company and noncontrolling interests are reported in equity as transactions between stockholders, provided that these transactions do not create a change in control.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Recently Adopted or Issued Accounting Pronouncements

Note 2 - Revenue

Revenue Recognition

Sales are recognized when obligations under the terms of the contract are satisfied and control of promised goods or services have transferred to our customers. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the

goods or services and is primarily based on shipping terms. Sales are measured as the amount of consideration the Company expects to receive in exchange for transferring products.

Disaggregated Revenue

Credit Losses for Receivables

The Company maintains an allowance for credit losses for estimated losses resulting from the inability of its customers to make required payments. The Company uses a current expected credit loss model in order to immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments, mainly trade receivables. Additionally, the allowance is based upon identified delinquent accounts, customer payment patterns and other analyses of historical data trends. Receivable balances are written off against an allowance for credit losses after a final determination has been made. The change in the allowance for credit losses includes expense and net write-offs, which areidentified in the following table:

Note 3 - Inventories, Net

Inventories, net

Inventory is carried at lower of cost or net realizable value. The components of inventory are as follows:

Costs for inventories of certain material, mainly in the U.S., are determined using the Last-In First-Out ("LIFO") method and totaled approximately $55.3million at March 31, 2024 and $60.1million at December 31, 2023. 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 are 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 periods ended March 31, 2024 and 2023, the net change in LIFO inventories resulted in expense of $0.2million and $0.5million, respectively, to Cost of products sold. The Company's reserves for slow moving and obsolete inventory was $17.8million at March 31, 2024 and $17.6million at December 31, 2023.

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Note 4 - Property and Equipment, Net

Note 5 - Contingent Liabilities

The Company can be party to a variety of pending legal proceedings and claims arising in the normal course of business, including, but not limited to, litigation relating to employment, workers' compensation, product liability, environmental and intellectual property. The Company has liability insurance to cover many of these claims.

Although the outcomes of these matters are not predictable with certainty, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In the event the Company determines that a loss is not probable, but is reasonably possible, and the likelihood to develop what the Company believes to be a reasonable range of potential loss exists, the Company will include disclosure related to such matters. To the extent that there is a reasonable possibility the losses could exceed amounts already accrued, the Company will adjust the accrual in the period in which the determination is made, disclose an estimate of the additional loss or range of loss and if the amount of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made.

In November 2016, the Company and its subsidiaries Helix Uniformed Ltd. ("Helix") and Preformed Line Products (Canada) Limited ("PLPC Canada"), were each named, jointly and severally, with each of SNC-Lavalin ATP, Inc. ("SNC ATP"), HD Supply Canada Inc., by its trade names HD Supply Power Solutions and HD Supply Utilities ("HD Supply"), and Anixter Power Solutions Canada Inc. (the corporate successor to HD Supply, "Anixter") and, together with the Company, PLPC Canada, Helix, SNC ATP and HD Supply (the "Defendants"), in a complaint filed by Altalink, L.P. (the "Plaintiff") in the Court of Queen's Bench of Alberta in Alberta, Canada in November 2016(the "Complaint").

The Complaint stated that the Plaintiff engaged SNC ATP to design, engineer, procure and construct numerous power distribution and transmission facilities in Alberta (the "Projects") and that through SNC ATP and HD Supply (now Anixter), spacer dampers manufactured by Helix were procured and installed in the Projects. The Complaint alleged that the spacer dampers have and may continue to become loose, open and detach from the conductors, resulting in damage and potential injury and a failure to perform the intended function of providing spacing and damping to the Project. The Plaintiff was seeking an estimated $56.0million Canadian dollars in damages jointly and severally from the Defendants, representing the costs of monitoring and replacing the spacer dampers and remediating property damage, due to alleged defects in the design and construction of, and supply of materials for, the Projects by SNC ATPand HD Supply/Anixter and in the design of the spacer dampers by Helix.

On September 26, 2023, the Defendants and the Plaintiff entered into a settlement agreement which dismissed the action against all Defendants with prejudice. Net of insurance, the total settlement amount paid by the Company in the fourth quarter of 2023 was $4.3million Canadian dollars ($3.2million US dollars). The settlement reflects the Company's desire to eliminate the burden, expense, distraction and further uncertainties of litigation, and settlement does not constitute an admission of liability, wrongdoing or fault by the Company and its subsidiaries.

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 flow. As of March 31, 2024 and December 31, 2023, there were zeroreserves for known global legal matters.

Note 6 - Pension Plans

The Company uses a December 31 measurement date for the Preformed Line Products Company Employees' Retirement Plan (the "U.S. Plan"). Net periodic pension expense for the U.S. Plan for the three months ended March 31, 2024 and 2023, respectively, follows:

There were nocontributions to the U.S. Plan during the three months ended March 31, 2024 and 2023. The Company is evaluating whether to make additional contributions to the U.S. Plan during 2024. In August 2023, the Board of Directors of the Company approved a resolution to terminate the U.S. Plan and preliminary administrative actions have been undertaken to proceed with the termination. Components of pension expenseare included in Other income, netin the Consolidated Statements of Income.

Note 7 - Accumulated Other Comprehensive Income ("AOCI")

Note 8 - Debt and Credit Arrangements

The Company maintains a credit facility (the "Facility") with a capacity of $90.0million that expires March 2, 2026. The interest rate is defined as the Secured Overnight Financing Rate ("SOFR") plus 1.125% unless the Company's funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 2.25to 1, at which point the SOFR spread becomes 1.500%. At March 31, 2024, the Company had utilized $35.0million with $55.0million available on the Facility. There were nolong-term outstanding letters of credit as of March 31, 2024. Our bank debt to equity percentage was 13.7%. The Facility contains, among other provisions, requirements for maintaining levels of net worth and profitability. At March 31, 2024, the Company was in compliance with these covenants.

On January 19, 2021, the Company received funding for a term loan from PNC Equipment Finance, LLC in the principal amount of $20.5million for the full amount of the purchase price for a new corporate aircraft. The term of the loan is 120 monthsat a fixed interest rate of 2.744%. The loan is payable in 119 equal monthly installments, which commenced on March 1, 2021with a final payment of any outstanding principal and accrued interest due and payable on the final monthly payment date. Of the $14.2million outstanding on this debt facility at March 31, 2024, $2.1million was classified as current. The loan is secured by the aircraft.

The Company has other borrowing facilities at certain of its foreign subsidiaries, which consist of overdraft lines, working capital credit lines, and facilities for the issuance of letters of credit and short-term borrowing needs. At March 31, 2024, and December 31, 2023, $7.3million and $13.3million was outstanding, of which $6.5million and $11.4million were classified as current, respectively. These facilities support commitments made in the ordinary course of business.

The Company's Asia-Pacific segment had $0.2million in restricted cash used to secure bank debt at March 31, 2024 and December 31, 2023, respectively. The restricted cash is shown on the Company's Consolidated Balance Sheets in Cash, cash equivalents and restricted cash.

Note 9 - Income Taxes

For the three months ended March 31, 2024 and 2023, the Company's effective tax rate was 19% and 24%, respectively. The effective tax rate for the three months ended March 31, 2024 was lower than the effective tax rate for the same period in 2023 mainly due to an increase in excess tax benefits on share-based compensation in relation to overall lower pre-tax book income.

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. During the period ended March 31, 2024, the Company did not record any additional valuation allowances in various jurisdictions on their deferred tax assets.

For the three-month periods ending March 31, 2024 and 2023, the Company did not record any new uncertain tax positions.

Note 10 - Computation of Earnings Per Share

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

For the three months ended March 31, 2024 and 2023, there were zerostock options which were excluded from the calculation of diluted earnings per share.

Note 11 - Goodwill and Other Intangibles

The Company's measurement date for its annual impairment test for goodwill is October 1st of each year. The Company performs additional interim impairment assessments as circumstances warrant. There were no indicators of impairment noted for the period ending March 31, 2024.

The Company may use both quantitative and qualitative approaches when testing goodwill for impairment. For selected reporting units where the qualitative approach is utilized, a qualitative evaluation of events and circumstances impacting the reporting unit is performed to determine if it is more likely than not that the fair value of the reporting unit exceeds its carrying amount. If that determination is made, no further evaluation is necessary. Otherwise, the Company performs a quantitative impairment test on the reporting unit.

For the quantitative approach, the Company uses a combination of the income approach, which uses a discounted cash flow methodology, and the market approach, which uses comparable market multiples in computing fair value by reporting unit. The Company then compares the fair value of the reporting unit with its carrying value to assess if goodwill has been impaired. The fair value estimates are subjective and sensitive to significant assumptions, such as revenue growth rates, operating margins, the weighted average cost of capital, and estimated market multiples, of which are affected by expectations of future market or economic conditions. The Company believes that the methodologies, significant assumptions, and weightings used are reasonable and result in appropriate fair values of the reporting units.

The Company's only intangible asset with an indefinite life is goodwill. The Company's goodwill is not deductible for tax purposes. Changes in the carrying amount of goodwill by reporting unit are shown in the following table:

Note 12 - Fair Value of Financial Assets and Liabilities

Fair value is measured based on an exit price, representing the amount that would be received to sell an asset or paid to satisfy a liability in an orderly transaction between market participants. The Company measures and records certain assets and liabilities at fair value. A fair value hierarchy is used for those assets and liabilities measured at fair value that distinguishes between assumptions based on market data (observable inputs), and the Company's assumptions (unobservable inputs). The hierarchy consists of the following three levels: (Level 1 Inputs) quoted market prices in active markets for identical assets or liabilities; (Level 2 Inputs) observable market-based inputs or unobservable inputs that are corroborated by market data; and (Level 3 Inputs) unobservable inputs that are not corroborated by market data.

The Company operates internationally and enters into intercompany transactions denominated in foreign currencies. Consequently, the Company is subject to market risk arising from exchange rate movements between the dates foreign currency transactions occur and the dates they are settled. The Company currently uses foreign currency forward contracts to reduce the risk related to some of these transactions. These contracts usually have maturities of 90days or less and generally require an exchange of foreign currencies for U.S. dollars at maturity at rates stated in the contracts. These contracts are not designated as hedging instruments under U.S. GAAP. Accordingly, the changes in the fair value of the foreign currency forward contracts are recognized in each accounting period in Other operating expense, net on the Consolidated Statements of Income together with the transaction gain or loss from the related balance sheet position. For the three months ended March 31, 2024 and 2023, the Company recognized net lossesof $0.2million and $0.1million, respectively, on foreign currency forward contracts.

The Company has a non-qualified supplemental profit sharing plan for its executives (the "Supplemental Profit Sharing Plan"). The liability for the unfunded Supplemental Profit Sharing Plan was $9.1million at March 31, 2024 and $8.2million at December 31, 2023. These amounts are recorded within Other noncurrent liabilities on the Company's Consolidated Balance Sheets. The Supplemental Profit Sharing Plan allows participants the ability to hypothetically invest their proportionate award into various investment options, which primarily includes mutual funds. The Company credits earnings, gains and losses to the participants' deferred compensation account balances based on the investments selected by the participants. The Company measures the fair value of the Supplemental Profit Sharing Plan liability using the market values of the participants' underlying investment accounts.

The carrying value of the Company's current financial instruments, which include cash, cash equivalents and restricted cash, accounts receivable, accounts payable and short-term debt, approximates fair value because of the short-term maturity of these instruments.

At March 31, 2024 and December 31, 2023, the fair value of the Company's long-term debt was estimated using discounted cash flows analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements that are considered to be Level 2 inputs. Based on the analysis performed, the fair value and the carrying value of the Company's long-term debt are as follows:

Note 13 - Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated by the CODM, or decision making group, in deciding how to allocate resources to an individual segment and in assessing performance.

Note 14 - Acquisitions of Businesses

Acquisition of Pilot Plastics

On February 1, 2023, the Company acquired substantially all of the assets of Pilot Plastics, headquartered in Akron, Ohio. Pilot Plastics is an injection molding manufacturer and the acquisition expanded the Company's injection molding capabilities and further enhanced the Company's domestic manufacturing footprint. The purchase price was approximately $13.8million, net of cash as of the closing date. The purchase price is subject to a holdback of approximately $1.7million. To fund the Pilot Plastics acquisition, the Company borrowed on the Facility.

The acquisition of Pilot Plastics is accounted for using the acquisition method of accounting, which requires the assets acquired and liabilities assumed to be recognized at their respective fair values on the acquisition date. The process of estimating the fair values of certain tangible assets, and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. During the measurement period, opening balance sheet adjustments were made to finalize the fair value estimates based on the final valuations received, which are summarized in the table below.

Due to the consideration transferred equaling the fair value of the assets acquired, no residual goodwill was recognized.

All measurement period adjustments were completed within a year from the acquisition date, and such adjustments did not have a material impact on the Company's results of operations and financial position.

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