| 3. | $1.3A $.2 million, or 6.1%0.9%, decrease of unrecognized tax benefits due to expiration of statutes of limitations. |
| 4. | A $1.5 million, or 7.1%, decrease resulting from earnings in jurisdictions with lower tax rates than the U.S. federal statutory rate where such earnings are permanently reinvested. |
| 4. | $.2 million, or .9%, increase resulting from the recognition of previously unrecognized tax benefits. |
Net income.income. As a result of the preceding items, net income for the year ended December 31, 20152017 was $6.7$12.7 million, compared to $12.9$15.3 million for 2014.2016. Excluding the effect of currency translation, net income decreased $6.1$2.8 million as summarized in the following table: | | | | | | | | | | | | | | Year Ended December 31 | | | | | Year Ended December 31 | | | | | | | | | | | | | | | Change | | | Change | | | | | | | (Thousands of dollars) | | 2015 | | 2014 | | Change | | Change Due to Currency Translation | | Change Excluding Currency Translation | | % Change | | | | | | | | | | | | | | | Due to | | | Excluding | | | | | | | | | | | | | | | | | | | | | | Currency | | | Currency | | | % | | | | | | 2017 | | | 2016 | | | Change | | | Translation | | | Translation | | | Change | | | Net income (loss) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PLP-USA | | $ | 2,031 | | | $ | 7,233 | | | $ | (5,202 | ) | | $ | 0 | | | $ | (5,202 | ) | | (72 | )% | | $ | (2,367 | ) | | $ | 2,007 | | | $ | (4,374 | ) | | $ | 0 | | | $ | (4,374 | ) | | | (218 | ) | % | The Americas | | | 3,178 | | | 2,647 | | | 531 | | | (858 | ) | | 1,389 | | | 55 | | | | 8,169 | | | | 5,881 | | | | 2,288 | | | | 71 | | | | 2,217 | | | | 38 | | | EMEA | | | 4,881 | | | 6,192 | | | (1,311 | ) | | (378 | ) | | (933 | ) | | (15 | ) | | | 4,088 | | | | 6,243 | | | | (2,155 | ) | | | 95 | | | | (2,250 | ) | | | (36 | ) | | Asia-Pacific | | | (3,415 | ) | | (3,211 | ) | | (204 | ) | | 1,176 | | | (1,380 | ) | | (43 | ) | | | 2,764 | | | | 1,124 | | | | 1,640 | | | | 21 | | | | 1,619 | | | | (144 | ) | | | | | | | | | | | | | | | | | | | | | Consolidated | | $ | 6,675 | | | $ | 12,861 | | | $ | (6,186 | ) | | $ | (60 | ) | | $ | (6,126 | ) | | (48 | )% | | $ | 12,654 | | | $ | 15,255 | | | $ | (2,601 | ) | | $ | 187 | | | $ | (2,788 | ) | | | (18 | ) | % | | | | | | | | | | | | | | | | | | | | |
PLP-USA net income decreased $5.2of $2.0 million due to a $7.4 million decrease in operating income partially offset by lower income taxes of $2.2 million.was flat year over year. International net income for the year ended December 31, 20152016 was unfavorably affected by $.1$1.5 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 $1.4$3.5 million as a result of a $2.1$5.0 million increase in operating income, and a $.2offset by an income tax expense increase of $1.5 million. EMEA net income increased $2.1 million decrease in interest expense as a portionresult of loan balances were repaid. These improvements were partiallya $2.5 million increase in operating income offset withby an increase in income taxes of $.9$.4 million. EMEAAsia-Pacific net (loss) income decreased $.9improved $4.5 million mainly as a result of a $1.2$3.9 million decreaseincrease in operating income, partiallycombined with the non-recurrence of a prior year receivable settlement of $.8 million, offset by a decrease in income taxes of $.3 million. Asia-Pacific net loss increased $1.4 million as a result of a $1.8 million decrease in operating income offset by thelower year over year net tax benefit for the region, which was $.4 million inclusive of the previously mentioned tax indemnification receivable reduction. 2014 RESULTS OF OPERATIONS COMPARED TO 2013
The following table sets forth a summary of the Company’s consolidated income statements and the percentage of net sales for the years ended December 31, 2014 and 2013.
| | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31 | | (Thousands of dollars) | | 2014 | | | 2013 | | | Change | | | | | | | | Net sales | | $ | 388,185 | | | | 100.0 | % | | $ | 409,776 | | | | 100.0 | % | | $ | (21,591 | ) | Cost of products sold | | | 267,237 | | | | 68.8 | | | | 278,875 | | | | 68.1 | | | | (11,638 | ) | | | | | | | | | | | | | | | | | | | | | | GROSS PROFIT | | | 120,948 | | | | 31.2 | | | | 130,901 | | | | 31.9 | | | | (9,953 | ) | Costs and expenses | | | 99,710 | | | | 25.7 | | | | 99,753 | | | | 24.3 | | | | (43 | ) | | | | | | | | | | | | | | | | | | | | | | OPERATING INCOME | | | 21,238 | | | | 5.5 | | | | 31,148 | | | | 7.6 | | | | (9,910 | ) | Other income (expense) | | | 172 | | | | 0.0 | | | | 646 | | | | 0.2 | | | | (474 | ) | | | | | | | | | | | | | | | | | | | | | | INCOME BEFORE INCOME TAXES | | | 21,410 | | | | 5.5 | | | | 31,794 | | | | 7.8 | | | | (10,384 | ) | Income taxes | | | 8,549 | | | | 2.2 | | | | 11,207 | | | | 2.7 | | | | (2,658 | ) | | | | | | | | | | | | | | | | | | | | | | NET INCOME | | $ | 12,861 | | | | 3.3 | % | | $ | 20,587 | | | | 5.0 | % | | $ | (7,726 | ) | | | | | | | | | | | | | | | | | | | | | |
Net sales. In 2014, net sales were $388.2 million, a decrease of $21.6 million, or 5%, compared to 2013. Excluding the unfavorable effect of currency translation, net sales decreased 3% as summarized in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31 | | (Thousands of dollars) | | 2014 | | | 2013 | | | Change | | | Change Due to Currency Translation | | | Change Excluding Currency Translation | | | % Change | | Net sales | | | | | | | | | | | | | | | | | | | | | | | | | PLP-USA | | $ | 152,567 | | | $ | 163,033 | | | $ | (10,466 | ) | | $ | 0 | | | $ | (10,466 | ) | | | (6 | )% | The Americas | | | 75,868 | | | | 72,518 | | | | 3,350 | | | | (4,942 | ) | | | 8,292 | | | | 11 | | EMEA | | | 65,446 | | | | 61,543 | | | | 3,903 | | | | (491 | ) | | | 4,394 | | | | 7 | | Asia-Pacific | | | 94,304 | | | | 112,682 | | | | (18,378 | ) | | | (3,855 | ) | | | (14,523 | ) | | | (13 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Consolidated | | $ | 388,185 | | | $ | 409,776 | | | $ | (21,591 | ) | | $ | (9,288 | ) | | $ | (12,303 | ) | | | (3 | )% | | | | | | | | | | | | | | | | | | | | | | | | | |
The decrease in PLP-USA net sales of $10.5 million, or 6%, was primarily due to a reduction in transmission sales as a result of fewer projects in the United States coupled with a $4.9 million decrease in solar sales. International net sales for the year ended December 31, 2014 were unfavorably affected by $9.3 million when local currencies were converted to U.S. dollars. The following discussion of changes in net sales excludes the effect of currency translation. The Americas net sales of $75.9 million increased $8.3 million, or 11%, primarily due to $13.2 million in sales at Helix, which was acquired in January of 2014, partially offset by lower net transmission sales of $4.9 million. EMEA net sales of $65.4 million increased $4.4 million, or 7%, primarily due to volume increases in telecommunications and distribution. The Asia-Pacific net sales of $94.3 million decreased $14.5 million, or 13%, compared to 2013. The decrease in net sales was primarily related to lower volume in transmission and substation sales as a result of slowing economies, government deferral of projects and political uncertainty in various locations within the region.
Gross Profit. Gross profit of $120.9 million for 2014 decreased $10.0 million, or 8%, compared to 2013. Excluding the unfavorable effect of currency translation, gross profit decreased $7.8 million, or 6%, as summarized in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31 | | (Thousands of dollars) | | 2014 | | | 2013 | | | Change | | | Change Due to Currency Translation | | | Change Excluding Currency Translation | | | % Change | | | | | | | | | Gross profit | | | | | | | | | | | | | | | | | | | | | | | | | PLP-USA | | $ | 52,807 | | | $ | 58,447 | | | $ | (5,640 | ) | | $ | 0 | | | $ | (5,640 | ) | | | (10 | )% | The Americas | | | 19,998 | | | | 22,337 | | | | (2,339 | ) | | | (1,300 | ) | | | (1,039 | ) | | | (5 | ) | EMEA | | | 22,776 | | | | 21,146 | | | | 1,630 | | | | (94 | ) | | | 1,724 | | | | 8 | | Asia-Pacific | | | 25,367 | | | | 28,971 | | | | (3,604 | ) | | | (793 | ) | | | (2,811 | ) | | | (10 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Consolidated | | $ | 120,948 | | | $ | 130,901 | | | $ | (9,953 | ) | | $ | (2,187 | ) | | $ | (7,766 | ) | | | (6 | )% | | | | | | | | | | | | | | | | | | | | | | | | | |
PLP-USA gross profit of $52.8 million decreased $5.6 million compared to 2013. PLP-USA’s $5.6 million decrease in gross profit was predominantly related to the reduction in sales volume. International gross profit for the year ended December 31, 2014 was unfavorably impacted by $2.2 million when local currencies were translated to U.S. dollars. The following discussion of gross profit changes excludes the effects of currency translation. The Americas gross profit decrease of $1.0 million was primarily the result of lower product margin transmission sales. Additionally, while Helix provided a positive contribution to gross profit, it was negatively impacted by the sale of inventories which were adjusted to fair value on the acquisition date. The acquisition was accounted for pursuant to the current business combination standards. In accordance with the standards, we recorded, as of the acquisition date, the acquired inventories at their respective fair values. We recognized $1.9 million of the acquired inventories fair value adjustment in Cost of products sold. The EMEA gross profit increased $1.7 million primarily as a result of higher net sales in the region. Asia-Pacific gross profit decreased $2.8 million primarily due to a $3.5 million decrease in gross profit from lower net sales partially offset by a $.7 million reduction in production costs and freight expense.
Costs and expenses. Costs and expenses of $99.7 million for the year ended December 31, 2014 decreased less than $.1 million, or less than 1%, compared to 2013. Excluding the effect of currency translation, costs and expenses increased 2% as summarized in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31 | | (Thousands of dollars) | | 2014 | | | 2013 | | | Change | | | Change Due to Currency Translation | | | Change Excluding Currency Translation | | | % Change | | Costs and expenses | | | | | | | | | | | | | | | | | | | | | | | | | PLP-USA | | $ | 40,668 | | | $ | 41,873 | | | $ | (1,205 | ) | | $ | 0 | | | $ | (1,205 | ) | | | (3 | )% | The Americas | | | 16,535 | | | | 13,552 | | | | 2,983 | | | | (1,117 | ) | | | 4,100 | | | | 30 | | EMEA | | | 14,752 | | | | 13,325 | | | | 1,427 | | | | (110 | ) | | | 1,537 | | | | 12 | | Asia-Pacific | | | 27,755 | | | | 31,003 | | | | (3,248 | ) | | | (1,021 | ) | | | (2,227 | ) | | | (7 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Consolidated | | $ | 99,710 | | | $ | 99,753 | | | $ | (43 | ) | | $ | (2,248 | ) | | $ | 2,205 | | | | 2 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
PLP-USA costs and expenses decreased $1.2 million primarily due to $1.5 million decline in personnel related and commission expenses, along with a decrease in net foreign currency exchange losses of $.5 million. The foreign currency exchange losses were primarily related to translating into U.S. dollars our foreign denominated loans, trade receivables and royalty receivables from our foreign subsidiaries at the December 2014 year-end exchange rates. These reductions in expense were partially offset by a $.9 million decline in intercompany royalty income. International costs and expenses for the year ended December 31, 2014 were favorably impacted by $2.2 million when local currencies were translated to U.S. dollars. The following discussions of costs and expenses exclude the effect of currency translation. The Americas costs and expenses increase of $4.1 million was primarily due to a $1.7 million impact related to a refund of VAT and interest and inflation from an income tax refund
recorded at our Brazilian location in 2013 that was not repeated in 2014 coupled with a $1.7 million increase in costs and expenses of Helix acquired in January 2014. Additionally, there was an increase of $.3 million in personnel expenses and professional fees along with $.4 million for net interest expense and royalty expense. EMEA costs and expenses increased $1.5 million due primarily to the start-up expenses for additional offices in the region of $1.2 million in addition to personnel cost increases of $.4 million. Asia-Pacific costs and expenses decreased $2.2 million primarily due to lower intercompany expenses of $1 million, a $.3 million decrease in net foreign currency exchange losses, and a $.9 million reduction in employee related and consulting costs.
Other income (expense). Other income for the year ended December 31, 2014 of $.2 million decreased $.5 million compared to 2013 due to a $.4 million increase in net interest expense and a $.1 million decrease in net other income.lower.
Income taxes. Income taxes for the years ended December 31, 2014 and 2013 were $8.5 million and $11.2 million, respectively, based on pretax income of $21.4 million and $31.8 million, respectively. The effective tax rate for the years ended December 31, 2014 and 2013 was 39.9% and 35.3%, respectively, compared to the U.S. federal statutory rate of 35%. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions, which differ from the U.S. federal statutory income tax rate, and the relative amount of income earned in those jurisdictions. It is also affected by discrete items that may occur in any given period but are not consistent from year to year. The following items had the most significant impact on the difference between our statutory U.S. federal income tax rate of 35% and our effective tax rate:
2014
| 1. | $1.9 million, or 9.0%, increase resulting from losses in certain jurisdictions where no tax benefit is recognized |
| 2. | $.3 million, or 1.1%, increase resulting from U.S. permanent items, primarily related to the repatriation of foreign earnings and state and local income taxes. |
| 3. | $1.3 million, or 6.1%, decrease resulting from earnings in jurisdictions with lower tax rates than the U.S. federal statutory rate where such earnings are permanently reinvested. |
| 4. | $.2 million, or .9%, increase resulting from the recognition of previously unrecognized tax benefits. |
2013
| 1. | $1.0 million, or 3.4%, increase resulting from losses in certain jurisdictions where no tax benefit is recognized. |
| 2. | $1.2 million, or 3.8%, increase resulting from U.S. permanent items, primarily related to the repatriation of foreign earnings and state and local income taxes. |
| 3. | $1.4 million, or 4.6%, decrease resulting from earnings in jurisdictions with lower tax rates than the U.S. federal statutory rate where such earnings are permanently reinvested. |
| 4. | $.7 million, or 2.3%, decrease resulting primarily from a favorable resolution of a domestic audit. |
Net income. As a result of the preceding items, net income for the year ended December 31, 2014 was $12.9 million, compared to $20.6 million for 2013. Excluding the effect of currency translation, net income decreased $7.8 million as summarized in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31 | | (Thousands of dollars) | | 2014 | | | 2013 | | | Change | | | Change Due to Currency Translation | | | Change Excluding Currency Translation | | | % Change | | Net income (loss) | | | | | | | | | | | | | | | | | | | | | | | | | PLP-USA | | $ | 7,233 | | | $ | 10,356 | | | $ | (3,123 | ) | | $ | 0 | | | $ | (3,123 | ) | | | (30 | )% | The Americas | | | 2,647 | | | | 6,415 | | | | (3,768 | ) | | | (141 | ) | | | (3,627 | ) | | | (57 | ) | EMEA | | | 6,192 | | | | 6,047 | | | | 145 | | | | 12 | | | | 133 | | | | 2 | | Asia-Pacific | | | (3,211 | ) | | | (2,231 | ) | | | (980 | ) | | | 218 | | | | (1,198 | ) | | | (54 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Consolidated | | $ | 12,861 | | | $ | 20,587 | | | $ | (7,726 | ) | | $ | 89 | | | $ | (7,815 | ) | | | (38 | )% | | | | | | | | | | | | | | | | | | | | | | | | | |
PLP-USA net income decreased $3.1 million due to a $4.4 million decrease in operating income partially offset by lower income taxes of $1.4 million. International net income for the year ended December 31, 2014 was favorably affected by $.1 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 decreased $3.6 million as a result of a $5.2 million decrease in operating income and a $.5 million increase in interest expense primarily due from funding for the Helix acquisition partially offset with lower income taxes of $1.9 million. EMEA net income increased $.1 million as a result of a $.2 million increase in operating income partially offset by increased income taxes. Asia-Pacific net loss increased $1.2 million as a result of a $.5 million decrease in operating income coupled with a decrease in other income of $.1 million and an increase in income taxes of $.6 million due to the Company’s decision not to recognize tax benefits attributable to operating losses.
WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES Management Assessment of Liquidity We measure liquidity on the basis of our ability to meet short-term and long-term operating needs, fund additional investments, including acquisitions, and make dividend payments to shareholders. Significant factors affecting the management of liquidity are cash flows from operating activities, capital expenditures, cash dividends, business acquisitions and access to bank lines of credit. Our investments include expenditures required for equipment and facilities as well as expenditures in support of our strategic initiatives. In 2015,2018, we used cash of $10.8$9.5 million for capital expenditures. We ended 20152018 with $30.4$43.9 million of cash, cash equivalents and restricted cash equivalents.(“cash”). Our cash and cash equivalents areis held in various locations throughout the world. At December 31, 2015,2018, the majority of our cash and cash equivalents areis held outside the U.S. We expect the majority of accumulated non-U.S. cash balances will remain outside of the U.S. and that we will meet U.S. liquidity needs through future cash flows, use of U.S. cash balances, external borrowings, or some combination of these sources. We complete comprehensive reviews of our significant customers and their creditworthiness by analyzing financial statements for customers where we have identified a measure of increased risk. We closely monitor payments and developments whichthat may signal possible customer credit issues. We currently have not identified any potential material impact on our liquidity from customer credit issues. Our financial position remains strong and our current ratio at December 31, 20152018 and 20142017 was 3.63.1 to 1.1 and 3.3 to 1, respectively. Total debt at December 31, 20152018 was $32.3$35.5 million. At December 31, 2015,2018, our unused availability under our line of credit was $16.8$49.8 million and our bank debt to equity percentage was 14.7%14.2%. TheOn March 13, 2018, the Company extended the term of ouron its $65 million credit facility extends through August 2017 at anfrom June 30, 2019 to June 30, 2021. All other terms remain the same, including the interest rate ofat LIBOR plus 1.125% unless its funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 2.25 to 1, then the LIBOR spread becomes 1.500%. As of December 31, 2018, the Company’s Polish subsidiary had borrowed $.9 million at a rate of 1.125% plus the Warsaw Interbank Offer Rate with a term expiring June 30, 2021. As of December 31, 2018, the interest rates on the U.S. and Polish line of credit agreement were 3.63% and 2.77%, respectively. As of December 31, 2018, the Company’s Australian subsidiary had borrowed $2.1 million at a rate of 1.125% plus the Australian Bank Bill Swap Bid Rate with a term expiring June 30, 2021. As of December 31, 2018, the interest rate on the Australian line of credit agreement was 2.96%. Under the credit facility, at December 31, 2018, the Company had utilized $15.2 million with $49.8 million available under the line of credit net of long-term outstanding letters of credit. The PLP-USA line of credit provides for $5.0 million to be available to the Company’s subsidiaries. The line of credit agreement contains, among other provisions, requirements for maintaining levels of net worth and profitability. At both December 31, 20152018 and throughout2017, the year, we wereCompany was in compliance with theseall covenants. We own a corporate aircraft with a remaining balance due on the loan of $11.0 million, of which $1.4 million is classified as short-term, with a term expiring in 2026. The loan is secured by the purchased aircraft. We expect that our major source of funding for 20162019 and beyond will be our operating cash flows, our existing cash and cash equivalents as well as our line of credit agreement. We earn a significant amount of our operating income outside the United States, which, except for current earnings in certain jurisdictions, is deemed to be indefinitely reinvested in foreign jurisdictions. We currently do not intend nor foresee a need to repatriate these funds. We believe our future operating cash flows will be more than sufficient to cover debt repayments, other contractual obligations, capital expenditures and dividends for the next 12 months and thereafter for the foreseeable future. In addition, we believe our borrowing capacity provides substantial financial resources, if needed, to supplement funding of capital expenditures and/or acquisitions. We also believe that we can expand our borrowing capacity, if necessary;necessary, however, we do not believe we would increase our debt to a level that would have a material adverse impact upon results of operations or financial condition. Sources and Uses of Cash Cash increased $.8 million for the year endedat December 31, 2015.2018 decreased $1.7 million compared to December 31, 2017. Net cash provided by operating activities was $20.2$23.0 million. The majormost significant net investing and financing uses of cash were payments of long-term debt of $85.5 million, capital expenditures of $10.8$9.5 million, commona combined net purchase of marketable securities and a company-owned life insurance policy of $4.7 million, share repurchases of $7.6$4.2 million and dividends paid of $4.4$4.2 million, partially offset by net debt and notes payable proceeds of $85.5 million. Currency had a positive $4.0negative $1.6 million impact on cash and cash equivalents when translating foreign denominated financial statements to U.S. dollars.
Net cash provided by operating activities decreased $5.0for the year ended December 31, 2018 and 2017 was $23.0 million compared to 2014and $33.8 million, respectively. The $10.8 million decrease was primarily as a result of a decreasean increase in net income of $6.2 million, a decrease of non-cash items of $1.5 million along with a decrease incash usage for operating assets (net of operating liabilities) of $2.6$24.4 million, which included a $5.3 million contribution to the pension plan, partially offset by an increase in net income of $13.9 million. Net cash used in investing activities of $10.9$14.0 million for the year ended December 31, 20152018 represents a decreasean increase of $22.4$11.5 million when compared to cash used in investing activities for the year ended December 31, 2014.2017. The decreaseincreased use of cash was primarily related to the business acquisitiona reduction in cash provided from fixed-term deposits of Helix for $15.0$8.5 million net of cash acquired, in 2014 along with net cash used of $4.7 million related to the purchase of marketable securities and a declinecompany-owned life insurance policy, partially offset by a decrease in cash used for capital expenditures of $6.9 million for 2015 when compared to 2014 along with an increase in proceeds in property disposals of $.8$1.7 million. These decreases in invested cash were partially offset by an increase in purchases of fixed term deposits of $.3 million in 2015. The decrease in capital expenditures was due primarily to the non-recurrence of the 2014 land and building purchase at Helix for $2.8 million and plant expansion of $4.8 million at our PLP-USA segment. Cash used byin financing activities for the year ended December 31, 20152018 was $12.7$9.1 million compared to cash generationa use of $13.2$19.6 million in 2014.the year ended December 31, 2017. The $25.9$10.5 million decreaseimprovement was primarily a result of a decreasenet favorable change in debt borrowingstransactions of $7.9 million in 20152018 as compared to 2014 of $23.8 million2017 and a net increaseyear-over-year decrease in cash used in capital stock transactions of $5.4 million partially offset by a decrease in repayments of debt of $3.4$2.6 million. The 2014 borrowings were used primarily to finance the acquisition of Helix. We have commitments under operating leases primarily for office and manufacturing space, transportation equipment, office and computer equipment and capital leases primarily for equipment. One such lease is for our aircraft with a lease commitment through February 2017. Under the terms of the lease, we maintain the risk to make up a deficiency from market value attributable to damage, extraordinary wear and tear, excess air hours or exceeding maintenance overhaul schedules required by the Federal Aviation Administration. At the present time, we do not believe we have incurred any obligation for any contingent rent under the lease. Contractual obligations and other commercial commitments are summarized in the following tables: | | | Payments Due by Period | | | Payments Due by Period | | Contractual Obligations | | Total | | | Less than 1 year | | | 1-3 years | | | 4-5 years | | | After 5 years | | | Total | | | Less than 1 year | | | 1-3 years | | | 4-5 years | | | After 5 years | | (Thousands of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Notes payable to bank (A) | | $ | 413 | | | $ | 413 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 9,042 | | | $ | 9,042 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Long-term debt (B) | | | 31,864 | | | | 110 | | | | 31,754 | | | | 0 | | | | 0 | | | | 26,408 | | | | 1,508 | | | | 18,223 | | | | 2,930 | | | | 3,747 | | Capital leases | | | 268 | | | | 83 | | | | 110 | | | | 67 | | | | 8 | | | | 189 | | | | 60 | | | | 89 | | | | 40 | | | | 0 | | Operating leases | | | 18,308 | | | | 2,438 | | | | 3,108 | | | | 2,685 | | | | 10,077 | | | | 12,998 | | | | 2,225 | | | | 3,408 | | | | 1,086 | | | | 6,279 | | Purchase commitments | | | 2,428 | | | | 2,428 | | | | 0 | | | | 0 | | | | 0 | | | | 634 | | | | 634 | | | | 0 | | | | 0 | | | | 0 | | Pension contribution and other retirement plans (C) | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Income taxes payable, non-current (D) | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | Amount of Commitment Expiration by Period | | | Other Commercial Commitments | | Total | | | Less than 1 year | | | 1-3 years | | | 4-5 years | | | After 5 years | | | (Thousands of dollars) | | | | | | | | | | | | | | | | | | Letters of credit | | $ | 6,122 | | | $ | 3,157 | | | $ | 1,366 | | | $ | 1,599 | | | $ | 0 | | | Guarantees | | | 536 | | | | 522 | | | | 14 | | | | 0 | | | | 0 | | |
| | Amount of Commitment Expiration by Period | | Other Commercial Commitments | | Total | | | Less than 1 year | | | 1-3 years | | | 4-5 years | | | After 5 years | | (Thousands of dollars) | | | | | | | | | | | | | | | | | | | | | Letters of credit | | $ | 2,508 | | | $ | 2,508 | | | $ | - | | | $ | - | | | $ | - | | Guarantees | | | 4,855 | | | | 1,558 | | | | 1,491 | | | | 1,012 | | | | 794 | |
(A) | Interest on short-term debt is included in the table at an interest rate of 3.17%rates from 2.83% to 9.40% in effect at December 31, 2015.2018. |
(B) | Interest on long-term debt is included in the table at interest rates from 1.29%2.71% to 5.59%4.60% based on the variable interest rates in effect at December 31, 2015.2018. |
(C) | The Company does not expect to make a contributioncontributions to the Company’s defined benefit pension plan in 2016.2019. Future expected amounts beyond one year have not been disclosed as such amounts are subject to change based on performance of the assets in the plan as well as the discount rate used to determine the obligation. At December 31, 2015, our unfunded contractual obligation was $11.6 million. Our Supplemental Profit Sharing Plan accrued liability at December 31, 2015 was $3.9 million. |
(D) | As of December 31, 2015, there were $.2 million of tax liabilities, including interest and penalties, related to unrecognized tax benefits. Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities, if any, we are unable to estimate the years in which cash settlement may occur with the respective tax authorities. |
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions. Critical accounting policies are defined as those that are reflective of significant judgment and uncertainties, and potentially may result in materially different outcomes under different assumptions and conditions.
Revenue Recognition OurNet sales include products and shipping and handling charges, net of estimates for product returns. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. All revenue recognition policy is in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 605, Revenue Recognition. We recognize salesrecognized when title passesthe Company satisfies the performance obligations under the contract and control of the product is transferred to the customer, either when goods are shipped or when they are delivered andprimarily based on the terms of the sale, there is persuasive evidence of an agreement, the price is fixed or determinable and collectability is reasonably assured.shipping terms. Revenue related tofor shipping and handling costs billed-to customerscharges are included in net sales andrecognized at the related shipping and handling coststime the products are included in cost of products sold.shipped to, delivered to or picked up by the customer. The Company estimates product returns based on historical return rates.
Receivable Allowances We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We record estimated allowances for uncollectible accounts receivable based upon the number of days the accounts are past due, the current business environment, and specific information such as bankruptcy or liquidity issues of customers. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. During 2015, we recorded a provision for doubtful accounts of $.5 million. The allowance for doubtful accounts represents approximately 2.8%less than 3.5% and 3.8% of our trade receivables balance at December 31, 20152018 and 2014.2017, respectively. Excess and Obsolescence Reserves We provide excess and obsolescence reserves to state inventories at the lower of cost or estimated marketnet realizable value. We identify inventory items whichthat have had no usage or are in excess of the usages over the historical 12 to 24 months. A management team with representatives from marketing, manufacturing, engineering and finance reviews these inventory items, determines the disposition of the inventory and assesses the estimated marketnet realizable value based on their knowledge of the product and market conditions. These conditions include, among other things, future demand for product, product utility, unique customer order patterns or unique raw material purchase patterns, changes in customer and quality issues. At December 31, 2015, theThe allowance for excess and obsolete inventory was 12.9% of gross inventory9.6% and at10.6% for the years ended December 31, 2014, the allowance for excess2018 and obsolete inventory was 9.3% of gross inventory.December 31, 2017, respectively. If the impact of market conditions deteriorates from those projected by management, additional inventory reserves may be necessary. Impairment of Long-Lived Assets We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets are impaired and the discountedundiscounted cash flows estimated to be generated by those assets are less than the carrying value of those items. Our cash flows are based on historical results adjusted to reflect the best estimate of future market and operating conditions. The net carrying value of assets not recoverable is then reduced to fair value. The estimates of fair value represent the best estimate based on industry trends and reference to market rates and transactions. Goodwill We perform our 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. We then compare 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 changed. However, we believe that the methodologies and weightings used are reasonable and result in appropriate fair values of the reporting units. Our measurement date for our annual impairment test is October 1 of each year. We performed our annual impairment tests for goodwill as of October 1, 2015.2018. We did not have any impairment for goodwill or other intangibles for the yearyears ended December 31, 2015.2018 or 2017. See Note J for additional information. Deferred Tax Assets Deferred taxes are recognized at currently enacted tax rates for temporary differences between the financial reporting and income tax basis of assets and liabilities and operating loss and tax credit carryforwards. We establish a valuation allowance to record our deferred tax assets at an amount that is more-likely-than-not to be realized. In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of their recorded amount, an adjustment to the valuation allowance would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the valuation allowance would be charged to expense in the period such determination was made. Uncertain Tax Positions We identify tax positions taken on the federal, state, local and foreign income tax returns filed or to be filed. A tax position can include: a reduction in taxable income reported in a previously filed tax return or expected to be reported on a future tax return that
impacts the measurement of current or deferred income tax assets or liabilities in the period being reported; a decision not to file a tax return; an allocation or a shift of income between jurisdictions; the characterization of income or a decision to exclude reporting taxable income in a tax return; or a decision to classify a transaction, entity or other position in a tax return as tax exempt. We determine whether a tax position is an uncertain or a routine business transaction tax position that is more-likely-than-not to be sustained at the full amount upon examination. Under FASB ASC 740 (formerly FIN 48)(“ASC 740”), tax benefits“Tax Benefits from uncertain tax positionsUncertain Tax Positions” that reduce our current or future income tax liability are reported in our financial statements only to the extent that each benefit is recognized and measured under a two-step approach. The first step requires us to assess whether each tax position based on its technical merits and facts and circumstances as of the reporting date, is more-likely-than-not to be sustained upon examination. The second step measures the amount of tax benefit that we would recognize in the financial statements based on a cumulative probability approach. A tax position that meets the more-likely-than-not threshold that is not highly certain is measured based on the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority, assuming that the tax authority has examined the position and has full knowledge of all relevant information. ASC 740 requires subjectivity to identify outcomes and to assign probability in order to estimate the settlement amount. We provide estimates in order to determine settlement amounts. During the year ended December 31, 2015,2018, we recorded a reduction in the liability of $.6 milliondid not record any activity for uncertain tax positions. At December 31, 2015, the total2018, there was no reserve requirement for uncertain tax positions was $.2 million.positions. Pensions We record obligations and expenses related to a pension benefit plansplan based on actuarial valuations, which include key assumptions on discount rates, expected returns on plan assets and compensation increases. These actuarial assumptions are reviewed annually and modified as appropriate. The effect of modifications is generally recorded or amortized over future periods. The discount rate of 4.25% at December 31, 20152018 reflects an analysis of yield curves as of the end of the year and the schedule of expected cash needs of the plan. The expected long-term return on plan assets of 8.0% reflects the plan’s historical returns and represents our best estimate of the likely future returns on the plan’s asset mix. We believe the assumptions used in recording obligations under the plans are reasonable based on prior experience, market conditions and the advice of plan actuaries. However, an increase in the discount rate would decrease the plan obligations and the net periodic benefit cost, while a decrease in the discount rate would increase the plan obligations and the net periodic benefit cost. In addition, an increase in the expected long-term return on plan assets would decrease the net periodic pension cost, while a decrease in expected long-term return on plan assets would increase the net periodic pension cost. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS In April 2014,March 2018, the Financial Accounting Standards Board (FASB)(“FASB”) issued Accounting Standards Update (ASU) 2014-08, “Presentation(“ASU”) 2018-05, “Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.” The ASU adds various Securities and Exchange Commission (“SEC”) paragraphs pursuant to the issuance of Financial Statements (Topic 205)the December 2017 SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Property, Plant,Jobs Act (“SAB 118”), which was effective immediately. For additional details regarding SAB 118, refer to Note G “Income Taxes.” In March 2017, the FASB issued ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Equipment (Topic 360): Reporting Discontinued Operations and DisclosuresNet Periodic Postretirement Benefit Cost,” which requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of Disposals of Components of an Entity,” or ASU 2014-08. ASU 2014-08 changes the criteria for reporting a discontinued operation. Under the new pronouncement, a disposal of a part of an organization that has a major effect on its operations and financial results is a discontinued operation. Wenet benefit cost are required to adoptbe presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The Company adopted ASU 2014-08 prospectively for all disposals or components2017-07 as of January 1, 2018. The adoption did not have a material impact on the business classified as held for saleCompany’s consolidated statements of operations and since prior period reclassifications were deemed immaterial, the Company elected to not make a retrospective adjustment to prior period income statements. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Company adopted ASU 2016-18 as of January 1, 2018 using a retrospective transition method to each period presented. The cash, cash equivalents and restricted cash balance on the Company’s consolidated cash flow includes $.3 million and $1.2 million of restricted cash as of December 31, 2018 and December 31, 2017, respectively. Restricted cash is included in Other assets on the Company’s consolidated balance sheet in each period presented. The adoption of ASU 2016-18 did not have a material impact on the Company’s consolidated financial statements. Refer to Note E “Debt Arrangements” for additional details regarding the Company’s restricted cash. In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” ASU 2016-16 modifies the recognition of income tax expense resulting from intra-entity transfers of assets other than
inventory. Pursuant to this amendment, entities should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This amendment eliminates the exception for an intra-entity transfer of assets other than inventory. The Company adopted ASU 2016-16 as of January 1, 2018 with no material impact on the Company’s consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”, which changes how companies recognize, measure, present and make disclosures about certain financial assets and financial liabilities. Under this guidance, entities have to measure certain equity investments, including available-for-sale securities, at fair value and recognize any changes in fair value in net income. ASU 2016-01 is effective for financial statements issued for fiscal periodyears beginning after December 15, 2014. We2017, and interim periods therein. The Company adopted ASU 2016-01 effective January 1, 2018. Refer to Note K “Fair Value of Financial Assets and Liabilities” for additional details regarding the guidanceCompany’s marketable securities. In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” or ASU 2014-09. ASU 2014-09 requires an entity to recognize revenue in a manner that depicts the first quartertransfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the amendment provides five steps that an entity should apply when recognizing revenue. The amendment also specifies the accounting of some costs to obtain or fulfill a contract with a customer and expands the disclosure requirements around contracts with customers. In August 2015, the FASB issued ASU No. 2015-14 deferring the effective date of the amendment to annual reporting periods beginning after December 15, 2017, including interim periods therein. The Company implemented changes to processes and itcontrols to meet the standard’s reporting and disclosure requirements and adopted ASU 2014-09 as of January 1, 2018 using the modified retrospective transition method applied to contracts that were not yet completed at that date. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be presented based on the Company’s historic accounting policy. The cumulative impact of adopting ASU 2014-09 as of January 1, 2018 did not have a material impact on the Company’s consolidated financial statements. Further, the Company does not expect the impact of the adoption of ASU 2014-09 to be material to its consolidated financial statements on an effect on our results of operations, financial condition or cash flows.ongoing basis. Refer to Note L “Revenue” for additional details regarding the Company’s revenue recognition policy. NEW ACCOUNTING STANDARDS TO BE ADOPTED In February 2018, the FASB issued ASU 2018-02, “Income Statement (Topic 220), Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The FASB issued the update to provide amended guidance to allow a reclassification from Accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. Additionally, under the new guidance an entity will be required to provide certain disclosures regarding stranded tax effects. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years, and the guidance may be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal income tax rate in the Tax Act is recognized. Early adoption is permitted. The Company is currently assessing the impact, if any, that the ASU will have on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The amendments in this Update require the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, a lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation.obligation for leases classified as operating leases under previous guidance. Both the asset and liability will initially be measured at the present value of the future minimum lease payments over the lease term. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. Initial costs directly attributable to negotiating and arranging the lease will be included in the asset. For leases with a term of 12 months or less, a lessee can make an accounting policy election by class of underlying asset to not recognize an asset and corresponding liability. Lessees will also be required to provide additional qualitative and quantitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. These disclosures are intended to supplement the amounts recorded in the financial statements and provide additional information about the nature of an organization’s leasing activities. This ASU is required to be applied using a modified retrospective adoption method with the option of applying the guidance either retrospectively to each prior comparative reporting period presented or retrospectively at the beginning of the period of adoption. This ASU is effective for interim and annual periods on January 1, 2019, and the Company will apply the transitional package of practical expedients allowed by the standard to not reassess the identification, classification and initial direct costs of leases commencing before this ASU's effective date; however, the Company will not elect the hindsight transitional practical expedient. The Company also will apply the practical expedient to not separate lease and non-lease components to new leases as well as existing leases through transition. The Company will elect an accounting policy to not apply recognition requirements of the guidance to short-term leases.
In July of 2018, the FASB issued ASU 2018-11, “Targeted Improvements to ASC 842,” which includes an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, Leases, as the initial application of transition. The amendments in this UpdateTopic 842 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. We are currently evaluating what The Company established a cross-functional implementation team and is finalizing policy elections, the discount rate to be used on January 1, 2019, data and business processes and controls to support recognition and disclosure under the new standard. As discussed above, the primary impact if any, itsupon adoption will have tobe the presentationrecognition of right of use assets and lease obligations, on a discounted basis, of our consolidated financial statements. In November 2015, the FASB issuedminimum lease obligations as disclosed in Note F “Leases”. The adoption of this ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” To simplify the presentation of deferred income taxes, the amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected byexpected to have a material impact on the amendments in this Update. The amendments in this Update are effective for fiscal years,Company’s results of operations, cash flows or debt covenants.
Item 7A. Quantitative and interim periods within those fiscal years, beginning after December 15, 2016. Earlier application is permitted as of the beginning of an interim or annual reporting period. The amendments in this Update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. We are currently evaluating what impact, if any, its adoption will have to the presentation of our consolidated financial statements.Qualitative Disclosures About Market Risk In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” The amendments in this Update more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments in this Update are effective for fiscal years beginning after December 15, 2016 and interim periods within fiscal years beginning after December 15, 2017. The amendments in this Update should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently evaluating what impact, if any, its adoption will have to the presentation of our consolidated financial statements.
In April 2015, the FASB issued ASU 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Topic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” The amendments in this Update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Earlier application is permitted. Amendments in this Update can be applied retrospectively or prospectively. We are currently not engaged in a cloud computing arrangement; however, we are evaluating what impact, if any, its adoption will have to the presentation of our consolidated financial statements if it enters such an arrangement.
In April 2015, the FASB issued ASU 2015-04, “Compensation – Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets.” For an entity that has a significant event in an interim period that calls for a re-measurement of defined benefit plan
assets and obligations, the amendments in this Update provide a practical expedient that permits the entity to re-measure defined benefit plan assets and obligations using the month-end that is closest to the date of the significant event. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Earlier application is permitted. Amendments in this Update should be applied prospectively. We are currently evaluating what impact, if any, its adoption will have to the presentation of our consolidated financial statements.
In January 2015, the FASB issued ASU 2015-01, “Income Statement-Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” This Update eliminates from GAAP the concept of extraordinary items. A material event or transaction that an entity considers to be of an unusual nature or of a type that indicates infrequency of occurrence or both shall be reported as a separate component of income from continuing operations. The nature and financial effects of each event or transaction shall be presented as a separate component of income from continuing operations or, alternatively, disclosed in notes to financial statements. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We are currently evaluating what impact, if any, its adoption will have to the presentation of our consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15 “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 provides guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The Company is required to adopt ASU 2014-15 prospectively for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. We are currently evaluating what impact, if any, its adoption will have to the presentation of our consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” or ASU 2014-09. ASU 2014-09 requires an entity to recognize revenue in a matter that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the amendment provides five steps that an entity should apply when recognizing revenue. The amendment also specifies the accounting of some costs to obtain or fulfill a contract with a customer and expands the disclosure requirements around contracts with customers. An entity can either adopt this amendment retrospectively to each prior reporting period presented or retrospectively with cumulative effect of initially applying the update recognized at the date of initial application. In August 2015, the FASB issued ASU No. 2015-14 deferring the effective date of the amendment to annual reporting periods beginning after December 15, 2017. Early adoption is not permitted. We are currently evaluating what impact, if any, its adoption will have to the presentation of our consolidated financial statements.
Item 7A. | 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’sCompany's global operations. As a result, the Company is subject to business risks inherent in non-U.S. activities, including political and economic uncertainty, import and export limitations and market risk related to changes in interest rates and foreign currency exchange rates. The Company believes that the political and economic risks related to the Company’sCompany's international operations are mitigated due to the geographic diversity in which the Company’sCompany's international operations are located. Effective July 1, 2018, Argentina was designated as a highly inflationary economy as the projected three-year cumulative inflation rate exceeded 100%. As such, beginning July 1, 2018, the functional currency for the Company’s Argentina subsidiary became the U.S. dollar. The impact to the Company’s Consolidated financial statements was not material and is included in the December 31, 2018 results. Revenue from operations in Argentina was less than 2% of total consolidated net sales for the year ended December 31, 2018. As of December 31, 2015,2018, the Company had no foreign currency forward exchange contracts outstanding. The Company does not hold derivatives for trading purposes. The Company’sCompany's primary currency rate exposures are related to foreign denominated debt, intercompany debt, forward exchange contracts, foreign denominated receivables and payables and cash and short-term investments. A hypothetical 10% change in currency rates would have a favorable/unfavorable impact on fair values on such instruments of $5.9$6.0 million and on income before tax of $2.5$2.7 million. 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 $32.3$35.5 million at December 31, 2015.2018. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $.3 million for the year ended December 31, 2015.2018. Included in ourthe Company’s accounting for defined benefit pension plan (“Plan”) are assumptions on future discount rates and the expected return on Plan assets. The Company considers current market conditions, including changes in interest rates and planPlan asset investment returns. Actuarial assumptions may differ materially from actual results due to changing market and economic conditions or higher or lower withdrawal rates. These differences may result in a significant impact to the amount of net pension expense or income recorded in the future. A discount rate is used to determine the present value of future payments. In general, our liability increases as the discount rate decreases and decreases as the discount rate increases. The discount rate used to determine ourthe future benefit obligation was 4.25% and 4.0% at both years ended December 31, 20152018 and 2014, respectively.2017. The discount rate is a significant factor in determining the amounts reported. A 50 basis point change in the discount rate of 4.25% used at December 31, 20152018 would have a $.8$.1 million effect on the Plan’s projected benefit obligation. The Company developed the expected return on planPlan assets by considering various factors which include targeted asset allocation percentages, historical returns, and expected future returns. The Company assumed an expected rate of return of 8.0% in both 20152018 and 2014.2017. A 50 basis point change in the expected rate of return would have a $.7$.3 million effect on the Plan’s subsequent year’s net periodic pension cost.
Item 8. Financial Statements and Supplementary Data Item 8. | Financial Statements and Supplementary Data |
Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Preformed Line Products Company Opinion on the Financial Statements We have audited the accompanying consolidated balance sheetsConsolidated Balance Sheets of Preformed Line Products Companyand subsidiaries (the Company) as of December 31, 20152018 and 2014,2017, and the related statementsStatements of consolidated income, comprehensive income (loss), cash flows,Consolidated Income, Comprehensive Income, Cash Flows, and shareholders’ equityShareholders' Equity for each of the three years in the period ended December 31, 2015. Our audits also included2018 and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “financial statements”). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Preformed Line Productsthe Company at December 31, 20152018 and 2014,2017, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015,2018, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), Preformed Line Productsthe Company’s internal control over financial reporting as of December 31, 2015,2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 12, 20158, 2019 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2008 Cleveland, Ohio March 11, 2016 8, 2019
PREFORMED LINE PRODUCTS COMPANY CONSOLIDATED BALANCE SHEETS | | | December 31 | | | | | 2015 | | 2014 | | | December 31 | | | | (Thousands of dollars, except share and per share data) | | | 2018 | | | 2017 | | | | | (Thousands of dollars, except share and per share data) | | ASSETS | | | | | | | | | | | | | Cash and cash equivalents | | $ | 30,393 | | | $ | 29,643 | | | $ | 43,609 | | | $ | 44,358 | | Accounts receivable, less allowances of $2,326 ($2,370 in 2014) | | | 63,626 | | | 67,942 | | | Accounts receivable, less allowances of $3,178 ($3,325 in 2017) | | | | 73,139 | | | | 73,972 | | Inventories - net | | | 69,912 | | | 80,037 | | | | 85,259 | | | | 77,886 | | Deferred income taxes | | | 8,608 | | | 7,249 | | | Prepaids | | | 4,030 | | | 6,926 | | | | 6,205 | | | | 3,434 | | Prepaid taxes | | | 5,585 | | | 2,241 | | | | 3,169 | | | | 5,266 | | Other current assets | | | 6,343 | | | 6,625 | | | | 2,882 | | | | 2,214 | | | | | | | | | | TOTAL CURRENT ASSETS | | | 188,497 | | | 200,663 | | | | 214,263 | | | | 207,130 | | | Property, plant and equipment - net | | | 91,965 | | | 102,531 | | | | 102,955 | | | | 108,598 | | Patents and other intangibles - net | | | 11,288 | | | 14,121 | | | Intangibles - net | | | | 8,458 | | | | 10,020 | | Goodwill | | | 15,821 | | | 17,792 | | | | 15,621 | | | | 16,544 | | Deferred income taxes | | | 5,299 | | | 5,773 | | | | 6,900 | | | | 7,774 | | Other assets | | | 11,703 | | | 13,087 | | | | 10,600 | | | | 9,719 | | | | | | | | | | | TOTAL ASSETS | | $ | 324,573 | | | $ | 353,967 | | | $ | 358,797 | | | $ | 359,785 | | | | | | | | | | | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | | Trade accounts payable | | | $ | 26,414 | | | $ | 25,141 | | Notes payable to banks | | $ | 413 | | | $ | 1,809 | | | | 9,042 | | | | 864 | | Current portion of long-term debt | | | 110 | | | 116 | | | | 1,448 | | | | 1,448 | | Trade accounts payable | | | 20,377 | | | 22,332 | | | Accrued compensation and amounts withheld from employees | | | 9,306 | | | 9,876 | | | | 11,153 | | | | 11,461 | | Accrued expenses and other liabilities | | | 13,334 | | | 13,021 | | | | 12,582 | | | | 14,686 | | Accrued profit-sharing and other benefits | | | 5,648 | | | 5,151 | | | | 6,982 | | | | 6,284 | | Dividends payable | | | 1,057 | | | 1,220 | | | | 1,051 | | | | 1,046 | | Income taxes payable and deferred income taxes | | | 1,646 | | | 1,802 | | | | | | | | | | | Income taxes payable | | | | 815 | | | | 1,903 | | TOTAL CURRENT LIABILITIES | | | 51,891 | | | 55,327 | | | | 69,487 | | | | 62,833 | | | Long-term debt, less current portion | | | 31,754 | | | 31,749 | | | | 24,960 | | | | 34,598 | | Unfunded pension obligation | | | 11,627 | | | 12,503 | | | | 5,259 | | | | 10,664 | | Income taxes payable | | | 195 | | | 1,735 | | | Deferred income taxes | | | 3,447 | | | 3,283 | | | | 1,711 | | | | 2,090 | | Other noncurrent liabilities | | | 6,675 | | | 6,445 | | | | 8,010 | | | | 11,063 | | | SHAREHOLDERS’ EQUITY | | | | | | Shareholders’ equity: | | | | | | Common shares - $2 par value per share, 15,000,000 shares authorized, 5,221,062 and 5,397,138 issued and outstanding, at December 31, 2015 and December 31, 2014 | | | 12,478 | | | 12,433 | | | Common shares issued to rabbi trust, 296,635 and 292,609 shares at December 31, 2015 and December 31, 2014, respectively | | | (12,052 | ) | | (11,790 | ) | | SHAREHOLDERS' EQUITY | | | | | | | | | | Shareholders' equity: | | | | | | | | | | Common shares - $2 par value per share, 15,000,000 shares authorized, 5,020,410 and 5,038,207 issued and outstanding, at December 31, 2018 and December 31, 2017, respectively | | | | 12,662 | | | | 12,593 | | Common shares issued to rabbi trust, 269,630 and 289,026 shares at December 31, 2018 and December 31, 2017, respectively | | | | (11,008 | ) | | | (11,834 | ) | Deferred compensation liability | | | 12,052 | | | 11,790 | | | | 11,008 | | | | 11,834 | | Paid-in capital | | | 22,916 | | | 22,795 | | | | 34,401 | | | | 29,734 | | Retained earnings | | | 292,311 | | | 289,849 | | | | 334,170 | | | | 311,765 | | Treasury shares, at cost, 1,018,013 and 819,424 shares at December 31, 2015 and December 31, 2014 | | | (54,570 | ) | | (47,018 | ) | | Treasury shares, at cost, 1,310,387 and 1,258,069 shares at | | | | | | | | | | December 31, 2018 and December 31, 2017, respectively | | | | (72,280 | ) | | | (68,115 | ) | Accumulated other comprehensive loss | | | (54,151 | ) | | (35,134 | ) | | | (59,583 | ) | | | (47,440 | ) | | | | | | | | | TOTAL SHAREHOLDERS’ EQUITY | | | 218,984 | | | 242,925 | | | | | | | | | | | | TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 324,573 | | | $ | 353,967 | | | | | | | | | | | TOTAL SHAREHOLDERS' EQUITY | | | | 249,370 | | | | 238,537 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | | $ | 358,797 | | | $ | 359,785 | |
See notes to consolidated financial statements.
PREFORMED LINE PRODUCTS COMPANY STATEMENTS OF CONSOLIDATED INCOME | | | Year Ended December 31 | | | | | 2015 | | 2014 | | 2013 | | | Year Ended December 31 | | | | (In thousands, except per share data) | | | 2018 | | | 2017 | | | 2016 | | | | | (In thousands, except per share data) | | Net sales | | $ | 354,666 | | | $ | 388,185 | | | $ | 409,776 | | | $ | 420,878 | | | $ | 378,212 | | | $ | 336,634 | | Cost of products sold | | | 251,214 | | | 267,237 | | | 278,875 | | | | 288,647 | | | | 259,584 | | | | 227,220 | | | | | | | | | | | | | GROSS PROFIT | | | 103,452 | | | 120,948 | | | 130,901 | | | | 132,231 | | | | 118,628 | | | | 109,414 | | | Costs and expenses | | | | | | | | | | | | | | | | | | | Selling | | | 30,593 | | | 35,655 | | | 35,704 | | | | 36,358 | | | | 34,048 | | | | 31,799 | | General and administrative | | | 36,878 | | | 42,563 | | | 44,557 | | | | 45,398 | | | | 43,160 | | | | 42,057 | | Research and engineering | | | 14,879 | | | 16,302 | | | 14,708 | | | | 15,107 | | | | 14,327 | | | | 14,025 | | Other operating expenses - net | | | 8,753 | | | 5,190 | | | 3,922 | | | | 2,434 | | | | 985 | | | | 54 | | Goodwill impairment | | | 0 | | | 0 | | | 862 | | | | | | | | | | | | | | | | | 91,103 | | | 99,710 | | | 99,753 | | | | | | | 99,297 | | | | 92,520 | | | | 87,935 | | OPERATING INCOME | | | 12,349 | | | 21,238 | | | 31,148 | | | | 32,934 | | | | 26,108 | | | | 21,479 | | | Other income (expense) | | | | | | | | | | | | | | | | | | | Interest income | | | 391 | | | 483 | | | 618 | | | | 486 | | | | 430 | | | | 291 | | Interest expense | | | (565 | ) | | (658 | ) | | (450 | ) | | | (1,290 | ) | | | (1,061 | ) | | | (844 | ) | Other income (expense) | | | (469 | ) | | 347 | | | 478 | | | | 458 | | | | 329 | | | | 27 | | | | | | | | | | | | | | (346 | ) | | | (302 | ) | | | (526 | ) | | | | (643 | ) | | 172 | | | 646 | | | | | | | | | | | | | | | INCOME BEFORE INCOME TAXES | | | 11,706 | | | 21,410 | | | 31,794 | | | | 32,588 | | | | 25,806 | | | | 20,953 | | | Income taxes | | | 5,031 | | | 8,549 | | | 11,207 | | | | 6,007 | | | | 13,152 | | | | 5,698 | | | | | | | | | | | | | | NET INCOME | | $ | 6,675 | | | $ | 12,861 | | | $ | 20,587 | | | $ | 26,581 | | | $ | 12,654 | | | $ | 15,255 | | | | | | | | | | | | | | BASIC EARNINGS PER SHARE | | | | | | | | | | | | | | | | | | | Net income | | $ | 1.25 | | | $ | 2.39 | | | $ | 3.84 | | | $ | 5.28 | | | $ | 2.48 | | | $ | 2.95 | | | | | | | | | | | | | | DILUTED EARNINGS PER SHARE | | | | | | | | | | | | | | | | | | | Net income | | $ | 1.24 | | | $ | 2.39 | | | $ | 3.77 | | | $ | 5.21 | | | $ | 2.47 | | | $ | 2.95 | | | | | | | | | | | | | | Cash dividends declared per share | | $ | 0.80 | | | $ | 0.80 | | | $ | 0.60 | | | $ | 0.80 | | | $ | 0.80 | | | $ | 0.80 | | | | | | | | | | | | | | Weighted-average number of shares outstanding - basic | | | 5,350 | | | 5,377 | | | 5,361 | | | | 5,032 | | | | 5,102 | | | | 5,166 | | | | | | | | | | | | | | Weighted-average number of shares outstanding - diluted | | | 5,366 | | | 5,382 | | | 5,467 | | | | 5,107 | | | | 5,133 | | | | 5,178 | | | | | | | | | | | | |
See notes to consolidated financial statements.
PREFORMED LINE PRODUCTS COMPANY STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS) | | | Year Ended December 31 | | | Year Ended December 31 | | | | 2015 | | 2014 | | 2013 | | | 2018 | | | 2017 | | | 2016 | | | | (Thousands of dollars) | | | (Thousands of dollars) | | Net income | | $ | 6,675 | | | $ | 12,861 | | | $ | 20,587 | | | $ | 26,581 | | | $ | 12,654 | | | $ | 15,255 | | Other comprehensive income (loss), net of tax: | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustment | | | (19,789 | ) | | (12,330 | ) | | (8,457 | ) | | | (12,285 | ) | | | 10,070 | | | | (3,579 | ) | Recognized net actuarial loss | | | 364 | | | 10 | | | 306 | | | Recognized net actuarial gains | | | | 386 | | | | 269 | | | | 326 | | Gain (loss) on unfunded pension obligations | | | 408 | | | (5,112 | ) | | 4,113 | | | | (244 | ) | | | (410 | ) | | | 35 | | | | | | | | | | | | | Other comprehensive income (loss), net of tax | | | (19,017 | ) | | (17,432 | ) | | (4,038 | ) | | | (12,143 | ) | | | 9,929 | | | | (3,218 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income (loss) | | $ | (12,342 | ) | | $ | (4,571 | ) | | $ | 16,549 | | | | | | | | | | | | | | Comprehensive income | | | $ | 14,438 | | | $ | 22,583 | | | $ | 12,037 | |
See notes to consolidated financial statements.
PREFORMED LINE PRODUCTS COMPANY STATEMENTS OF CONSOLIDATED CASH FLOWS | | | Year Ended December 31 | | | Year Ended December 31 | | | | 2015 | | 2014 | | 2013 | | | 2018 | | | 2017 | | | 2016 | | | | (Thousands of dollars) | | | (Thousands of dollars) | | OPERATING ACTIVITIES | | | | | | | | | | | | | | | | | | | Net income | | $ | 6,675 | | | $ | 12,861 | | | $ | 20,587 | | | $ | 26,581 | | | $ | 12,654 | | | $ | 15,255 | | | Adjustments to reconcile net income to net cash provided by operations: | | | | | | | | | | | | | | | | | | | Depreciation and amortization | | | 11,532 | | | 12,857 | | | 12,088 | | | | 12,444 | | | | 12,790 | | | | 11,996 | | Provision for accounts receivable allowances | | | 961 | | | 1,211 | | | 837 | | | | 1,206 | | | | 1,165 | | | | 2,184 | | Provision for inventory reserves | | | 2,477 | | | 2,244 | | | 2,672 | | | | 2,402 | | | | 1,205 | | | | 2,736 | | Deferred income taxes | | | (944 | ) | | (1,697 | ) | | (1,105 | ) | | | 314 | | | | 2,436 | | | | 2,249 | | Share-based compensation expense | | | 248 | | | 1,542 | | | 3,057 | | | | 4,236 | | | | 3,055 | | | | 1,366 | | Excess tax benefits from share-based awards | | | 20 | | | (97 | ) | | (357 | ) | | Goodwill impairment | | | 0 | | | 0 | | | 862 | | | Loss (gain) on sale of property and equipment | | | 363 | | | 115 | | | (57 | ) | | (Gain) loss on sale of property and equipment | | | | (156 | ) | | | 160 | | | | (20 | ) | Other - net | | | 67 | | | 26 | | | 11 | | | | 192 | | | | 213 | | | | 539 | | Changes in operating assets and liabilities (excluding impact of acquired assets): | | | | | | | | Changes in operating assets and liabilities assets: | | | | | | | | | | | | | | Accounts receivable | | | (2,965 | ) | | (2,435 | ) | | (10,273 | ) | | | (4,499 | ) | | | (9,205 | ) | | | (2,292 | ) | Inventories | | | (2,297 | ) | | (5,704 | ) | | 3,040 | | | | (13,703 | ) | | | (2,208 | ) | | | (6,354 | ) | Trade accounts payables and accrued liabilities | | | 5,652 | | | 6,716 | | | (3,906 | ) | | | 3,048 | | | | 4,957 | | | | 4,270 | | Income taxes payable | | | (4,038 | ) | | (882 | ) | | (4,670 | ) | | Income taxes, net | | | | (1,896 | ) | | | 7,134 | | | | (4,999 | ) | Contributions to company pension plan | | | | (5,340 | ) | | | (225 | ) | | | (991 | ) | Other - net | | | 2,478 | | | (1,501 | ) | | (1,247 | ) | | | (1,853 | ) | | | (301 | ) | | | 35 | | | | | | | | | | | | | NET CASH PROVIDED BY OPERATING ACTIVITIES | | | 20,229 | | | 25,256 | | | 21,539 | | | | 22,976 | | | | 33,830 | | | | 25,974 | | | INVESTING ACTIVITIES | | | | | | | | | | | | | | | | | | | Capital expenditures | | | (10,754 | ) | | (17,663 | ) | | (21,034 | ) | | | (9,528 | ) | | | (11,233 | ) | | | (24,725 | ) | Business acquisitions, net of cash acquired | | | 0 | | | (14,975 | ) | | 0 | | | Proceeds from the sale of property and equipment | | | 929 | | | 142 | | | 532 | | | | 195 | | | | 142 | | | | 70 | | Restricted cash and purchase of fixed-term deposits | | | (1,037 | ) | | (797 | ) | | (3,642 | ) | | | | | | | | | | | | | Purchase of marketable securities | | | | (4,690 | ) | | | 0 | | | | 0 | | Proceeds from sale of marketable securities | | | | 2,953 | | | | 0 | | | | 0 | | Purchase of company owned life insurance policy | | | | (2,953 | ) | | | 0 | | | | 0 | | Fixed-term deposits | | | | 0 | | | | 8,527 | | | | (3,815 | ) | NET CASH USED IN INVESTING ACTIVITIES | | | (10,862 | ) | | (33,293 | ) | | (24,144 | ) | | | (14,023 | ) | | | (2,564 | ) | | | (28,470 | ) | | FINANCING ACTIVITIES | | | | | | | | | | | | | | | | | | | Increase (decrease) in notes payable to banks | | | (775 | ) | | 941 | | | 922 | | | | 8,446 | | | | (537 | ) | | | 851 | | Proceeds from the issuance of long-term debt | | | 51,942 | | | 75,774 | | | 73,638 | | | Proceeds from long-term debt | | | | 76,030 | | | | 55,581 | | | | 70,274 | | Payments of long-term debt | | | (51,940 | ) | | (57,123 | ) | | (69,884 | ) | | | (85,496 | ) | | | (63,981 | ) | | | (57,742 | ) | Dividends paid | | | (4,391 | ) | | (4,412 | ) | | (2,305 | ) | | | (4,088 | ) | | | (4,099 | ) | | | (4,170 | ) | Excess tax benefits from share-based awards | | | (20 | ) | | 97 | | | 357 | | | 0 | | | 0 | | | | (2 | ) | Earn-out consideration payments | | | 0 | | | 0 | | | (513 | ) | | Proceeds from issuance of common shares | | | 80 | | | 166 | | | 1,519 | | | | 222 | | | | 1,962 | | | | 248 | | Purchase of common shares for treasury | | | (6,003 | ) | | (104 | ) | | (2,881 | ) | | | (191 | ) | | | (2 | ) | | | (3,108 | ) | Purchase of common shares for treasury from related parties | | | (1,550 | ) | | (2,130 | ) | | (4,030 | ) | | | (3,974 | ) | | | (8,475 | ) | | | (1,962 | ) | | | | | | | | | | | | NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | | | (12,657 | ) | | 13,209 | | | (3,177 | ) | | | NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | | | | (9,051 | ) | | | (19,551 | ) | | | 4,389 | | Effects of exchange rate changes on cash and cash equivalents | | | 4,040 | | | 180 | | | 1,953 | | | | (1,591 | ) | | | 1,359 | | | | (1,539 | ) | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | 750 | | | 5,352 | | | (3,829 | ) | | | Cash and cash equivalents at beginning of year | | | 29,643 | | | 24,291 | | | 28,120 | | | | | | | | | | | | | | | CASH AND CASH EQUIVALENTS AT END OF YEAR | | $ | 30,393 | | | $ | 29,643 | | | $ | 24,291 | | | | | | | | | | | | | | Net (decrease) increase in cash, cash equivalents and restricted cash | | | | (1,689 | ) | | | 13,074 | | | | 354 | | Cash, cash equivalents and restricted cash at beginning of year | | | | 45,599 | | | | 32,525 | | | | 32,171 | | CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR(1) | | | $ | 43,910 | | | $ | 45,599 | | | $ | 32,525 | |
(1) | Includes restricted cash of $.3 million, $1.2 and $1.8 million for the years ended December 31, 2018, 2017 and 2016, respectively. For further information regarding restricted cash, refer to Note E, “Debt Arrangements.” |
See notes to consolidated financial statements.
PREFORMED LINE PRODUCTS COMPANY STATEMENTS OF CONSOLIDATED SHAREHOLDERS’SHAREHOLDERS' EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated Other Comprehensive Income (Loss) | | | | | | | Common Shares | | | Common Shares Issued to Rabbi Trust | | | Deferred Compensation Liability | | | Paid in Capital | | | Retained Earnings | | | Treasury Shares | | | Cumulative Translation Adjustment | | | Unrecognized Pension Benefit Cost | | | Total | | | | (In thousands, except share and per share data) | | | | | | | | | | | | Balance at January 1, 2013 | | $ | 12,135 | | | $ | (6,522 | ) | | $ | 6,522 | | | $ | 16,355 | | | $ | 264,115 | | | $ | (37,872 | ) | | $ | (7,340 | ) | | $ | (6,324 | ) | | $ | 241,069 | | | | | | | | | | | | Net income | | | | | | | | | | | | | | | | | | | 20,587 | | | | | | | | | | | | | | | | 20,587 | | Foreign currency translation adjustment | | | | | | | | | | | | | | | | | | | | | | | | | | | (8,457 | ) | | | | | | | (8,457 | ) | Recognized net actuarial loss, net of tax provision of $187 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 306 | | | | 306 | | Gain on unfunded pension obligations, net of tax provision of $2,506 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,113 | | | | 4,113 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 16,549 | | Share-based compensation | | | | | | | | | | | | | | | 3,057 | | | | (100 | ) | | | | | | | | | | | | | | | 2,957 | | Excess tax benefits from share-based awards | | | | | | | | | | | | | | | 357 | | | | | | | | | | | | | | | | | | | | 357 | | Purchase of 89,807 common shares | | | | | | | | | | | | | | | | | | | | | | | (6,911 | ) | | | | | | | | | | | (6,911 | ) | Issuance of 34,575 common shares | | | 69 | | | | | | | | | | | | 1,450 | | | | | | | | | | | | | | | | | | | | 1,519 | | Restricted shares awards of 68,369 | | | 137 | | | | | | | | | | | | (137 | ) | | | | | | | | | | | | | | | | | | | 0 | | Common shares issued to rabbi trust of 69,120 | | | | | | | (2,784 | ) | | | 2,784 | | | | | | | | | | | | | | | | | | | | | | | | 0 | | Cash dividends declared - $.60 per share | | | | | | | | | | | | | | | | | | | (3,210 | ) | | | | | | | | | | | | | | | (3,210 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2013 | | $ | 12,341 | | | $ | (9,306 | ) | | $ | 9,306 | | | $ | 21,082 | | | $ | 281,392 | | | $ | (44,783 | ) | | $ | (15,797 | ) | | $ | (1,905 | ) | | $ | 252,330 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | | | | | | | | | | | | | | | | | 12,861 | | | | | | | | | | | | | | | | 12,861 | | Foreign currency translation adjustment | | | | | | | | | | | | | | | | | | | | | | | | | | | (12,330 | ) | | | | | | | (12,330 | ) | Recognized net actuarial loss, net of tax provision of $6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10 | | | | 10 | | Loss on unfunded pension obligations, net of tax benefit of $3,115 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (5,112 | ) | | | (5,112 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (4,571 | ) | Share-based compensation | | | | | | | | | | | | | | | 1,542 | | | | (106 | ) | | | | | | | | | | | | | | | 1,436 | | Excess tax benefits from share-based awards | | | | | | | | | | | | | | | 97 | | | | | | | | | | | | | | | | | | | | 97 | | Purchase of 40,145 common shares | | | | | | | | | | | | | | | | | | | | | | | (2,235 | ) | | | | | | | | | | | (2,235 | ) | Issuance of 3,531 common shares | | | 7 | | | | | | | | | | | | 159 | | | | | | | | | | | | | | | | | | | | 166 | | Restricted shares awards of 42,678 | | | 85 | | | | | | | | | | | | (85 | ) | | | | | | | | | | | | | | | | | | | 0 | | Common shares issued to rabbi trust of 43,592 | | | | | | | (2,484 | ) | | | 2,484 | | | | | | | | | | | | | | | | | | | | | | | | 0 | | Cash dividends declared - $.80 per share | | | | | | | | | | | | | | | | | | | (4,298 | ) | | | | | | | | | | | | | | | (4,298 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2014 | | $ | 12,433 | | | $ | (11,790 | ) | | $ | 11,790 | | | $ | 22,795 | | | $ | 289,849 | | | $ | (47,018 | ) | | $ | (28,127 | ) | | $ | (7,007 | ) | | $ | 242,925 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | | | | | | | | | | | | | | | | | 6,675 | | | | | | | | | | | | | | | | 6,675 | | Foreign currency translation adjustment | | | | | | | | | | | | | | | | | | | | | | | | | | | (19,789 | ) | | | | | | | (19,789 | ) | Recognized net actuarial loss, net of tax provision of $219 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 364 | | | | 364 | | Gain on unfunded pension obligations, net of tax provision of $245 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 408 | | | | 408 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (12,342 | ) | Share-based compensation | | | | | | | | | | | | | | | 248 | | | | 47 | | | | | | | | | | | | | | | | 295 | | Excess tax benefits from share-based awards | | | | | | | | | | | | | | | (20 | ) | | | | | | | | | | | | | | | | | | | (20 | ) | Purchase of 198,589 common shares | | | | | | | | | | | | | | | | | | | | | | | (7,552 | ) | | | | | | | | | | | (7,552 | ) | Issuance of 1,899 common shares | | | 4 | | | | | | | | | | | | 76 | | | | | | | | | | | | | | | | | | | | 80 | | Restricted shares awards of 20,614 | | | 41 | | | | | | | | | | | | (41 | ) | | | | | | | | | | | | | | | | | | | 0 | | Common shares issued to rabbi trust of 7,113 | | | | | | | (262 | ) | | | 262 | | | | | | | | | | | | | | | | | | | | | | | | 0 | | Cash dividends declared - $.80 per share | | | | | | | | | | | | | | | (142 | ) | | | (4,260 | ) | | | | | | | | | | | | | | | (4,402 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2015 | | $ | 12,478 | | | $ | (12,052 | ) | | $ | 12,052 | | | $ | 22,916 | | | $ | 292,311 | | | $ | (54,570 | ) | | $ | (47,916 | ) | | $ | (6,235 | ) | | $ | 218,984 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated Other Comprehensive Income (Loss) | | | | | | | | Common Shares | | | Common Shares Issued to Rabbi Trust | | | Deferred Compensation Liability | | | Paid in Capital | | | Retained Earnings | | | Treasury Shares | | | Cumulative Translation Adjustment | | | Unrecognized Pension Benefit Cost | | | Total | | | (In thousands, except share and per share data) | | Balance at January 1, 2016 | | $ | 12,478 | | | $ | (12,052 | ) | | $ | 12,052 | | | $ | 22,916 | | | $ | 292,311 | | | $ | (54,570 | ) | | $ | (47,916 | ) | | $ | (6,235 | ) | | $ | 218,984 | | Net income | | | | | | | | | | | | | | | | | | | 15,255 | | | | | | | | | | | | | | | | 15,255 | | Foreign currency translation adjustment | | | | | | | | | | | | | | | | | | | | | | | | | | | (3,579 | ) | | | | | | | (3,579 | ) | Recognized net actuarial loss, net of tax provision of $196 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 326 | | | | 326 | | Gain on unfunded pension obligations, net of tax provision of $21 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 35 | | | | 35 | | Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 12,037 | | Share-based compensation | | | | | | | | | | | | | | | 1,366 | | | | (27 | ) | | | | | | | | | | | | | | | 1,339 | | Excess tax benefits from share-based awards | | | | | | | | | | | | | | | 2 | | | | | | | | | | | | | | | | | | | | 2 | | Purchase of 118,430 common shares | | | | | | | | | | | | | | | | | | | | | | | (5,070 | ) | | | | | | | | | | | (5,070 | ) | Issuance of 15,131 common shares | | | 30 | | | | | | | | | | | | 345 | | | | | | | | | | | | | | | | | | | | 375 | | Common shares issued to rabbi trust of 646, net | | | | | | | (2 | ) | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | 0 | | Cash dividends declared - $.80 per share | | | | | | | | | | | | | | | | | | | (4,124 | ) | | | | | | | | | | | | | | | (4,124 | ) | Balance at December 31, 2016 | | $ | 12,508 | | | $ | (12,054 | ) | | $ | 12,054 | | | $ | 24,629 | | | $ | 303,415 | | | $ | (59,640 | ) | | $ | (51,495 | ) | | $ | (5,874 | ) | | $ | 223,543 | | Net income | | | | | | | | | | | | | | | | | | | 12,654 | | | | | | | | | | | | | | | | 12,654 | | Foreign currency translation adjustment | | | | | | | | | | | | | | | | | | | | | | | | | | | 10,070 | | | | | | | | 10,070 | | Recognized net actuarial loss, net of tax provision of $199 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 269 | | | | 269 | | (Loss) on unfunded pension obligations, net of tax provision of $247 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (410 | ) | | | (410 | ) | Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 22,583 | | Share-based compensation | | | | | | | | | | | | | | | 3,055 | | | | (231 | ) | | | | | | | | | | | | | | | 2,824 | | Purchase of 121,626 common shares | | | | | | | | | | | | | | | | | | | | | | | (8,475 | ) | | | | | | | | | | | (8,475 | ) | Issuance of 42,080 common shares | | | 85 | | | | | | | | | | | | 2,050 | | | | | | | | | | | | | | | | | | | | 2,135 | | Common shares distributed from rabbi trust of 8,255, net | | | | | | | 220 | | | | (220 | ) | | | | | | | | | | | | | | | | | | | | | | | 0 | | Cash dividends declared - $.80 per share | | | | | | | | | | | | | | | | | | | (4,073 | ) | | | | | | | | | | | | | | | (4,073 | ) | Balance at December 31, 2017 | | $ | 12,593 | | | $ | (11,834 | ) | | $ | 11,834 | | | $ | 29,734 | | | $ | 311,765 | | | $ | (68,115 | ) | | $ | (41,425 | ) | | $ | (6,015 | ) | | $ | 238,537 | | Net income | | | | | | | | | | | | | | | | | | | 26,581 | | | | | | | | | | | | | | | | 26,581 | | Foreign currency translation adjustment | | | | | | | | | | | | | | | | | | | | | | | | | | | (12,285 | ) | | | | | | | (12,285 | ) | Recognized net actuarial gain, net of tax provision of $139 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 386 | | | | 386 | | (Loss) on unfunded pension obligations, net of tax benefit of $77 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (244 | ) | | | (244 | ) | Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 14,438 | | Share-based compensation | | | | | | | | | | | | | | | 4,236 | | | | (152 | ) | | | | | | | | | | | | | | | 4,084 | | Purchase of 52,318 common shares | | | | | | | | | | | | | | | | | | | | | | | (4,165 | ) | | | | | | | | | | | (4,165 | ) | Issuance of 34,521 common shares | | | 69 | | | | | | | | | | | | 431 | | | | | | | | | | | | | | | | | | | | 500 | | Common shares distributed from rabbi trust of 19,396, net | | | | | | | 826 | | | | (826 | ) | | | | | | | | | | | | | | | | | | | | | | | 0 | | Cash dividends declared - $.80 per share | | | | | | | | | | | | | | | | | | | (4,024 | ) | | | | | | | | | | | | | | | (4,024 | ) | Balance at December 31, 2018 | | $ | 12,662 | | | $ | (11,008 | ) | | $ | 11,008 | | | $ | 34,401 | | | $ | 334,170 | | | $ | (72,280 | ) | | $ | (53,710 | ) | | $ | (5,873 | ) | | $ | 249,370 | |
See notes to consolidated financial statements.
PREFORMED LINE PRODUCTS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tables in thousands of dollars, except share and per share data, unless specifically noted) Note A - Significant Accounting Policies Nature of Operations Preformed Line Products Company and subsidiaries (the “Company”) is a designer and manufacturer of products and systems employed in the construction and maintenance of overhead and underground networks for the energy, telecommunication, cable operators, data communication and other similar industries. The Company’s primary products support, protect, connect, terminate and secure cables and wires. The Company also provides solar hardware systems and mounting hardware for a variety of solar power applications. The Company’s customers include public and private energy utilities and communication companies, cable operators, governmental agencies, contractors and subcontractors, distributors and value-added resellers. The Company serves its worldwide markets through strategically located domestic and international manufacturing facilities. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries for which it has a controlling interest. All intercompany accounts and transactions have been eliminated upon consolidation. Investments in Foreign Joint Ventures
Investments in joint ventures, where the Company owns between 20% and 50%, or where the Company does not have control but has the ability to exercise significant influence over operations or financial policies, are accounted for by the equity method. As of December 31, 2015, the Company owns 25.93% in Proxisafe Ltd. (“Proxisafe”), located in Calgary, Alberta. The Company accounts for its joint venture interest in Proxisafe accounts using the equity method.
Cash and Cash Equivalents Cash equivalents are stated at fair value and consist of highly liquid investments with original maturities of three months or less at the time of acquisition. Receivable Allowances The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The allowances for uncollectible accounts receivable is based upon the number of days the accounts are past due, the current business environment and specific information such as bankruptcy or liquidity issues of customers. The Company also maintains an allowance for future sales credits related to sales recorded during the year. The estimated allowance is based on historical sales credits issued in the subsequent year related to the prior year and any significant, preapproved open return good authorizations as of the balance sheet date. Inventories The Company uses the last-in, first-out (LIFO)(“LIFO”) method of determining cost for the majority of its material portion of inventories in PLP-USA. All other inventories are determined by the first-in, first-out (FIFO) or average cost methods. Inventories are carried at the lower of cost or market. Reserves are maintained for estimated obsolescence or excess inventory based on past usage and future demand. We provide excess and obsolescence reserves to state inventories at the lower of cost or estimated net realizable value. We identify inventory items that have had no usage or are in excess of the usages over the historical 12 to 24 months. A management team with representatives from marketing, manufacturing, engineering and finance reviews these inventory items, determines the disposition of the inventory and assesses the net realizable value based on their knowledge of the product and market conditions. These conditions include, among other things, future demand for product, product utility, unique customer order patterns or unique raw material purchase patterns, changes in customer and quality issues. The allowance for excess and obsolete inventory was 9.6% and 10.6% for the years ended December 31, 2018 and December 31, 2017, respectively. If the impact of market conditions deteriorates from those projected by management, additional inventory reserves may be necessary. Fair Value of Financial Instruments Financial Accounting Standards Board’s (FASB)(“FASB”) Accounting Standards Codification (ASC)(“ASC”) 825, Disclosures“Disclosures about Fair Value of Financial Instruments,Instruments”, requires disclosures of the fair value of financial instruments. The carrying value of the Company’s current financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable and short-term debt, approximates fair value because of the short-term maturity of these instruments. At December 31, 2015, theestimated fair value of the Company’s long-term debtfinancial instruments was estimated using discounted cash flow analysis,principally based on the Company’s current incremental borrowing rates formarket prices where such prices were available, and when unavailable, fair values were estimated based on market prices of similar types of borrowing arrangements, which is considered to be a level two input. Based on the analysis performed, the carrying value of the Company’s long-term debt approximates fair value at December 31, 2015.instruments.
Property, Plant and Equipment and Depreciation Property, plant, and equipment is recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives. The estimated useful lives used, when purchased new, are: land improvements, ten years; buildings, forty years; building improvements, five to forty years; and machinery and equipment, three to ten years; and aircraft, fifteen years. Appropriate reductions in estimated useful lives are made for property, plant and equipment purchased in connection with an acquisition of a business or in a used condition when purchased. Long-Lived Assets The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the carrying value of the assets are impaired and the discountedundiscounted future cash flows estimated to be generated by such assets are less than the carrying value. The Company’s cash flows are based on historical results adjusted to reflect the Company’s best estimate of future market and operating conditions. The net carrying value of assets not recoverable is then reduced to fair value. The estimate of fair value representrepresents the Company’s best estimate based on industry trends and reference to market rates and transactions. The Company did not record any impairment to long-lived assets during the years ended December 31, 20152018 and 2014.2017. Goodwill and Other Intangibles Goodwill and other intangible assets generally result from business acquisitions. Goodwill and intangible assets with indefinite lives areis not subject to amortization, but areis subject to annual impairment testing. Intangible assets with definite lives, consisting primarily of purchased customer relationships, patents, technology, customer backlogs, trademarks and land use rights, are generally amortized over periods from less than one year to twenty years. The Company’s intangible assets with finite lives are generally amortized using a projected cash flow basis method over their useful lives unless another method was demonstrated to be more appropriate. Customer relationships, technology and trademark intangibles acquired in 2014 and 2012 are amortized using a projected cash flow basis method over the period in which the economic benefits of the intangibles are consumed. Customer relationships, technology and trademarks acquired in July 2010 are being amortized using the straight-line method over their useful lives. This straight-line method was more appropriate because it better reflected the pattern in which the economic benefits of the intangible asset are consumed or otherwise expire compared to using a projected cash flow basis method. An evaluation of the remaining useful life of intangible assets with a determinable life is performed on a periodic basis and when events and circumstances warrant an evaluation. The Company assesses intangible assets with a determinable life for impairment consistent with its policy for assessing other long-lived assets. Goodwill and intangible assets are also reviewed for impairment annually or more frequently when changes in circumstances indicate the carrying amount may be impaired, or in the case of finite-lived intangible assets, when the carrying amount may not be recoverable. Events or circumstances that would result in an impairment review primarily include operations reporting losses or a significant change in the use of an asset. Impairment charges are recognized pursuant to FASB ASC 350-20, Goodwill.“Goodwill”. The Company performs the annual impairment test for goodwill utilizing a combination of discounted cash flow methodology, market comparables, and an overall market capitalization reasonableness test in computing fair value by reporting unit. The Company 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 changed. However, the Company believes that the methodologies and weightings used are reasonable and result in appropriate fair values of the reporting units. The Company performed its annual impairment test for goodwill as of October 1, 20152018 and 20142017 and determined that no adjustment to the carrying value was required for the years ended December 31, 20152018 and 2014.2017. Revenue Recognition Sales areNet sales include products and shipping and handling charges, net of estimates for product returns. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. All revenue is recognized when title passesthe Company satisfies the performance obligations under the contract and control of the product is transferred to the customer, either when goods are shipped or when they are delivered andprimarily based on the terms of the sale, there is persuasive evidence of an agreement, the price is fixed or determinable and collectability is reasonably assured.shipping terms. Revenue related tofor shipping and handling costs billedcharges are recognized at the time the products are shipped to, customers is included in net sales anddelivered to or picked up by the related shipping and handling costs are included in cost of products sold.customer. The Company estimates product returns based on historical return rates.
Research and Development Research and development costs for new products are expensed as incurred and totaled $2.9$2.4 million in 2015,2018, $2.1 million in 2017 and $2.7 million in 2014 and $2.3 million in 2013.2016.
Income Taxes Income taxes are computed in accordance with the provisions of FASB ASC 740, Income Taxes. “Income taxes” and includes U.S. (federal and state) and foreign income taxes. In the Consolidated Financial Statements, the benefits of a consolidated return have been reflected where such returns have or could be filed based on the entities and jurisdictions included in the financial statements. Tax legislation commonly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) includes a mandatory one-time tax on certain accumulated earnings of foreign subsidiaries, and as a result, these previously unremitted earnings for which no U.S. deferred tax liability had been accrued have now been subject to U.S. tax. Notwithstanding the U.S. taxation of these amounts, the Company intends to continue to invest most or all of these earnings, as well as its capital in these subsidiaries, indefinitely outside of the U.S. and do not expect to incur any significant, additional taxes related to such amounts. The Company will monitor cash balances at each of its foreign subsidiaries on an ongoing basis. In January 2018, the Financial Accounting Standard Board released guidance on the accounting for tax on the global intangible low-taxed income (GILTI) provisions of the Tax Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or to treat any taxes on GILTI inclusions as a period cost are both acceptable methods subject to an accounting policy election. The Company has elected to account for GILTI as a component of tax expense in the period incurred. Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected on the Consolidated Financial Statements. Deferred tax liabilities and assets are determined based on the differences between the book and tax basis of particular assets and liabilities and operating loss carryforwards using tax rates in effect for the years in which the differences are expected to reverse. Net deferredDeferred tax assets are recognized to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
Uncertain tax positions are recorded in accordance with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.authority. Advertising Advertising costs are expensed as incurred and totaled $1.9 million in 2018, $1.7 million in 2015, $2.02017 and $1.8 million in 2014 and 2013.2016. Foreign Currency Translation Asset and liability accounts are translated into U.S. dollars using exchange rates in effect at the date of the Consolidated Balance Sheet. The translation adjustments are recorded in Accumulated other comprehensive income (loss). Revenues and expenses are translated at weighted average exchange rates in effect during the period. Transaction gains and losses arising from exchange rate changes on transactions denominated in a currency other than the functional currency are included in income and expense as incurred. Aggregate transaction gains and losses for the yearyears ended December 31, 2015, 20142018, 2017 and 20132016 were $7.4a loss of $1.5 million, $2.9a gain of $.3 million and $3.8a gain of $1.3 million, respectively. Upon sale or substantially complete liquidation of an investment in a foreign entity, the cumulative translation adjustment for that entity is reclassified from Accumulated other comprehensive income (loss) to earnings. Effective July 1, 2018, Argentina was designated as a highly inflationary economy as the projected three-year cumulative inflation rate exceeded 100%. As such, beginning July 1, 2018, the functional currency for the Company’s Argentina subsidiary became the U.S. dollar. The impact to the Company’s Consolidated financial statements was not material and is included in the December 31, 2018 results. Revenue from operations in Argentina was less than 2% of total consolidated net sales for the year ended December 31, 2018, Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenuesrevenue and expenses during the reporting period. Actual results could differ from these estimates. Business Combinations The Company accounts for acquisitions in accordance with ASC 805.805 “Business Combinations.” Derivative Financial Instruments The Company does not hold derivatives for trading purposes. Reclassifications
Certain prior year amounts have been reclassified to conform to current year presentation.
Recently Adopted Accounting Pronouncements In AprilMarch 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-05, “Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.” The ASU adds various Securities and Exchange Commission (“SEC”) paragraphs pursuant to the issuance of the December 2017 SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the U.S. Tax Cuts and Jobs Act of 2017 (“SAB 118”), which was effective immediately. For additional details regarding SAB 118, refer to Note G “Income Taxes.” In March 2017, the FASB issued ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The Company adopted ASU 2017-07 as of January 1, 2018. The adoption did not have a material impact on the Company’s consolidated statements of operations and since prior period reclassifications were deemed immaterial, the Company elected to not make a retrospective adjustment to prior period income statements. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Company adopted ASU 2016-18 as of January 1, 2018 using a retrospective transition method to each period presented. The cash, cash equivalents and restricted cash balance on the Company’s consolidated cash flow includes $.3 million and $1.2 million of restricted cash as of December 31, 2018 and December 31, 2017, respectively. Restricted cash is included in Other assets on the Company’s consolidated balance sheet in each period presented. The adoption of ASU 2016-18 did not have a material impact on the Company’s consolidated financial statements. Refer to Note E “Debt Arrangements” for additional details regarding the Company’s restricted cash. In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” ASU 2016-16 modifies the recognition of income tax expense resulting from intra-entity transfers of assets other than inventory. Pursuant to this amendment, entities should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This amendment eliminates the exception for an intra-entity transfer of assets other than inventory. The Company adopted ASU 2016-16 as of January 1, 2018 with no material impact on the Company’s consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”, which changes how companies recognize, measure, present and make disclosures about certain financial assets and financial liabilities. Under this guidance, entities have to measure certain equity investments, including available-for-sale securities, at fair value and recognize any changes in fair value in net income. ASU 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods therein. The Company adopted ASU 2016-01 effective January 1, 2018. Refer to Note K “Fair Value of Financial Assets and Liabilities” for additional details regarding the Company’s marketable securities. In May 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements2014-09, “Revenue from Contracts with Customers (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,606),” or ASU 2014-08.2014-09. ASU 2014-08 changes2014-09 requires an entity to recognize revenue in a manner that depicts the criteriatransfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for reportingthose goods or services. To achieve that core principle, the amendment provides five steps that an entity should apply when recognizing revenue. The amendment also specifies the accounting of some costs to obtain or fulfill a discontinued operation. Undercontract with a customer and expands the new pronouncement, a disposal of a part of an organization that has a major effect on its operations and financial results is a discontinued operation. The Company is required to adoptdisclosure requirements around contracts with customers. In August 2015, the FASB issued ASU 2014-08 prospectively for all disposals or componentsNo. 2015-14 deferring the effective date of the business classified as held for sale during the fiscal periodamendment to annual reporting periods beginning after December 15, 2014. 2017, including interim periods therein.
The Company implemented changes to processes and controls to meet the standard’s reporting and disclosure requirements and adopted ASU 2014-09 as of January 1, 2018 using the guidance inmodified retrospective transition method applied to contracts that were not yet completed at that date. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be presented based on the first quarterCompany’s historic accounting policy. The cumulative impact of 2015 and itadopting ASU 2014-09 as of January 1, 2018 did not have an effecta material impact on the Company’s resultsconsolidated financial statements. Further, the Company does not expect the impact of operations,the adoption of ASU 2014-09 to be material to its consolidated financial condition or cash flows.statements on an ongoing basis. Refer to Note L “Revenue” for additional details regarding the Company’s revenue recognition policy. New Accounting Standards To Be Adopted In February 2018, the FASB issued ASU 2018-02, “Income Statement (Topic 220), Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The FASB issued the update to provide amended guidance to allow a reclassification from Accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. Additionally, under the new guidance an entity will be required to provide certain disclosures regarding stranded tax effects. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years, and the guidance may be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal income tax rate in the Tax Act is recognized. Early adoption is permitted. The Company is currently assessing the impact, if any, that the ASU will have on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The amendments in this UpdateTopic 842 require the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, a lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation.obligation for leases classified as operating leases under previous guidance. Both the asset and liability will initially be measured at the present value of the future minimum lease payments over the lease term. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. Initial costs directly attributable to negotiating and arranging the lease will be included in the asset. For leases with a term of 12 months or less, a lessee can make an accounting policy election by class of underlying asset to not recognize an asset and corresponding liability. Lessees will also be required to provide additional qualitative and quantitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. These disclosures are intended to supplement the amounts recorded in the financial statements and provide additional information about the nature of an organization’s leasing activities. Topic 842 is required to be applied using a modified retrospective adoption method with the option of applying the guidance either retrospectively to each prior comparative reporting period presented or retrospectively at the beginning of the period of adoption. This ASU is effective for interim and annual periods on January 1, 2019, and the Company will apply the transitional package of practical expedients allowed by the standard to not reassess the identification, classification and initial direct costs of leases commencing before this ASU's effective date; however, the Company will not elect the hindsight transitional practical expedient. The Company also will apply the practical expedient to not separate lease and non-lease components to new leases as well as existing leases through transition. The Company will elect an accounting policy to not apply recognition requirements of the guidance to short-term leases. In July of 2018, the FASB issued ASU 2018-11, “Targeted Improvements to ASC 842,” which includes an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, Leases, as the initial application of transition. The amendments in this UpdateTopic 842 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company established a cross-functional implementation team and is currently evaluating whatfinalizing policy elections, the discount rates to be used on January 1, 2019, data and business processes and controls to support recognition and disclosure under the new standard. As discussed above, the primary impact if any, itsupon adoption will be the recognition of right of use assets and lease obligations, on a discounted basis, of our minimum lease obligations as disclosed in Note F “Leases”. The adoption of this ASU is not expected to have to the presentation ofa material impact on the Company’s consolidated financial statements.results of operations, cash flows or debt covenants. In November 2015, the FASB issued Accounting Standards Update 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” To simplify the presentation of deferred income taxes, the amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2016. Earlier application is permitted as of the beginning of an interim or annual reporting period. The amendments in this Update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is currently evaluating what impact, if any, its adoption will have to the presentation of the Company’s consolidated financial statements.
In July 2015, the FASB issued Accounting Standards Update 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” The amendments in this Update more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments in this Update are effective for fiscal years beginning after December 15, 2016 and interim periods within fiscal years beginning after December 15, 2017. The amendments in this Update should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating what impact, if any, its adoption will have to the presentation of the Company’s consolidated financial statements.
In April 2015, the FASB issued Accounting Standards Update 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Topic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” The amendments in this Update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Earlier application is permitted. Amendments in this Update can be applied retrospectively or prospectively. The Company is currently not engaged in a cloud computing arrangement; however, it is evaluating what impact, if any, its adoption will have to the presentation of the Company’s consolidated financial statements if it enters such an arrangement.
In April 2015, the FASB issued Accounting Standards Update 2015-04, “Compensation – Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets.” For an entity that has a significant event in an interim period that calls for a re-measurement of defined benefit plan assets and obligations, the amendments in this Update provide a practical expedient that permits the entity to re-measure defined benefit plan assets and obligations using the month-end that is closest to the date of the significant event. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Earlier application is permitted. Amendments in this Update should be applied prospectively. The Company is currently evaluating what impact, if any, its adoption will have to the presentation of the Company’s consolidated financial statements.
In January 2015, the FASB issued Accounting Standards Update 2015-01, “Income Statement-Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” This Update eliminates from GAAP the concept of extraordinary items. A material event or transaction that an entity considers to be of an unusual nature or of a type that indicates infrequency of occurrence or both shall be reported as a separate component of income from continuing operations. The nature and financial effects of each event or transaction shall be presented as a separate component of income from continuing operations or, alternatively, disclosed in notes to financial statements. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company is currently evaluating what impact, if any, its adoption will have to the presentation of the Company’s consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15 “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 provides guidance in GAAP about management’s responsibility to evaluate whether there is substantial
doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The Company is required to adopt ASU 2014-15 prospectively for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is currently evaluating what impact, if any, its adoption will have to the presentation of the Company’s consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” or ASU 2014-09. ASU 2014-09 requires an entity to recognize revenue in a matter that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the amendment provides five steps that an entity should apply when recognizing revenue. The amendment also specifies the accounting of some costs to obtain or fulfill a contract with a customer and expands the disclosure requirements around contracts with customers. An entity can either adopt this amendment retrospectively to each prior reporting period presented or retrospectively with cumulative effect of initially applying the update recognized at the date of initial application. In August 2015, the FASB issued ASU No. 2015-14 deferring the effective date of the amendment to annual reporting periods beginning after December 15, 2017. Early adoption is not permitted. The Company is currently evaluating what impact, if any, its adoption will have to the presentation of the Company’s consolidated financial statements.
Note B - Other Financial Statement Information Inventories – net | | | | | | December 31 | | | | December 31 | | | 2018 | | | 2017 | | | | 2015 | | | 2014 | | | | Raw materials | | | $ | 43,041 | | | $ | 42,712 | | Work-in-process | | | | 8,818 | | | | 9,609 | | Finished products | | $ | 37,812 | | | $ | 41,634 | | | | 42,163 | | | | 33,780 | | Work-in-process | | | 6,902 | | | | 7,964 | | | Raw materials | | | 34,854 | | | | 40,423 | | | | | | | | | | | | | | 79,568 | | | | 90,021 | | | | 94,022 | | | | 86,101 | | Excess of current cost over LIFO cost | | | (3,538 | ) | | | (4,471 | ) | | | (4,474 | ) | | | (2,991 | ) | Noncurrent portion of inventory | | | (6,118 | ) | | | (5,513 | ) | | | (4,289 | ) | | | (5,224 | ) | | | | | | | | | $ | 85,259 | | | $ | 77,886 | | | | $ | 69,912 | | | $ | 80,037 | | | | | | | | | | |
Costs for inventories of certain material are determined using the LIFO method and totaled approximately $26.8$29.5 million and $27.0$25.1 million at December 31, 20152018 and 2014,2017, respectively. Property and equipment – net Major classes of property, plant and equipment are as follows: | | | December 31 | | | | | 2015 | | | 2014 | | | December 31 | | | | | 2018 | | | 2017 | | Land and improvements | | $ | 12,260 | | | $ | 14,173 | | | $ | 12,552 | | | $ | 13,141 | | Buildings and improvements | | | 71,711 | | | | 75,587 | | | | 74,743 | | | | 75,941 | | Machinery and equipment | | | 137,599 | | | | 144,213 | | | Machinery, equipment and aircraft | | | | 171,015 | | | | 166,999 | | Construction in progress | | | 3,369 | | | | 3,382 | | | | 3,392 | | | | 5,124 | | | | | | | | | | | | | 224,939 | | | | 237,355 | | | | 261,702 | | | | 261,205 | | Less accumulated depreciation | | | 132,974 | | | | 134,824 | | | | (158,747 | ) | | | (152,607 | ) | | | | | | | | | $ | 102,955 | | | $ | 108,598 | | | | $ | 91,965 | | | $ | 102,531 | | | | | | | | | | |
Depreciation of property and equipment was $10.3$12.1 million in 2015, $11.32018, $11.8 million in 20142017 and $10.6$10.8 million in 2013.2016. Machinery, equipment and equipmentaircraft includes $.3$.1 million and $.2 million of capital leases at the years ended December 31, 20152018 and 2014. 2017, respectively.Legal proceedings From timeThe Company can be party to time,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. 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 states that 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 alleges that the spacer dampers have and may be subjectcontinue to litigation incidentalbecome loose, open and detach from the conductors, resulting in damage and potential injury and a failure to its business.perform the intended function of providing spacing and damping to the Project. The Plaintiffs were initially seeking an estimated $56.0 million 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 ATP and HD Supply/Anixter and in the design of the spacer dampers by Helix. The Plaintiffs reduced their demand for damages to $29.4 million Canadian dollars on June 1, 2018. The Company believes the claims against it are without merit and intends to vigorously defend against such claims. The Company is notunable to predict the outcome of this case and cannot reasonably estimate a partypotential range of loss. However, if the matter is to any pending legal proceedings thatbe in a manner adverse to the Company, believes would, individually or in the aggregate,it could have a material adverse effect on itsthe Company’s financial condition, results of operations or cash flows.results. Note C - Pension Plans PLP-USA hourly employees of the Company who meet specific requirements as to age and length and date of service are covered by a defined benefit pension plan (“Plan”). On December 12, 2012, the Company approved a freeze on further benefit accruals under the Plan and notified the participants of the freeze on December 19, 2012. Beginning February 1, 2013, participants ceased earning additional benefits under the Plan and no new participants entered the Plan. The Company uses a December 31 measurement date for its Plan. Net periodic pension cost for the Plan consists of the following components for the year ended December 31: | | | 2015 | | | 2014 | | | 2013 | | | | | | | | 2018 | | | 2017 | | | 2016 | | Service cost | | $ | 189 | | | $ | 118 | | | $ | 222 | | | | | $ | 250 | | | $ | 255 | | | $ | 203 | | Interest cost | | | 1,436 | | | | 1,362 | | | | 1,251 | | | | | | 1,349 | | | | 1,456 | | | | 1,465 | | Expected return on plan assets | | | (1,849 | ) | | | (1,792 | ) | | | (1,436 | ) | | | | | (1,985 | ) | | | (1,903 | ) | | | (1,824 | ) | Recognized net actuarial loss | | | 583 | | | | 16 | | | | 493 | | | | | | 525 | | | | 468 | | | | 522 | | | | | | | | | | | | | Net periodic pension cost (income) | | $ | 359 | | | $ | (296 | ) | | $ | 530 | | | | | | | | | | | | | | Net periodic pension cost | | | | | $ | 139 | | | $ | 276 | | | $ | 366 | |
The following tables set forth benefit obligations, plan assets and the accrued benefit cost of the Plan at December 31: | | | 2015 | | | 2014 | | | | | | | | 2018 | | | 2017 | | Projected benefit obligation at beginning of the year | | $ | 36,193 | | | $ | 27,525 | | | | | $ | 36,031 | | | $ | 34,858 | | Service cost | | | 189 | | | | 118 | | | | | | 250 | | | | 255 | | Interest cost | | | 1,436 | | | | 1,362 | | | | | | 1,349 | | | | 1,456 | | Actuarial (gain) loss | | | (2,105 | ) | | | 7,991 | | | | | | (2,409 | ) | | | 2,215 | | Benefits paid | | | (950 | ) | | | (803 | ) | | | | | (1,290 | ) | | | (2,753 | ) | | | | | | | | | Projected benefit obligation at end of year | | $ | 34,763 | | | $ | 36,193 | | | | | $ | 33,931 | | | $ | 36,031 | | | | | | | | | | | | | | | | | | | | | | Fair value of plan assets at beginning of the year | | $ | 23,690 | | | $ | 22,499 | | | | | $ | 25,367 | | | $ | 24,435 | | Actual return on plan assets | | | 396 | | | | 1,555 | | | | | | (745 | ) | | | 3,460 | | Employer contributions | | | 0 | | | | 439 | | | | | | 5,340 | | | | 225 | | Benefits paid | | | (950 | ) | | | (803 | ) | | | | | (1,290 | ) | | | (2,753 | ) | | | | | | | | | Fair value of plan assets at end of the year | | $ | 23,136 | | | $ | 23,690 | | | | | $ | 28,672 | | | $ | 25,367 | | | | | | | | | | | | | | | | | | | | Unfunded pension obligation | | $ | 11,627 | | | $ | 12,503 | | | | | $ | 5,259 | | | $ | 10,664 | | | | | | | | | |
In accordance with ASC 715-20, the Company recognizes the underfunded status of the Plan as a liability. The amount recognized in Accumulated other comprehensive loss related to the Plan at December 31 is comprised of the following: | | | 2015 | | | 2014 | | | | | 2018 | | | 2017 | | Balance at January 1 | | $ | (6,988 | ) | | $ | (1,886 | ) | | | | $ | (6,015 | ) | | $ | (5,874 | ) | | | | | | | | | | | | | Reclassification adjustments: | | | | | | | | | | | | | | | Pretax amortized net actuarial loss | | | 583 | | | | 16 | | | Pre-tax amortized net actuarial loss | | | | | | 525 | | | | 468 | | Tax provision | | | (219 | ) | | | (6 | ) | | | | | (139 | ) | | | (199 | ) | | | | | | | | | | | | 386 | | | | 269 | | | | | 364 | | | | 10 | | | | | | | | | | | | | | | | | | | | | Adjustment to recognize gain (loss) on unfunded pension obligations: | | | | | | | | | | | | | | | Pretax gain (loss) | | | 653 | | | | (8,227 | ) | | Tax (benefit) provision | | | (245 | ) | | | 3,115 | | | | | | | | | | | | | | 408 | | | | (5,112 | ) | | Pre-tax loss | | | | | | (321 | ) | | | (657 | ) | Tax provision | | | | | | 77 | | | | 247 | | | | | | | | | | | | | (244 | ) | | | (410 | ) | | | | | | | | | | | | | Balance at December 31 | | $ | (6,216 | ) | | $ | (6,988 | ) | | | | $ | (5,873 | ) | | $ | (6,015 | ) | | | | | | | | |
The pretax2018 pre-tax unfunded pension obligation gainloss of $.7$0.3 million included a decreased costgain of $1.5$2.7 million resulting fromdue to a .25%.5% increase in the discount rate used to calculate the estimated future benefit costs along with an additional4.25%, a gain of $.7$.2 million associated with the industry updates to the mortality table used.used, offset by a loss of $.5 million due to demographic changes combined with a loss of $2.7 million resulting from asset performance below the 8.0% rate of return assumption. The estimated net loss for the Plan that will be amortized from Accumulated other comprehensive income into periodic benefit cost for 20162019 is $.5 million. There is no prior service cost to be amortized in the future. The Plan had accumulated benefit obligations in excess of Plan assets as follows: | | | | | | | | | | | 2015 | | | 2014 | | | | | Accumulated benefit obligation | | $ | 34,763 | | | $ | 36,193 | | Fair market value of assets | | | 23,136 | | | | 23,690 | |
Weighted-average assumptions used to determine benefit obligations at December 31 are as follows:
| | | | 2018 | | | 2017 | | Accumulated benefit obligation | | | | $ | 33,931 | | | $ | 36,031 | | Fair market value of assets | | | | | 28,672 | | | | 25,367 | |
| | | 2015 | | 2014 | | | | | 2018 | | | 2017 | | Discount rate | | | 4.25 | % | | 4.00 | % | | | | 4.25% | | | 3.75% | | Rate of compensation increase | | | n/a | | | n/a | | | | | n/a | | | n/a | |
Weighted-average assumptions used to determine net periodic benefit cost for the year ended December 31 are as follows: | | | 2015 | | 2014 | | 2013 | | | | | 2018 | | | 2017 | | | 2016 | | Discount rate | | | 4.00 | % | | 5.00 | % | | 4.00 | % | | | | 4.25% | | | | 4.25% | | | 4.25% | | Rate of compensation increase | | | n/a | | | n/a | | | n/a | | | | | n/a | | | n/a | | | n/a | | Expected long-term return on plan assets | | | 8.00 | | | 8.00 | | | 8.00 | | | | | | 8.00 | | | | 8.00 | | | | 8.00 | |
The net periodic pension cost for 20152018 was based on a long-term asset rate-of-return of 8.0%. This rate is based upon management’s estimate of future long-term rates of return on similar assets and is consistent with historical returns on such assets. Using the Plan’s current mix of assets and based on the average historical returns and expected future returns for such mix, an expected long-term rate-of-return of 8.0% is justified.
At December 31, 2015,2018 and 2017, the fair value of the Plan assets included inputs in Level 1: Quoted market prices in active markets for identical assets or liabilities and Level 2: Observable market basedmarket-based inputs or unobservable inputs that are corroborated by market data. The fair value of the Plan assets as of December 31, 20152018 and 2014,2017, by category, are as follows: | | | At December 31, 2015 | | | At December 31, 2018 | | | | Total Assets at Fair Value | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Total Assets at Fair Value | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | Asset Category | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash | | $ | 545 | | | $ | 545 | | | $ | 0 | | | $ | 0 | | | $ | 462 | | | $ | 462 | | | $ | 0 | | | $ | 0 | | Equity Securities | | | 14,086 | | | | 14,086 | | | | 0 | | | | 0 | | | | 10,470 | | | | 10,470 | | | | 0 | | | | 0 | | U.S. Treasury Bonds | | | 3,729 | | | | 3,729 | | | | 0 | | | | 0 | | | | 13,109 | | | | 13,109 | | | | 0 | | | | 0 | | Corporate Bonds | | | 4,776 | | | | 0 | | | | 4,776 | | | | 0 | | | | 4,631 | | | 0 | | | | 4,631 | | | | 0 | | | | | | | | | | | | | | | | Total | | $ | 23,136 | | | $ | 18,360 | | | $ | 4,776 | | | $ | 0 | | | $ | 28,672 | | | $ | 24,041 | | | $ | 4,631 | | | $ | 0 | | | | | | | | | | | | | | | |
| | | At December 31, 2014 | | | At December 31, 2017 | | | | Total Assets at Fair Value | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Total Assets at Fair Value | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | Asset Category | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash | | $ | 410 | | | $ | 410 | | | $ | 0 | | | $ | 0 | | | $ | 453 | | | $ | 453 | | | $ | 0 | | | $ | 0 | | Equity Securities | | | 8,231 | | | | 8,231 | | | | 0 | | | | 0 | | | | 16,667 | | | | 16,667 | | | | 0 | | | | 0 | | U.S. Treasury Bonds | | | 4,834 | | | | 4,834 | | | | 0 | | | | 0 | | | | 3,517 | | | | 3,517 | | | | 0 | | | | 0 | | Mutual Funds - Equity | | | 6,474 | | | | 6,474 | | | | 0 | | | | 0 | | | Corporate Bonds | | | 3,741 | | | | 0 | | | | 3,741 | | | | 0 | | | | 4,730 | | | 0 | | | | 4,730 | | | | 0 | | | | | | | | | | | | | | | | Total | | $ | 23,690 | | | $ | 19,949 | | | $ | 3,741 | | | $ | 0 | | | $ | 25,367 | | | $ | 20,637 | | | $ | 4,730 | | | $ | 0 | | | | | | | | | | | | | | | |
The Plan weighted-average asset allocations at December 31, 20152018 and 2014,2017, by asset category, are as follows: | | | | | | | | Plan assets | | | | | Plan assets at December 31 | | | | | at December 31 | | | | | 2015 | | 2014 | | | | | 2018 | | | 2017 | | | Asset category | | | | | | | | | | | | | | | | | Equity securities | | | 61 | % | | 62 | % | | | | | 37 | | % | | 66 | | % | Debt securities | | | 37 | | | 36 | | | | | | 61 | | | | 32 | | | Cash and equivalents | | | 2 | | | 2 | | | | | | 2 | | | | 2 | | | | | | | | | | | | | | 100 | | % | | 100 | | % | | | | 100 | % | | 100 | % | | | | | | | | | |
Management seeks to maximize the long-term total return of financial assets consistent with the fiduciary standards of ERISA. The ability to achieve these returns is dependent upon the need to accept moderate risk to achieve long-term capital appreciation. In recognition of the expected returns and volatility from financial assets, Plan assets are invested in the following ranges with the target allocation noted:
| | Range | | Target | | | | | | | Range | | | Target | | Equities | | 30-80% | 30-80 | % | 60% | | 60 | % | Fixed Income | | 20-70% | 20-70 | % | 40% | | 40 | % | Cash Equivalents | | 0-10% | 0-10 | % | | | | |
Investment in these markets is projected to provide performance consistent with expected long-term returns with appropriate diversification. The Company’sCompany's policy is to fund amounts deductible for federal income tax purposes. The Company does not expect to contribute to the Plan in 2016.2019.
The benefits expected to be paid out of the Plan assets in each of the next five years and the aggregate benefits expected to be paid for the subsequent five years are as follows: | | | | | Year | | Pension Benefits | | | | 2016 | | $ | 879 | | 2017 | | | 951 | | 2018 | | | 1,019 | | 2019 | | | 1,104 | | 2020 | | | 1,196 | | 2021-2025 | | | 7,600 | |
Year | | Pension Benefits | | 2019 | | $ | 1,202 | | 2020 | | | 1,246 | | 2021 | | | 1,310 | | 2022 | | | 1,402 | | 2023 | | | 1,484 | | 2024-2028 | | | 8,709 | |
The Company also provides retirement benefits through various defined contribution plans including PLP-USA’s Profit Sharing Plan. Expense for these defined contribution plans was $5.5 million in 2015, $6.1 million in 2014 and $5.6 million in 2013.2018, $5.1 million in 2017 and $5.8 million in 2016. Further, the Company also provides retirement benefits through the Supplemental Profit Sharing Plan. To the extent an employee’s award under PLP-USA’s Profit Sharing Plan exceeds the maximum allowable contribution permitted under existing tax laws, the excess is accrued for (but not funded) under a non-qualified Supplemental Profit Sharing Plan. The return under this Supplemental Profit Sharing Plan is calculated at a weighted average ofDuring January 2018, the one-year Treasury Bill rate plus 1%. At December 31, 2015 and 2014, the interest rate forCompany amended the Supplemental Profit Sharing Plan was 1.22% and 1.12%, respectively.to allow the participants the ability to hypothetically invest their proportionate award into various investment options, which primarily includes mutual funds. Expense for the Supplemental Profit Sharing Plan was $.3$.2 million for 2015,2018, $.5 million for 20142017 and $.3$.5 million for 2013, respectively.2016. The Supplemental Profit Sharing Plan unfunded status as offor the years ended December 31, 20152018 and 20142017 was $3.9$4.9 million and $3.5$4.8 million, respectively, and is included in Other noncurrent liabilities. Note D -– Accumulated Other Comprehensive Income (“AOCI”) The following tables set forth the total changes in AOCI by component, net of tax: | | | Year Ended December 31, 2018 | | | Year Ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | Cumulative | | | | | | | | | | | Cumulative | | | | | | | | Year Ended December 31, 2015 | | Year Ended December 31, 2014 | | | Unrecognized | | | Translation | | | | | | | Unrecognized | | | Translation | | | | | | | | Unrecognized Benefit Cost | | Cumulative Translation Adjustment | | Total | | Unrecognized Benefit Cost | | Cumulative Translation Adjustment | | Total | | | Benefit Cost | | | Adjustment | | | Total | | | Benefit Cost | | | Adjustment | | | Total | | Balance at January 1 | | $ | (7,007 | ) | | $ | (28,127 | ) | | $ | (35,134 | ) | | $ | (1,905 | ) | | $ | (15,797 | ) | | $ | (17,702 | ) | | $ | (6,015 | ) | | $ | (41,425 | ) | | $ | (47,440 | ) | | $ | (5,874 | ) | | $ | (51,495 | ) | | $ | (57,369 | ) | Other comprehensive income before reclassifications: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loss on foreign currency translation adjustment | | | 0 | | | (19,789 | ) | | (19,789 | ) | | 0 | | | (12,330 | ) | | (12,330 | ) | | Gain (loss) on foreign currency translation adjustment | | | | 0 | | | | (12,285 | ) | | | (12,285 | ) | | | 0 | | | | 10,070 | | | | 10,070 | | Gain (loss) on unfunded pension obligations | | | 408 | | | 0 | | | 408 | | | (5,112 | ) | | 0 | | | (5,112 | ) | | | (244 | ) | | | 0 | | | | (244 | ) | | | (410 | ) | | | 0 | | | | (410 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | Amounts reclassified from AOCI: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Amortization of defined benefit pension actuarial loss (a) | | | 364 | | | 0 | | | 364 | | | 10 | | | 0 | | | 10 | | | | 386 | | | | 0 | | | | 386 | | | | 269 | | | | 0 | | | | 269 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net current period other comprehensive income (loss) | | | 772 | | | (19,789 | ) | | (19,017 | ) | | (5,102 | ) | | (12,330 | ) | | (17,432 | ) | | | 142 | | | | (12,285 | ) | | | (12,143 | ) | | | (141 | ) | | | 10,070 | | | | 9,929 | | | | | | | | | | | | | | | | | | | | | | Balance at December 31 | | $ | (6,235 | ) | | $ | (47,916 | ) | | $ | (54,151 | ) | | $ | (7,007 | ) | | $ | (28,127 | ) | | $ | (35,134 | ) | | $ | (5,873 | ) | | $ | (53,710 | ) | | $ | (59,583 | ) | | $ | (6,015 | ) | | $ | (41,425 | ) | | $ | (47,440 | ) | | | | | | | | | | | | | | | | | | | | |
(a) | This AOCI component is included in the computation of net periodic pension costs as noted in Note C – Pension Plans. |
Note E - Debt and Credit Arrangements | | | December 31 | | | December 31 | | | | 2015 | | | 2014 | | | 2018 | | | 2017 | | Short-term debt | | | | | | | | | | | | | Secured notes | | | | | | | | | | | | | Brazilian Real denominated at 5.35% in 2015 and 3.38% to 3.69% in 2014, due 2016 | | $ | 301 | | | $ | 1,809 | | | Australian dollar denominated at 3.17% in 2015, due 2016 | | | 112 | | | | 0 | | | Thailand Bhat denominated at 3.95% | | | | 0 | | | | 864 | | Thailand Bhat denominated at 4.15% - 4.75% | | | | 1,797 | | | | 0 | | Thailand Bhat denominated at 4.25% | | | | 683 | | | | 0 | | Brazil Real denominated at 2.83% - 5.90% | | | | 802 | | | | 0 | | Brazil Real denominated at 4.30% - 4.84% | | | | 842 | | | | 0 | | Brazil Real denominated at 9.40% | | | | 4,918 | | | | 0 | | Current portion of long-term debt | | | 110 | | | | 116 | | | | 1,448 | | | | 1,448 | | | | | | | | | | Total short-term debt | | | 523 | | | | 1,925 | | | | 10,490 | | | | 2,312 | | | | | | | | | | | | | | | | | | Long-term debt | | | | | | | | | | | | | USD denominated at 1.29%, due 2017 | | | 30,505 | | | | 31,451 | | | Australian dollar denominated at 3.185%, due 2017 | | | 1,093 | | | | 0 | | | Australian dollar denominated term loans, at 5.59% in 2015 and 2014, due 2018, secured by land and building | | | 266 | | | | 414 | | | | | | | | | | | USD denominated at 3.63%, due 2021 | | | | 12,189 | | | | 23,133 | | USD denominated at 2.71%, due 2026 | | | | 10,984 | | | | 12,433 | | Brazilian Real denominated at 4.60% due 2022 | | | | 214 | | | | 286 | | Poland Zloty denominated at 2.77% due 2021 | | | | 904 | | | | 0 | | Australian Dollar denominated at 2.96%, due 2021 | | | | 2,117 | | | | 194 | | Total long-term debt | | | 31,864 | | | | 31,865 | | | | 26,408 | | | | 36,046 | | Less current portion | | | (110 | ) | | | (116 | ) | | | (1,448 | ) | | | (1,448 | ) | | | | | | | | | Total long-term debt, less current portion | | | 31,754 | | | | 31,749 | | | | 24,960 | | | | 34,598 | | | | | | | | | | Total debt | | $ | 32,277 | | | $ | 33,674 | | | $ | 35,450 | | | $ | 36,910 | | | | | | | | | |
The PLP-USA line of credit makes $50 million available to
On March 13, 2018, the Company at anextended the term on its $65 million credit facility from June 30, 2019 to June 30, 2021. All other terms remain the same, including the interest rate ofat LIBOR plus 1.125% unless its funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 2.25 to 1, then the LIBOR spread becomes 1.500%. As of December 31, 2018, the Company’s Polish subsidiary had borrowed $.9 million at a rate of 1.125% plus the Warsaw Interbank Offer Rate with a term expiring August 2017. The PLP-USAJune 30, 2021. As of December 31, 2018, the interest rates on the U.S. and Polish line of credit makes $5.0 million available toagreement were 3.63% and 2.77%, respectively. As of December 31, 2018, the Company’s subisidiaries. At December 31, 2015, our Australian subsidiary had borrowed $1.5$2.1 million Australian dollars at a rate of 1.125% plus the Australian Bank Bill Swap Bid Rate with a term expiring August 2017. AtJune 30, 2021. As of December 31, 2015,2018, the interest rate on the Australian line of credit agreement was 3.185%2.96%. There was $16.8 million availableUnder the credit facility, at December 31, 20152018, the Company had utilized $15.2 million with $49.8 million available under the line of credit net of long-term outstanding letterletters of credits.credit. The PLP-USA line of credit provides for $5.0 million to be available to the Company’s subsidiaries. The line of credit agreement contains, among other provisions, requirements for maintaining levels of net worth and profitability. At both December 31, 2015,2018 and 2017, the Company was in compliance with theseall covenants. The Company own a corporate aircraft with a remaining balance due on the loan of $11.0 million, of which $1.4 million is classified as short-term, with a term expiring in 2026. The loan is secured by the purchased aircraft. The Company’s Asia Pacific segment had $.3 million and $1.2 million in restricted cash at December 31, 2018 and 2017, respectively. The restricted cash is used to secure bank debt and is included in Other assets on the balance sheet. Aggregate maturities of long-term debt during the next five years are as follows: $.1$1.4 million for 2016, $31.72019, $1.5 million for 2017, less than $.12020, $16.7 million for 2018,2021, $1.5 million for 2022 and $0$5.2 million thereafter. Interest paid was $.5$1.8 million in 2015, $.62018, $1.0 million in 20142017 and $.4$.7 million in 2013.2016. Guarantees and Letters of Credit The Company has provided financial guarantees for uncompleted work and financial commitments. The terms of these guarantees vary with end dates ranging from the current year through the completion of such transactions. The guarantees would typically be triggered in the event of nonperformance. As of December 31, 2015,2018, the Company had total outstanding guarantees of $.5$4.9 million. Additionally, certain domestic and foreign customers require the Company to issue letters of credit or performance bonds as a condition of placing an order. As of December 31, 2015,2018, the Company had total outstanding letters of credit of $6.1$2.5 million.
Note F - Leases The Company has commitments under operating leases primarily for office and manufacturing space, transportation equipment, office equipment and computer equipment. Rental expense was $3.4$2.6 million in 2015 and $3.82018, $2.6 million in both 20142017 and 2013.$2.1 million in 2016. Future minimum rental commitments having non-cancelable terms exceeding one year are $2.4$2.3 million in 2016,2019, $1.9 million in 2020, $1.6 million in 2017, $1.52021, $.9 million in 2018, $1.42022, $.2 million in 2019, $1.3 million in 2020,2023, and an aggregate $10.1$6.3 million thereafter. One such lease is for the Company’s aircraft with a lease commitmentthereafter. The total minimum sublease rentals to be received through February 2017. Under the terms2024 under noncancelable subleases as of the lease, the Company maintains the risk to make up a deficiency from market value attributable to damage, extraordinary wear and tear, excess air hours or exceeding maintenance overhaul schedules required by the Federal Aviation Administration. At the present time, the Company does not believe it has incurred any obligation for any contingent rent under the lease.December 31, 2018 was $4.0 million.
The Company has commitments under capital leases for equipment and vehicles. Amounts recognized as capital lease obligations are reported in Accrued expense and other liabilities and Other noncurrent liabilities in the Consolidated Balance Sheets. Future minimum rental commitments for capital leases are approximately less than $.1 million in 2016, 2017, 2018,for each of the years ended December 31, 2019, 2020, 2021 and 2020. The2022 and the related imputed interest for the capital leases in each of these years is less than $.1 million. Future minimum rental commitment and imputed interest for capital leases in 2023 is $0. Leased property and equipment under capital leases are amortized using the straight-line method over the term of the lease. Routine maintenance, repairs and replacements are expensed as incurred. Note G - Income Taxes The Company recorded net tax provisions of $6.0 million, $13.2 million, and $5.7 million for the years ending December 31, 2018, 2017, and 2016, respectively. Cash taxes paid net of refunds were $5.6 million, $3.4 million, and $6.9 million for the years ending December 31, 2018, 2017, and 2016, respectively. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code that affected 2017, including, but not limited to, requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years. The Tax Act also established new tax laws that affected 2018, including but not limited to, (1) reduction of the U.S. federal statutory rate from 35% to 21%; (2) the creation of the base erosion anti-abuse tax (BEAT), a new minimum tax; (3) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (4) a new provision, Global Intangible Low-Taxed Income (GILTI), which ends deferral of taxation on a significant portion of foreign earnings; (5) a new limitation on deductible interest expense; (6) the repeal of the domestic production activity deduction; (7) limitations on the deductibility of certain executive compensation; and (8) limitations on the use of FTCs to reduce the U.S. income tax liability. The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate to be included in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. As a result of the application of SAB 118, the Company recorded provisional amounts related to the reduction of its deferred tax assets and liabilities resulting from the tax rate reduction from 35% to 21% and for the Transition Tax at December 31, 2017. The Company updated these provisional amounts during the third quarter of 2018 and recorded a $.7 million decrease in tax expense related to the reduction of its deferred tax assets and liabilities, and a $.9 million decrease in tax expense related to the Transition Tax. In the fourth quarter of 2018, the Company completed its analysis of the effects of the Tax Act and determined that no additional material adjustments were needed. Income before income taxes was derived from the following sources: | | | 2015 | | | 2014 | | | 2013 | | | | | | 2018 | | | 2017 | | | 2016 | | United States | | $ | 4,421 | | | $ | 11,810 | | | $ | 16,388 | | | $ | 10,268 | | | $ | 4,774 | | | $ | 3,501 | | Foreign | | | 7,285 | | | | 9,600 | | | | 15,406 | | | | 22,320 | | | | 21,032 | | | | 17,452 | | | | | | | | | | | | | $ | 32,588 | | | $ | 25,806 | | | $ | 20,953 | | | | $ | 11,706 | | | $ | 21,410 | | | $ | 31,794 | | | | | | | | | | | | | |
The components of income taxes for the year ended December 31 are as follows: | | | 2015 | | | 2014 | | | 2013 | | | 2018 | | | 2017 | | | 2016 | | Current | | | | | | | | | | | | | | | | | | | Federal | | $ | 2,679 | | | $ | 4,718 | | | $ | 6,308 | | | $ | (904 | ) | | $ | 4,592 | | | $ | (1,698 | ) | Foreign | | | 2,951 | | | | 5,081 | | | | 5,018 | | | | 6,247 | | | | 5,998 | | | | 5,115 | | State and local | | | 345 | | | | 447 | | | | 986 | | | | 350 | | | | 126 | | | | 32 | | | | | | | | | | | | | | 5,693 | | | | 10,716 | | | | 3,449 | | | | | 5,975 | | | | 10,246 | | | | 12,312 | | | | | | | | | | | | | | Deferred | | | | | | | | | | | | | | | | | | | Federal | | | (611 | ) | | | (425 | ) | | | (1,081 | ) | | | 801 | | | | 2,316 | | | | 2,986 | | Foreign | | | (309 | ) | | | (1,110 | ) | | | 157 | | | | (608 | ) | | | 12 | | | | (914 | ) | State and local | | | (24 | ) | | | (162 | ) | | | (181 | ) | | | 121 | | | | 108 | | | | 177 | | | | | | | | | | | | | | 314 | | | | 2,436 | | | | 2,249 | | | | | (944 | ) | | | (1,697 | ) | | | (1,105 | ) | | | | | | | | | | | | | Income taxes | | $ | 5,031 | | | $ | 8,549 | | | $ | 11,207 | | | $ | 6,007 | | | $ | 13,152 | | | $ | 5,698 | | | | | | | | | | | | |
The differences between the provision for income taxes at the U.S. federal statutory rate and the tax shown in the Statements of Consolidated Income for the year ended December 31 are summarized as follows: | | | 2015 | | 2014 | | 2013 | | | 2018 | | | 2017 | | | 2016 | | U. S. federal statutory tax rate | | | 35 | % | | 35 | % | | 35 | % | | | 21 | % | | | 35 | % | | | 35 | % | | | | | | | | | | | | | | | Federal tax at statutory rate | | $ | 4,097 | | | $ | 7,494 | | | $ | 11,128 | | | $ | 6,843 | | | $ | 9,033 | | | $ | 7,334 | | State and local taxes, net of federal benefit | | | 89 | | | 290 | | | 583 | | | | 273 | | | | 82 | | | | 20 | | U.S. federal permanent items | | | 251 | | | 208 | | | 124 | | | | 240 | | | | (60 | ) | | | 400 | | Domestic production activities deduction | | | (321 | ) | | (536 | ) | | (372 | ) | | Foreign earnings and related tax credits | | | 700 | | | 700 | | | 701 | | | Global low-taxed income | | | | 1,721 | | | | (116 | ) | | | 0 | | Foreign tax credits | | | | (1,707 | ) | | 0 | | | | 716 | | Transition tax | | | | (1,780 | ) | | | 2,592 | | | 0 | | Non-U.S. tax rate variances | | | (685 | ) | | (1,313 | ) | | (1,467 | ) | | | 1,011 | | | | (1,491 | ) | | | (1,484 | ) | Unrecognized tax benefits | | | (768 | ) | | 186 | | | (770 | ) | | | 0 | | | | 0 | | | | (195 | ) | Valuation allowance | | | 1,754 | | | 1,925 | | | 1,091 | | | | (57 | ) | | | 88 | | | | (414 | ) | Tax credits | | | (212 | ) | | (184 | ) | | (453 | ) | | | (295 | ) | | | (255 | ) | | | (252 | ) | Tax impact, deferred rate | | | | (680 | ) | | | 3,161 | | | 0 | | Other, net | | | 126 | | | (221 | ) | | 642 | | | | 438 | | | | 118 | | | | (427 | ) | | | | | | | | | | | | $ | 6,007 | | | $ | 13,152 | | | $ | 5,698 | | | | $ | 5,031 | | | $ | 8,549 | | | $ | 11,207 | | | | | | | | | | | | | |
Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the tax basis of assets and liabilities and their carrying value for financial statement purposes. The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities at December 31 are as follows: | | | 2015 | | | 2014 | | | 2018 | | | 2017 | | Deferred tax assets: | | | | | | | | | | | | | Accrued compensation and benefits | | $ | 1,199 | | | $ | 1,358 | | | $ | 1,387 | | | $ | 1,093 | | Inventory valuation reserves | | | 3,080 | | | | 2,849 | | | | 2,256 | | | | 2,332 | | Allowance for doubtful accounts | | | 335 | | | | 316 | | | | 346 | | | | 360 | | Benefit plan reserves | | | 10,878 | | | | 11,331 | | | | 7,153 | | | | 7,981 | | Net operating loss carryforwards | | | 3,851 | | | | 2,751 | | | | 2,651 | | | | 3,402 | | Tax credit carryforwards | | | 534 | | | | 745 | | | Other accrued expenses | | | 2,350 | | | | 2,226 | | | | 2,830 | | | | 2,489 | | Unrealized foreign exchange | | | 3,179 | | | | 1,805 | | | | 1,217 | | | | 1,462 | | | | | | | | | | Gross deferred tax assets | | | 25,406 | | | | 23,381 | | | | 17,840 | | | | 19,119 | | Valuation allowance | | | (5,209 | ) | �� | | (3,614 | ) | | | (3,495 | ) | | | (3,965 | ) | | | | | | | | | Net deferred tax assets | | | 20,197 | | | | 19,767 | | | | 14,345 | | | | 15,154 | | | | | | | | | | | | | | | | | | | | Deferred tax liabilities: | | | | | | | | | | | | | Depreciation and other basis differences | | | (5,841 | ) | | | (5,814 | ) | | | (6,855 | ) | | | (6,313 | ) | Intangibles | | | (2,959 | ) | | | (3,706 | ) | | | (2,057 | ) | | | (2,706 | ) | Undistributed foreign earnings | | | (1,094 | ) | | | (444 | ) | | | (172 | ) | | | (426 | ) | Other | | | (67 | ) | | | (65 | ) | | | (72 | ) | | | (25 | ) | | | | | | | | | Deferred tax liabilities | | | (9,961 | ) | | | (10,029 | ) | | | (9,156 | ) | | | (9,470 | ) | | | | | | | | | Net deferred tax assets | | $ | 10,236 | | | $ | 9,738 | | | $ | 5,189 | | | $ | 5,684 | | | | | | | | | |
| | 2018 | | | 2017 | | Change in net deferred tax assets: | | | | | | | | | Deferred income tax expense | | | | | | | | | Ordinary movement | | $ | (993 | ) | | $ | (473 | ) | Tax act - transition tax | | | 0 | | | | 1,198 | | Tax impact deferred rate | | | 680 | | | | (3,161 | ) | Items of other comprehensive income (loss) | | | (62 | ) | | | 48 | | Currency translation | | | (120 | ) | | | (58 | ) | Total change in net deferred tax assets | | $ | (495 | ) | | $ | (2,446 | ) |
| | | | | | | | | | | 2015 | | | 2014 | | Change in net deferred tax assets: | | | | | | | | | Deferred income tax benefit | | $ | 944 | | | $ | 1,697 | | Items of other comprehensive income (loss) | | | (464 | ) | | | 3,109 | | Currency translation | | | 18 | | | | 140 | | Deferred tax balances from business acquisition | | | 0 | | | | (2,025 | ) | | | | | | | | | | Total change in net deferred tax assets | | $ | 498 | | | $ | 2,921 | | | | | | | | | | |
Deferred taxes are recorded at a rate at which such items are expected to reverse based on currently enacted tax rates for temporary differences between the financial reporting and income tax basis of assets and liabilities and operating loss and tax credit carryforwards. At December 31, 2015,2018, the Company had $3.6$9.2 million of foreign net operating loss carryfowardscarryforwards of which $.5$7.7 million have an indefinite carryforward and $1.5 million will expire between the years 20172024 and 2025.2028. The Company assesses the available positive and negative evidence to determine if it is more likely than not sufficient future taxable income will be generated to utilize the existing deferred tax assets by jurisdiction. Based on this evaluation, the Company has established a valuation allowance of $5.2$3.5 million at December 31, 20152018 in order to measure only the portion of the deferred tax asset that is more likely than not to be realized. The net increase in the valuation allowance during the year was $1.6$.5 million, of which $1.8$.1 million impacts the income tax provision and ($.2)$.4 million is reflected through Other Comprehensive Income.relates to currency translation. The Company has not established a deferred tax liability associated with approximately $130.6 millionpreviously considered the majority of its undistributed foreignthe earnings at December 31, 2015 as these earnings are consideredin our non-U.S. subsidiaries to be permanently reinvested outsideand accordingly did not record any associated deferred income taxes on such earnings. Since the Tax Act includes a mandatory one-time tax on certain accumulated earnings of foreign subsidiaries, these previously unremitted earnings for which no U.S. deferred tax liability had been accrued have now been subject to U.S. tax. Notwithstanding the U.S. These earnings would be taxable upon the sale or liquidationtaxation of these foreign subsidiaries, or uponamounts, the remittance of such earnings. While the measurementCompany intends to continue to invest approximately $92.0 million of the unrecognized U.S. income taxes with respect to these earnings is not practicable, foreign tax credits would be available to offset some or allapproximate total of $95.0 million of such earnings, that would be remitted as dividends. Incomewell as our capital in these subsidiaries, indefinitely outside of the U.S. and do not expect to incur any significant, additional taxes paid netrelated to such amounts. The Company has recorded a tax liability of refunds were approximately $12.3$0.2 million in 2015, $7.7 million in 2014 and $19.9 million in 2013.related to the cost to remit such earnings not permanently reinvested, which is primarily related to local country withholding cost.
The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. As of December 31, 2015,2018, with few exceptions, the Company is no longer subject to U.S. federal examinations by tax authorities for years before 20122014 and state, local or foreign examinations by tax authorities for years before 2009.2012. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, for the year ended December 31: | | | 2015 | | | 2014 | | | 2013 | | | 2018 | | | 2017 | | | 2016 | | Balance at January 1 | | $ | 794 | | | $ | 608 | | | $ | 1,361 | | | $ | 0 | | | $ | 0 | | | $ | 178 | | Additions for tax positions of prior years | | | 0 | | | | 186 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Reductions for tax positions of prior years | | | (616 | ) | | | 0 | | | | (588 | ) | | | 0 | | | | 0 | | | | 0 | | Expiration of statutes of limitations | | | 0 | | | | 0 | | | | (165 | ) | | | 0 | | | | 0 | | | | (178 | ) | | | | | | | | | | | | Balance at December 31 | | $ | 178 | | | $ | 794 | | | $ | 608 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | | | | | | | | |
The Company records accrued interest as well as penalties related to unrecognized tax benefits as part of the provision for income taxes. The Company recognized less than $.1 million, net of the amount lapsed through expiring statutes, during each ofDuring the years ended December 31, 2015, 20142018, 2017 and 2013. During the year ended December 31, 2015,2016, the Company reduced previouslyhad no significant activity with regard to unrecognized tax benefits by $.6 million, primarily due to final resolution of an audit in the Asia Pacific region, the resolution of which resulted in a $.2 million reduction of unrecognized tax benefits from the amount that was previously accrued. The Company also recognized a related tax benefit during the year for the reduction of accrued interest and penalties of $.5 million and $.1 million, respectively.benefits. The Company had approximately less than $.1 million, $.6 million, and $.6 millionno accrued for the paymentinterest or penalties as of interest for the years ended December 31, 2015, 20142018, 2017 and 2013, respectively.2016. The Company had approximately $0, $.3 million, and $.3 million accrued fordoes not anticipate a change in the payment of penalties for the year ended December 31, 2015, 2014 and 2013, respectively. If recognized, approximately $.2 million, $.2 million, and $0 of unrecognized tax benefits would affect the tax rate for the year ended December 31, 2015, 2014 and 2013, respectively. The Company anticipates a decrease in its unrecognized tax benefits by approximately $.2 million within the next twelve months due to effective settlement.months.
Note H -– Share-Based Compensation The 1999 Stock Option Plan Activity in the Company’s 1999 Stock Option Plan for the year ended December 31, 20152018 was as follows: | | | | | | | | | | Number of Shares | | | Weighted Average Exercise Price per Share | | | Weighted Average Remaining Contractual Term (Years) | | | Aggregate Intrinsic Value | | | | Number of Shares | | | Weighted Average Exercise Price per Share | | | Weighted Average Remaining Contractual Term (Years) | | | Aggregate Intrinsic Value | | | | Outstanding at January 1, 2015 | | | 12,000 | | | $ | 41.44 | | | | | | | Outstanding at January 1, 2018 | | | | 750 | | | $ | 39.10 | | | | | | | | | | Exercised | | | 0 | | | $ | 0.00 | | | | | | | | 0 | | | $ | 0.00 | | | | | | | | | | Forfeited | | | 0 | | | $ | 0.00 | | | | | | | | 0 | | | $ | 0.00 | | | | | | | | | | | | | | | | | | | | | Outstanding (exercisable and vested) at December 31, 2015 | | | 12,000 | | | $ | 41.44 | | | | 1.8 | | | $ | 47 | | | | | | | | | | | | | | Outstanding (exercisable and vested) at December 31, 2018 | | | | 750 | | | $ | 39.10 | | | | 0.8 | | | $ | 11 | |
There were 0, 1,0004,800 and 19,1506,450 in stock options exercised during the yearyears ended December 31, 2015, 20142018, 2017 and 2013,2016, respectively. The total intrinsic value of stock options exercised during the year ended December 31, 2015, 2014 and 20132017 was $0, less thanapproximately $.1 million and $.6 million, respectively. Cashmillion. No cash was received for the exercise of stock options during 2015 and 2014 was $0 and less than $.1 million, respectively.2018. The Company recorded no compensation expense related to thethese stock options currently vesting of $0 for each of the years ended December 31, 2015, 20142018, 2017 and 2013,2016, as all compensation has been recognizedoptions were fully vested as of December 31, 2012. The excess tax benefits from share-based awards for the year ended December 31, 2015, 2014 and 2013 were $0, $0 and $.2 million, respectively, as reported on the Consolidated Statements of Cash Flows in financing activities, and represents 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 options exercised in the current period.
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 share units. 2016 Incentive Plan
The purpose of this LTIP isCompany maintains an equity award program to give the Company 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. Under the Preformed Line Products Company Long Term Incentive Plan of 2008 (the “LTIP”), certain employees, officers, and directors were eligible to receive awards of options, restricted shares and restricted share units (RSUs). The total number of Company common shares reserved for awards under the LTIP is 900,000. Of thewas 900,000, of which 800,000 common shares 800,000were reserved for RSUs and 100,000 common shares were reserved for share options. The Preformed Line Products Company 2016 Incentive Plan (the “Incentive Plan”) was put in place upon approval by the Company’s Shareholders at the 2016 Annual Meeting of Shareholders on May 10, 2016. No further awards will be made under the LTIP and previously granted awards remain outstanding in accordance with their terms. Under the Incentive Plan, certain employees, officers, and directors will be eligible to receive awards of options, restricted shares and RSUs. The total number of Company common shares reserved for awards under the Incentive Plan is 1,000,000 of which 900,000 common shares have been reserved for restricted share units and restricted sharesawards and 100,000 common shares have been reserved for share options. As of December 31, 2018, 10,000 options and 155,002 restricted shares have been granted under the Incentive Plan. The LTIPIncentive Plan expires on April 17, 2018.May 10, 2026.
Restricted Share Units For all of the participants except the CEO,regular annual grants, a portion of the restricted share units (RSUs) awardRSUs is subject to time-based cliff vesting and a portion is subject to vesting based upon the Company’s financial performance over a three-year period.set period for all participants except the CEO. All of the CEO’s regular annual RSUs are subject to vesting based upon the Company’s financial performance over a three-yearset-year period. The RSUs are offered at no cost to the employees;employees, however, the participant must remain employed with the Company until the restrictions on the RSUs lapse. The fair value of RSUs is based on the market price of a common share on the grant date. The Company currently estimates that no RSUs will be forfeited related to the time-based awards. Dividends declared are accrued in cash.accrued. A summary of the RSUs for the year ended December 31, 20152018 is as follows: | | | | | | | | | | Restricted Share Awards | | | | Restricted Share Awards | | | Performance | | | | | | | Total | | | Weighted-Average | | | | Performance and Service Required | | | Service Required | | | Total Restricted Awards | | | Weighted-Average Grant-Date Fair Value | | | and Service | | | Service | | | Restricted | | | Grant-Date | | Nonvested as of January 1, 2015 | | | 88,508 | | | | 10,413 | | | | 98,921 | | | $ | 67.36 | | | | | | Required | | | Required | | | Awards | | | Fair Value | | Nonvested as of January 1, 2018 | | | | 200,572 | | | | 18,214 | | | | 218,786 | | | $ | 44.49 | | Granted | | | 50,927 | | | | 21,073 | | | | 72,000 | | | | 45.02 | | | | 63,122 | | | | 8,155 | | | | 71,277 | | | | 73.86 | | Vested | | | 0 | | | | (20,614 | ) | | | (20,614 | ) | | | 49.60 | | | | (19,277 | ) | | | (9,071 | ) | | | (28,348 | ) | | | 41.97 | | Forfeited | | | (47,832 | ) | | | 0 | | | | (47,832 | ) | | | 70.27 | | | | (30,793 | ) | | | 0 | | | | (30,793 | ) | | | 45.85 | | | | | | | | | | | | | | | | Nonvested as of December 31, 2015 | | | 91,603 | | | | 10,872 | | | | 102,475 | | | $ | 53.88 | | | | | | | | | | | | | | | | | Nonvested as of December 31, 2018 | | | | 213,624 | | | | 17,298 | | | | 230,922 | | | $ | 53.68 | |
For time-based RSUs, 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 StatementStatements of Consolidated Income. CompensationAnnual compensation expense related to the time-based RSUs for the yearyears ended December 31, 2015, 20142018, 2017 and 20132016 was $.5 million, $.4 million and $.3 million, annually for each year.respectively. As of December 31, 2015,2018, there was $.3$.6 million of total unrecognized compensation cost related to time-based RSUs that is expected to be recognized over the weighted-average remaining period of approximately 1.61.7 years. For the performance-based RSUs, the number of RSUs in which the participants will vest depends on the Company’s level of performance measured by growth in pretax income or operatingpre-tax 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. For the year ended December 31, 2015 a $1.0 million reduction to performance-based compensation expense was recorded. Performance-based compensation expense for the years ended December 31, 20142018, 2017 and 20132016 was $1.0$3.7 million, $2.7 million and $2.7$.9 million, respectively. DuringThe Company participants forfeited 30,793 RSUs granted during 2015 upon vesting of the year endedremaining portion of such awards at December 31, 2015, a $.5 million reduction in performance-based compensation was recorded related to the 2013 performance-based RSU grant, due to lower results2018 for growth in pretaxwhich pre-tax income and sales resulting in a forfeiture of 47,832 RSUs granted in 2013. During the year ended December 31, 2015, a $.8 million reduction in performance-based compensation expense was recorded related to the 2014 performance-based RSU grant, due to changes in estimates for growth in pretax income and sales. During the year ended December 31, 2014, a $.2 million reduction in performance-based compensation expense was recorded related to the 2012 performance-based RSU grant, due to lower results for growth in pretax income, resulting in a forfeiture of 3,537 RSU’s granted in 2012. During the year ended December 31, 2014, a $1.3 million reduction in performance-based compensation expense was recorded related to the 2013 performance-based RSU grant, due to changes in estimates for growth in pretax income.performance were not fully achieved. As of December 31, 2015,2018, the remaining performance-based RSUs compensation expense of $.8$4.6 million is expected to be recognized over a period of approximately 21.7 years. In November 2015, a special, one-time grant of restricted stock was awarded to the CEO and other officers that fully vested on the issuance date of November 30, 2015, as a shorter-term reward for achievements not tied to the performance metrics. Compensation expense recorded for the restricted stock was $.6 million.
The excess tax benefits from service and performance-based RSUs was $.2 million, $.2 million and $.1 million for the years ended December 31, 2015, 20142018, 2017 and 2013 was less than $.1 million, $.1 million and $.1 million, respectively, as reported on the Consolidated Statements of Cash Flows in financing activities, and2016, respectively. This represents 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.period. In the event of a Change in Control (as defined in the LTIP)LTIP and Incentive Plan), vesting of the RSUs will be accelerated and all restrictions will lapse. UnvestedNonvested performance-based awards are based on a maximum target 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 RSUs, the Company has reserved new shares from its authorized but unissued shares. Any additional granted awards will also be issued from the Company’s authorized but unissued shares. Under the LTIP, there are 312,398 common shares currently 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 stockshares of the Company at a later date instead of fees paid each quarter in cash. Second, this plan allows certain Company employees to defer LTIP restricted shares or RSUs for future distribution in the form of common shares. 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. As of December 31, 2015, 296,6352018, 269,630 LTIP shares have been deferred and are being held by the rabbi trust. Share Option Awards The LTIP planpermitted and now the Incentive Plan 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 December 31, 2015, there were 11,000 shares remaining available for issuance under the LTIP. Options issued to date under the LTIP and Incentive 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 utilizes the Black-Scholes option pricing model for estimating fair values of options. The Black-Scholes model requires assumptions regarding the volatility of the Company’s stock, the expected life of the stock award and the Company’s dividend yield. The companyCompany utilizes historical data in determining these assumptions. 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 10,500, 35,500,5,000, 5,000 and 0 options granted for the yearyears ended December 31, 2015, 20142018, 2017 and 2013,2016, respectively. The fair values for the stock options granted were estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: | | | 2015 | | 2014 | | 2018 | | | 2017 | | | 2016 | Risk-free interest rate | | | 2.1 | % | | 1.9 | % | | 2.8 | % | | | 2.0 | % | | N/A | Dividend yield | | | 1.6 | % | | 1.7 | % | | 1.6 | % | | | 1.7 | % | | N/A | Expected life (years) | | | 5 | | | 5 | | 5 | | | 5 | | | N/A | Expected volatility | | | 37.9 | % | | 42.9 | % | | 40.0 | % | | | 36.8 | % | | N/A |
Activity in the Company’s LTIP planand Incentive Plan for the year ended December 31, 20152018 was as follows: | | | | | | | | | | Number of Shares | | | Weighted Average Exercise Price per Share | | | Weighted Average Remaining Contractual Term (Years) | | | Aggregate Intrinsic Value | | | | Number of Shares | | | Weighted Average Exercise Price per Share | | | Weighted Average Remaining Contractual Term (Years) | | | Aggregate Intrinsic Value | | | | Outstanding at January 1, 2015 | | | 47,750 | | | $ | 58.11 | | | | | | | Outstanding at January 1, 2018 | | | | 29,250 | | | $ | 56.84 | | | | | | | | | | Granted | | | 10,500 | | | $ | 41.92 | | | | | | | | 5,000 | | | $ | 61.39 | | | | | | | | | | Exercised | | | 0 | | | $ | 0.00 | | | | | | | | (3,500 | ) | | $ | 63.56 | | | | | | | | | | Forfeited | | | (2,000 | ) | | $ | 52.21 | | | | | | | | 0 | | | $ | 0.00 | | | | | | | | | | | | | | | | | | | | | Outstanding (vested and expected to vest) at December 31, 2015 | | | 56,250 | | | $ | 55.30 | | | | 6.7 | | | $ | 9 | | | | | | | | | | | | | | Exercisable at December 31, 2015 | | | 29,000 | | | $ | 57.54 | | | | 7.5 | | | $ | 0 | | | | | | | | | | | | | | Outstanding (vested and expected to vest) at December 31, 2018 | | | | 30,750 | | | $ | 56.81 | | | | 6.9 | | | $ | 131 | | Exercisable at December 31, 2018 | | | | 23,250 | | | $ | 56.77 | | | | 6.1 | | | $ | 115 | |
The weighted-average grant-date fair value of options granted during 2015 and 20142018 was $13.16 and $20.83, respectively.$61.39. There were 0, 1,250,3,500, 28,500, and 14,250500 stock options exercised during the yearyears ended December 31, 2015, 20142018, 2017 and 2013,2016, respectively. The total intrinsic value of stock options exercised duringwas $.1 million, $.7 million and $0 for the yearyears ended December 31, 20152018, 2017 and 2014 was $0 and less than $.1 million,2016, respectively. Cash received for the exercise of stock options during 20152018 was $.2 million, $1.5 million in 2017 and 2014 was $0 andless than $.1 million respectively.in 2016.
For the yearyears ended December 31, 2015, 20142018, 2017 and 2013,2016, the Company recorded compensation expense related to the stock options currently vestingvested of $.3less than $.1 million, $.3$.1 million and $.1$.2 million, respectively. The total compensation cost related to nonvested awards not yet recognized at December 31, 20152018 is expected to be a combined total of $.4$.1 million over a weighted-average period of approximately 22.6 years. The excess tax benefits from share basedshare-based awards for each of the yearyears ended December 31, 2015, 20142018, 2017 and 20132016 was $0,less than $.1 million and $.1 million, respectively, as reported on the Consolidated Statements of Cash Flows in financing activities, andmillion. This represents 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 options exercised in the current period. Note I - Computation of Earnings Per Share Basic earnings per share were computed by dividing net income by the weighted-average number of shares of common stockshares outstanding for each respective period. Diluted earnings per share were calculated by dividing net income by the weighted-average of all potentially dilutive shares of common stockshares that were outstanding during the years presented. The calculation of basic and diluted earnings per share for the year ended December 31 was as follows: | | | 2015 | | | 2014 | | | 2013 | | | 2018 | | | 2017 | | | 2016 | | Numerator | | | | | | | | | | | | | | | | | | | Net income | | $ | 6,675 | | | $ | 12,861 | | | $ | 20,587 | | | $ | 26,581 | | | $ | 12,654 | | | $ | 15,255 | | | | | | | | | | | | | | | | | | | | | | | | | | | Denominator | | | | | | | | | | | | | | | | | | | Determination of shares (in thousands) | | | | | | | | | | | | | | | | | | | Weighted-average common shares outstanding | | | 5,350 | | | | 5,377 | | | | 5,361 | | | | 5,032 | | | | 5,102 | | | | 5,166 | | Dilutive effect - share-based awards | | | 16 | | | | 5 | | | | 106 | | | | 75 | | | | 31 | | | | 12 | | | | | | | | | | | | | Diluted weighted-average common shares outstanding | | | 5,366 | | | | 5,382 | | | | 5,467 | | | | 5,107 | | | | 5,133 | | | | 5,178 | | | | | | | | | | | | | | | | | | | | | | | | | | | Earnings per common share | | | | | | | | | | | | | | | | | | | Basic | | $ | 1.25 | | | $ | 2.39 | | | $ | 3.84 | | | $ | 5.28 | | | $ | 2.48 | | | $ | 2.95 | | | | | | | | | | | | | | | | | | | | | | | | | Diluted | | $ | 1.24 | | | $ | 2.39 | | | $ | 3.77 | | | $ | 5.21 | | | $ | 2.47 | | | $ | 2.95 | | | | | | | | | | | | |
For the year ended December 31, 2015, 20142018, 2017 and 2013, 58,350, 25,0002016, 260, 13,000 and 1,50056,850 stock options, respectively, were excluded from the calculation of diluted earnings per share as the effect would have been anti-dilutive. For the year ended December 31, 2015, 2014 and 2013, 0, 52,368 and 0 restricted share units, respectively, were excluded from the calculation of diluted earnings per share as the effect of the settlement in common shares would have been anti-dilutive.
Note J - Goodwill and Other Intangibles The Company’s finite and indefinite-lived intangible assets consist of the following: | | | December 31, 2015 | | | December 31, 2014 | | | December 31, 2018 | | | December 31, 2017 | | | | Gross Carrying Amount | | | Accumulated Amortization | | | Gross Carrying Amount | | | Accumulated Amortization | | | Gross Carrying | | | Accumulated | | | Gross Carrying | | | Accumulated | | | | | Amount | | | Amortization | | | Amount | | | Amortization | | Finite-lived intangible assets | | | | | | | | | | | | | | | | | | | | | | | | | Patents | | $ | 4,815 | | | $ | (4,799 | ) | | $ | 4,823 | | | $ | (4,730 | ) | | $ | 4,806 | | | $ | (4,788 | ) | | $ | 4,806 | | | $ | (4,791 | ) | Land use rights | | | 1,155 | | | | (173 | ) | | | 1,247 | | | | (164 | ) | | | 1,134 | | | | (203 | ) | | | 1,199 | | | | (201 | ) | Trademark | | | 1,713 | | | | (899 | ) | | | 1,888 | | | | (814 | ) | | | 1,707 | | | | (1,247 | ) | | | 1,770 | | | | (1,166 | ) | Technology | | | 3,021 | | | | (860 | ) | | | 3,432 | | | | (734 | ) | | | 2,994 | | | | (1,334 | ) | | | 3,149 | | | | (1,215 | ) | Customer relationships | | | 11,816 | | | | (4,501 | ) | | | 13,104 | | | | (3,931 | ) | | | 11,804 | | | | (6,415 | ) | | | 12,350 | | | | (5,881 | ) | | | | | | | | | | | | | | | $ | 22,445 | | | $ | (13,987 | ) | | $ | 23,274 | | | $ | (13,254 | ) | | | $ | 22,520 | | | $ | (11,232 | ) | | $ | 24,494 | | | $ | (10,373 | ) | | | | | | | | | | | | | | | | Indefinite-lived intangible assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Goodwill | | $ | 15,821 | | | | | $ | 17,792 | | | | | $ | 15,621 | | | | | | | $ | 16,544 | | | | | | | | | | | | | | | | | |
The Company performs its annual impairment test for goodwill utilizing a combination of 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. The Company believes that the methodologies and weightings used are reasonable and result in appropriate fair values of the reporting units. The Company performed its annual impairment test for goodwill as of October 1, 20152018 and October 1, 20142017 and determined that no adjustment to the carrying value was required. During the third quarter of 2015, the Company’s market capitalization dropped below its equity carrying value. This was identified as an interim indicator of impairment. As such, the Company performed an interim goodwill impairment assessment of its Asia-Pacific reporting unit and one of its reporting units within The Americas segment. The result of this interim assessment was the Company passed step one by a margin of 16% and 24%, respectively, for the two reporting units, which compares to a margin of 24% and 39%, respectively, at October 1, 2014. The Company had goodwill balances of $8.3 million and $4.1 million, respectively, for these reporting units at September 30, 2015. The weighted average cost of capital and long-term growth assumptions used in the Company’s assessment were 14.7% and 3%, respectively, for its Asia Pacific reporting unit and 13.5% and 3%, respectively, for the reporting unit within The America’s segment. While it was determined that there was no impairment at September 30, 2015, the Company will continue to monitor the results of these operations as there is a reasonable possibility of a future impairment charge and significant uncertainties regarding the recoverability of the respective carrying values. The Company determined there were no indicators of impairment during the fourth quarter, while similar margins were present.
During the fourth quarter of 2015, the Company transferred a product line from The Americas segment and consolidated its manufacturing processes into the PLP-USA segment and therefore transferred $3.1 million of goodwill from The Americas to PLP-USA. As such, certain prior year amounts have been reclassified to conform to current year presentation. The changes in the carrying amount of goodwill by segment for the year ended December 31, 2015 and 2014 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | USA | | | The Americas | | | EMEA | | | Asia-Pacific | | | Total | | | | | | | | Balance at January 1, 2014 | | $ | 3,078 | | | $ | 0 | | | $ | 1,754 | | | $ | 9,041 | | | $ | 13,873 | | Additions | | | 0 | | | | 4,909 | | | | 0 | | | | 0 | | | | 4,909 | | Currency translation | | | 0 | | | | (237 | ) | | | (226 | ) | | | (527 | ) | | | (990 | ) | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2014 | | | 3,078 | | | | 4,672 | | | | 1,528 | | | | 8,514 | | | | 17,792 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Currency translation | | | 0 | | | | (754 | ) | | | (227 | ) | | | (990 | ) | | | (1,971 | ) | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2015 | | $ | 3,078 | | | $ | 3,918 | | | $ | 1,301 | | | $ | 7,524 | | | $ | 15,821 | | | | | | | | | | | | | | | | | | | | | | |
| | USA | | | The Americas | | | EMEA | | | Asia-Pacific | | | Total | | Balance at January 1, 2017 | | $ | 3,078 | | | $ | 4,017 | | | $ | 1,287 | | | $ | 7,387 | | | $ | 15,769 | | Currency translation and other | | | 0 | | | | 275 | | | | 208 | | | | 292 | | | | 775 | | Balance at December 31, 2017 | | | 3,078 | | | | 4,292 | | | | 1,495 | | | | 7,679 | | | | 16,544 | | | | | | | | | | | | | | | | | | | | | | | Currency translation | | | 0 | | | | (295 | ) | | | (140 | ) | | | (488 | ) | | | (923 | ) | Balance at December 31, 2018 | | $ | 3,078 | | | $ | 3,997 | | | $ | 1,355 | | | $ | 7,191 | | | $ | 15,621 | |
The Company’s only intangible asset with an indefinite life is goodwill. The Company’s goodwill is not deductible for tax purposes. The increase in goodwill of $4.9 million in 2014 is related to the acquisition of Helix resulting in an incremental $4.9 million of goodwill which was partially offset by a $1.0 million decline related to foreign currency translation. The decrease in goodwill of $2.0 million in 2015 is related to foreign currency translation. The aggregate amortization expense for other intangibles with finite lives, ranging from 4 to 82 years, for each of the yearyears ended December 31, 2015, 20142018, 2017 and 20132016 was $1.2$1.0 million $1.6 million and $1.5 million, respectively. . Amortization expense is estimated to be $1.0 million for 2016, $1.0 million for 2017, $.9 million for 2018, $.9$0.9 million for 2019, and $.9$0.9 million for 2020.2020, $.8 million for 2021, $.8 million for 2022 and $.8 million for 2023. The weighted-average remaining amortization period is approximately 20.616.3 years. The weighted-average remaining amortization period by intangible asset class; patents, 107.0 years; land use rights, 58.957.0 years; trademark, 10.38.6 years; technology, 15.912.9 years and customer relationships, 14.111.4 years. Note K – Fair Value of Financial Assets and Liabilities The Company measures and records certain assets and liabilities at fair value. A fair value hierarchy is used for those assets and liabilities measured at fair value that distinguishes between assumptions based on market data (observable inputs), and the Company’s assumptions (unobservable inputs). The hierarchy consists of the following three levels: Level 1 | Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. |
Level 2 | Inputs other than Level 1 inputs that are either directly or indirectly observable, which may include: |
| o | Quoted prices for similar assets in active markets; |
| o | Quoted prices for identical or similar assets or liabilities in inactive markets; |
| o | Inputs other than quoted prices that are observable for the asset or liability; and |
| o | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
Level 3 | Inputs to the valuation methodology are unobservable and developed using estimates and assumptions developed by the Company which reflect those that a market participant would use. |
The following table summarizes the Company’s assets and liabilities, recorded and measured at fair value, in the consolidated balance sheets as of December 31, 2018 (there were no financial instruments measured at fair value at December 31, 2017): Description | | Balance as of December 31, 2018 | | | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | | | Significant Other Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | Assets: | | | | | | | | | | | | | | | | | Marketable securities | | $ | 1,648 | | | $ | 1,648 | | | $ | 0 | | | $ | 0 | | Total Assets | | $ | 1,648 | | | $ | 1,648 | | | $ | 0 | | | $ | 0 | | | | | | | | | | | | | | | | | | | Liabilities: | | | | | | | | | | | | | | | | | Supplemental profit sharing plan | | | 4,946 | | | | 0 | | | | 4,946 | | | | 0 | | Total Liabilities | | $ | 4,946 | | | $ | 0 | | | $ | 4,946 | | | $ | 0 | |
During the year ended December 31, 2018, the Company invested $4.7 million in marketable securities, principally equity-based mutual funds, to mitigate the risk associated with the investment returns on the Company’s Supplemental Profit Sharing Plan discussed below. These marketable securities are comprised of available-for-sale securities. During the year ended December 31, 2018, the Company sold $3.0 million from the marketable securities to fund a Corporate Owned Life Insurance Policy (“COLI”), resulting in the $1.6 million of marketable securities reported that are reported at fair value within Other current assets on the Company’s consolidated balance sheet as of December 31, 2018. Changes in the fair value of the securities of $.1 million were recognized within Other income, net within the consolidated statements of income for the twelve-month period ended December 31, 2018. At December 31, 2018, the cash surrender value of the COLI was $2.8 million and is recorded in Other assets on the Company’s consolidated balance sheet. The Company has a non-qualified Supplemental Profit Sharing Plan for its executives. The liability for this unfunded Supplemental Profit Sharing Plan was $4.9 million and $4.8 million at December 31, 2018 and December 31, 2017, respectively, and is recorded within Other noncurrent liabilities on the Company’s consolidated balance sheets. During January 2018, the Company amended the Supplemental Profit Sharing Plan to allow the participants the ability to hypothetically invest their proportionate award into various investment options, which primarily includes mutual funds. The company then 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 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 December 31, 2015,2018, 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 that are considered to be Level 2 inputs. There have been no transfers in or out of Level 2 for the year ended December 31, 2015.2018. Based on the analysis performed, the fair value and the carrying value of the Company’s long-term debt are as follows: | | | | | | | | | | | | | | | | | | | December 31, 2015 | | | December 31, 2014 | | | | Fair Value | | | Carrying Value | | | Fair Value | | | Carrying Value | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-term debt and related current maturities | | $ | 31,866 | | | $ | 31,864 | | | $ | 31,876 | | | $ | 31,865 | | | | | | | | | | | | | | | | | | |
| | December 31, 2018 | | | December 31, 2017 | | | | Fair Value | | | Carrying Value | | | Fair Value | | | Carrying Value | | Long-term debt and related current maturities | | $ | 27,017 | | | $ | 26,408 | | | $ | 35,369 | | | $ | 36,046 | |
Note L – Revenue Revenue recognition Net sales include products and shipping and handling charges, net of estimates for product returns. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. All revenue is recognized when the Company satisfies the performance obligations under the contract and control of the product is transferred to the customer, primarily based on shipping terms. Revenue for shipping and handling charges are recognized at the time the products are shipped to, delivered to or picked up by the customer. The Company estimates product returns based on historical return rates. Disaggregated revenue The Company’s revenues by segment and product type are as follows: | | Year Ended December 31, 2018 | | Product Type | | PLP-USA | | | The Americas | | | EMEA | | | Asia-Pacific | | | Consolidated | | Energy | | | 60 | % | | | 67 | % | | | 73 | % | | | 68 | % | | | 66 | % | Communications | | | 34 | % | | | 29 | % | | | 12 | % | | | 4 | % | | | 21 | % | Special Industries | | | 6 | % | | | 4 | % | | | 15 | % | | | 28 | % | | | 13 | % | Total | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % |
Note LM – Segment Information The Company designs, manufactures and sells hardware employed in the construction and maintenance of telecommunication, energy and other utility networks, data communication products and mounting hardware for solar power applications. Principal products include cable anchoring, control hardware and splice enclosures, which are sold primarily to customers in North and South America, Europe, South Africa and Asia Pacific. The Company reports its segments in four geographic regions: PLP-USA, The Americas, EMEA (Europe, Middle East & Africa) and Asia-Pacific in accordance with accounting standards codified in FASB ASCFinancial Accounting Standards Board “FASB” Accounting Standards Codification “ASC” 280, Segment Reporting.“Segment Reporting”. Each segment distributes a full range of the Company’s primary products. The PLP-USA segment is comprised of U.S. operations manufacturing the Company’s traditional products primarily supporting domestic energy, telecommunications and solar products. The other three segments, The Americas, EMEA and Asia-Pacific support the Company’s 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. The amount of each segment’s performance reported to the chief operating decision maker is for purposes of making decisions about allocating resources to the segment and assessing its performance. The Company evaluates segment performance and allocates resources based on several factors primarily based on sales and income from continuing operations, net of tax. The accounting policies of the operating segments are the same as those described in Note A in the Notes Toto Consolidated Financial Statements. No single customer accounts for more than ten percent of the Company’s consolidated revenues. It is not practical to present revenues by product line.revenue. U.S. net sales for the year ended December 31, 2015, 2014,2018, 2017, and 20132016 were $142.5$169.0 million, $152.6$147.6 million and $163$135.3 million, respectively. U.S. long-lived assets as of December 31, 20152018 and 20142017 were $40.6$51.5 million and $41.1$53.2 million, respectively.
The following table presents a summary of the Company’s reportable segments for the year ended December 31, 2015, 20142018, 2017 and 2013.2016. Financial results for the PLP-USA segment include the elimination of all segments’ intercompany profits in inventory. During the fourth quarter of 2015, | | Year Ended December 31 | | | | 2018 | | | 2017 | | | 2016 | | Net sales | | | | | | | | | | | | | PLP-USA | | $ | 169,040 | | | $ | 147,646 | | | $ | 135,260 | | The Americas | | | 66,868 | | | | 69,764 | | | | 60,049 | | EMEA | | | 69,773 | | | | 63,916 | | | | 56,411 | | Asia-Pacific | | | 115,197 | | | | 96,886 | | | | 84,914 | | Total net sales | | $ | 420,878 | | | $ | 378,212 | | | $ | 336,634 | | | | | | | | | | | | | | | Intersegment sales | | | | | | | | | | | | | PLP-USA | | $ | 11,648 | | | $ | 12,234 | | | $ | 9,471 | | The Americas | | | 9,480 | | | | 5,570 | | | | 5,132 | | EMEA | | | 1,664 | | | | 1,120 | | | | 1,363 | | Asia-Pacific | | | 11,907 | | | | 8,596 | | | | 7,827 | | Total intersegment sales | | $ | 34,699 | | | $ | 27,520 | | | $ | 23,793 | | | | | | | | | | | | | | | Interest income | | | | | | | | | | | | | PLP-USA | | $ | 0 | | | $ | 0 | | | $ | 0 | | The Americas | | | 273 | | | | 283 | | | | 79 | | EMEA | | | 102 | | | | 47 | | | | 116 | | Asia-Pacific | | | 111 | | | | 100 | | | | 96 | | Total interest income | | $ | 486 | | | $ | 430 | | | $ | 291 | | | | | | | | | | | | | | | Interest expense | | | | | | | | | | | | | PLP-USA | | $ | (1,023 | ) | | $ | (941 | ) | | $ | (738 | ) | The Americas | | | (111 | ) | | | (10 | ) | | | (14 | ) | EMEA | | | (58 | ) | | | (31 | ) | | | (13 | ) | Asia-Pacific | | | (98 | ) | | | (79 | ) | | | (79 | ) | Total interest expense | | $ | (1,290 | ) | | $ | (1,061 | ) | | $ | (844 | ) | | | | | | | | | | | | | | Income taxes | | | | | | | | | | | | | PLP-USA | | $ | 367 | | | $ | 7,142 | | | $ | 1,494 | | The Americas | | | 3,349 | | | | 3,593 | | | | 2,507 | | EMEA | | | 1,204 | | | | 1,583 | | | | 1,862 | | Asia-Pacific | | | 1,087 | | | | 834 | | | | (165 | ) | Total income taxes | | $ | 6,007 | | | $ | 13,152 | | | $ | 5,698 | | | | | | | | | | | | | | | Net income (loss) | | | | | | | | | | | | | PLP-USA | | $ | 9,900 | | | $ | (2,367 | ) | | $ | 2,007 | | The Americas | | | 8,479 | | | | 8,169 | | | | 5,881 | | EMEA | | | 3,527 | | | | 4,088 | | | | 6,243 | | Asia-Pacific | | | 4,675 | | | | 2,764 | | | | 1,124 | | Total net income | | $ | 26,581 | | | $ | 12,654 | | | $ | 15,255 | |
| | Year Ended December 31 | | | | 2018 | | | 2017 | | | 2016 | | Expenditure for long-lived assets | | | | | | | | | | | | | PLP-USA | | $ | 3,672 | | | $ | 4,474 | | | $ | 18,314 | | The Americas | | | 1,746 | | | | 1,272 | | | | 2,634 | | EMEA | | | 1,591 | | | | 2,329 | | | | 1,450 | | Asia-Pacific | | | 2,519 | | | | 3,158 | | | | 2,327 | | Total expenditures for long-lived assets | | $ | 9,528 | | | $ | 11,233 | | | $ | 24,725 | | | | | | | | | | | | | | | Depreciation and amortization | | | | | | | | | | | | | PLP-USA | | $ | 5,452 | | | $ | 5,389 | | | $ | 4,937 | | The Americas | | | 1,488 | | | | 1,985 | | | | 1,874 | | EMEA | | | 1,808 | | | | 1,678 | | | | 1,402 | | Asia-Pacific | | | 3,696 | | | | 3,738 | | | | 3,783 | | Total depreciation and amortization | | $ | 12,444 | | | $ | 12,790 | | | $ | 11,996 | |
| | As of December 31 | | | | 2018 | | | 2017 | | Identifiable assets | | | | | | | | | PLP-USA | | $ | 118,171 | | | $ | 116,484 | | The Americas | | | 69,764 | | | | 70,720 | | EMEA | | | 57,263 | | | | 62,524 | | Asia-Pacific | | | 113,599 | | | | 110,057 | | Total identifiable assets | | $ | 358,797 | | | $ | 359,785 | | | | | | | | | | | Long-lived assets | | | | | | | | | PLP-USA | | $ | 51,506 | | | $ | 53,211 | | The Americas | | | 14,847 | | | | 16,365 | | EMEA | | | 11,768 | | | | 12,971 | | Asia-Pacific | | | 24,834 | | | | 26,051 | | Total long-lived assets | | $ | 102,955 | | | $ | 108,598 | |
Note N - Related Party Transactions On February 6, 2018, the Company reconfiguredpurchased 7,877 shares of the Company from current Officers and a product lineretired Officer at a price per share of $80.20, which was calculated from a 30-day average of market price in connection with the vesting of equity awards. The Americas segment and consolidated its manufacturing processes intoAudit Committee of the PLP-USA segment. As such, certain prior year amounts have been reclassified to conform to current year presentation. | | | | | | | | | | | | | | | Year Ended December 31 | | | | 2015 | | | 2014 | | | 2013 | | Net sales | | | | | | | | | | | | | PLP-USA | | $ | 142,470 | | | $ | 152,567 | | | $ | 163,033 | | The Americas | | | 59,290 | | | | 75,868 | | | | 72,518 | | EMEA | | | 53,778 | | | | 65,446 | | | | 61,543 | | Asia-Pacific | | | 99,128 | | | | 94,304 | | | | 112,682 | | | | | | | | | | | | | | | Total net sales | | $ | 354,666 | | | $ | 388,185 | | | $ | 409,776 | | | | | | | | | | | | | | | | | | | Intersegment sales | | | | | | | | | | | | | PLP-USA | | $ | 9,339 | | | $ | 12,690 | | | $ | 10,944 | | The Americas | | | 5,074 | | | | 5,875 | | | | 5,949 | | EMEA | | | 1,652 | | | | 1,848 | | | | 2,080 | | Asia-Pacific | | | 8,364 | | | | 11,921 | | | | 10,491 | | | | | | | | | | | | | | | Total intersegment sales | | $ | 24,429 | | | $ | 32,334 | | | $ | 29,464 | | | | | | | | | | | | | | | | | | | Interest income | | | | | | | | | | | | | PLP-USA | | $ | 0 | | | $ | 0 | | | $ | 0 | | The Americas | | | 145 | | | | 129 | | | | 290 | | EMEA | | | 123 | | | | 223 | | | | 215 | | Asia-Pacific | | | 123 | | | | 131 | | | | 113 | | | | | | | | | | | | | | | Total interest income | | $ | 391 | | | $ | 483 | | | $ | 618 | | | | | | | | | | | | | | | | | | | Interest expense | | | | | | | | | | | | | PLP-USA | | $ | (440 | ) | | $ | (427 | ) | | $ | (305 | ) | The Americas | | | (56 | ) | | | (130 | ) | | | (41 | ) | EMEA | | | (23 | ) | | | (54 | ) | | | (68 | ) | Asia-Pacific | | | (46 | ) | | | (47 | ) | | | (36 | ) | | | | | | | | | | | | | | Total interest expense | | $ | (565 | ) | | $ | (658 | ) | | $ | (450 | ) | | | | | | | | | | | | | | | | | | Income taxes | | | | | | | | | | | | | PLP-USA | | $ | 2,387 | | | $ | 4,576 | | | $ | 6,032 | | The Americas | | | 1,399 | | | | 930 | | | | 2,839 | | EMEA | | | 1,646 | | | | 2,122 | | | | 2,052 | | Asia-Pacific | | | (401 | ) | | | 921 | | | | 284 | | | | | | | | | | | | | | | Total income taxes | | $ | 5,031 | | | $ | 8,549 | | | $ | 11,207 | | | | | | | | | | | | | | | | | | | Net income (loss) | | | | | | | | | | | | | PLP-USA | | $ | 2,031 | | | $ | 7,233 | | | $ | 10,356 | | The Americas | | | 3,178 | | | | 2,647 | | | | 6,415 | | EMEA | | | 4,881 | | | | 6,192 | | | | 6,047 | | Asia-Pacific | | | (3,415 | ) | | | (3,211 | ) | | | (2,231 | ) | | | | | | | | | | | | | | Total net income | | $ | 6,675 | | | $ | 12,861 | | | $ | 20,587 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Year Ended December 31 | | | | 2015 | | | 2014 | | | 2013 | | Expenditure for long-lived assets | | | | | | | | | | | | | PLP-USA | | $ | 5,164 | | | $ | 7,673 | | | $ | 12,349 | | The Americas | | | 2,074 | | | | 4,788 | | | | 3,020 | | EMEA | | | 1,673 | | | | 1,375 | | | | 2,573 | | Asia-Pacific | | | 1,843 | | | | 3,827 | | | | 3,092 | | | | | | | | | | | | | | | Total expenditures for long-lived assets | | $ | 10,754 | | | $ | 17,663 | | | $ | 21,034 | | | | | | | | | | | | | | | | | | | Depreciation and amortization | | | | | | | | | | | | | PLP-USA | | $ | 4,551 | | | $ | 4,521 | | | $ | 4,185 | | The Americas | | | 1,862 | | | | 2,464 | | | | 2,052 | | EMEA | | | 1,464 | | | | 1,790 | | | | 1,792 | | Asia-Pacific | | | 3,655 | | | | 4,082 | | | | 4,059 | | | | | | | | | | | | | | | Total depreciation and amortization | | $ | 11,532 | | | $ | 12,857 | | | $ | 12,088 | | | | | | | | | | | | | | |
| | | | | | | | | | | As of December 31 | | | | 2015 | | | 2014 | | | | | Identifiable assets | | | | | | | | | PLP-USA | | $ | 106,854 | | | $ | 109,115 | | The Americas | | | 60,294 | | | | 75,752 | | EMEA | | | 51,006 | | | | 51,691 | | Asia-Pacific | | | 106,105 | | | | 117,093 | | | | | | | | | | | | | | 324,259 | | | | 353,651 | | Corporate assets | | | 314 | | | | 316 | | | | | | | | | | | Total identifiable assets | | $ | 324,573 | | | $ | 353,967 | | | | | | | | | | | | | | Long-lived assets | | | | | | | | | PLP-USA | | $ | 40,638 | | | $ | 41,131 | | The Americas | | | 14,937 | | | | 19,451 | | EMEA | | | 11,232 | | | | 12,504 | | Asia-Pacific | | | 25,158 | | | | 29,445 | | | | | | | | | | | Total long-lived assets | | $ | 91,965 | | | $ | 102,531 | | | | | | | | | | |
Note M -Related Party TransactionsBoard of Directors approved this transaction.
On March 26, 2015,15, 2018, the Company purchased 1,290 common1,430 shares of the Company from a current Officer at a price per share of $63.63, which was calculated from a 30-day average of market price in connection with the vesting of equity awards. The Audit Committee of the Board of Directors approved this transaction. On May 10, 2018, the Company purchased 3,200 shares of the Company from a current Officer at a price per share of $68.10, which was calculated from a 30-day average of market price in connection with the vesting of equity awards. The Audit Committee of the Board of Directors approved this transaction. On June 1, 2018, the Company purchased 8,800 shares of the Company from a retired Officer at a price per share of $73.53, which was calculated from a 30-day average of market price in connection with the vesting of equity awards. The Audit Committee of the Board of Directors approved this transaction.
On June 15, 2018, the Company purchased 1,500 shares of the Company from current Officers at a price per share of $77.06, which was calculated from a 30-day average of market price in connection with the vesting of equity awards. The Audit Committee of the Board of Directors approved this transaction. On August 7, 2018, the Company purchased 17,141 shares of the Company from current Officers and a retired officer at a price per share of $87.19, which was calculated from a 30-day average of market price in connection with the vesting of equity awards. The Audit Committee of the Board of Directors approved this transaction. On August 23, 2018, the Company purchased 2,000 shares of the Company from a current employee at a price per share of $83.53, which was calculated from a 30-day average of market price in connection with the vesting of equity awards. The Audit Committee of the Board of Directors approved this transaction. On September 14, 2018, the Company purchased 7,500 shares of the Company from a current Officer at a price per share of $80.95, which was calculated from a 30-day average of market price in connection with the vesting of equity awards. The Audit Committee of the Board of Directors approved this transaction. On December 18, 2018, the Company purchased 35 shares of the Company from a retired Officer at a price per share of $57.85, which was calculated from a 30-day average of market price in connection with the vesting of equity awards. The Audit Committee of the Board of Directors approved this transaction On January 3, 2017, the Company purchased 1,834 shares of the Company from current Officers at a price per share of $58.58, which was calculated from a 30-day average of market price in connection with the vesting of equity awards. The Audit Committee of the Board of Directors approved these transactions. On May 9, 2017, the Company purchased 2,500 shares of the Company from a current Officer at a price per share of $52.05, which was calculated from a 30-day average of market price in connection with the vesting of equity awards. The Audit Committee of the Board of Directors approved this transaction. On August 16, 2017, the Company purchased 24,920 shares of the Company from a trust for the benefit of Barbara P. Ruhlman at a price per share of $50.16, which was calculated from a 30-day average of market price. Barbara P. Ruhlman is Director Emeritus for the Company’s Board of Directors and the mother of Robert G. Ruhlman and grandmother of J. Ryan Ruhlman and Maegan A. R. Cross, all of whom are also members of the Board of Directors and Messrs. Robert G. Ruhlman and J. Ryan Ruhlman also serve as executive officers of the Company. The purchase was consummated pursuant to a Share Purchase Agreement dated August 16, 2017, between the Company and the trust. The Audit Committee of the Board of Directors approved this transaction. On November 8, 2017, the Company purchased 24,874 shares of the Company from current Officers and other employees, at a price per share of $71.07, which was calculated from a 30-day average market price. Additionally, on November 8, 2017, the Company purchased 7,000 shares of the Company from Robert G. Ruhlman, at a price per share of $45.39,$71.07, which was calculated from a 30-day average of market price. On November 30, 2015, the Company purchased 1,479 common shares of the Company from Robert G. Ruhlman, at a price per share of $41.50, which was calculated from a 30-day average of market price. Additionally, on December 8, 2015, the Company purchased 1,510 common shares of the Company from Robert G. Ruhlman, at a price per share of $40.83, which was calculated from a 30-day average of market price. Mr. Ruhlman is Chairman, President and CEOChief Executive Officer (CEO) of the Company, son of Barbara P. Ruhlman, Director Emeritus, and father of J. Ryan Ruhlman and Maegan A. R. Cross, each of whom are also members of the Board of Directors and Mr. J. Ryan Ruhlman is an executive officer of the Company. The Audit Committee of the Board of Directors approved these transactions. On November 17, 2017, the Company purchased 7,975 shares of the Company from current Officers and other employees, at a price per share of $74.51, which was calculated from a 30-day average market price. The Audit Committee of the Board of Directors approved these transactions. On November 30, 2017, the Company purchased 3,334 shares of the Company from a retired Officer of the Company, at a price per share of $75.37, which was calculated from a 30-day average market price. The Audit Committee of the Board of Directors approved this transaction.
On December 13, 2017, the Company purchased 21,650 shares of the Company from current Officers and other employees, at a price per share of $78.68, which was calculated from a 30-day average market price. Additionally, on December 13, 2017, the Company purchased 7,500 shares of the Company from Randall M. Ruhlman at a price per share of $78.68, which was calculated from a 30-day average market price. Mr. Ruhlman is the son of Barbara P. Ruhlman, Director Emeritus, brother of Robert G. Ruhlman and a former member of the Company’s Board of Directors. The Audit Committee of the Board of Directors approved these transactions. On December 13, 2017, the Company purchased 15,000 shares of the Company from a trust for the benefit of Barbara P. Ruhlman, Director Emeritus, at a price per share of $78.68, which was calculated from a 30-day average of market price. The purchase was consummated pursuant to a Share Purchase Agreement dated December 13, 2017, between the Company and the trust. The Audit Committee of the Board of Directors approved this transaction. In 2016, the Company purchased 7,703 common shares of the Company from current Officers and other employees, at a price per share ranging between $42.10 and $45.20, which was calculated from a 30-day average of market price. The Audit Committee of the Board of Directors approved these transactions. On August 11, 2015,23, 2016, the Company purchased 30,713 Common Shares27,448 shares of the Company from a trust for the benefit of Barbara P. Ruhlman and a foundation of which Barbara P. Ruhlman, Robert G. Ruhlman and Bernard Karr are officers, at a price per share of $35.00$44.66 which was calculated from a 30-day average of market price. Barbara P. Ruhlman is a member of the Company’s Board of Directors and the mother of Robert G. Ruhlman and grandmother of J. Ryan Ruhlman, both of whom are also members of the Board of Directors. The purchase was consummated pursuant to Share Purchase Agreements both dated August 11, 2015,23, 2016, between the Company and the foundation. The Audit Committee of the Board of Directors approved this transaction. J. Ryan Ruhlman has worked for the Company for over eleven years, was elected to the Company’s Board of Directors in July 2015foundation, and as Vice President-Marketing and Business Development in December 2015. He is the son of Robert G. Ruhlman, Chairman, President and CEO of the Company, and grandson of Barbara P. Ruhlman, a member of the Board of Directors. He received $189,870 in reportable compensation for 2015 of which $33,725 is attributable to his 2015 award of stock options, and $153,273 in reportable compensation for 2014 of which $39,100 is attributable to his 2014 award of stock options, which amounts are in line with the Company’s compensation for mid-level managers.
On March 20, 2014, the Company purchased 2,098 common shares of the Company from Robert G. Ruhlman, at a price per share of $62.99, which was calculated from a 30-day average of market price. Mr. Ruhlman is Chairman, President and Chief Executive Officer (CEO) of the Company. The Audit Committee of the Board of Directors approved this transaction.
On August 14, 2014, the Company purchased 34,106 Common Shares of the Company from a trust for the benefit of Barbara P. Ruhlman and a foundation of which Barbara P. Ruhlman, Robert G. Ruhlman and Bernard Karr are officers, at a price per share of $54.83. Barbara P. Ruhlman is a member of the Company’s Board of Directors and the mother of Robert G. Ruhlman , who is also a member of the Board of Directors and Chairman, President and CEO of the Company. The purchase was consummated pursuant to Share Purchase Agreements both dated August 14, 2014, between the Company and the foundation.trust. The Audit Committee of the Board of Directors approved these transactions.
On May 8, 2013,December 29, 2016, the Company purchased 2,500 common5,000 shares of the Company from J. Ryan Ruhlman,a current Officer, at a price per share of $76.98,$56.38, which was calculated from a 30-day average of market price. On November 12, 2013, the Company purchased 3,200 common shares of the Company from J. Ryan Ruhlman, at a price per share of $78.91, which was calculated from a 30-day average of market price. Mr. Ruhlman is the son of Robert G. Ruhlman, Chairman, President and Chief Executive Officer (CEO) of the Company. The Audit Committee of the Board of Directors approved this transaction. On May 8, 2013, the Company purchased 3,000 common shares of the Company from David C. Sunkle, at a price per share of $76.98, which was calculated from a 30-day average of market price. Additionally, on November 12, 2013, the Company purchased 1,000 common shares of the Company from David C. Sunkle, at a price per share of $78.91, which was calculated from a 30-day average of market price. Mr. Sunkle is an Officer of the Company. The Audit Committee of the Board of Directors approved these transactions.
On May 9, 2013, the Company purchased 9,757 Common Shares of the Company from a foundation of which Barbara P. Ruhlman, Robert G. Ruhlman and Bernard Karr are officers, at a price per share of $76.87. Barbara P. Ruhlman is a member of the Company’s Board of Directors and the mother of Robert G. Ruhlman who is also a member of the Board of Directors and Chairman, President and CEO of the Company. The purchase was consummated pursuant to a Shares Purchase Agreement dated May 9, 2013, between the Company and the foundation. The Audit Committee of the Board of Directors approved this transaction.
On November 12, 2013, the Company purchased 25,000 common shares of the Company from Robert G. Ruhlman, at a price per share of $78.91, which was calculated from a 30-day average of market price. Mr. Ruhlman is Chairman, President and CEO of the Company. The Audit Committee of the Board of Directors approved this transaction.
On November 12, 2013, the Company purchased 2,750 common shares of the Company from Dennis F. McKenna, at a price per share of $78.91, which was calculated from a 30-day average of market price. Mr. McKenna is an Officer of the Company. The Audit Committee of the Board of Directors approved this transaction.
On November 12, 2013, the Company purchased 2,500 common shares of the Company from J. Cecil Curlee, at a price per share of $78.91, which was calculated from a 30-day average of market price. Mr. Curlee is an Officer of the Company. The Audit Committee of the Board of Directors approved this transaction.
On November 12, 2013, the Company purchased 1,750 common shares of the Company from Caroline S. Vaccariello, at a price per share of $78.91, which was calculated from a 30-day average of market price. Mrs. Vaccariello is an Officer of the Company. The Audit Committee of the Board of Directors approved this transaction.
The Company’s Australian subsidiary utilizes copper extrusion services from Cast Alloy. For each of the yearyears ended December 31, 2015, 20142018, 2017 and 2013,2016, PLP-Australia incurred a total of $.2 million $.1 million and $.1 million for these expenses, respectively.expenses. Cast Alloy is owned by Simi Almasan, Continuous Improvement Engineer, a current PLP employee. The Audit Committee of the Board of Directors approved these transactions. The Company’s New Zealand subsidiary, Electropar currently leases two parcelsone parcel of property, on which it has its corporate office, manufacturing and warehouse space. The entities leasing the property to Electropar are owned, in part, by Grant Wallace, a Director.former Director who is no longer with the Company as of March 2017, therefore no related party expense was incurred in 2018. For eachthe year ended December 31, 2015, 20142017, Electropar incurred less than $.1 million for such lease expense. For the year ended December 31, 2016, Electropar leased two parcels of property which were owned, in part, by Grant Wallace, a former Director, and 2013, Electropar incurred a total of $.3 million annually for such lease expense. The Audit Committee of the Board of Directors approved these transactions. The Company’s DPW operation rents two properties owned by RandReau Properties, LLC and RaRe Properties, LLC., which are owned by Kevin Goodreau, Vice President of Business Development – Solar Division, and Jeffrey Randall, Vice President of Product Design – Solar Division. For the year ended December 31, 2015, 2014 and 2013, DPW paid rent expense of $.2 million, $.2 million and $.3 million, respectively, for the properties. The Audit Committee of the Board of Directors approved these transactions. The Company’s Belos operation hirespreviously hired temporary employees through a temporary work agency, Flex-Work Sp. Z.o.o., which is 50% owned by Agnieszka Rozwadowska. Agnieszka Rozwadowska is the wife of Piotr Rozwadowski,Rozwadowska, the Managing Director of the Belos operation located in Poland. For the yearyears ended December 31, 2015, 20142018, 2017 and 2013,2016, Belos incurred a total of $.4$.0 million, $.5$.0 million and $.3$.4 million, respectively, for such temporary labor expense. The Audit Committee of the Board of Directors approved these transactions.
During 2018, the Company paid approximately $.1 million in legal fees to Baker & Hostetler LLP, of which R. Steven Kestner was the Chairman and the chair of its policy committee. Mr. Kestner is a Director of the Company. Note NO -Business Combinations On January 31, 2014, the Company acquired Helix Uniformed Limited (Helix), located in Montreal, Quebec, Canada. From an accounting perspective, the acquisition is not considered material. The acquisition of Helix will diversify the Company’s business in Canada, expand its manufacturing footprint and enhance its engineering capabilities. The results of Helix are included in The Americas reportable segment. The values related to the acquisition have been finalized.None.
Note OP – Product Warranty Reserve The Company records an accrual for estimated warranty costs to Costs of products sold in the Consolidated Statements of Consolidated 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: | | | 2015 | | | 2014 | | | 2013 | | | 2018 | | | 2017 | | | 2016 | | Balance at January 1 | | $ | 892 | | | $ | 1,140 | | | $ | 1,229 | | | $ | 1,076 | | | $ | 1,058 | | | $ | 714 | | Additions charged to costs and expenses | | | 74 | | | | (45 | ) | | | 443 | | | | 97 | | | | 347 | | | | 649 | | Warranty usage | | | (158 | ) | | | (133 | ) | | | (475 | ) | | | (133 | ) | | | (399 | ) | | | (269 | ) | Currency translation | | | (94 | ) | | | (70 | ) | | | (57 | ) | | | (112 | ) | | | 70 | | | | (36 | ) | | | | | | | | | | | | Balance at December 31 | | $ | 714 | | | $ | 892 | | | $ | 1,140 | | | $ | 928 | | | $ | 1,076 | | | $ | 1,058 | | | | | | | | | | | | |
Note PQ - Quarterly Financial Information (unaudited) The following table summarizes ourthe Company’s results of operations for each of the quarters in 20152018 and 2014:2017: | | | | | | | | | | Quarter ended | | | | Quarter ended | | | March 31 | | | June 30 | | | September 30 | | | December 31 | | | | March 31 | | | June 30 | | | September 30 | | | December 31 | | | 2015 | | | | | | | | | | | | | | Net sales | | $ | 85,790 | | | $ | 87,869 | | | $ | 89,046 | | | $ | 91,961 | | | Gross profit | | | 24,760 | | | | 26,444 | | | | 26,159 | | | | 26,089 | | | Income (loss) before income taxes | | | (59 | ) | | | 4,466 | | | | 2,141 | | | | 5,158 | | | Net income (loss) | | | (256 | ) | | | 3,680 | | | | 206 | | | | 3,045 | | | Net income, basic | | $ | (0.05 | ) | | $ | 0.68 | | | $ | 0.04 | | | $ | 0.58 | | | Net income, diluted | | $ | (0.05 | ) | | $ | 0.68 | | | $ | 0.04 | | | $ | 0.58 | | | | 2014 | | | | | | | | | | | | | | 2018 | | | | | | | | | | | | | | | | | | Net sales | | $ | 89,925 | | | $ | 99,981 | | | $ | 102,100 | | | $ | 96,179 | | | $ | 98,139 | | | $ | 108,915 | | | $ | 108,413 | | | $ | 105,411 | | Gross profit | | | 27,448 | | | | 31,197 | | | | 32,455 | | | | 29,848 | | | | 31,518 | | | | 35,203 | | | | 33,491 | | | | 32,019 | | Income before income taxes | | | 4,137 | | | | 7,606 | | | | 5,294 | | | | 4,373 | | | | 7,629 | | | | 9,224 | | | | 7,856 | | | | 7,879 | | Net income | | | 2,738 | | | | 5,080 | | | | 2,555 | | | | 2,488 | | | | 5,528 | | | | 6,735 | | | | 9,054 | | | | 5,264 | | Net income, basic | | $ | 0.51 | | | $ | 0.94 | | | $ | 0.48 | | | $ | 0.46 | | | $ | 1.10 | | | $ | 1.34 | | | $ | 1.80 | | | $ | 1.05 | | Net income, diluted | | $ | 0.50 | | | $ | 0.94 | | | $ | 0.48 | | | $ | 0.46 | | | $ | 1.09 | | | $ | 1.33 | | | $ | 1.76 | | | $ | 1.02 | | | | | | | | | | | | | | | | | | | | 2017 | | | | | | | | | | | | | | | | | | Net sales | | | $ | 84,569 | | | $ | 97,512 | | | $ | 99,239 | | | $ | 96,892 | | Gross profit | | | | 24,665 | | | | 29,673 | | | | 33,535 | | | | 30,755 | | Income before income taxes | | | | 2,118 | | | | 6,258 | | | | 9,739 | | | | 7,691 | | Net income | | | | 1,518 | | | | 4,156 | | | | 6,278 | | | | 702 | | Net income, basic | | | $ | 0.30 | | | $ | 0.81 | | | $ | 1.23 | | | $ | 0.14 | | Net income, diluted | | | $ | 0.30 | | | $ | 0.81 | | | $ | 1.23 | | | $ | 0.14 | |
Note Q – Charges related to restructuring activitiesR –Subsequent Events During 2015,
On February 28, 2019, the Company reconfigured oneacquired SubCon Electrical Fittings GmbH (“SubCon”), headquartered in Dornbirn, Austria with manufacturing operations in Brno, Czech Republic. The acquisition is not considered material as assets acquired are less than 5% of its operations within its Asia Pacific segment by reducing its workforce and manufacturing facilities while outsourcing its production predominantly to its locations with lower cost operations. This was done in response to a slowdown in economic activitythe Company’s total consolidated assets. The acquisition of SubCon will strengthen the Company’s position in the region as well as continued downwardglobal substation market pressure on prices. Total costs related to this reconfiguration were $2.7 million. Additionally, the Company initiated a reconfigurationand will expand its operational presence in the PLP-USA segment which was primarily a reduction in personnel and facilities in response to downward market pressure on prices. The total charges for the PLP-USA segment are anticipated to be $1.3 million. Both of these actions are expected to reduce infrastructure and manufacturing costs. The restructuring liability is recorded in Accrued compensation and amounts withheld from employees, Accrued expenses and other liabilities and Other noncurrent liabilities. These costs are included in Cost of products sold ($3.4 million), Research and engineering expense ($.1 million) and Other operating expense ($.5 million). A summary by reporting segment of the accruals recorded as a result of the restructuring is as follows:Europe.
| | | | | | | | | | | | | | | | | | | | | | | Severance | | | Lease Termination Costs | | | Asset Disposals | | | Other | | | Total | | | | | | | | December 31, 2014 Balance | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | | | | | | | | | | | | | | | | | | | Charges | | | | | | | | | | | | | | | | | | | | | PLP-USA | | $ | 416 | | | $ | 402 | | | $ | 306 | | | $ | 166 | | | $ | 1,290 | | | | | | | | Asia-Pacific | | | 1,232 | | | | 1,241 | | | | 188 | | | | 0 | | | | 2,661 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,648 | | | | 1,643 | | | | 494 | | | | 166 | | | | 3,951 | | | | | | | | Payments and other adjustments | | | | | | | | | | | | | | | | | | | | | PLP-USA | | | (266 | ) | | | (98 | ) | | | (306 | ) | | | (161 | ) | | $ | (831 | ) | | | | | | | Asia-Pacific | | | (1,232 | ) | | | (637 | ) | | | (188 | ) | | | 0 | | | | (2,057 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | (1,498 | ) | | | (735 | ) | | | (494 | ) | | | (161 | ) | | | (2,888 | ) | | | | | | | December 31, 2015 Balance | | | | | | | | | | | | | | | | | | | | | PLP-USA | | | 150 | | | | 304 | | | | 0 | | | | 5 | | | | 459 | | | | | | | | Asia-Pacific | | | 0 | | | | 604 | | | | 0 | | | | 0 | | | | 604 | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 150 | | | $ | 908 | | | $ | 0 | | | $ | 5 | | | $ | 1,063 | | | | | | | | | | | | | | | | | | | | | | |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures The Company’s Principal Executive Officer and Principal Financial Officer have concluded based on their review thereof 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 December 31, 2015.2018. Management’s Report on Internal Control Over Financial Reporting The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’sCompany's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of the consolidated financial statements in accordance with generally accepted accounting principles. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Management, with the participation of the Company’sCompany's Chief Executive Officer and Chief Financial Officer and Vice President of Finance and Treasurer, assessed the effectiveness of the Company’sCompany's internal control over financial reporting as of December 31, 2015.2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control—Integrated Framework (2013). Based upon its assessment, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2015.2018. The effectiveness of the Company’s internal control over financial reporting as of December 31, 20152018 has been audited by Ernst & Young LLP, an independent registered public accounting firm, who expressed an unqualified opinion as stated in their report, a copy of which is included below. 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 December 31, 20152018 that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Preformed Line Products Company Opinion on Internal Control over Financial Reporting We have audited Preformed Line Products Company’sCompany and subsidiaries’ internal control over financial reporting as of December 31, 2015,2018, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Preformed Line Products and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Consolidated Balance Sheets of Preformed Line Products and subsidiaries as of December 31, 2018 and 2017, and the related Statements of Consolidated Income, Comprehensive Income, Cash Flows, and Shareholders’ Equity for each of the three years in the period ended December 31, 2018 and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “financial statements”) of the Company and our report dated March 8, 2019 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’sCompany’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Preformed Line Products Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria./s/ Ernst & Young LLP
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Preformed Line Products Company as of December 31, 2015 and 2014 and the related statements of consolidated income, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2015 and our report dated Cleveland, Ohio
March 11, 2016 expressed an unqualified opinion thereon.8, 2019
| /s/ Ernst & Young LLP | | Cleveland, Ohio | March 11, 2016 |
Item 9B. Other Information None
Part III Item 10. Directors, Executive Officers and Corporate Governance Item 10. | Directors, Executive Officers and Corporate Governance |
The information required by this Item 10 is incorporated by reference to the information under the captions “Corporate Governance – Board Composition”, “Corporate Governance - Election of Directors”, “Section 16(a) Beneficial Ownership Compliance”, “Corporate Governance – Code of Conduct” and “Corporate Governance – Board Committees and Committee Meetings – Audit Committee” in the Company’s Proxy Statement, for the Annual Meeting of Shareholders to be held May 10, 20167, 2019 (the “Proxy Statement”). Information relative to executive officers of the Company is contained in Part I of this Annual Report on Form 10-K. Item 11. Executive Compensation Item 11. | Executive Compensation |
The information set forth under the caption “Director“Directors and Executive OfficerOfficers Compensation” and “Compensation Policies and Risk” in the Proxy Statement is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Other than the information required by Item 201(d) of Regulation S-K the information set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement is incorporated herein by reference. The information required by Item 201(d) of Regulation S-K is set forth in Item 5 of this report. Item 13. Certain Relationships, Related Transactions and Director Independence Item 13. | Certain Relationships, Related Transactions and Director Independence |
The information set forth under the captions “Transactions with Related Persons” and “Election of Directors” in the Proxy Statement is incorporated herein by reference. Item 14. Principal Accounting Fees and Services Item 14. | Principal Accounting Fees and Services |
The information set forth under the captions “Independent Registered Public Accountants”Accounting Firm”, “Audit Fees”, “Audit-Related Fees”, “Tax Fees” and “All Other Fees” in the Proxy Statement is incorporated herein by reference.
Part IV Item 15. Exhibits and Financial Statement Schedules Item 15.(a) | Exhibits and Financial Statement Schedules |
(a) | Financial Statements and Schedule |
| | | Exhibit
Number | | Exhibit | | | | 3.1 | | Amended and Restated Articles of Incorporation (incorporated by reference to the Company’s Registration Statement on Form 10). | | | | 3.2 | | Amended and Restated Code of Regulations of Preformed Line Products Company (incorporated by reference to the Company’s Registration Statement on Form 10). | | | | 3.3 | | Amendment to the Amended and Restated Code of Regulations of Preformed Line Products Company, effective May 10, 2016, filed herewith | | | | 4 | | Description of Specimen Share Certificate (incorporated by reference to the Company’s Registration Statement on Form 10). | | | | 10.1 | | Preformed Line Products Company 1999 Employee Stock Option Plan (incorporated by reference to the Company’s Registration Statement on Form 10).* | | | | 10.2 | | Preformed Line Products Company Officers Bonus Plan (incorporated by reference to the Company’s 10-K filed for the year ended December 31, 2007).* | | | | 10.3 | | Preformed Line Products Company Executive Life Insurance Plan – Summary (incorporated by reference to the Company’s Registration Statement on Form 10).* | | | | 10.4 | | Preformed Line Products Company Supplemental Profit Sharing Plan (incorporated by reference to the Company’s Registration Statement on Form 10).* | | | | 10.5 | | Revolving Credit Agreement between National City Bank (now, PNC Bank, National Association) and Preformed Line Products Company, dated December 30, 1994 (incorporated by reference to the Company’s Registration Statement on Form 10). | | | | 10.6 | | Amendment to the Revolving Credit Agreement between National City Bank (now, PNC Bank, National Association) and Preformed Line Products Company, dated October 31, 2002 (incorporated by reference to the Company’s 10-K filing for the year ended December 31, 2003). | | | | 10.7 | | Line of Credit Note dated February 5, 2010 between the Company and PNC Bank, National Association (incorporated by reference to the Company’s 10-K filing for the fiscal year ended December 31, 2010). | | | | 10.8 | | Amended and Restated Loan Agreement dated September 24, 2015 between the Company and PNC Bank, National Association filed herewith.(incorporated by reference to the Company’s 10-K filing for the year ended December 31, 2015). | | | | 10.9 | | Preformed Line Products Company 1999 Employee Stock Option Plan Incentive Stock Option agreement (incorporated by reference to the Company’s 10-K filing for the year ended December 31, 2004).* | | | | 10.10 | | Preformed Line Products Company Chief Executive Officer Bonus Plan (incorporated by reference to the Company’s10-K filing for the year ended December 31, 2007).* | | | | 10.11 | | Preformed Line Products Company Amended and Restated Long Term Incentive Plan of 2008 (incorporated by reference to Appendix A of the Company’s Definitive Proxy Statement filed on March 11, 2011).* | | | | 10.12 | | Deferred Shares Plan (incorporated by reference to the Company’s 8-K current report filing dated August 21, 2008). | | | | 10.13 | | Form of Restricted Shares Grant Agreement under the Amended and Restated Long Term Incentive Plan of 2008 (incorporated by reference to the Company’s 10-Q filing for the quarter ended September 30, 2008).* | | | | 10.14 | | Form of Restricted Stock Unit Award Agreement under the Amended and Restated Long Term Incentive Plan of 2008 (incorporated by reference to the Company’s 10-K filing for the year ended December 31, 2013).* |
| | | 10.15 | | 10.15 | | Form of Restricted Stock Unit Award Agreement under the Amended and Restated Long Term Incentive Plan of 2008 (incorporated by reference to the Company’s 10-K filing for the year ended December 31, 2014).* | | | | 10.16 | | Shares Purchase Agreement, dated August 11, 2015,16, 2017, between the Company and the trustee under the 2016 Trust Agreement Between Barbara P. Ruhlman and Bernard L. Karr, dated September 21, 2016 (incorporated by reference to the Company’s Form 8-K filed on August 16, 2017).* | | | | 10.17 | | Shares Purchase Agreement, dated December 13, 2017, between the Company and the trustee under the 2016 Trust Agreement Between Barbara P. Ruhlman and Bernard L. Karr, dated September 21, 2016 (incorporated by reference to the Company’s Form 8-K filed on December 14, 2017).* | | | | 10.18 | | Shares Purchase Agreement, dated August 23, 2016, between the Company and the Irrevocable Trust Agreement betweenBetween Barbara P. Ruhlman and Bernard L. Karr, dated July 29, 2008 (incorporated by reference to the Company’s Form 8-K filed on August 11, 2015)23, 2016). | | | | 10.17 10.19 | | SharesShare Purchase Agreement, dated August 11, 2015,23, 2016, between the Company and the Thomas F. Peterson Foundation (incorporated by reference to the Company’s Form 8-K filed on August 11, 2015)23, 2016). |
| | | | | | 10.18 10.20 | | Form of Restricted Stock Agreement under the Amended and Restated Long Term Incentive Plan of 2008 filed herewith.(incorporated by reference to the Company’s 10-K filing for the year ended December 31, 2015).* | | | | 10.19 10.21 | | Form of Restricted Stock Unit Award Agreement under the Amended and Restated Long Term Incentive Plan of 2008 filed herewith.(incorporated by reference to the Company’s 10-K filing for the year ended December 31, 2015).* | | | | 10.20 10.22 | | Amendment to Amended and Restated Loan Agreement dated November 6, 2015 between the Company and PNC Bank, National Association filed herewith.(incorporated by reference to the Company’s 10-K filing for the year ended December 31, 2015). | | | | 10.23 | | Preformed Line Products Company 2016 Incentive Plan (incorporated by reference to Appendix A of the Company’s Definitive Proxy Statement on Schedule 14A filed March 17, 2016). | | | | 10.24 | | Promissory Note dated June 27, 2016, between the Company and PNC Bank, National Association (incorporated by reference to the Company’s Form 10-Q filing for the quarter ended September 30, 2016). | 10.25 | | Amendment No. 2 to Amended and Restated Loan Agreement dated August 22, 2016 between the Company and PNC Bank, National Association (incorporated by reference to the Company’s Form 10-Q filing for the quarter ended September 30, 2016). | | | | 10.26 | | Amended and Restated Line of Credit Note dated August 22, 2016 between the Company and PNC Bank, National Association (incorporated by reference to the Company’s Form 10-Q filing for the quarter ended September 30, 2016). | | | | 10.27 | | Amended and Restated Line of Credit Note dated March 13, 2018 between the Company and PNC Bank, National Association (incorporated by reference to the Company’s Form 10-Q filing for the quarter ended March 31, 2018). | | | | 10.28 | | Amendment No. 3 to Amended and Restated Line of Credit Note dated March 13, 2018 between the Company and PNC Bank, National Association (incorporated by reference to the Company’s Form 10-Q filing for the quarter ended March 31, 2018). | | | | 10.29 | | Preformed Line Products Company Amended Supplemental Profit Sharing Plan (incorporated by reference to the Company’s Form 10-Q filing for the quarter ended June 30, 2018). | | | | 14.1 | | Preformed Line Products Company Code of Conduct (incorporated by reference to the Company’s 8-K current report filing dated August 6, 2007). | | | | 21 | | Subsidiaries of Preformed Line Products Company, filed herewith. | | | | 23.1 | | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm, filed herewith. |
| | | 31.1 | | 31.1 | | Certification of the Principal Executive Officer, Robert G. Ruhlman, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. | | | | 31.2 | | Certification of the Principal FinancialAccounting Officer, Eric R. Graef,Michael A. Weisbarth, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.herewith. | | | | 32.1 | | Certification of the Principal Executive Officer, Robert G. Ruhlman, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished.furnished. | | | | 32.2 | | Certification of the Principal Accounting Officer, Eric R. Graef,Michael A. Weisbarth, 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.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. | | | | 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. | | | | 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
* | Indicates management contracts or compensatory plan or arrangement. |
SIGNATURESSIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. | | | | | | | | | Preformed Line Products Company | | | | March 11, 20168, 2019 | | | | /s/ Robert G. Ruhlman | | | | | Robert G. Ruhlman | | | | | Chairman, President and Chief Executive Officer | | | | | (principal executive officer) | | | | March 11, 20168, 2019 | | | | /s/ Eric R. GraefMichael A. Weisbarth | | | | | Eric R. GraefMichael A. Weisbarth | | | | | Chief Financial Officer, Vice President -– Finance and Treasurer | | | | | (principal financialaccounting officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacity and on the dates indicated. March 8, 2019 | | | | | March 11, 2016 | | | | /s/ Robert G. Ruhlman | | | | | Robert G. Ruhlman | | | | | Chairman, President and Chief Executive Officer | | | | March 11, 2016 | | | | /s/ Barbara P. Ruhlman
| | | | | Barbara P. Ruhlman | March 8, 2019 | | | | Director | | | | March 11, 2016 | | | | /s/ Glenn E. Corlett | | | | | Glenn E. Corlett | | | | | Director | | | | March 11, 20168, 2019 | | /s/ Matthew E. Frymier | | | Matthew E. Frymier | | | Director | | | | March 8, 2019 | | /s/ Michael E. Gibbons | | | | | Michael E. Gibbons | | | | | Director | | | | March 11, 20168, 2019 | | | | /s/ R. Steven Kestner | | | | | R. Steven Kestner | | | | | Director | | | | March 11, 20168, 2019 | | | | /s/ Richard R. Gascoigne | | | | | Richard R. Gascoigne | | | | | Director | | | | March 11, 20168, 2019 | | | | /s/ J. Ryan Ruhlman | | | | | J. Ryan Ruhlman | | | Director | March 8, 2019 | | /s/ Maegan A. R. Cross | | | Maegan A. R. Cross | | | Director |
PREFORMED LINE PRODUCTS COMPANY SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS Year Ended December 31, 2015, 20142018, 2017 and 20132016 (Thousands of dollars) | For the year ended December 31, 2015: | | Balance at beginning of period | | | Additions charged to costs and expenses | | Deductions | | Other additions or deductions (a) | | Balance at end of period | | | | For the year ended December 31, 2018: | | | Balance at beginning of period | | | Additions charged to costs and expenses | | | Deductions | | | Other additions or deductions | | | Balance at end of period | | Allowance for doubtful accounts | | $ | 1,943 | | | $ | 524 | | | $ | (414 | ) | | $ | (182 | ) | | $ | 1,871 | | | $ | 2,910 | | | $ | 449 | | | $ | (529 | ) | | $ | (178 | ) | | $ | 2,652 | | Reserve for credit memos | | | 428 | | | | 437 | | | (408 | ) | | (2 | ) | | 455 | | | | 415 | | | | 802 | | | | (688 | ) | | | (3 | ) | | | 526 | | Slow-moving and obsolete inventory reserves | | | 9,183 | | | | 2,477 | | | (1,509 | ) | | 79 | | | 10,230 | | | | 9,066 | | | | 1,341 | | | | (1,658 | ) | | | (287 | ) | | | 8,462 | | Accrued product warranty | | | 892 | | | | 74 | | | (158 | ) | | (94 | ) | | 714 | | | | 1,076 | | | | 97 | | | | (133 | ) | | | (112 | ) | | | 928 | | Foreign net operating loss tax carryforwards | | | 3,614 | | | | 2,105 | | | (287 | ) | | (223 | ) | | 5,209 | | | Deferred tax asset valuation allowance | | | | 3,965 | | | | 568 | | | | (761 | ) | | | (277 | ) | | | 3,495 | | | | | | | | | | | | | | | | | | | | | | | | For the year ended December 31, 2014: | | Balance at beginning of period | | | Additions charged to costs and expenses | | Deductions | | Other additions or deductions (a) | | Balance at end of period | | | | For the year ended December 31, 2017: | | | Balance at beginning of period | | | Additions charged to costs and expenses | | | Deductions | | | Other additions or deductions (a) | | | Balance at end of period | | Allowance for doubtful accounts | | $ | 1,441 | | | $ | 803 | | | $ | (260 | ) | | $ | (41 | ) | | $ | 1,943 | | | $ | 2,815 | | | $ | 472 | | | $ | (432 | ) | | $ | 55 | | | $ | 2,910 | | Reserve for credit memos | | | 672 | | | | 408 | | | (652 | ) | | 0 | | | 428 | | | | 395 | | | | 693 | | | | (675 | ) | | | 2 | | | | 415 | | Slow-moving and obsolete inventory reserves | | | 8,075 | | | | 2,244 | | | (701 | ) | | (435 | ) | | 9,183 | | | | 11,560 | | | | 998 | | | | (3,855 | ) | | | 363 | | | | 9,066 | | Accrued product warranty | | | 1,140 | | | | (45 | ) | | (133 | ) | | (70 | ) | | 892 | | | | 1,058 | | | | 347 | | | | (399 | ) | | | 70 | | | | 1,076 | | Foreign net operating loss tax carryforwards | | | 1,420 | | | | 2,553 | | | (232 | ) | | (127 | ) | | 3,614 | | | Deferred tax asset valuation allowance | | | | 3,805 | | | | 490 | | | | (312 | ) | | | (18 | ) | | | 3,965 | | | | | | | | | | | | | | | | | | | | | | | | For the year ended December 31, 2013: | | Balance at beginning of period | | | Additions charged to costs and expenses | | Deductions | | Other additions or deductions (a) | | Balance at end of period | | | | For the year ended December 31, 2016: | | | Balance at beginning of period | | | Additions charged to costs and expenses | | | Deductions | | | Other additions or deductions (a) | | | Balance at end of period | | Allowance for doubtful accounts | | $ | 1,395 | | | $ | 419 | | | $ | (368 | ) | | $ | (5 | ) | | $ | 1,441 | | | $ | 1,871 | | | $ | 1,809 | | | $ | (864 | ) | | $ | (1 | ) | | $ | 2,815 | | Reserve for credit memos | | | 644 | | | | 418 | | | (390 | ) | | 0 | | | 672 | | | | 455 | | | | (674 | ) | | | 613 | | | | 1 | | | | 395 | | Slow-moving and obsolete inventory reserves | | | 6,773 | | | | 2,672 | | | (1,006 | ) | | (364 | ) | | 8,075 | | | | 10,230 | | | | 2,825 | | | | (1,408 | ) | | | (87 | ) | | | 11,560 | | Accrued product warranty | | | 1,229 | | | | 443 | | | (475 | ) | | (57 | ) | | 1,140 | | | | 714 | | | | 649 | | | | (269 | ) | | | (36 | ) | | | 1,058 | | U.S. tax capital loss | | | 2,034 | | | | 0 | | | (49 | ) | | (1,985 | ) | | 0 | | | Foreign net operating loss tax carryforwards | | | 295 | | | | 1,310 | | | (115 | ) | | (70 | ) | | 1,420 | | | Deferred tax asset valuation allowance | | | | 5,209 | | | | 346 | | | | (1,175 | ) | | | (575 | ) | | | 3,805 | |
(a) | Other additions or deductions relate to translation adjustments and 2013 reflects the expiration of U.S. capital loss and certain foreign net operating loss carryforwards and 2014 reflects the expiration of certain foreign net operating loss carryforwards. |
Exhibit Index
| | | | | 3.1 | | Amended and Restated Articles of Incorporation (incorporated by reference to the Company’s Registration Statement on Form 10). | | | 3.2 | | Amended and Restated Code of Regulations of Preformed Line Products Company (incorporated by reference to the Company’s Registration Statement on Form 10). | | | 4 | | Description of Specimen Stock Certificate (incorporated by reference to the Company’s Registration Statement on Form 10). | | | 10.1 | | Preformed Line Products Company 1999 Employee Stock Option Plan (incorporated by reference to the Company’s Registration Statement on Form 10).* | | | 10.2 | | Preformed Line Products Company Officers Bonus Plan (incorporated by reference to the Company’s 10-K filing for the year ended December 31, 2007).* | | | 10.3 | | Preformed Line Products Company Executive Life Insurance Plan – Summary (incorporated by reference to the Company’s Registration Statement on Form 10).* | | | 10.4 | | Preformed Line Products Company Supplemental Profit Sharing Plan (incorporated by reference to the Company’s Registration Statement on Form 10).* | | | 10.5 | | Revolving Credit Agreement between National City Bank (now, PNC Bank, National Association) and Preformed Line Products Company, dated December 30, 1994 (incorporated by reference to the Company’s Registration Statement on Form 10). | | | 10.6 | | Amendment to the Revolving Credit Agreement between National City Bank (now, PNC Bank, National Association) and Preformed Line Products Company, dated October 31, 2002 (incorporated by reference to the Company’s 10-K filing for the year ended December 31, 2003). | | | 10.7 | | Line of Credit Note and Loan Agreement dated February 5, 2010 between the Company and PNC Bank, National Association (incorporated by reference to the Company’s 10-K filing for the fiscal year ended December 31, 2010). | | | 10.8 | | Amended and Restated Loan Agreement dated September 24, 2015 between the Company and PNC Bank, National Association, filed herewith. | | | 10.9 | | Preformed Line Products Company 1999 Employee Stock Option Plan Incentive Stock Option Agreement (incorporated by reference to the Company’s 10-K filing for the year ended December 31, 2004).* | | | 10.10 | | Preformed Line Products Company Chief Executive Officer Bonus Plan (incorporated by reference to the Company’s10-K filing for the year ended December 31, 2007). | | | 10.11 | | Preformed Line Products Company Amended and Restated Long Term Incentive Plan of 2008 (incorporated by reference to the Company’s Definitive Proxy Statement filed on March 11, 2011).* | | | 10.12 | | Deferred Shares Plan (incorporated by reference to the Company’s 8-K current report filing dated August 21, 2008).* | | | 10.13 | | Form of Restricted Shares Grant Agreement under the Amended and Restated Long Term Incentive Plan of 2008 (incorporated by reference to the Company’s 10-Q filing for the quarter ended September 30, 2008).* | | | 10.14 | | Form of Restricted Stock Unit Award Agreement under the Amended and Restated Long Term Incentive Plan of 2008 (incorporated by reference to the Company’s 10-K filing for the year ended December 31, 2013).* | | | 10.15 | | Form of Restricted Stock Unit Award Agreement under the Amended and Restated Long Term Incentive Plan of 2008 (incorporated by reference to the Company’s 10-K filing for the year ended December 31, 2014).* | | | 10.16 | | Shares Purchase Agreement, dated August 11, 2015, between the Company and the trustee under the Irrevocable Trust Agreement between Barbara P. Ruhlman and Bernard L. Karr dated July 29, 2008 (incorporated by reference to the Company’s Form 8-K filed on August 11, 2015). | | | 10.17 | | Shares Purchase Agreement, dated August 11, 2015, between the Company and the Thomas F. Peterson Foundation (incorporated by reference to the Company’s Form 8-K filed on August 11, 2015). | | | 10.18 | | Form of Restricted Stock Agreement under the Amended and Restated Long Term Incentive Plan of 2008, filed herewith.* |
| | | | | 10.19 | | Form of Restricted Stock Unit Award Agreement under the Amended and Restated Long Term Incentive Plan of 2008, filed herewith.* | | | 10.20 | | Amendment to Amended and Restated Loan Agreement dated November 6, 2015 between the Company and PNC Bank, National Association, filed herewith. | | | 14.1 | | Preformed Line Products Company Code of Conduct (incorporated by reference to the Company’s 8-K current report filing dated August 6, 2007). | | | 21 | | Subsidiaries of Preformed Line Products Company, filed herewith. | | | 23.1 | | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm, filed herewith. | | | 31.1 | | Certifications of the Principal Executive Officer, Robert G. Ruhlman, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. | | | 31.2 | | Certification 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. | | | 101.INS | | XBRL Instance Document. | | | 101.SCH | | XBRL Taxonomy Extension Schema Document. | | | 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. | | | 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. | | | 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. | | | 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
* | Indicates management contracts or compensatory plan or arrangement. |
7974
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