SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended December, 31, 2001
Commission file number 0-31164
Preformed Line Products Company
(Exact Name of Registrant as Specified in Its Charter)
Ohio 34-0676895
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(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
660 Beta Drive
Mayfield Village, Ohio 44143
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(Address of Principal Executive Office) (Zip Code)
(440) 461-5200
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: (None)
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, $2 par value per share
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ___
The aggregate market value of voting and non-voting common shares held by
non-affiliates of the registrant as of February 28, 2002 was $56,899,900, based
on the closing price of such common shares, as reported on the NASDAQ National
Market System. As of March 12, 2002, there were 5,757,030 common shares of the
Company ($2 par value) outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement for the Annual Meeting of
Shareholders to be held April 29, 2002 are incorporated by reference into Part
III Items 10, 11, 12, and 13.
TABLE OF CONTENTS
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PAGE
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PART I.
Item 1. Business..................................................................................4
Item 2. Properties...............................................................................12
Item 3. Legal Proceedings........................................................................13
Item 4. Submission of Matters to a Vote of Security Holders......................................13
PART II.
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.....................14
Item 6. Selected Financial Data..................................................................15
Item 7. Management Discussion and Analysis of Financial Condition and Results
of Operations..........................................................................15
Item 7A. Quantitative and Qualitative Disclosures.................................................20
Item 8. Financial Statements and Supplementary Data..............................................21
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...................................................................37
PART III.
Item 10. Directors and Executive Officers of the Registrant.......................................37
Item 11. Executive Compensation...................................................................37
Item 12. Security Ownership of Certain Beneficial Owners and Management...........................37
Item 13. Certain Relationships and Related Transactions...........................................37
PART IV.
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K.........................38
SIGNATURES.......................................................................................................40
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FORWARD-LOOKING STATEMENTS
This Form 10-K contains forward-looking statements regarding the
Company's and management's beliefs and expectations. As a general matter,
forward-looking statements are those focused upon future plans, objectives or
performance (as opposed to historical items) and include statements of
anticipated events or trends and expectations and beliefs relating to matters
not historical in nature. Such forward-looking statements are subject to
uncertainties and factors relating to the Company's operations and business
environment, all of which are difficult to predict and many of which are beyond
the Company's control. Such uncertainties and factors could cause the Company's
actual results to differ materially from those matters expressed in or implied
by such forward-looking statements.
The following factors, among others, could affect the Company's future
performance and cause the Company's actual results to differ materially from
those expressed or implied by forward-looking statements made in this report:
- The overall demand for cable anchoring and control hardware for
electrical transmission and distribution lines on a worldwide
basis, which has a slow growth rate in mature markets such as the
United States, Canada, Japan and Western Europe;
- The effect on the Company's business resulting from economic
uncertainty within Asia-Pacific and Latin American regions;
- Technology developments that affect longer-term trends for
communication lines such as wireless communication;
- The Company's success at continuing to develop proprietary
technology to meet or exceed new industry performance standards
and individual customer expectations;
- The rate of progress in continuing to reduce costs and in
modifying the Company's cost structure to maintain and enhance
the Company's competitiveness;
- The Company's success in strengthening and retaining
relationships with the Company's customers, growing sales at
targeted accounts and expanding geographically;
- The extent to which the Company is successful in expanding the
Company's Product line into new areas for inside plant;
- The Company's ability to identify, complete and integrate
acquisitions for profitable growth;
- The potential impact of consolidation and deregulation among the
Company's suppliers, competitors and customers;
- The relative degree of competitive and customer price pressure on
the Company's products;
- The cost, availability and quality of raw materials required for
the manufacture of products;
- The effects of fluctuation in currency exchange rates upon the
Company's reported results from international operations,
together with non-currency risks of investing in and conducting
significant operations in foreign countries, including those
relating to political, social, economic and regulatory factors;
- Changes in significant government regulations affecting
environmental compliance;
- The Company's ability to continue to compete with larger
companies who have acquired a substantial number of the Company's
former competitors; and
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- The factors set forth under the caption "Risk Factors" in the
Company's Form 10 Registration Statement filed with the
Securities and Exchange Commission (see Amendment No.3 to Form 10
filed on August 24, 2001). The Form 10 can be found on the
Securities and Exchange Commission's website at www.sec.gov.
PART I
ITEM 1. BUSINESS
BACKGROUND
Preformed Line Products Company ("the Company") is a international
designer and manufacturer of products and systems employed in the construction
and maintenance of overhead and underground networks for the energy,
communications, cable (TV) provider, information (data communication) and other
similar industries. The Company's primary products support, protect, connect,
terminate and secure cables and wires. The Company also manufactures a line of
products serving the voice and data transmission markets. The Company's goal is
to continue to achieve profitable growth as a leader in the innovation,
development, manufacture and marketing of technically advanced products and
services related to energy, communications and cable systems and to take
advantage of this leadership position to sell additional quality products in
familiar markets.
The Company serves a worldwide market through strategically located
domestic and international manufacturing facilities. Each of the Company's
domestic manufacturing facilities and many of the Company's foreign
manufacturing facilities are International Standards Organization ("ISO") 9001
certified. The ISO 9001 certification is an internationally recognized quality
standard for manufacturing and assists the Company in marketing its products in
certain markets. The Company's customers include public and private energy
utilities and communication companies, cable operators, financial institutions,
governmental agencies, original equipment manufacturers, contractors and
subcontractors, distributors and value-added resellers. The Company is not
dependent on a single customer or a few customers. No single customer accounts
for more than ten percent of the Company's consolidated revenues.
The Company's products include:
- Formed Wire and Related Hardware Products
- Protective Closures
- Data Communication Interconnection Devices
Formed Wire Products are used in the energy, communications and cable
industries to support, protect, terminate and secure both power conductor and
communication cables and to control cable dynamics (e.g., vibration). These
products are based on the principle of forming a variety of stiff wire materials
into a helical (spiral) shape. Advantages of using the Company's helical formed
wire products are that they are economical, and dependable and easy to use. The
Company introduced formed wire products to the power industry over 50 years ago
and such products enjoy an almost universal acceptance in the Company's markets.
Formed wire and related hardware products are estimated to be 52%, 47%, and 44%
of the Company's revenues in 1999, 2000 and 2001, respectively.
Protective Closures, including splice cases, are used to protect copper
cable or fiber optic cable from moisture, environmental hazards and other
potential contaminants. Protective closures are estimated to be 28%, 29% and 34%
of the Company's revenues in 1999, 2000 and 2001, respectively.
Data Communication Interconnection Devices are products used in
high-speed data systems to connect electronic equipment. Data communication
interconnection devices are estimated to be 20%, 24% and 22% of the Company's
revenues in 1999, 2000 and 2001, respectively.
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CORPORATE HISTORY
The Company was incorporated in Ohio in 1947 to manufacture and sell
helically shaped "armor rods," which are sets of stiff helically shaped wires
applied on an electrical conductor at the point where it is suspended or held.
Thomas F. Peterson, the Company's founder, developed and patented a unique
method to manufacture and apply these armor rods to protect electrical
conductors on overhead power lines. Over a period of years Peterson and the
Company developed, tested, patented, manufactured and marketed a variety of
helically shaped products for use by the electrical and telephone industries.
Although all of the Peterson patents have now expired, those patents served as
the nucleus for licensing the Company's formed wire products abroad.
The success of the Company's formed wire products in the United States
led to expansion abroad. The first international license agreement was
established in the mid-1950s in Canada. In the late 1950s the Company's products
were being sold through joint ventures and licensees in Canada, England,
Germany, Spain and Australia. Additionally, the Company began export operations
and promoted products into other selected offshore markets. The Company
continued its expansion program, bought out most of the original licensees, and,
by the mid-1990s, owned complete operations in Australia, Brazil, Canada, Great
Britain, Mexico, South Africa and Spain and held a minority interest in two
joint ventures in Japan.
Recognizing the need for a stronger presence in the fast growing Asian
market, in 1996 the Company also formed a joint venture in China and, in 2000,
became sole owner of this venture. All of the Company's international
subsidiaries operate as independent business units with the necessary
infrastructure (manufacturing, engineering, marketing and general management) to
support local business activities. Each is staffed with local personnel at all
levels to ensure that the Company is well versed in local business practices,
cultural constraints, technical requirements and the intricacies of local client
relationships.
In 1968, the Company expanded into the underground telecommunications
field by acquisition of the Smith Company located in California. The Smith
Company had a patented line of buried closures and pressurized splice cases.
These closures and splice cases protect copper cable openings from environmental
damage and degradation. The Company continued to build on expertise acquired
through the acquisition of the Smith Company and in 1995 introduced the highly
successful Coyote closure line of products. Since 1995 nine domestic and three
foreign patents have been granted to the Company on the Coyote closure. None of
the Coyote patents has expired. The earliest Coyote patent was filed in April
1995 and will not expire until April 2015.
In 2001, the Company introduced its new Armadillo closure, a plastic
pressurized underground, buried and aerial splice case for copper voice, data
and video cables. This new product is an alternative to the Company's stainless
steel splice case, which for over 30 years has set an industry standard for
waterproof, re-enterable underground and buried closures and aerial
applications.
In 1993, the Company purchased the assets of Superior Modular Products
Company. Located in Asheville, North Carolina, Superior Modular Products is a
technical leader in the development and manufacture of high-speed
interconnection devices for voice, data and video applications. This acquisition
was the catalyst to expand the Company's range of communication products to
components for structuring cabling systems used inside a customer's premises.
In 2000, the Company acquired Rack Technologies Pty., Limited,
headquartered in Sydney, Australia. Rack Technologies is a specialist
manufacturer of rack system enclosures for the communications, electronics and
securities industries. This acquisition complements and broadens the Company's
existing line of data communication products used inside a customer's premises.
The Company's corporate headquarters is located at 660 Beta Drive,
Mayfield Village, Ohio 44143. Telephone number (440) 461-5200.
BUSINESS
The demand for the Company's products comes primarily from new,
maintenance and repair construction for energy, communication and data
communication customers. Over the past several years a significant portion of
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the Company's growth has been generated by customers of the Company's power
transmission and fiber optic products. Maintenance constructions by the
Company's customers use many of the Company's products, including formed wire
products, to revitalize the aging outside plant infrastructure. Many of the
Company's products are used on a proactive basis by the Company's customers to
reduce and prevent lost revenue. A single malfunctioning line could cause the
loss of thousands of dollars per hour for a power or communication customer. A
malfunctioning fiber cable could also result in substantial revenue loss. Repair
construction by the Company's customers generally occurs in the case of
emergency or natural disasters, such as hurricanes, tornadoes, earthquakes,
floods or ice storms. Under these circumstances, the Company provides 24-hour
service to get the repair products to customers as quickly as possible.
The Company has adapted the formed wire products' helical technology
for use in a wide variety of fiber optic cable applications that have special
requirements. The Company's formed wire products are uniquely qualified for
these applications due to the gentle gripping over a greater length of the fiber
cable. This is an advantage over traditional pole line hardware clamps that
compress the cable to the point of possible fatigue and optical signal
deterioration.
The Company's protective closures and splice cases are used to protect
cable from moisture, environmental hazards and other potential contaminants. The
Company's splice case is an easily re-enterable closure that allows utility
maintenance workers access to the cable splice closure to repair or add
communications services. Over the years, the Company has made many significant
improvements in the splice case that have greatly increased its versatility and
application in the market place. The Company also designs and markets custom
splice cases to satisfy specific customer requirements. This has allowed the
Company to remain a strong partner with several primary customers and has earned
the Company the reputation as a responsive and reliable supplier.
In the early 1980s, fiber optic cable was first deployed in the outside
plant environment. Through fiber optic technologies, a much greater amount of
both voice and data communication could be transmitted reliably. In addition,
this technology solved the cable congestion problem that the large count copper
cable was causing in underground, buried and aerial applications. The Company
developed and adapted copper closures for use in the emerging fiber optic world.
In the late 1980s, the Company developed a series of splice cases designed
specifically for fiber application. In the mid-1990s, the Company developed its
plastic Coyote closure. The Coyote closure is an example of the Company
developing a new line of proprietary products to meet the changing needs of its
customers.
The Company also designs and manufactures data communication
interconnect devices and enclosures for data communications networks, offering a
comprehensive line of copper and fiber optic cross-connect systems. The product
line offers a comprehensive network system within a building or premise.
JOINT VENTURES AND LICENSE AGREEMENTS
The Company is currently a minority partner in two joint ventures in
Japan, holding a 49% ownership interest in Japan PLP Co. LTD. and a 24%
ownership interest in Toshin Denko Kabushiki Kaisha. Neither of these joint
ventures is believed to be significant to the Company's overall business. The
Company receives royalties under fifteen separate license agreements. The
Company does not believe that its business is materially dependent on any one
license agreement.
MARKETS
The Company markets its products to the energy, communications, cable
provider and information (data communication) industries. While rapid changes in
technology have blurred the distinctions between telephone, cable, and data
communication, the energy industry is clearly separate. The Company's role in
the energy industry is to supply formed wire products and related hardware used
with the electrical conductors, cables and wires that transfer power from the
generating facility to the ultimate user of that power. Formed wire products are
used to support, protect, terminate and secure both power conductor and
communication cables and to control cable dynamics.
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Electric Utilities - Transmission. The electric transmission grid is
the interconnected network of high voltage aluminum conductors used to transport
large blocks of electric power from generating facilities to distribution
networks. Currently, there are three major power grids in the United States: the
Eastern Interconnect, the Western Interconnect and the Texas Interconnect.
Virtually all electrical energy utilities are connected with at least one other
utility by one of these major grids. The Company believes that the transmission
grid has been neglected throughout much of the United States for more than a
decade. Additionally, because of deregulation, many electric utilities have
turned this responsibility over to Independent System Operators (ISOs), who have
also been slow to add transmission lines. With demand for power now exceeding
supply in some areas, the need for the movement of bulk power from the
energy-rich states to the energy-deficient areas means that new transmission
lines will likely be built and many existing lines will likely be refurbished.
In addition, consolidations are also driving the demand for new transmission
lines, because merged utilities need to tie their systems together. The Company
believes that this will generate growth for the Company's products in this
market over at least the next several years. In addition, construction of
international transmission grids is occurring in all regions of the world,
including North America. However, consolidation in the markets the Company
services may also have an adverse impact on the Company's revenues.
Electric Utilities - Distribution. The distribution market includes
those utilities that distribute power from a substation where voltage is reduced
to levels appropriate for the consumer. Unlike the transmission market in this
era of deregulation, distribution is still handled primarily by local electric
utilities. These utilities are motivated to reduce cost in order to maintain and
enhance their profitability. The Company believes that its growth in the
distribution market will be achieved primarily as a result of incremental gains
in market share driven by emphasizing the Company's quality products and service
over price. Internationally, in the developing regions there is increasing
political pressure to extend the availability of electricity to additional
populations. To address this demand, the electricity network providers continue
to expand through increased construction and investment.
Communication and Cable. The communications and cable industries
continue the rapid evolution and expansion they have been experiencing for a
number of years, both domestically and worldwide. Major developments, including
the Internet and other high-speed data communications technologies, ongoing
convergence between the cable and communications industries, and demand for
enhanced communications services, have led to a changing regulatory and
competitive environment in many markets throughout the world. The deployment of
new metro networks or improvements to existing networks for advanced
applications is a national priority for many countries, permitting them to
participate and compete in the rapidly emerging information-based global
economy.
To meet today's demands and anticipating future demand, cable
operators, local communications operators and power utilities are building,
rebuilding or upgrading signal delivery networks around the world. These
networks are designed to deliver video and voice transmissions and provide
Internet connectivity to individual residences and businesses. Operators deploy
a variety of network technologies and architectures, to carry broadband and
narrowband signals.
These architectures are constructed of electronic hardware connected
via coaxial cables, copper wires or optic fibers. The Company manufactures
closures that these industries use when they require connections or splice
housings in a secure, protective closure and cable management connectivity
systems.
As critical components of the outdoor infrastructure, closures provide
protection against weather and vandalism and permit ready access to devices for
technicians who maintain and manage the system. Cable operators and local
telephone network operators place great reliance on manufacturers of protective
closures because any material damage to the signal delivery networks is likely
to disrupt communications services. In addition to closures, the Company
supplies the communication and cable industry with its formed wire products to
hold, support, protect and terminate the copper wires and cables and the fiber
optic cables used by that industry to transfer voice or data signals.
Due to the growing demand for communication bandwidth, the industry is
finding new technological methods to increase the usage of copper-based plant
through high-speed digital subscriber lines (DSLs). The primary driver of this
increase is the Internet and data-related communications. This is also
contributing to the increased deployment of fiber and coaxial cable in all areas
of the communication industry. The Company has been
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actively pursuing the development of products for the communication operating
companies, the Inter-Exchange Carriers (IXCs), and the Competitive Local
Exchange Carriers (CLECs), as well as cable operator companies.
Fiber Optic Hardware. Companies seeking to serve the burgeoning
Internet needs of their customers are providing substantially increased access
speed by installing fiber optic cable onto all types of utility poles and
rights-of-way including those used by energy and communication companies.
Customers serving the Internet represent an opportunity for the Company to
increase its sales of helical formed wire products specifically designed for
fiber applications.
Data Communication. The data communication market is being driven by
the continual demand for increased bandwidth. Growing Internet Service Providers
(ISPs), construction in Wide Area Networks (WANs) and demand for data
communication in the workplace are all key elements to the increased demand for
the connecting devices made by the Company. This market will increasingly be
focused on the systems that provide the highest speed and highest quality
signal, such as fiber optic and copper networks. The Company's connecting
devices are sold to a number of categories of customers including (i) original
equipment manufacturers (OEMs), which use the Company's "patch panels" to make
their electronic components, (ii) ISPs, (iii) large companies and organizations
which have their own LAN (local area network) for data communication, and (iv)
national and international distributors of electronic products for use in the
above markets.
Other Markets. The Company's formed wire products can also be used in
other industries which require a method of securing or terminating cables,
including the metal building and tower and antenna industries, the arborist
industry, and various applications within the marine systems industry. Products
other than formed wire products are also marketed to other industries. For
example, the Company's urethane capabilities allow it to market products to the
light rail industry, while plastic processes are utilized to manufacture
products for the toy industry. The Company continues to explore new and
innovative uses of its manufacturing capabilities; however, these markets remain
a small portion of overall consolidated sales.
FOREIGN OPERATIONS
Except for geography, the foreign business segment of the Company is
essentially the same as its domestic business. It manufactures in its foreign
plants the same types of products as are sold domestically, it sells to the same
types of customers and faces the same types of competition (and in some cases
the same competitors). Sources of supply of raw materials are not significantly
different internationally. See Note K to the Consolidated Financial Statements
for information relating to certain foreign and domestic financial data of the
Company.
While a number of the Company's foreign plants are in developed
countries, the Company believes it has strong market opportunities in developing
countries such as Brazil and Mexico and, in particular, China, where the need
for the transmission and distribution of electrical power is significant. The
Company is now serving the Far East market, other than China and Japan,
primarily from Australia. In addition, as the need arises, the Company is
prepared to establish new manufacturing facilities abroad. For example, in
January 2001 the Company moved its Mexican manufacturing operations from a
leased facility in Mexico City, Mexico to a newly constructed facility in
Queretaro, Mexico.
SALES AND MARKETING
Nationally and internationally, the Company markets its products
through a direct sales force and manufacturer's representatives. The latter are
independent organizations that represent the Company as well as other
complementary product lines. These organizations are paid a commission based on
the sales amount. The direct sales force is employed by the Company and works
with the manufacturer's representatives as well as key direct accounts and
distributors, who also buy and resell the Company's products.
RESEARCH AND DEVELOPMENT
The Company is committed to providing technical leadership through
scientific research and product development in order to continue to expand the
Company's position as a supplier to the communications and power industries.
Research is conducted on a continuous basis using internal experience in
conjunction with outside
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professional expertise to develop state-of-the-art materials for all of the
Company's products that capitalize on cost-efficiency while offering exacting
mechanical performance that meets or exceeds industry standards. The Company's
research and development activities have resulted in numerous patents being
issued to the Company (see "Patents" below).
Early in its history the Company recognized the need to understand the
performance of its products and the needs of its customers. To that end, the
Company developed its own Research and Engineering Center in Cleveland, Ohio.
Using the Research and Engineering Center, engineers and technicians could
simulate a wide range of external conditions encountered by the Company's
products to ensure quality, durability and performance. The work performed in
the Research and Engineering Center included advanced studies and
experimentation with various forms of vibration. This work has contributed
significantly to the collective knowledge base of the industries the Company
serves and is the subject matter of many papers and seminars presented to these
industries. The Company also developed the industry's first mobile testing
laboratory, the Dynalab, to monitor the phenomena affecting overhead conductor,
wire and cable, allowing the Company's sales representatives to work directly
with customers in the field for training, problem identification and problem
solving.
In 1979, the Company relocated and expanded its Research and
Engineering Center as a 29,000-square-foot addition to its World Headquarters in
Mayfield Village, Ohio. The Company believes that this facility is one of the
most sophisticated in the world in its specialized field. The expanded Research
and Engineering Center also has an advanced prototyping technology machine
on-site to develop models of new designs where intricate part details are
studied prior to the construction of expensive production tooling. Today, the
Company's reputation for vibration testing, tensile testing, fiber optic cable
testing, environmental testing, field vibration monitoring and third-party
contract testing is a major asset. In addition to testing, the work done at the
Company's Research and Development Center continues to fuel product development
efforts. For example, the Company estimates that approximately 15% to 20% of
2001 revenues were attributed to products developed by the Company in the past
five years. In addition, the Company's position in the industry is further
reinforced by its long-standing leadership role in many key international
technical organizations including IEEE (Institute of Electrical and Electronics
Engineers), CIGRE (Counsiel Internationale des Grands Reseaux Electriques a
Haute Tension), and IEC (International Electromechanical Commission). These
organizations are charged with the responsibility of establishing industrywide
specifications and performance criteria. See Note A to the Consolidated
Financial Statements for information relating to the Company's research and
development expenses in 1999, 2000 and 2001.
PATENTS
The Company applies for patents in the United States and other
countries, as appropriate, to protect its significant patentable developments.
As of December 31, 2001, the Company had in force 36 U.S. patents and 50 foreign
patents in 15 countries and had pending five U.S. patent applications and four
foreign applications. While such domestic and foreign patents expire from time
to time, the Company continues to apply for and obtain patent protection on a
regular basis. Patents held by the Company in the aggregate are of material
importance in the operation of the Company's business. The Company, however,
does not believe that any single patent, or group of related patents, is
essential to the Company's business as a whole or to any of its businesses.
Additionally, the Company owns and uses a substantial body of proprietary
information and numerous trademarks. The Company relies on nondisclosure
agreements to protect trade secrets and other proprietary data and technology.
As of December 31, 2001, the Company had obtained U.S. registration on 32
trademarks and two trademark applications remained pending. Foreign
registrations amounted to 155 registrations in 37 countries, with 22 pending
foreign registrations.
Since June 8, 1995, United States patents have been issued for terms of
20 years beginning with the date of filing of the patent application. Prior to
that time, a U.S. patent had a term 17 years from the date of its issuance.
Patents issued by foreign countries generally expire 20 years after filing. U.S.
and foreign patents are not renewable after expiration of their initial term.
U.S. and foreign trademarks are generally speaking perpetual, renewable in
10-year increments upon a showing of continued use. To the knowledge of
management the Company has not been subject to any formal allegation or charges
of infringement of intellectual property rights by any organization.
In the normal course of business, the Company from time to time makes
and receives inquiries with regard to possible patent and trademark
infringement. The extent of such inquiries from third parties has been limited
to
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verbal remarks to Company representatives at industry trade shows. The Company
believes that it is unlikely that the outcome of these inquiries will have a
material adverse effect on the Company's financial position.
COMPETITION
All of the markets that the Company serves are highly competitive. In
each market the principal methods of competition are price, performance, and
service. The Company believes, however, that several factors (described below)
provide the Company with a competitive advantage.
- The Company has a strong and stable workforce. This consistent
and continuous knowledge base has afforded the Company the
ability to provide superior service to the Company's customers
and representatives.
- The Company's Research and Engineering Center maintains a strong
technical support function to develop unique solutions to
customer problems.
- The Company is vertically integrated both in manufacturing and
distribution, continually upgrading equipment and increasing
warehouse space.
- The Company is sensitive to the marketplace and provides an extra
measure of service in cases of emergency, storm damage and other
rush situations. This high level of customer service and customer
responsiveness has become a hallmark of the Company.
Domestically, there are two competitors for formed wire products.
Although it has other competitors in many of the countries where it has plants,
the Company has leveraged its expertise and is very strong in the global market.
The Company believes that it is the world's largest manufacturer of formed wire
products. However, the Company's formed wire products compete against other pole
line hardware products manufactured by other companies.
Minnesota Manufacturing and Mining Company ("3M") is the primary
domestic competitor of the Company for pressurized copper closures. The Company
believes that 3M's market share for pressurized closures exceeds that of the
Company. Based on its experience in the industry the Company believes its market
share exceeds 30%. Internationally, with the exception of Canada, the Company is
just beginning to enter the closure market. The fiber optic closure market is
one of the most competitive product areas for the Company, with the Company
competing against, among others, Tyco International Ltd. and 3M. There are a
number of primary competitors and several smaller niche competitors that compete
at all levels in the marketplace. The Company believes that it is one of four
leading suppliers of fiber optic closures.
The Company's data communication competitors range from assemblers of
low cost, low quality components, to well-established multinational
corporations. This market is growing worldwide and competition continues to
expand to meet this demand. The Company's competitive strength is its
technological leadership and worldwide presence. Additionally, the Company
provides product to its licensees and other companies on a privately branded
basis. Patented technology developed by the Company is currently licensed to
many of the largest competitors. Low-cost Asian competitors, however, keep
pressure on prices and will continue to do so.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The principal raw materials used by the Company are galvanized wire,
stainless steel, aluminized steel wire, aluminum re-draw rod, plastic
(polyethylene and PVC) resins, glass-filled plastic compounds, neoprene rubbers
and aluminum ingots. The Company also uses certain other materials such as
fasteners, packaging materials and communications cable. The Company believes
that it has adequate sources of supply for the raw materials used in its
manufacturing processes and it regularly attempts to develop and maintain
sources of supply in order to extend availability and encourage competitive
pricing of these products.
Most plastic resins are purchased under annual contracts to stabilize
costs and improve delivery performance and are available from a number of
reliable suppliers. Aluminized steel wire and aluminum re-draw rod
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are purchased in standard stock diameters and coils under annual contracts
available from a number of reliable suppliers. Rolled stainless steel is
purchased under annual contracts. Glass-filled plastic compound is purchased
under an annual blanket contract with GE Polymerland. The Company is still in
the process of qualifying alternatives to the glass-filled plastic compound
purchased from GE Polymerland in order to improve the Company's cost control
efforts.
The Company also relies on certain other manufacturers to supply
products that complement the Company's product lines, such as aluminum and
ferrous castings, fiber optic cable and connectors, circuit boards and various
metal racks and cabinets. The Company believes there are multiple sources of
supply for these products.
There have been no shortages in materials that have had a material
adverse effect on the business, and none are expected.
BACKLOG ORDERS
The Company's backlog is not material. The Company's order backlog
generally represents two to four weeks. All customer orders entered are firm at
the time of entry. Substantially all orders are shipped within a two to four
week period unless the customer requests an alternative date.
SEASONALITY
The Company markets products that are used by utility maintenance and
construction crews worldwide. The products are marketed through distributors and
directly to end users, who maintain stock to ensure adequate supply for their
customers and construction crews. As a result, the Company does not have wide
variation in sales from quarter to quarter.
ENVIRONMENTAL
The Company is subject to extensive and changing federal, state, and
local environmental laws, including laws and regulations that (i) relate to air
and water quality, (ii) impose limitations on the discharge of pollutants into
the environment, (iii) establish standards for the treatment, storage and
disposal of toxic and hazardous waste, and (iv) require proper storage,
handling, packaging, labeling, and transporting of products and components
classified as hazardous materials. Stringent fines and penalties may be imposed
for noncompliance with these environmental laws. In addition, environmental laws
could impose liability for costs associated with investigating and remediating
contamination at the Company's facilities or at third-party facilities at which
the Company has arranged for the disposal treatment of hazardous materials.
Although no assurances can be given, the Company believes it is in
compliance in all material respects with all applicable environmental laws and
the Company is not aware of any noncompliance or obligation to investigate or
remediate contamination that could reasonably be expected to result in a
material liability. The Company does not expect to make any material capital
expenditure during the remainder of 2002 or during 2003 for environmental
control facilities. The environmental laws continue to be amended and revised to
impose stricter obligations, and compliance with future additional environmental
requirements could necessitate capital outlays. However, the Company does not
believe that these expenditures should ultimately result in a material adverse
effect on its financial position or results of operations. The Company cannot
predict the precise effect such future requirements, if enacted, would have on
the Company, although the Company believes that such regulations would be
enacted over time and would affect the industry as a whole.
EMPLOYEES
At December 31, 2001, the Company and its consolidated subsidiaries had
1,657 employees. Approximately 47% of the Company's employees are located in the
United States.
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ITEM 2. PROPERTIES
The Company currently owns or leases 16 facilities, which together
contain approximately 1.4 million square feet of manufacturing, warehouse,
research and development, sales and office space worldwide. Most of the
Company's international facilities contain space for offices, research and
engineering (R&E), warehousing and manufacturing with manufacturing using a
majority of the space. The following table provides information regarding the
Company's facilities:
LOCATION USE OWNED/LEASED SQUARE FEET
-------- --- ------------ -----------
1. Mayfield Village, Ohio Corporate Headquarters Owned 62,000
Research and Engineering
Center
2. Rogers, Arkansas Manufacturing Owned 310,000
Warehouse
Office
3. Charlotte, North Carolina Manufacturing Leased 9,000
4. Albemarle, North Carolina Manufacturing Owned 261,000
Warehouse
Office
5. Asheville, North Carolina Manufacturing Owned 46,300
R&E
Warehouse
Office
6. Sydney, Australia Manufacturing Leased 17,200
R&E
Warehouse
Office
7. Sydney, Australia Manufacturing Owned 90,950
R&E
Warehouse
Office
8. Sao Paulo, Brazil Manufacturing Owned 146,250
R&E
Warehouse
Office
9. Cambridge, Ontario, Canada Manufacturing Owned 70,450
Warehouse
Office
10. Andover, Hampshire, England Manufacturing Owned 88,770
R&E
Warehouse
Office
11. Queretaro, Mexico Manufacturing Owned 50,000
Warehouse
Office
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12. Pietermaritzburg, South Africa Manufacturing Owned 74,200
R&E
Warehouse
Office
13. Sevilla, Spain Manufacturing Owned 74,000
R&E
Warehouse
Office
14. Beijing, China Manufacturing Owned 37,700
Warehouse
Office
15. Lower Huff, New Zealand Manufacturing Leased 10,350
Warehouse
Office
16. Glenrothes Fife, Scotland Manufacturing Leased 30,000
Warehouse
Office
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company may be subject to litigation incidental
to its business. The Company is not a party to any pending legal proceedings
that the Company believes would, individually or in the aggregate, have a
material adverse effect on its financial condition, results of operations or
cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the security holders of the
Registrant during the quarter ended December 31, 2001.
EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position
- ---- --- --------
Jon R. Ruhlman 74 Chairman of the Company
Robert G. Ruhlman 45 President and Chief Executive Officer
R. Jon Barnes 49 Vice President - Marketing and Sales
Eric R. Graef 49 Vice President - Finance and Treasurer
William H. Haag 38 Vice President - International Operations
Robert C. Hazenfield 48 Vice President - Research and Engineering
Michael S. Pezo 51 Vice President - Manufacturing
Robert L. Weber 61 Vice President - Employee Relations
The following sets forth the name and recent business experience for
each person who is an executive officer of the Company at March 1, 2002.
Jon R. Ruhlman has been the Chairman of the Company since 1975. He
served as Chief Executive Officer from 1975 until July 2000. Jon R. Ruhlman
joined the Company in 1954 as an engineer in the Company's Research and
Engineering Center. He has served as a Director of the Company since 1956.
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Robert G. Ruhlman became Chief Executive Officer in July 2000. He had
served as President since 1995 (a position he continues to hold) and Chief
Operating Officer from 1995 until July 2000. Robert G. Ruhlman joined the
Company in 1979 as an engineer in the Company's former Marine Products Division.
He served as Vice President, Corporate Planning from 1989 until becoming
Executive Vice President in 1992. He has served as a Director of the Company
since 1992.
R. Jon Barnes was elected Vice President--Marketing and Sales in
January 1998. He held the position of Vice President--Telecommunications Sales
from 1993 until January 1998.
Eric R. Graef was elected Vice President--Finance and Treasurer in
December 1999. Prior to that time, Mr. Graef was employed by The Lubrizol
Corporation, a $1.7 billion specialty chemical manufacturer, in various
financial positions from 1986 until rejoining the Company in December 1999. Mr.
Graef was previously employed by the Company from 1978 through 1986.
William H. Haag was elected Vice President--International Operations in
April 1999. From January 1997 until January 1999 he was Regional Operations
Manager and from January 1999 until April 1999 he was director of International
Regional Operations.
Robert C. Hazenfield has served as Vice President--Research and
Engineering since April 1998. He served as Director of Research and Engineering
from January 1998 until April 1998 and as Manager of Telecommunication
Engineering from 1987 until December 1997.
Michael S. Pezo was elected Vice President--Manufacturing in April
1997. Prior to that, from May 1995 until April 1997 he served as Director of
Manufacturing.
Robert L. Weber began his employment with the Company in 1960. He was
elected Vice President--Employee Relations in 1986.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON SHARE AND RELATED SHAREHOLDER MATTERS
The Company's Common Shares are traded on NASDAQ under the trading
symbol "PLPC". As of March 12, 2002, the Company had approximately 230
shareholders of record. The following table sets for the periods indicated (i)
the high and low closing sale prices per share of the Company's Common Shares as
reported by the NASDAQ and the over-the-counter market (OTC) under the symbol
"PLIN" and (ii) the amount per share of cash dividends paid by the Company. The
Company's Common Shares began trading on the NASDAQ on September 18, 2001. The
OTC Common share price history below is based on the high and low selling price
as quoted by McDonald Investments, Inc. a market maker for the Company's Common
Shares. The quotations do not reflect adjustments for retail mark-ups, markdowns
or commissions and may not necessarily reflect actual transactions.
While the Company expects to continue to pay dividends of a comparable
amount in the near term, the declaration and payment of future dividends will be
made at the discretion of the Company's Board of Directors in light of then
current needs of the Company. Therefore, there can be no assurance that the
Company will continue to make such dividend payments in the future.
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Years Ended
-------------------------------------------------------------------------------
December 31, 2001 December 31, 2000
--------------------------------------- ------------------------------------
Quarter High Low Dividend High Low Dividend
- ---------------------------------------------------------------------------------------------------
First $17.25 $13.00 $0.15 $16.50 $13.25 $0.15
Second 22.00 13.88 0.20 19.00 14.00 0.15
Third 21.00 17.00 0.20 18.00 15.00 0.15
Fourth 19.50 14.50 0.20 16.75 13.50 0.15
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31
---------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
---------------------------------------------------------------------------------------
Thousands of dollars, except per share data
NET SALES AND INCOME
Net sales $196,365 $207,332 $195,245 $216,244 $204,644
Operating income 7,571 18,805 14,155 27,952 26,287
Income before income taxes 7,432 17,135 14,729 28,464 27,060
Net income 5,176 11,051 10,201 19,006 17,796
PER SHARE AMOUNTS*
Net income - basic and diluted $0.90 $1.91 $1.71 $3.10 $2.90
Dividends declared 0.75 0.60 0.60 0.58 0.50
Shareholders' equity 20.98 21.47 20.45 19.91 17.78
OTHER FINANCIAL INFORMATION
Current assets $83,226 $87,783 $84,531 $84,250 $75,217
Total assets 161,186 170,611 159,664 157,717 144,821
Current liabilities 37,646 26,244 24,790 24,002 21,711
Long-term debt 2,341 20,160 14,507 11,110 13,077
Shareholders' equity 120,780 123,856 119,194 121,776 109,079
* Reflects adjustment for two-for-one stock split effected in the form of a 100%
stock dividend on June 10, 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In 2001, the general downturn in the economy and the challenges in our
industry caused the Company's domestic sales and the resulting gross profit to
be lower than the previous year. Selling expenses increased as the Company
introduced its data communication product line in the international market.
Additionally, the Company wrote off assets, terminated employees and closed
locations in an effort to realign the data communication product line. These
were the primary reasons that 2001 earnings were below the prior year.
In 2001, the Company's domestic operations generated 58% of the
Company's sales and 20% of operating income. Domestic operating income was 1% of
sales while foreign operating income was 7% of sales. Domestic operating income
as a percentage of sales is lower than the foreign percentage because of (i)
lower gross profit of 3 percentage points, (ii) a realignment charge of 2
percentage points, (iii) a higher commission rate on domestic sales approaching
3 percentage points, and (iv) higher expenses at Corporate headquarters for
general and administrative and research and development activities of 4
percentage points partially offset by higher domestic other income (primarily
royalties) of 6 percentage points.
The Company wrote off assets and recorded severance payments related to
realigning its data communications product line during the third quarter ended
September 30, 2001. These charges related to abandoning a three-year effort to
enter the domestic market for local area network hubs and media converters and
-15-
re-evaluation of the strategy for penetrating the Asia-Pacific market with its
data communication products. As a result of these actions, the Company recorded
a pre-tax charge of $3.1 million ($2.0 million after tax) consisting of: $2.0
million of inventory write-offs (included in cost of products sold); $.7 million
write down of assets (included in costs and expenses); and $.4 million in
severance payments, lease cancellations and related expenses (included in costs
and expenses). The Company anticipates annualized savings of approximately $1.0
million from these realignment activities relating primarily to lower employee
and occupancy costs. See Note I in the Notes to Consolidated Financial
Statements for a detail discussion of this realignment charge.
Note K in the Notes to Consolidated Financial Statements contains a
description of the Company's operations and related financial disclosure for
domestic and foreign operations.
2001 RESULTS OF OPERATIONS COMPARED TO 2000
In 2001, consolidated revenue was $196.4 million, a decrease of $11.0
million, or 5%, from 2000. Domestic revenue decreased $12.5 million, or 10%,
primarily as a result of a decrease in volume. The volume decrease is
attributable to softness in the domestic market for both the Company's data
communication and formed wire products. Although the Company cannot quantify the
amount, it believes the events of September 11th exacerbated an already slowing
North American economy. The Company's 2001 fourth quarter revenues of $44.3
million were 10% below those of the fourth quarter 2000 and the third quarter
2001. Because of the general economic downturn combined with instability in the
energy and communications market sectors, the Company believes improvement in
domestic revenue may not be forthcoming until the end of 2002 or early 2003.
Foreign revenue increased $1.5 million, or 2%, primarily as a result of higher
volumes. The stronger dollar in 2001 had a negative impact of $8.4 million when
foreign sales were converted from native currency to U.S. dollars. Excluding the
impact of foreign currency, foreign sales would have increased by 12% and
consolidated sales would have decreased by only 1%.
Gross profit declined $4.4 million, or 7%, in 2001 compared to 2000.
This decrease was primarily attributable to lower sales, including the impact of
the stronger dollar. The realignment activities undertaken in the third quarter
2001 and continued efforts in reducing manufacturing costs are expected to
improve the gross profit percentage in 2002.
Costs and expenses of $53.5 million increased $6.6 million, or 14% over
2000. Expenses related to the introduction of the Company's data communication
products to foreign markets accounted for approximately 57% of this increase
while approximately 17% of the increase is the result of the business
realignment charge. The rest of the increase is due to general increases
including expenses associated with moving a plant in Mexico and fees associated
with registering the Company's common shares with the Securities and Exchange
Commission and listing the Company's common shares on the NASDAQ. Excluding the
impact of the business realignment charge from 2001, the Company expects 2002
costs and expenses to remain flat with 2001.
Royalty income of $2.0 million, decreased $.2 million from 2000 as a
result of higher foreign data communication royalty expense.
Operating income of $7.6 million is a decrease of $11.2 million, or 60%
from 2000. This decrease was the result of the $4.4 million decrease in gross
profit, the increase in cost and expenses of $6.6 million and the $.2 million
decrease in royalty income.
Expense of $.1 million included in other income (expense) was a $1.5
million improvement compared to 2000. This improvement is primarily attributable
to an increase in earnings of foreign joint ventures of $.5 million, a reduction
of interest expense of $.2 million, due to lower interest rates, and the
non-recurrence of the $.9 million adjustment in 2000 of accumulated amortization
pertaining to the Company's investment in qualified affordable housing project
limited partnerships.
In 2001, income before income taxes decreased $9.7 million, or 57%,
compared to 2000 as a result of the $11.2 million decrease in operating income
offset by the reduction in other expense of $1.5 million.
-16-
The effective tax rate in 2001 was 30.4% compared to 35.5% in 2000. The
difference in the effective rate is primarily due to the increased profitability
of our low tax jurisdiction subsidiaries in 2001. See Note F in the Notes to
Consolidated Financial Statements for further discussion of the differences
between the statutory tax rate and the effective tax rate.
Overall, net income for 2001 of $5.2 million decreased $5.9 million, or
53% compared to 2000. Earnings per share were $.90 for 2001 compared to $1.91 in
2000. Earnings per share for 2001 would have been $1.25 if the realignment
charge was excluded.
2000 RESULTS OF OPERATIONS COMPARED TO 1999
In 2000, consolidated revenues were $207.3 million, an increase of
$12.1 million or 6% over 1999. The impact of volume and price (including mix)
was favorable in the domestic market in 2000 and the increase in foreign sales
was primarily volume-driven. In 2000, the relatively stronger dollar had a
negative impact on sales of $3.3 million when foreign sales were converted from
foreign currency to U.S. dollars.
Gross profit improved $5.2 million, or 9%, in 2000 compared to 1999 on
a sales increase of 6%. This increase was equally attributable to (i) the
elimination of the foundry business that carried a negative gross profit, (ii)
the additional sales volume associated with Rack Technologies, and (iii) the
increase in sales throughout the world. The stronger dollar resulted in $1.0
million lower gross profit when international operations were translated from
foreign currencies to U.S. dollars. As a result of the above, gross profit as a
percent of sales improved from 30% in 1999 to 31% in 2000.
Costs and expenses of $46.9 million in 2000 represent a modest increase
of $.1 million, or less than 1%, from the $46.8 million incurred in 1999. The
stronger dollar resulted in a decrease in costs and expenses of $.7 million and
a $.4 million decrease in currency exchange losses reduced costs and expenses by
4% compared to 1999. Offsetting these decreases in expenses was $1.2 million of
costs and expenses of Rack Technologies following the acquisition of its assets.
Royalty income in 2000 of $2.2 million decreased $.4 million, or 16%
compared to 1999 as a result of lower domestic data communication product
royalties.
Operating income for 2000 increased $4.6 million, or 33%, compared to
1999. This increase was a result of the 9% increase in gross profit while costs
and expenses and royalty income were relatively flat.
Totals other income of $.5 million in 1999 decreased by $2.2 million
resulting in total other expense of $1.7 million in 2000. This decrease is
comprised primarily of $.6 million lower equity earnings resulting from the
depressed markets in Japan, higher interest expense of $.5 million from
increased debt and an adjustment of accumulated amortization of approximately
$.9 million pertaining to the Company's investment in qualified affordable
housing projects limited partnerships.
In 2000, income before income taxes increased $2.4 million compared to
1999 as a result of the $4.6 million increase in operating income offset by the
decrease in other income of $2.2 million.
The effective tax rate in 2000 was 35.5% compared to 30.7% in 1999.
This difference is primarily the result of the write-down in the partnership
investment which is not deductible for tax purposes and higher taxes in Canada
as a result of the full utilization of tax credits in 1999. See Note F to the
Consolidated Financial Statements for further discussion of the differences
between the statutory tax rate and the effective tax rate.
Overall, 2000 net income increased $.9 million, or 8%, from 1999.
Earnings per share were $1.91 in 2000 compared to $1.71 in 1999.
WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES
In 2001, net cash generated from operating activities of $17.2 million
along with $.8 million in proceeds generated by the sale of property and
equipment were used for capital expenditures and business acquisitions of $7.3
-17-
million, the payment of dividends of $4.0 million, the reduction the Company's
outstanding debt by $5.5 million and the repurchase of $.2 million of the
Company's common shares. After recognizing the effects of exchange rate changes
of $2.1 million, cash and cash equivalents decreased $1.1 million in 2001.
Net cash provided by operating activities decreased $6.3 million, or
27% in 2001 compared to 2000. This decrease is primarily due to lower net income
of $5.9 million and an increase of $1.8 million in working capital, partially
offset by $1.4 million in non-cash items.
Net cash used in investing activities of $6.5 million represents a
reduction of $11.7 million from 2000. This reduction is the result of lower
capital expenditures in 2001 of $8.2 million and lower business acquisition
costs, net of proceeds from the sale of property and equipment of $3.5 million.
At December 31, 2001, the Company had open uncompleted purchase commitments for
capital equipment of $.9 million. The Company is continually analyzing potential
acquisition candidates and business alternatives but has no commitments that
would materially impact the operations of the business.
The Company has commitments under operating leases primarily for office
and manufacturing space, transportation equipment and computer equipment. See
Note E in the Notes to Consolidated Financial Statements for further discussion
on the future minimal rental commitment under these leasing arrangements. One
such lease is for the Company's present aircraft with a lease commitment through
2005. The Company is scheduled to take delivery of a new aircraft in 2002. Under
the terms of the current lease, the Company maintains the risk for the residual
value in excess of the market value for the current aircraft. At the present
time, the Company believes its risks, if any, to be immaterial as the estimated
market value of the current aircraft approximates its residual value. The
Company is presently negotiating the lease for the new aircraft and anticipates
annual lease expenses to be approximately that of the current lease.
The Company had not completed its evaluation of its long-term borrowing
requirements by December 31, 2001. As a result, its main credit facility, which
matures on December 31, 2002, became current at December 31, 2001. See Note D in
the Notes to Consolidated Financial Statements for a more complete discussion of
the Company's debt and credit arrangements. Once the Company's evaluation is
complete, it may either extend the current facility or pursue a new long-term
loan. The Company does not anticipate any difficulties in obtaining renewed
financing at a competitive interest rate or meeting scheduled principal and
interest payments. Even with the Company's main credit facility becoming
current, the Company's financial position remains strong because its current
ratio at December 31, 2001 was 2.2:1 compared to 3.3:1 at December 31, 2000. At
December 31, 2001 the Company's unused balance under its main credit facility
was $29 million and its debt to equity ratio was 13%.
Although the Company believes its existing credit facilities,
internally generated funds and ability to obtain additional financing will be
sufficient to meet the Company's growth and operating needs for the next 12
months there are inherent risks related to each of these sources. As discussed
earlier, funds generated from continuing operations are contingent upon the
general economy remaining flat or improving and the recovery of the energy and
telecommunication market sectors in particular.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. On January 1, 2001 the Company adopted this
Statement along with its amendments SFAS No. 137 and SFAS No. 138. The impact
from the adoption of these Statements was not material to the Company.
In June 2001, the FASB issued SFAS No. 141, Business Combinations, and
No. 142, Goodwill and Other Intangible Assets, effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests. Other intangibles will continue to be
amortized over their useful lives.
The Company will adopt the Statements on accounting for goodwill and
other intangible assets as of January 1, 2002. The Company is currently in the
process of determining what the effect of these Statements will be on the
earnings and financial position of the Company. Goodwill and intangibles are
$7.4 million (net of
-18-
accumulated amortization) at December 31, 2001, while amortization expense for
2001 was $1.8 million. The Company is currently in the process of determining
which intangible assets will have a definite versus indefinite life. Upon
adoption of these Statements, the Company expects $1.3 million of goodwill
amortization expense to cease.
In July 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations, effective for fiscal years beginning after June 15,
2002. The Statement requires the current accrual of a legal obligation resulting
from a contractual obligation, government mandate, or implied reliance on
performance by a third party, for costs relating to retirements of long-lived
assets that result from the acquisition, construction, development and /or
normal operation of the asset. The Statement requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred, if it can be reasonably estimated, and a corresponding
amount be included as a capitalized cost of the related asset. The capitalized
amount will be depreciated over the assets' useful life. The Statement also
notes that long-lived assets with an undetermined future life would not require
the recognition of a liability until sufficient information is available. The
Company does not expect the adoption of this Statement to have a material impact
on its financial position and results of operations.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, effective for fiscal years
beginning after December 15, 2001. This Statement supersedes FASB Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of and APB Opinion No. 30, Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events.
This Statement was issued to establish a single accounting model to
address the financial accounting and reporting for the impairment and disposal
of long-lived assets. Although this Statement retains many of the provisions of
FAS 121, there are a number of changes including the removal of goodwill from
its scope. This Statement also retains the basic provision of APB Opinion No.
30. However, for long-lived assets held for sale, this Statement introduces the
"components of an entity" (rather than a segment of a business) approach to
determine discontinued operations. A "component of an entity" has clearly
distinguishable operating and financial reporting practices. Criteria have been
established to qualify an asset as held for sale, including the asset being able
to be sold immediately, and the asset transfer taking place within one year.
Assets reclassified from held for sale to held for use should be adjusted for
depreciation (amortization) expense that ceased when the asset was initially
considered held for sale, and the asset value must be measured at the lower of
carrying amount (after adjusting for depreciation) or the fair value of the
asset when reclassified as held and used. At December 31, 2001, the Company had
no long-lived assets being held for disposal or requiring the recording of an
impairment charge. The Company does not expect the adoption of this Statement to
have a material impact on its financial position and results of operations.
CRITICAL ACCOUNTING POLICIES
The Company's discussion and analysis of its financial condition and
results of operations are based upon the consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these consolidated financial
statements requires the Company 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. The
Company believes that the critical accounting policies are limited to those that
are described below. For a detailed discussion on the application of these and
other accounting policies, see Note A in the Notes to Consolidated Financial
Statements.
Warranty Reserves:
The Company establishes a warranty reserve when a known measurable
potential exposure exists. In addition, such reserves are adjusted for
management's best estimate of warranty obligations based on current and
historical trends. Should actual product failures, and related costs to correct
such product failures, differ from management's estimates, revisions to the
estimated warranty liability would be required. At December 31, 2001 the
Company's warranty reserve was less than $.2 million.
-19-
Excess and Obsolescence Reserves:
The Company has provided an allowance for excess inventory and
obsolescence based on estimates of future demand and industry trends, which are
subject to change. At December 31, 2001 the allowance for excess inventory and
obsolescence was 6% of gross inventories. If actual market conditions are less
favorable than those projected by management, additional inventory write-downs
may be necessary.
Sales Returns and Allowances:
The Company records a provision for estimated sales returns and
allowances on product and services related sales in the same period as the
related revenues are recorded. These estimates are based on historical sales
returns and other known factors. At December 31, 2001, these provisions
accounted for less than 1% of consolidated net sales for 2001. If future returns
do not reflect the historical data the Company uses to calculate these
estimates, additional allowances may be required.
Allowance for Doubtful Accounts:
The Company maintains an allowance for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments.
If the financial condition of the Company's customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.
Impairment of Long-Lived Assets:
The Company records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying value of those items. The Company's 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. If these estimates or their related assumptions change in the
future, the Company may be required to record impairment charges for these
assets. At December 31, 2001, the Company has not recorded any such impairment
charges.
Investments:
The Company accounts for investments in two joint ventures in Japan
under the equity method of accounting. The Company records an investment
impairment charge when it believes that an investment has experienced a decline
in value that is other than temporary. Future adverse changes in market
conditions or poor operating results of underlying investments could result in
losses or an inability to recover the carrying value of the investments that may
not be reflected in the investment's current carrying value, thereby possibly
requiring an impairment charge in the future.
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's global
operations. As a result, the Company is subject to business risks inherent in
non-U.S. activities, including political and economic uncertainty, import and
export limitations and market risk related to changes in interest rates and
foreign currency exchange rates. The Company believes the political and economic
risks related to the Company's foreign operations are mitigated due to the
stability of the countries in which the Company's largest foreign operations are
located. Currently, the Company does not use derivative financial instruments
such as interest rate swaps or foreign currency forward exchange contracts to
manage the Company's market risks nor does the Company hold derivatives for
trading purposes.
The Company is exposed to market risk, including changes in interest
rates. The Company is subject to interest rate risk on its variable rate
revolving credit facilities, which consisted of borrowings of $16.7 million at
December 31, 2001. A 100 basis point increase in the interest rate would have
resulted in an increase in interest expense of approximately $196,000 for the
year ended December 31, 2001.
The Company's primary currency rate exposures are to foreign denominated
debt, intercompany debt and cash and short-term investments. The calculation of
potential loss in fair values is based on an immediate change in the U.S. dollar
equivalent balances of the Company's currency exposures due to a 10% shift in
exchange rates. The
-20-
potential loss in income before tax is based on the change over a one-year
period resulting from an immediate 10% change in currency exchange rates. A
hypothetical 10% change in currency exchange rates would have a
favorable/unfavorable impact on fair values of $2.3 million and income before
tax of $0.6 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Preformed Line Products Company
In our opinion, the accompanying consolidated balance sheet as of
December 31, 2001 and the related statements of consolidated income,
shareholders' equity and cash flows present fairly, in all material respects,
the financial position of Preformed Line Products Company and its subsidiaries
at December 31, 2001, and the results of their operations and their cash flows
for the year then ended in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in
the United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion. The financial statements of
the Company as of December 31, 2000 and for each of the two years then ended
were audited by other independent accountants whose report dated February 12,
2001 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Cleveland, Ohio
February 15, 2002
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Preformed Line Products Company
We have audited the accompanying consolidated balance sheet of
Preformed Line Products Company and subsidiaries as of December 31, 2000, and
the related consolidated statements of income, shareholders' equity and cash
flows for each of the two years in the period ended December 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the 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 Products Company and subsidiaries at December 31, 2000 and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
Ernst & Young LLP
Cleveland, Ohio
February 12, 2001
-21-
PREFORMED LINE PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEETS
December 31
2001 2000
----------------------------------
(Thousands of dollars, except
share and per share data)
ASSETS
Cash and cash equivalents $ 8,409 $ 9,470
Accounts receivable, less allowance of $813 ($910 in 2000) 29,251 30,839
Inventories-net 38,637 43,648
Deferred income taxes - short-term 3,206 2,501
Prepaids and other 3,727 1,325
--------- ---------
TOTAL CURRENT ASSETS 83,230 87,783
Property and equipment - net 54,206 58,743
Investments in foreign joint ventures 9,976 10,148
Deferred income taxes - long-term 1,435 1,323
Goodwill, patents and other intangibles - net 7,410 8,077
Other 4,933 4,537
--------- ---------
TOTAL ASSETS $ 161,190 $ 170,611
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable to banks $ 1,201 $ 1,704
Trade accounts payable 9,560 10,289
Accrued compensation and amounts withheld from employees 3,585 3,292
Accrued expenses and other liabilities 3,890 4,762
Accrued profit-sharing and pension contributions 4,130 2,811
Dividends payable 1,151 865
Income taxes 923 1,976
Current portion of long-term debt 13,198 545
--------- ---------
TOTAL CURRENT LIABILITIES 37,638 26,244
Long-term debt, less current portion 2,341 20,160
Deferred income taxes - long-term 431 307
Minority interest -- 44
SHAREHOLDERS' EQUITY
Common stock - $2 par value, 15,000,000 shares authorized, 5,757,030 and
5,768,086 issued and outstanding, net of 398,618
and 387,562 treasury shares at par, respectively 11,514 11,536
Retained earnings 128,721 127,994
Accumulated foreign currency translation adjustment (19,455) (15,674)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 120,780 123,856
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 161,190 $ 170,611
========= =========
See notes to consolidated financial statements.
-22-
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED INCOME
Year ended December 31
----------------------------------------------------
2001 2000 1999
------------- ------------ ------------
(Thousands, except per share data)
Net sales $ 196,365 $ 207,332 $ 195,245
Cost of products sold 137,266 143,800 136,917
--------- --------- ---------
GROSS PROFIT 59,099 63,532 58,328
Costs and expenses
Selling 24,924 20,118 19,728
General and administrative 20,815 20,335 20,343
Research and engineering 6,236 5,709 5,514
Other operating expenses 1,568 744 1,170
--------- --------- ---------
53,543 46,906 46,755
Royalty income - net 2,015 2,179 2,582
--------- --------- ---------
OPERATING INCOME 7,571 18,805 14,155
Other income (expense)
Equity in net income of foreign joint ventures 803 335 928
Interest income 685 682 713
Interest expense (1,427) (1,608) (1,067)
Other (expense) (200) (1,079) --
--------- --------- ---------
(139) (1,670) 574
--------- --------- ---------
INCOME BEFORE INCOME TAXES 7,432 17,135 14,729
Income taxes 2,256 6,084 4,528
--------- --------- ---------
NET INCOME $ 5,176 $ 11,051 $ 10,201
========= ========= =========
Net income per share - basic $ 0.90 $ 1.91 $ 1.71
========= ========= =========
Net income per share - diluted $ 0.90 $ 1.91 $ 1.71
========= ========= =========
Cash dividends declared per share $ 0.75 $ 0.60 $ 0.60
========= ========= =========
Average number of shares outstanding 5,755 5,790 5,975
========= ========= =========
See notes to consolidated financial statements.
-23-
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
Accumulated
Foreign
Currency
Common Retained Translation
Shares Earnings Adjustment Total
---------- ---------- ------------ ----------
(Thousands of dollars, except share and per share data)
Balance at January 1, 1999 $ 12,235 $ 119,506 $ (9,965) $ 121,776
Net income 10,201 10,201
Foreign currency translation adjustment (3,723) (3,723)
----------
Total comprehensive income 6,478
Purchase of 288,018 common shares (576) (4,906) (5,482)
Cash dividends declared - $.60 per share (3,578) (3,578)
---------- ---------- ---------- ----------
Balance at December 31, 1999 11,659 121,223 (13,688) 119,194
Net income 11,051 11,051
Foreign currency translation adjustment (1,986) (1,986)
----------
Total comprehensive income 9,065
Purchase of 61,222 common shares (123) (812) (935)
Cash dividends declared - $.60 per share (3,468) (3,468)
---------- ---------- ---------- ----------
Balance at December 31, 2000 11,536 127,994 (15,674) 123,856
Net income 5,176 5,176
Foreign currency translation adjustment (3,781) (3,781)
----------
Total comprehensive income 1,395
Purchase of 11,056 common shares (22) (133) (155)
Cash dividends declared - $.75 per share (4,316) (4,316)
---------- ---------- ---------- ----------
Balance at December 31, 2001 $ 11,514 $ 128,721 $ (19,455) $ 120,780
========== ========== ========== ==========
See notes to consolidated financial statements.
-24-
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED CASH FLOWS
Year ended December 31
----------------------------------------
2001 2000 1999
---------- ---------- ----------
(Thousands of dollars)
OPERATING ACTIVITIES
Net income $ 5,176 $ 11,051 $ 10,201
Adjustment to reconcile net income to net cash (used in) provided by operations
Depreciation and amortization 10,320 11,411 9,786
Noncash realignment and impairment charges 2,668 -- 1,000
Deferred income taxes (263) (838) 325
Equity in earnings of joint ventures - net of dividends received (618) 103 309
Loss (gain) on sales of property and equipment (6) 44 1,034
Changes in operating assets and liabilities
Receivables 1,588 (1,870) 589
Inventories 3,023 561 (5,064)
Trade payables and accruals 297 2,681 (959)
Income taxes (2,946) 304 166
Other - net (2,059) 57 (2,004)
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,180 23,504 15,383
INVESTING ACTIVITIES
Capital expenditures (6,196) (14,388) (13,136)
Business acquisitions (1,058) (5,724) --
Proceeds from the sale of property and equipment 757 1,887 79
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (6,497) (18,225) (13,057)
FINANCING ACTIVITIES
Increase (decrease) in notes payable to banks (503) (1,285) 937
Proceeds from the issuance of long-term debt 17,673 24,443 20,584
Payments of long-term debt (22,651) (20,140) (16,190)
Dividends paid (4,030) (3,479) (3,622)
Purchase of common shares (155) (935) (5,482)
---------- ---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (9,666) (1,396) (3,773)
Effects of exchange rate changes on cash and cash equivalents (2,078) (1,320) (2,121)
---------- ---------- ----------
Increase (decrease) in cash and cash equivalents (1,061) 2,563 (3,568)
Cash and cash equivalents at beginning of year 9,470 6,907 10,475
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 8,409 $ 9,470 $ 6,907
========== ========== ==========
See notes to consolidated financial statements.
-25-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of dollars, except per share data)
NOTE A SIGNIFICANT ACCOUNTING POLICIES
Reclassification
Certain amounts in the prior year's financial statements have been
reclassified to conform to the presentation of 2001.
Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries where ownership is greater than 50%. All
intercompany accounts and transactions have been eliminated upon consolidation.
Investments and Joint Ventures
Investments in joint ventures, where the Company owns at least 20% but
less than 50%, are accounted for by the equity method. Dividends received from
joint ventures totaled $.2 million in 2001, $.4 million in 2000 and $1.3 million
in 1999.
Cash Equivalents
Cash equivalents are stated at fair value and consist of highly liquid
investments with remaining maturities of three months or less at the time of
acquisition.
Inventories
Inventories are carried at the lower of cost or market.
Debt
The fair value of debt approximates the amounts recorded.
Depreciation and Amortization
Depreciation for the majority of the Company's assets is computed using
accelerated methods over the estimated useful lives. The estimated useful lives
used are: land improvements, ten years; buildings, forty years; and machinery
and equipment, three to ten years; with the exception of personal computers
which are depreciated over three years using the straight line method. Goodwill
is amortized by the straight-line method over periods ranging from ten to twenty
years. Patents and other intangible assets represent primarily the value
assigned to patents acquired with purchased businesses and are amortized using
the straight-line method over their useful lives.
Goodwill and other long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate 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. The asset would be considered impaired when the future net
undiscounted cash flows estimated to be generated by the asset are less than its
carrying value. An impairment loss would be recognized based on the amount by
which the carrying value of the asset exceeds its fair value.
Research and Development
Research and engineering costs are expensed as incurred. Company
sponsored costs for research and development of new products were $2.6 million
in 2001, $2.3 million in 2000 and $2.1 million in 1999.
-26-
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; revenues
and expenses are translated at weighted average exchange rates in effect during
the period. Translation gains and losses arising from exchange rate changes on
transactions denominated in a currency other than the functional currency are
included in income or expense as incurred. Such transactions have not been
material. Unrealized translation adjustments are recorded as accumulated foreign
currency translation adjustment in shareholders' equity.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and the accompanying notes. Actual results could differ from these
estimates.
Revenue Recognition
Revenue is recognized when products are shipped and title has passed to
unaffiliated customers.
Acquisitions
In April 2000, the Company acquired assets and assumed certain
liabilities of Rack Technologies Pty. Limited whose results of operations are
included in the consolidated financial statements from the date of acquisition.
Rack Technologies Pty. Limited has two foreign locations and one domestic
location. The Company accounted for this acquisition using the purchase method.
The initial cash payment for this acquisition was $5.3 million. Under the terms
of the acquisition agreement, the Company was obligated to make an additional
payment based on the acquired company's profitability of ongoing operations for
the year 2000. The Company made a payment of $.8 million in 2001 for the year
2000 and recorded the payment as goodwill which is being amortized over the
remaining life of the original goodwill. Due to the immateriality of the impact
on the Company's results of operations, no supplemental pro forma results of
operations of Rack Technologies Pty. Limited have been provided for 2000 and
1999.
In addition, during April 2000, the Company acquired the remaining 20
percent minority interest in its subsidiary in China for $.4 million. This
subsidiary's net sales and the Company's total investment in this subsidiary
were not material.
In December 2001, the Company acquired the remaining 2.4 percent
minority interest in its subsidiary in Mexico for $.1 million. This subsidiary's
net sales and the Company's total investment in this subsidiary are not
material.
New accounting pronouncements
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. On January 1, 2001 the Company adopted this
Statement along with its amendments SFAS No. 137 and SFAS No. 138. The impact
from the adoption of these Statements was not material to the Company.
In June 2001, the FASB issued SFAS No. 141, Business Combinations, and
No. 142, Goodwill and Other Intangible Assets, effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests. Other intangibles will continue to be
amortized over their useful lives.
The Company will adopt the Statements on accounting for goodwill and
other intangible assets as of January 1, 2002. The Company is currently in the
process of determining what the effect of these Statements will be
-27-
on the earnings and financial position of the Company. Goodwill and intangibles
are $7.4 million (net of accumulated amortization) at December 31, 2001, while
amortization expense for 2001 was $1.8 million. The Company is currently in the
process of determining which intangible assets will have a definite versus
indefinite life. Upon adoption of these Statements, the Company expects $1.3
million of goodwill amortization expense to cease.
In July 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations, effective for fiscal years beginning after June 15,
2002. The Statement requires the current accrual of a legal obligation resulting
from a contractual obligation, government mandate, or implied reliance on
performance by a third party, for costs relating to retirements of long-lived
assets that result from the acquisition, construction, development and /or
normal operation of the asset. The Statement requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred, if it can be reasonably estimated, and a corresponding
amount be included as a capitalized cost of the related asset. The capitalized
amount will be depreciated over the assets' useful life. The Statement also
notes that long-lived assets with an undetermined future life would not require
the recognition of a liability until sufficient information is available. The
Company does not expect the adoption of this Statement to have a material impact
on its financial position and results of operations.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, effective for fiscal years
beginning after December 15, 2001. This Statement supersedes FASB Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of and APB Opinion No. 30, Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events.
This Statement was issued to establish a single accounting model to
address the financial accounting and reporting for the impairment and disposal
of long-lived assets. Although this Statement retains many of the provisions of
FAS 121, there are a number of changes including the removal of goodwill from
its scope. This Statement also retains the basic provision of APB Opinion No.
30. However, for long-lived assets held for sale, this Statement introduces the
"components of an entity" (rather than a segment of a business) approach to
determine discontinued operations. A "component of an entity" has clearly
distinguishable operating and financial reporting practices. Criteria have been
established to qualify an asset as held for sale, including the asset being able
to be sold immediately, and the asset transfer taking place within one year.
Assets reclassified from held for sale to held for use should be adjusted for
depreciation (amortization) expense that ceased when the asset was initially
considered held for sale, and the asset value must be measured at the lower of
carrying amount (after adjusting for depreciation) or the fair value of the
asset when reclassified as held and used. At December 31, 2001, the Company had
no long-lived assets being held for disposal or requiring the recording of an
impairment charge. The Company does not expect the adoption of this Statement to
have a material impact on its financial position and results of operations.
NOTE B SUPPLEMENTAL INFORMATION
December 31,
-----------------------------
2001 2000
------------ ------------
INVENTORIES
Finished products $21,370 $20,209
Work-in-process 1,022 1,592
Raw materials 17,885 24,174
------------ ------------
40,277 45,975
Excess of current cost over LIFO cost (1,640) (2,327)
------------ ------------
$38,637 $43,648
============ ============
The Company uses the last-in, first-out (LIFO) method of determining
cost for the majority (approximately $13.8 million in 2001 and $16.5 million in
2000) of its material inventories in the United States. All other inventories
are determined by the FIFO method.
-28-
December 31,
-----------------------------
2001 2000
------------ ------------
PROPERTY AND EQUIPMENT - AT COST
Land and improvements $ 6,510 $ 6,623
Buildings and improvements 37,011 36,070
Machinery and equipment 76,108 73,171
Construction in progress 3,571 5,560
-------- --------
123,200 121,424
Less accumulated depreciation 68,994 62,681
-------- --------
$ 54,206 $ 58,743
======== ========
Depreciation of property and equipment was $8.5 million in 2001, $8.4
million in 2000 and $8.0 million in 1999.
December 31,
-----------------------------
2001 2000
------------ ------------
GOODWILL AND INTANGIBLE ASSETS
Goodwill $ 9,950 $ 9,183
Patents and other intangible assets 7,556 7,339
-------- --------
17,506 16,522
Less accumulated amortization 10,096 8,445
-------- --------
$ 7,410 $ 8,077
======== ========
Amortization of goodwill and intangibles was $1.6 million in 2001, $1.9
million in 2000 and $1.8 million in 1999.
NOTE C PENSION PLANS
Domestic hourly employees of the Company and certain employees of
foreign subsidiaries who meet specific requirements as to age and service are
covered by defined benefit pension plans. Net periodic benefit cost and
obligations of the Company's foreign plans are not material. Net periodic
benefit cost for the Company's domestic plan included the following components
for the year ended December 31:
2001 2000 1999
---------- ---------- --------
Service cost $ 470 $ 487 $ 568
Interest cost 544 530 498
Expected return on plan assets (568) (569) (516)
Amortization of the unrecognized transition asset - net 13 13 13
------- ------- -------
Net periodic benefit cost $ 459 $ 461 $ 563
======= ======= =======
The following tables set forth benefit obligations, assets and the
accrued benefit cost of the Company's domestic defined benefit plan at December
31:
-29-
2001 2000
---------- ----------
Projected benefit obligation at beginning of the year $ 8,036 $ 6,967
Service cost 470 487
Interest cost 545 530
Actuarial (gain) loss (636) 314
Curtailment -- (121)
Benefits paid (151) (141)
--------- ---------
Projected benefit obligation at end of year $ 8,264 $ 8,036
========= =========
Fair value of plan assets at beginning of the year $ 7,501 $ 7,445
Actual return on plan assets (539) 197
Employer contributions 535 --
Benefits paid (151) (141)
--------- ---------
Fair value of plan assets at end of the year $ 7,346 $ 7,501
========= =========
Benefit obligations in excess of plan assets (918) (535)
Unrecognized net loss 859 387
Unamortized transition asset 13 25
--------- ---------
Accrued benefit cost ($46) ($123)
========= =========
In determining the projected benefit obligation, the assumed discount
rate was 7.25% for 2001 and 7.50% for 2000, the rate of increase in future
compensation levels was 3.5% for 2001 and 4.0% for 2000, and the expected
long-term rate of return on plan assets was 7.5% in 2001 and 2000. The Company's
policy is to fund amounts deductible for federal income tax purposes. Expense
for defined contribution plans was $2.6 million in 2001 and $2.5 million in 2000
and 1999.
-30-
NOTE D DEBT AND CREDIT ARRANGEMENTS
December 31
--------------------------
2001 2000
----------- -----------
SHORT-TERM DEBT
Secured Notes
Chinese Rmb denominated at 6.39% - 7.029% $ -- $ 785
Other short-term debt at 6.0% to 12% -- 41
Unsecured short-term debt
US $ denominated at 2.87% 1,170 878
Other short-term debt at 4.12 to 5.82% 31 --
Current portion of long term debt 13,198 545
-------- --------
Total short-term debt 14,399 2,249
-------- --------
LONG-TERM DEBT
Revolving credit agreement 11,000 17,400
Australian dollar denominated term loans (A$4,000 and A$3,000),
at 7.3 to 7.46% currently, due annually 2002-2005 2,227 2,141
Brazilian Reais denominated term loan (R$3,206) at 11.8%,
due 2002-2003 1,262 --
Other loans in various denominations, currently ranging
from 4.0 to 6.0%, due 2002-2005 1,050 1,164
-------- --------
Total long-term debt 15,539 20,705
Less current portion (13,198) (545)
-------- --------
2,341 20,160
-------- --------
Total debt $ 16,740 $ 22,409
======== ========
The revolving credit agreement makes $40 million available through
December 31, 2002, at an interest rate of the lower of the lender's prime rate,
1/2% above the London interbank rate (LIBOR) or the lender's cost of funds plus
1/2%. The effective rate at December 31, 2001, was 2.25%. The revolving credit
agreement contains among other provisions, requirements for maintaining levels
of working capital and net worth. Under the most restrictive of the convenants,
approximately $48.2 million of net worth (exclusive of accumulated foreign
currency translation adjustment) was available for payment of dividends as of
December 31, 2001.
Aggregate maturities of long-term debt during the next five years are
as follows: 2002, 13.2 million; 2003, $1.4 million; 2004, $.7 million; 2005, $.2
million and 2006, $0 million.
Interest paid was $1.3 million in 2001, $1.6 million in 2000 and $1.1
million in 1999.
NOTE E LEASES
The Company has commitments under operating leases primarily for office
and manufacturing space, transportation equipment and computer equipment. Rental
expense was $1.4 million in 2001, $1.3 million in 2000, and $1.0 million in
1999, respectively. Future minimum rental commitments having non-cancelable
terms exceeding one year are $1.2 million in 2002, $.9 million in 2003, $.8
million in 2004, $.7 million in 2005, $.2 million in 2006 and an aggregate $9.7
million thereafter.
NOTE F INCOME TAXES
The provision for income taxes is based upon income before tax for
financial reporting purposes. Deferred tax assets and liabilities are recognized
for the expected future tax consequences of temporary differences between
-31-
the tax bases of assets and liabilities and their carrying value for financial
statement purposes. In estimating future tax consequences, the Company considers
anticipated future events, except changes in tax laws or rates, which are
recognized when enacted.
Income before income tax consists of the following:
2001 2000 1999
--------- ----------- ----------
United States $ 1,428 $ 6,617 $ 5,965
Foreign 6,004 10,518 8,764
------- ------- -------
Total $ 7,432 $17,135 $14,729
======= ======= =======
The components of income tax expense are as follows:
2001 2000 1999
--------- ----------- ----------
Current:
Federal $ 716 $ 2,753 $ 1,117
Foreign 1,458 3,662 2,096
State and local 345 507 990
------- ------- -------
2,519 6,922 4,203
Deferred:
Federal (511) (575) (212)
Foreign 324 (178) 568
State and local (76) (85) (31)
------- ------- -------
(263) (838) 325
------- ------- -------
$ 2,256 $ 6,084 $ 4,528
======= ======= =======
The differences between the provision for income taxes at the U.S.
statutory rate and the tax shown in the Statements of Consolidated Income are
summarized as follows:
2001 2000 1999
--------- ----------- ----------
Tax at statutory rate of 35% $ 2,603 $ 5,996 $ 5,155
State and local taxes, net of federal benefit 175 274 696
Non-deductible expenses 344 604 926
Non-U.S. tax rate variances net of foreign tax credits (962) (890) (1,523)
Other, net 96 100 (726)
------- ------- -------
$ 2,256 $ 6,084 $ 4,528
======= ======= =======
The tax effects of temporary differences that give rise to significant
portions of the Company's deferred tax assets (liabilities) at December 31 are
as follows:
-32-
2001 2000
----------- -----------
Deferred tax assets:
Accrued compensation benefits $ 696 $ 885
Depreciation and other basis differences 1,717 1,076
Inventory obsolescence 770 550
Allowance for doubtful accounts 284 310
Benefit plans reserves 657 503
Other accrued expenses 517 500
-------- --------
Gross deferred tax assets $ 4,641 $ 3,824
Deferred tax liabilities:
Depreciation and other basis differences (431) (307)
Inventory (382) --
Other (228) (180)
-------- --------
Gross deferred tax liabilities (1,041) (487)
-------- --------
Net deferred tax assets $ 3,600 $ 3,337
======== ========
The Company has not provided for U.S. income taxes or foreign
withholding taxes on undistributed earnings of foreign subsidiaries which are
considered to be indefinitely reinvested in operations outside the U.S. The
amount of such earnings was approximately $38 million at December 31, 2001. If
distributed, the earnings would be subject to withholding taxes but would be
substantially free of U.S. income taxes.
Income taxes paid, net of refunds, were $4.7 million in 2001, $6.2
million in 2000, and $4.8 million in 1999.
NOTE G STOCK OPTIONS
The 1999 Stock Option Plan (Plan) provides for granting of 300,000
options to buy common shares of the Company to key employees at not less than
fair market value of the shares on the date of grant. At December 31, 2001,
there were 300,000 shares reserved for the Plan. Under the Plan, options vest
50% after one year following the date of the grant, 75% after two years, 100%
after three years and expire from five to ten years from the date of grant.
In 2000, 155,000 options were granted at exercise prices of $15.125 and
$16.638 per share for a weighted average price of $15.32 per share. In 2001,
12,000 options were granted at an exercise price of $15.00 per share. All
options were outstanding as of December 31, 2001. All 77,500 of exercisable
options as of December 31, 2001 relate to 2000 grants. The weighted average
remaining contractual life of options granted in 2001 and 2000 were 9.3 years
and 7.5 years, respectively. No options have been forfeited or exercised in 2001
and 2000.
As permitted under Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation ("SFAS 123"), the Company applies the
intrinsic value based method prescribed in Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees, to account for stock options
granted to employees to purchase common shares. Under this method, compensation
expense is measured as the excess, if any, of the market price at the date of
grant over the exercise price of the options. No compensation expense has been
recorded.
SFAS 123 requires pro forma disclosure of the effect on net income and
earnings per share when applying the fair value method of valuing stock-based
compensation. If the fair value method to measure compensation cost for the
Company's stock compensation plan had been used, the Company's net income would
have been reduced by $.04 million in 2001 ($.01 per share) and $.5 million in
2000 ($.09 per share). For purposes of this pro forma disclosure, the estimated
fair value of the options is amortized ratably over the vesting period.
Disclosures under the fair value method are estimated using the
Black-Scholes option-pricing model with the following assumptions:
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2001 2000
------------- ------------
Risk-free interest rate 5.50% 5.88%
Dividend yield 3.74% 3.97%
Expected life 10 years 5 years
Expected volatility 29.5% 25.6%
NOTE H COMPUTATION OF EARNINGS PER SHARE
2001 2000 1999
--------- -------- --------
Numerator
Net income $ 5,176 $11,051 $10,201
======= ======= =======
Denominator
Determination of shares
Weighted average common shares outstanding 5,755 5,790 5,975
Dilutive effect - employee stock options -- -- --
------- ------- -------
Diluted weighted average common shares outstanding 5,755 5,790 5,975
======= ======= =======
Earnings per common share
Basic $ 0.90 $ 1.91 $ 1.71
Diluted $ 0.90 $ 1.91 $ 1.71
NOTE I BUSINESS REALIGNMENT CHARGE
During the third quarter ended September 30, 2001, the Company recorded
business realignment charges to write off assets and to record severance
payments related to its data communications product line. These charges included
abandoning a three-year effort to expand into the market for local area network
hubs and media converters and revaluation of the strategy for penetrating the
Asia-Pacific market with its data communication products. The Company incurred a
pre-tax charge of $3.1 million for these activities. An analysis of the business
realignment charges recorded in the Statements of Consolidated Income as of
December 31, 2001 and the amount accrued in the Consolidated Balance Sheet at
December 31, 2001, are as follows:
Realignment Cash Accrual
Description Charges Payments Balance
- -------------------------------------------------------------- ------- ------- -------
Write-off of inventories included in Cost of products sold $ 1,988 $ -- $ --
Severance and other related expenses included in Costs and expenses 453 453 --
Impaired assets and goodwill included in Costs and expenses 680 -- --
------- ------- -------
Pre-tax charge $ 3,121 $ 453 $ --
======= ======= =======
Impaired assets and goodwill include the write-off of goodwill recorded
at the time certain assets were acquired and related to the abandoned product
offerings for the local area network hubs and media converter markets. Severance
and other related costs include the reduction of approximately 20 employees. The
severance and other related costs include payment for severance, earned
vacation, costs of exiting leased office space and other contractual
obligations.
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NOTE J ASSET IMPAIRMENT
In 1999, the Company recorded a $1.0 million impairment charge related
to its foundry business located in Birmingham, Alabama. This impairment charge
is reflected in the Statements of Consolidated Income for the year ended
December 31, 1999, in Cost of products sold. In February 2000, the Company sold
certain long-lived assets as well as operating assets located at this facility
to a third party.
NOTE K BUSINESS SEGMENTS
The Company designs, manufactures and sells hardware employed in the
construction and maintenance of telecommunications, energy and other utility
networks. Principal products include cable anchoring and control hardware,
splice enclosures and devices which are sold primarily to customers in North and
South America, Europe and Asia.
The Company's segments are based on the way management makes operating
decisions and assesses performance. The Company's operating segments are
domestic and foreign operations. The accounting policies of the operating
segments are the same as those described in Note A. No individual foreign
country accounted for 10% or more of the Company's revenues or assets for the
years presented. It is not practical to present revenues by product line by
segments.
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2001 2000 1999
--------- --------- ---------
Net sales
Domestic $ 113,308 $ 125,764 $ 123,228
Foreign 83,057 81,568 72,017
--------- --------- ---------
Total net sales $ 196,365 $ 207,332 $ 195,245
========= ========= =========
Intersegment sales
Domestic $ 4,177 $ 4,996 $ 3,490
Foreign 597 732 427
--------- --------- ---------
Total intersegment sales $ 4,774 $ 5,728 $ 3,917
========= ========= =========
Operating income
Domestic $ 1,532 $ 8,535 $ 5,485
Foreign 6,039 10,270 8,670
--------- --------- ---------
7,571 18,805 14,155
Equity in net income of joint ventures 803 335 928
Interest income
Domestic 254 58 124
Foreign 431 624 589
--------- --------- ---------
685 682 713
Interest expense
Domestic (953) (1,206) (642)
Foreign (474) (402) (425)
--------- --------- ---------
(1,427) (1,608) (1,067)
Other (expense) (200) (1,079) --
--------- --------- ---------
Income before income taxes $ 7,432 $ 17,135 $ 14,729
========= ========= =========
Identifiable assets
Domestic $ 85,934 $ 97,905 $ 95,051
Foreign 65,280 62,558 55,378
--------- --------- ---------
151,214 160,463 150,429
Corporate 9,976 10,148 9,235
--------- --------- ---------
Total assets $ 161,190 $ 170,611 $ 159,664
========= ========= =========
Long-lived assets
Domestic $ 55,667 $ 59,852 $ 52,236
Foreign 20,858 21,653 21,339
--------- --------- ---------
$ 76,525 $ 81,505 $ 73,575
========= ========= =========
Expenditure for long-lived assets
Domestic $ 3,666 $ 9,571 $ 8,463
Foreign 2,530 4,817 4,673
--------- --------- ---------
$ 6,196 $ 14,388 $ 13,136
========= ========= =========
Depreciation and amortization
Domestic $ 7,905 $ 9,302 $ 7,284
Foreign 2,415 2,109 2,502
--------- --------- ---------
$ 10,320 $ 11,411 $ 9,786
========= ========= =========
Transfers between geographic areas are generally above cost and
consistent with rules and regulations of
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governing tax authorities. Corporate assets are equity investments in joint
ventures.
NOTE L QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Three months ended
----------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
----------- ----------- ----------- ----------
2001
Net sales $50,073 $52,863 $49,127 $44,302
Gross profit 15,019 17,172 13,518 13,390
Income before income taxes 2,081 3,960 184 1,207
Net income 1,121 2,870 158 1,027
Net income per share, basic and diluted $0.19 $0.50 $0.03 $0.18
2000
Net sales $49,820 $54,988 $53,353 $49,171
Gross profit 14,871 16,938 16,102 15,621
Income before income taxes 3,684 5,103 4,414 3,934
Net income 2,831 3,097 2,679 2,444
Net income per share, basic and diluted $0.49 $0.53 $0.46 $0.43
Third quarter 2001 includes a business realignment charge of $2.0
million ($.35 per share). See footnote I in the Notes to Consolidated Financial
Statements for further discussion of this business realignment charge.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Previously reported by the Company in its Form 8-K filed with the SEC
on October 24, 2001.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 is incorporated by reference
to the information under the captions "Election of Directors" and "Section 16(a)
Beneficial Ownership Compliance" in the Company's Proxy Statement dated March
28, 2002, for the Annual Meeting of Shareholders to be held April 29, 2002 (the
"Proxy Statement"). Information relative to executive officers of the Company is
contained in Part I of this Annual Report of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in
the Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" in the Proxy Statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the captions "Certain Relationships and
Related Transactions" in the Proxy Statement is incorporated herein by
reference.
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PART IV
ITEM 14. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Page Financial Statements
- ---- --------------------
22 Consolidated Balance Sheets as of December 31, 2000 and 2001
23 Statements of Consolidated Income as of December 31, 1999, 2000
and 2001
24 Statements of Consolidated Shareholders' Equity as of December
31, 1999, 2000 and 2001
25 Statements of Consolidated Cash Flows as of December 31, 1999,
2000 and 2001
26 Notes to Consolidated Financial Statements
All schedules are omitted because the required information is not
applicable or is included in the consolidated financial statements or related
notes.
(b) The following reports on form 8-K were filed during the quarter ended
December 31, 2001:
On October 24, 2001 the Company filed Form 8-K for Changes in
Registrant's Certifying Accountant.
(c) Exhibits
Exhibit
Number Exhibit
- ------ -------
3.1 Amended and Restated Articles of Incorporation (incorporated by
reference to Exhibit 3.1 to the Company's Registration
Statement on Form 10 (No. 000-31164)).
3.2 Amended and Restated Code of Regulations of Preformed Line
Products Company (incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on Form 10 (No.
000-31164)).
4 Description of Specimen Stock Certificate (incorporated by
reference to Exhibit 4 to the Company's Registration Statement
on Form 10 (No. 000-31164)).
10.1 Agreement between Ruhlman Motor Sports and Preformed Line
Products Company dated February 28, 2002 regarding sponsorship
of racing car, filed herewith.
10.2 Agreement between Ruhlman Motor Sports and Preformed Line
Products Company dated February 28, 2001 regarding sponsorship
of racing car (incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form 10 (No. 000-31164)).
10.3 Agreement between Ruhlman Motor Sports and Preformed Line
Products Company dated February 1, 2000 regarding sponsorship
of racing car (incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement on Form 10 (No. 000-31164)).
10.4 Agreement between Ruhlman Motor Sports and Preformed Line
Products Company dated February 4, 1999 regarding sponsorship
of racing car (incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form 10 (No. 000-31164)).
10.5 Employment Agreement between Kenneth W. Brownell, Jr. and
Preformed Line Products Company dated December 3, 1998
(incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement on Form 10 (No. 000-31164)).
10.6 Preformed Line Products Company 1999 Employee Stock Option
Program (incorporated by reference to Exhibit 10.5 to the
Company's Registration Statement on Form 10 (No. 000-31164)).
10.7 Preformed Line Products Company Officers Bonus Plan
(incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement on Form 10 (No. 000-31164)).
10.8 Preformed Line Products Company Executive Life Insurance Plan -
Summary (incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form 10 (No. 000-31164)).
10.9 Preformed Line Products Company Supplemental Profit Sharing
Plan (incorporated by reference to Exhibit 10.8 to the
Company's Registration Statement on Form 10 (No. 000-31164)).
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10.10 Revolving Credit Agreement between National City Bank and
Preformed Line Products Company, dated December 30, 1994
(incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form 10 (No. 000-31164)).
21 Subsidiaries of Preformed Line Products Company (incorporated
by reference to Exhibit 21 to the Company's Registration
Statement on Form 10 (No. 000-31164)).
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants,
filed herewith.
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants,
filed herewith.
23.3 Consent of Ernst & Young LLP, Independent Auditors, filed
herewith.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(5) 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 19, 2002 / s / Robert G. Ruhlman
-------------------------------------
Robert G. Ruhlman
President and Chief Executive Officer
March 19, 2002 /s/ Eric R. Graef
-------------------------------------
Eric R. Graef
Vice President Finance and Treasurer
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 19, 2002 /s/ Jon R. Ruhlman
-------------------------------------
Jon R. Ruhlman
Chairman
March 19, 2002 /s/ Frank B. Carr
-------------------------------------
Frank B. Carr
Director
March 19, 2002 /s/ John D. Drinko
-------------------------------------
John D. Drinko
Director
March 19, 2002 /s/ Wilber C. Nordstom
-------------------------------------
Wilber C. Nordstrom
Director
March 19, 2002 /s/ Barbara P. Ruhlman
-------------------------------------
Barbara P. Ruhlman
Director
March 19, 2002 /s/ Randall M. Ruhlman
-------------------------------------
Randall M. Ruhlman
Director
March 19, 2002 /s/ Robert G. Ruhlman
-------------------------------------
Robert G. Ruhlman
Director
-40-
EXHIBIT INDEX
3.1 Amended and Restated Articles of Incorporation (incorporated by
reference to Exhibit 3.1 to the Company's Registration
Statement on Form 10 (No. 000-31164)).
3.2 Amended and Restated Code of Regulations of Preformed Line
Products Company (incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on Form 10 (No.
000-31164)).
4 Description of Specimen Stock Certificate (incorporated by
reference to Exhibit 4 to the Company's Registration Statement
on Form 10 (No. 000-31164)).
10.1 Agreement between Ruhlman Motor Sports and Preformed Line
Products Company dated February 28, 2002 regarding sponsorship
of racing car, filed herewith.
10.2 Agreement between Ruhlman Motor Sports and Preformed Line
Products Company dated February 28, 2001 regarding sponsorship
of racing car (incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form 10 (No. 000-31164)).
10.3 Agreement between Ruhlman Motor Sports and Preformed Line
Products Company dated February 1, 2000 regarding sponsorship
of racing car (incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement on Form 10 (No. 000-31164)).
10.4 Agreement between Ruhlman Motor Sports and Preformed Line
Products Company dated February 4, 1999 regarding sponsorship
of racing car (incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form 10 (No. 000-31164)).
10.5 Employment Agreement between Kenneth W. Brownell, Jr. and
Preformed Line Products Company dated December 3, 1998
(incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement on Form 10 (No. 000-31164)).
10.6 Preformed Line Products Company 1999 Employee Stock Option
Program (incorporated by reference to Exhibit 10.5 to the
Company's Registration Statement on Form 10 (No. 000-31164)).
10.7 Preformed Line Products Company Officers Bonus Plan
(incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement on Form 10 (No. 000-31164)).
10.8 Preformed Line Products Company Executive Life Insurance Plan -
Summary (incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form 10 (No. 000-31164)).
10.9 Preformed Line Products Company Supplemental Profit Sharing
Plan (incorporated by reference to Exhibit 10.8 to the
Company's Registration Statement on Form 10 (No. 000-31164)).
10.10 Revolving Credit Agreement between National City Bank and
Preformed Line Products Company, dated December 30, 1994
(incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form 10 (No. 000-31164)).
21 Subsidiaries of Preformed Line Products Company (incorporated
by reference to Exhibit 21 to the Company's Registration
Statement on Form 10 (No. 000-31164)).
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants,
filed herewith.
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants,
filed herewith.
23.3 Consent of Ernst & Young LLP, Independent Auditors, filed
herewith.
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