PREFORMED LINE PRODUCTS CO - Annual Report: 2010 (Form 10-K)

 

 

UNITED STATES
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

Commission file number 0-31164

Preformed Line Products Company

(Exact name of registrant as specified in its charter)

Ohio		34-0676895
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
660 Beta Drive Mayfield Village, Ohio		44143
(Address of Principal Executive Office)		(Zip Code)

(440) 461-5200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Shares, $2 par value per share		NASDAQ

Securities registered pursuant to Section 12(g) of the Act: (None)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (S232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange act.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller Reporting Company o

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

The aggregate market value of voting and non-voting common shares held by non-affiliates of the registrant as of June 30, 2010 was $61,224,698 based on the closing price of such common shares, as reported on the NASDAQ National Market System. As of March 9, 2011, there were 5,272,804 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 25, 2011 are incorporated by reference into Part III, Items 10, 11, 12, 13 and 14.

 

 

Table of Contents

		Page
Part I.
Item 1. Business			4
Item 1A. Risk Factors			13
Item 1B. Unresolved Staff Comments			14
Item 2. Properties			15
Item 3. Legal Proceedings			16
Item 4. (Removed and Reserved)			16
Part II.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities			17
Item 6. Selected Financial Data			19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			35
Item 8. Financial Statements and Supplementary Data			36
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			68
Item 9A. Controls and Procedures			68
Item 9B. Other Information			70
Part III.
Item 10. Directors, Executive Officers and Corporate Governance			70
Item 11. Executive Compensation			70
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			70
Item 13. Certain Relationships, Related Transactions, and Director Independence			70
Item 14. Principal Accounting Fees and Services			70
Part IV.
Item 15. Exhibits and Financial Statement Schedules			70
SIGNATURES			73
Schedule II — Valuation and Qualifying Accounts			74
Exhibit 10.15
Exhibit 10.16
Exhibit 21
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

Forward-Looking Statements

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

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

	•		The overall demand for cable anchoring and control hardware for electrical transmission and distribution lines on a worldwide basis, which has a slow growth rate in mature markets such as the United States (U.S.), Canada, and Western Europe and may not grow as expected in developing regions;
	•		The ability of our customers to raise funds needed to build the facilities their customers require;
	•		Technological developments that affect longer-term trends for communication lines such as wireless communication;
	•		The decreasing demands for product supporting copper-based infrastructure due to the introduction of products using new technologies or adoption of new industry standards;
	•		The Company’s success at continuing to develop proprietary technology and maintaining high quality products and customer service to meet or exceed new industry performance standards and individual customer expectations;
	•		The Company’s success in strengthening and retaining relationships with the Company’s customers, growing sales at targeted accounts and expanding geographically;
	•		The extent to which the Company is successful in expanding the Company’s product line or production facilities into new areas;
	•		The Company’s ability to identify, complete and integrate acquisitions for profitable growth;
	•		The potential impact of consolidation, deregulation and bankruptcy among the Company’s suppliers, competitors and customers;
	•		The relative degree of competitive and customer price pressure on the Company’s products;
	•		The cost, availability and quality of raw materials required for the manufacture of products;
	•		The effects of fluctuation in currency exchange rates upon the Company’s reported results from international operations, together with non-currency risks of investing in and conducting significant operations in foreign countries, including those relating to political, social, economic and regulatory factors;
	•		Changes in significant government regulations affecting environmental compliances;
	•		The telecommunication market’s continued deployment of Fiber-to-the-Premises;

	•		The Company’s ability to obtain funding for future acquisitions;
	•		The potential impact of the global economic condition and the depressed U.S. housing market on the Company’s ongoing profitability and future growth opportunities in our core markets in the U.S. and other foreign countries where the financial situation is expected to be similar going forward;
	•		The continued support by Federal, State, Local and Foreign Governments in incentive programs for upgrading electric transmission lines and promoting renewable energy deployment;
	•		Those factors described under the heading “Risk Factors” on page 13.

Part I

Item 1.		Business

Background

Preformed Line Products Company and its subsidiaries (the “Company”) is an international designer and manufacturer of products and systems employed in the construction and maintenance of overhead and underground networks for the energy, telecommunication, cable operators, information (data communication) and other similar industries. The Company’s primary products support, protect, connect, terminate and secure cables and wires. The Company also provides solar hardware systems and mounting hardware for a variety of solar power applications. The Company’s 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 and international manufacturing facilities have obtained an International Organization of Standardization (“ISO”) 9001:2000 Certified Management System, with the exception of Direct Power and Water Corporation (DPW), which was acquired during 2007. The ISO 9001:2000 certified management system is a globally recognized quality standard for manufacturing and assists the Company in marketing its products throughout the world. The Company’s customers include public and private energy utilities and communication companies, cable operators, financial institutions, governmental agencies, 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:

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Formed Wire and Related Hardware Products

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Protective Closures

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Data Communication Cabinets

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Plastic Products

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Other Products

Formed Wire Products and Related Hardware Products are used in the energy, communications, cable and special industries to support, protect, terminate and secure both power conductor and communication cables and to control cable dynamics (e.g., vibration). Formed wire 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, dependable and easy to use. The Company introduced formed wire products to the power industry over 60 years ago and such products enjoy an almost universal acceptance in the Company’s markets. Related hardware products include hardware for supporting and protecting transmission conductors, spacers, spacer-dampers, stockbridge dampers, corona suppression devices and various compression fittings for dead-end applications. Formed wire and related hardware products are approximately 65% of the Company’s revenues in 2010, 62% in 2009 and 59% in 2008.

Protective Closures, including splice cases, are used to protect fixed line communication networks, such as copper cable or fiber optic cable, from moisture, environmental hazards and other potential contaminants. Protective closures are approximately 17% of the Company’s revenues in 2010, 22% in 2009 and 24% in 2008.

Data Communication Cabinets are products used in high-speed data systems to hold and protect electronic equipment. Data communication cabinets are approximately 4% of the Company’s revenues in 2010 and 2009 and 5% in 2008.

Plastic Products, including guy markers, tree guards, fiber optic cable markers and pedestal markers, are used in energy, communications, cable television and special industries to identify power conductors, communication cables and guy wires. Plastic products are approximately 3% of the Company’s revenues in 2010, 2009 and 2008.

Other Products include hardware assemblies, pole line hardware, resale products, underground connectors, solar hardware systems and urethane products. They are used by energy, renewable energy, communications, cable and special industries for various applications and are defined as products that compliment the Company’s core line offerings. Other products are approximately 11% of the Company’s revenues in 2010, 9% in 2009 and 5% in 2008.

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, Mr. 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 Mr. Peterson’s 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 U.S. 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, had complete ownership of operations in Australia, Brazil, Canada, Great Britain, South Africa and Spain and held a minority interest in two joint ventures in Japan. The Company’s international subsidiaries have the necessary infrastructure (i.e. manufacturing, engineering, marketing and general management) to support local business activities. Each is staffed with local personnel 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 its 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 COYOTEâ Closure line of products. Since 1995 fourteen domestic and three international patents have been granted to the Company on the COYOTE Closure. None of the COYOTE Closure patents have expired. The earliest COYOTE Closure patent was filed April 1995 and will not expire until April 2015.

In 1993, the Company purchased the assets of Superior Modular Products Company,located in Asheville, North Carolina.

Recognizing the need for a stronger presence in the fast growing Asian market, in 1996 the Company formed a joint venture in China and, in 2000, became sole owner of this venture.

In 2000, the Company acquired Rack Technologies Pty. Ltd, headquartered in Sydney, Australia. Rack Technologies was a specialist manufacturer of rack system enclosures for the communications, electronics and securities industries. This acquisition complemented and broadens the Company’s existing line of data communication products used inside a customer’s premises.

In 2002, the Company acquired the remaining 2.6% minority interest in its operations in Mexico. The 97.4% interest was acquired in 1969.

In 2003, the Company sold its 24% interest in Toshin Denko Kabushiki Kaisha in Osaka, Japan. The Company’s investment in Toshin Denko dated back to 1961 when the joint venture company was founded.

In 2004, the Company acquired the assets of Union Electric Manufacturing Co. Ltd, located in Bangkok, Thailand.

In 2004, the Company sold its 49% interest in Japan PLP Co. Ltd., a joint venture in Japan.

In 2007, the Company acquired the shares of DPW, located in New Mexico, U.S. This acquisition broadened the Company’s product lines and manufactures mounting hardware for a variety of solar power applications and provides designs and installations of solar power systems.

In 2007, the Company acquired 83.74% of Belos SA (Belos), located in Bielsko-Biala, Poland. Belos is a manufacturer and supplier of fittings for various voltage power networks. This acquisition complements the Company’s existing line of energy products. In 2008, the Company acquired an additional 8.3% of the outstanding shares of Belos. In 2009, the Company acquired an additional 4.1% of the outstanding shares of Belos. In 2010, the Company acquired the remaining 3.86% of the outstanding shares of Belos.

In 2008, the Company divested its data communication business, Superior Modular Products.

In 2008, the Company formed a joint venture between the Company’s Australian subsidiary, Preformed Line Products Australia Pty Ltd (PLP-AU) and BlueSky Energy Pty Ltd, a solar systems integration and installation business based in Sydney, Australia. PLP-AU holds a 50% ownership interest in the joint venture company, which operates under the name BlueSky Energy Australia (BlueSky), with the option to acquire the remaining 50% ownership interest from BlueSky Energy Pty Ltd over the next five years.

In 2009, the Company acquired a 33.3% investment in Proxisafe Ltd. Proxisafe is a Canadian developmental company formed to design and commercialize new industrial safety equipment located in Calgary, Alberta.

In 2009, the Company acquired the Dulmison business from Tyco Electronics Group S.A. (Tyco Electronics), which includes both the acquisition of equity of certain Tyco Electronics entities and the acquisition of assets from other Tyco Electronics entities. Dulmison was a leader in the supply and manufacturer of electrical transmission and distribution products. Dulmison designed, manufactured and marketed pole line hardware and vibration control products for the global electrical utility industry. Dulmison had operations in Australia, Thailand, Indonesia, Malaysia, Mexico and the United States. The Dulmison business has been fully integrated into the Company’s core businesses.

In 2010, the Company acquired Electropar Limited (Electropar), a New Zealand corporation. Electropar designs, manufactures and markets pole line and substation hardware for the global electrical utility industry. Electropar is based in New Zealand with a subsidiary operation in Australia. The acquisition has and is expected to continue to strengthen the Company’s position in the power distribution, transmission and substation hardware markets and will expand the Company’s presence in the Asia-Pacific region.

The Company’s World headquarters is located at 660 Beta Drive, Mayfield Village, Ohio 44143.

Business

The demand for the Company’s products comes primarily from new, maintenance and repair construction for the energy, telecommunication and data communication industries. 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 emergencies or natural disasters, such as hurricanes, tornadoes, earthquakes, floods or ice storms. Under these circumstances, the Company provides 24-hour service to provide 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 cases are easily re-enterable closures that allow utility maintenance workers access to the cables located inside the 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 their 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.

Fiber optic cable was first deployed in the outside plant environment in the early 1980s. Through fiber optic technologies, a much greater amount of both voice and data communication can 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, and has since expanded the product line to address Fiber-to-the-Premise (FTTP) applications. 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 cabinets and enclosures for data communication networks, offering a comprehensive line of copper and fiber optic cross-connect systems. The product line enables reliable, high-speed transmission of data over customers’ local area networks.

With the acquisition of DPW in 2007, the Company expanded into the fast growing renewable energy sector. DPW provides a comprehensive line of mounting hardware for a variety of solar power applications including residential roof mounting, commercial roofing systems, top of pole mounting and customized solutions. DPW also provides design and installation services for residential and commercial solar power systems primarily in the western U.S.

Markets

The Company markets its products to the energy, telecommunication, cable, data communication and special industries. While rapid changes in technology have blurred the distinctions between telephone, cable, and data communication, the energy industry is clearly distinct. 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.

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 U.S.: 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 U.S. for more than a decade. Additionally, because of deregulation, some 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 areas to the energy-deficient areas means that new transmission lines will likely be built and many existing lines will likely be refurbished. In addition, passage of the economic stimulus bill in early 2009 that contains provisions for upgrading the aging transmission infrastructure and connecting renewable energy sources to the grid should attract new investment to fund new infrastructure projects in the industry. 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, increased construction of international transmission grids is occurring in many regions of the world. However, consolidations in the markets that 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, 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, particularly in the developing regions, there is increasing political pressure to extend the availability of electricity to additional populations. Through its global network of factories and sales offices, the Company is prepared to take advantage of this new growth in construction.

Renewable Energy. The renewable energy market includes residential consumers, commercial businesses, off-grid operators, and utility companies that have an interest in alternative energy sources. Environmental concerns along with federal, state, and local utility incentives have fueled demand for renewable energy systems including solar, wind, and biofuel. The industry continues to grow rapidly as advancements in technology lead to greater efficiencies which drive down overall system costs. The Company currently provides hardware solutions, system design and installation services for solar power applications. The Company markets and sells these products and services to end-users, distributors, installers and integrators.

Communication and Cable. Major developments, including growing competition between the cable and communications industries and increasing overall demand for high-speed communication services, have led to a changing regulatory and competitive environment in many markets throughout the world. The deployment of new access networks and improvements to existing networks for advanced applications continues to gain momentum.

Cable operators, local communication operators and power utilities are building, rebuilding or upgrading signal delivery networks in developed countries. 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 optical fibers. The Company manufactures closures that these industries use to securely connect and protect these vital networks.

As critical components of the outdoor infrastructure, closures provide protection against weather and vandalism, and permit technicians who maintain and manage the system ready access to the devices. 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 communication 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, video or data signals.

The industry has developed technological methods to increase the usage of copper-based plant through high-speed digital subscriber lines (DSLs). The popularity of these services, the regulatory environment and the increasingly fierce competition between communications and cable operators has driven the move toward building out the “last mile” in fiber networks. FTTP technology supports the next wave in broadband innovation by carrying fiber optic technology into homes and businesses. The Company has been actively developing products that address this market.

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 products in the workplace are all key elements to the increased demand for the connecting devices made by the Company. The Company’s products are sold to a number of categories of customers including, (i) ISPs, (ii) large companies and organizations which have their own local area network for data communication, and (iii) distributors of structured cabling systems and components for use in the above markets.

Special Industries. The Company’s formed wire products are also used in other industries which require a method of securing or terminating cables, including the metal building, 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. The Company continues to explore new and innovative uses of its manufacturing capabilities; however, these markets remain a small portion of overall consolidated sales.

International Operations

The international operations of the Company are essentially the same as its domestic (PLP-USA) business. The Company manufactures similar types of products in its international plants as are sold domestically, sells to similar types of customers and faces similar types of competition (and in some cases the same competitors). Sources of supply of raw materials are not significantly different internationally. See Note K in the Notes To Consolidated Financial Statements for information and financial data relating to the Company’s international operations that represent reportable segments.

While a number of the Company’s international plants are in developed countries, the Company believes it has strong market opportunities in developing countries 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 Thailand and Indonesia. In addition, as the need arises, the Company is prepared to establish new manufacturing facilities abroad.

Sales and Marketing

Domestically and internationally, the Company markets its products through a direct sales force and manufacturing representatives. 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. The manufacturer’s representatives are independent organizations that represent the Company as well as other complimentary product lines. These organizations are paid a commission based on the sales amount.

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 professional expertise to develop state-of-the-art materials for several of the Company’s products. These products 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 and Trademarks” 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 a 29,000 square feet Research and Engineering Center located at its corporate headquarters in Mayfield Village, Ohio. Using the Research and Engineering Center, engineers and technicians 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 includes 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 believes that its Research and Engineering Center 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 competitive advantage. 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 18% of 2010 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 which are charged with the responsibility of establishing industry wide specifications and performance criteria, including IEEE (Institute of Electrical and Electronics Engineers), CIGRE (Counsiel Internationale des Grands Reseaux Electriques a Haute Tension), and IEC (International Electromechanical Commission). Research and development costs are expensed as incurred. Research and development costs for new products were $1.7 million in 2010, $2.3 million in 2009 and $2 million in 2008.

Patents and Trademarks

The Company applies for patents in the U.S. and other countries, as appropriate, to protect its significant patentable developments. As of December 31, 2010, the Company had in force 32 U.S. patents and 67 international patents in 11 countries and had pending six U.S. patent applications and 24 international applications. While such domestic and international 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, 2010, the Company had obtained U.S. registration on 31 trademarks and no trademark applications remained pending. International registrations amounted to 229 registrations in 38 countries, with no pending international registrations.

Since June 8, 1995, U.S. 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 of 17 years from the date of its issuance. Patents issued by international countries generally expire 20 years after filing. U.S. and international patents are not renewable after expiration of their initial term. U.S. and international trademarks are generally 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 significant allegation or charges of infringement of intellectual property rights by any organization.

In the normal course of business, the Company occasionally makes and receives inquiries with regard to possible patent and trademark infringement. The extent of such inquiries from third parties has been limited generally to verbal remarks to Company representatives. 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.

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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.

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The Company’s Research and Engineering Center in Mayfield Village, Ohio and Research and Engineering department’s subsidiary locations maintain a strong technical support function to develop unique solutions to customer problems.

•

The Company is vertically integrated both in manufacturing and distribution and is continually upgrading equipment and processes.

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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 is a hallmark of the Company.

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The Company’s 17 manufacturing locations ensure close support and proximity to customers worldwide.

Domestically, there are several 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 for energy and communications markets. 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. Based on its experience in the industry, the Company believes it maintains a strong market share position.

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., 3M and Corning Cable Systems. 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. The Company’s competitive strength is its technological leadership and manufacturing expertise.

Sources and Availability of Raw Materials

The principal raw materials used by the Company are galvanized wire, stainless steel, aluminum covered steel wire, aluminum re-draw rod, plastic resins, glass-filled plastic compounds, neoprene rubbers and aluminum castings. 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 contracts to stabilize costs and improve delivery performance and are available from a number of reliable suppliers. Wire and re-draw rod are purchased in standard stock diameters and coils under contracts from a number of reliable suppliers. Contracts have firm prices except for fluctuations of base metals and petroleum prices, which result in surcharges when global demand is greater than the available supply.

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 and various metal racks and cabinets. The Company believes there are multiple sources of supply for these products.

The Company relies on sole source manufacturers for certain raw materials used in production. The current state of economic uncertainty presents a risk that existing suppliers could go out of business. However, there are other potential sources for these materials available, and the Company could relocate the tooling and processes to other manufacturers if necessary.

Due to capacity constraints and increased worldwide demand, raw material costs increased throughout 2010. This increasing trend is expected to continue throughout 2011.

Backlog Orders

The Company’s backlog was approximately $59.1 million at the end of 2010 and $38 million at the end of 2009. The Company’s order backlog generally represents six to nine weeks of sales. 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 or construction crews. As a result, the Company does not have a 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.

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 2011 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. The Company believes that such regulations would be enacted over time and would affect the industry as a whole.

Employees

At December 31, 2010, the Company had 2,617 employees. Approximately 31% of the Company’s employees are located in the U.S.

Available Information

The Company maintains an Internet site at http://www.preformed.com, on which the Company makes available, free of charge, the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC. The Company’s SEC reports can be accessed through the investor relations section of its Internet site. The information found on the Company’s Internet site is not part of this or any other report that is filed or furnished to the SEC.

The public may read and copy any materials the Company files with or furnishes to the SEC at the SEC’s Public Reference Room at 100 F. Street, NE., Washington, DC 20549. Information on the operation of the Public Reference Room is available by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information filed with the SEC by electronic filers. The SEC’s Internet site is http://www.sec.gov. The Company also has a link from its Internet site to the SEC’s Internet site, this link can be found on the investor relations page of the Company’s Internet site.

Item 1A.		Risk Factors

Due to the Company’s dependency on the energy and telecommunication industries, the Company is susceptible to negative trends relating to those industries that could adversely affect the Company’s operating results.

The Company’s sales to the energy and telecommunication industries represent a substantial portion of the Company’s historical sales. The concentration of revenue in such industries is expected to continue into the foreseeable future. Demand for products to these industries depends primarily on capital spending by customers for constructing, rebuilding, maintaining or upgrading their systems. The amount of capital spending and, therefore, the Company’s sales and profitability are affected by a variety of factors, including general economic conditions, access by customers to financing, government regulation, demand for energy and cable services, and technological factors. As a result, some customers may not continue as going concerns, which could have a material adverse effect on the Company’s business, operating results and financial condition. Consolidation and deregulation present the additional risk to the Company in that combined or deregulated customers will rely on relationships with a source other than the Company. Consolidation and deregulation may also increase the pressure on suppliers, such as the Company, to sell product at lower prices.

The Company’s business will suffer if the Company fails to develop and successfully introduce new and enhanced products that meet the changing needs of the Company’s customers.

The Company’s ability to anticipate changes in technology and industry standards and to successfully develop and introduce new products on a timely basis will be a significant factor in the Company’s ability to grow and remain competitive. New product development often requires long-term forecasting of market trends, development and implementation of new designs and processes and a substantial capital commitment. The trend toward consolidation of the energy, telecommunication and data communication industries may require the Company to quickly adapt to rapidly changing market conditions and customer requirements. Any failure by the Company to anticipate or respond in a cost-effective and timely manner to technological developments or changes in industry standards or customer requirements, or any significant delays in product development or introduction or any failure of new products to be widely accepted by the Company’s customers, could have a material adverse effect on the Company’s business, operating results and financial condition as a result of reduced net sales.

The intense competition in the Company’s markets, particularly telecommunication, may lead to a reduction in sales and profits.

The markets in which the Company operates are highly competitive. The level of intensity of competition may increase in the foreseeable future due to anticipated growth in the telecommunication and data communication industries. The Company’s competitors in the telecommunication and data communication markets are larger companies with significant influence over the distribution network. The Company may not be able to compete successfully against its competitors, many of which may have access to greater financial resources than the Company. In addition, the pace of technological development in the telecommunication and data communication markets is rapid and these advances (i.e., wireless, fiber optic network infrastructure, etc.) may adversely affect the Company’s ability to compete in this market.

The introduction of products embodying new technologies or the emergence of new industry standards can render existing products or products under development obsolete or unmarketable and result in lost sales.

The energy, telecommunication and data communication industries are characterized by rapid technological change. Satellite, wireless and other communication technologies currently being deployed may represent a threat to copper, coaxial and fiber optic-based systems by reducing the need for wire-line networks. Future advances or further development of these or other new technologies may have a material adverse effect on the Company’s business, operating results and financial condition as a result of lost sales.

Price increases of raw materials could result in lower earnings.

The Company’s cost of sales may be materially adversely affected by increases in the market prices of the raw materials used in the Company’s manufacturing processes. The Company may not be able to pass on price increases in raw materials to the Company’s customers through increases in product prices. As a result, the Company’s operating results could be adversely affected.

The Company’s international operations subject the Company to additional business risks that may have a material adverse effect on the Company’s business, operating results and financial condition.

International sales account for a substantial portion of the Company’s net sales (58%, 54% and 54% in 2010, 2009 and 2008, respectively) and the Company expects these sales will increase as a percentage of net sales in the future. Due to its international sales, the Company is subject to the risks of conducting business internationally, including unexpected changes in, or impositions of, legislative or regulatory requirements, fluctuations in the U.S. dollar which could materially adversely affect U.S. dollar revenues or operating expenses, tariffs and other barriers and restrictions, potentially longer payment cycles, greater difficulty in accounts receivable collection, reduced or limited protection of intellectual property rights, potentially adverse taxes and the burdens of complying with a variety of international laws and communications standards. The Company is also subject to general geopolitical risks, such as political and economic instability and changes in diplomatic and trade relationships, in connection with its international operations. These risks of conducting business internationally may have a material adverse effect on the Company’s business, operating results and financial condition.

The Company may not be able to successfully integrate businesses that it may acquire in the future or complete acquisitions on satisfactory terms, which could have a material adverse effect on the Company’s business, operating results and financial condition.

A portion of the Company’s growth in sales and earnings has been generated from acquisitions. The Company expects to continue a strategy of identifying and acquiring businesses with complementary products. In connection with this strategy, the Company faces certain risks and uncertainties relating to acquisitions. The factors affecting this exposure are in addition to the risks faced in the Company’s day-to-day operations. Acquisitions involve a number of special risks, including the risks pertaining to integrating acquired businesses. In addition, the Company may incur debt to finance future acquisitions, and the Company may issue securities in connection with future acquisitions that may dilute the holdings of current and future shareholders. Covenant restrictions relating to additional indebtedness could restrict the Company’s ability to pay dividends, fund capital expenditures, consummate additional acquisitions and significantly increase the Company’s interest expense. Any failure to successfully complete acquisitions or to successfully integrate such strategic acquisitions could have a material adverse effect on the Company’s business, operating results and financial condition.

The Company may have interruptions in or lost businesses due to the uncertainty of the global economy, specifically the potential impact of bankruptcy among the Company’s suppliers and lack of available funding for the Company’s customers.

The Company relies on sole source manufacturers for certain materials that complement the Company’s product lines. The current state of economic uncertainty presents a risk that existing suppliers could go out of business. If, due to any of these risk factors, the Company had to relocate the tooling and processes to other manufacturers, there could be an adverse effect on the supply and the Company’s ability to make products on a timely basis. Additionally, as the financial markets are experiencing unprecedented volatility, lower levels of liquidity may be available. The inability to obtain funding may postpone customer spending and adversely affect the Company’s business, operating results and financial condition.

Item 1B.		Unresolved Staff Comments

The Company does not have any unresolved staff comments.

Item 2.		Properties

The Company currently owns or leases 20 facilities, which together contain approximately 2 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 principal facilities:

										Reportable
Location		Use		Owned/Leased		Square Feet				Segment
1. Mayfield Village, Ohio		Corporate Headquarters R&E		Owned			62,000			PLP-USA
2. Rogers, Arkansas		Manufacturing Warehouse Office		Owned			310,000			PLP-USA
3. Albemarle, North Carolina		Manufacturing Warehouse Office		Owned			261,000			PLP-USA
4. Sydney, Australia		Manufacturing R&E Warehouse Office		Owned			123,000			Asia-Pacific
5. São Paulo, Brazil		Manufacturing R&E Warehouse Office		Owned			148,500			The Americas
6. Cambridge, Ontario, Canada		Manufacturing Warehouse Office		Owned			73,300			The Americas
7. Andover, Hampshire, England		Manufacturing R&E Warehouse Office		Land Leased; Building Owned			89,400			EMEA
8. Queretaro, Mexico		Manufacturing Warehouse Office		Owned			82,900			The Americas
9. Beijing, China		Manufacturing Warehouse Office		Land Leased; Building Owned			180,900			Asia-Pacific
10. Pietermarizburg, South Africa		Manufacturing R&E Warehouse Office		Owned			73,100			EMEA

										Reportable
Location		Use		Owned/Leased		Square Feet				Segment
11. Sevilla, Spain		Manufacturing R&E Warehouse Office		Owned			63,300			EMEA
12. Bangkok, Thailand		Manufacturing Warehouse Office		Owned			60,000			Asia-Pacific
13. Albuquerque, New Mexico		Manufacturing Warehouse Office		Leased			27,200			The Americas
14. Bielsko-Biala, Poland		Manufacturing Warehouse Office		Land Leased; Buildings Owned			174,400			EMEA
15. Bekasi, Indonesia		Manufacturing Office		Owned			31,700			Asia-Pacific
16. Selangor, Malaysia		Manufacturing Warehouse Office		Leased			18,600			Asia-Pacific
17. Bangkok, Thailand		Manufacturing Warehouse Office		Leased			135,700			Asia-Pacific
18. Auckland, New Zealand		Manufacturing Warehouse Office		Leased			46,200			Asia-Pacific

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.		(Removed and Reserved)

Executive Officers of the Registrant

Each executive officer is elected by the Board of Directors, serves at its pleasure and holds office until a successor is appointed, or until the earliest of death, resignation or removal.

Name		Age				Position
Robert G. Ruhlman			54			Chairman, President and Chief Executive Officer
Eric R. Graef			58			Chief Financial Officer and Vice President — Finance
William H. Haag			47			Vice President — International Operations
J. Cecil Curlee Jr.			54			Vice President — Human Resources
Dennis F. McKenna			44			Vice President — Marketing and Business Development
David C. Sunkle			52			Vice President — Research and Engineering and Manufacturing
Caroline S. Vaccariello			44			General Counsel and Corporate Secretary

The following sets forth the name and recent business experience for each person who is an executive officer of the Company at March 1, 2011.

Robert G. Ruhlman was elected Chairman in July 2004. Mr. Ruhlman has served as Chief Executive Officer since July 2000 and as President since 1995 (positions he continues to hold). Mr. Ruhlman is the brother of Randall M. Ruhlman and son of Barbara P. Ruhlman, both Directors of the Company.

Eric R. Graef was elected Vice President—Finance in December 1999 and Chief Financial Officer in December 2007.

William H. Haag was elected Vice President—International Operations in April 1999.

J. Cecil Curlee Jr. was elected Vice President—Human Resources in January 2003.

Dennis F. McKenna was elected Vice President—Marketing and Business Development in April 2004.

David C. Sunkle was elected Vice President-Research and Engineering in January 2007. In addition, Mr. Sunkle has taken on the role of the Vice President — Manufacturing since July 2008. Mr. Sunkle joined the Company in 1978. He has served a variety of positions in Research and Engineering until 2002 when he became Director of International Operations. In 2006, Mr. Sunkle rejoined Research and Engineering as the Director of Engineering.

Caroline S. Vaccariello was elected General Counsel and Corporate Secretary in January 2007. Ms. Vaccariello joined the Company in 2005 as General Counsel and has led the Company’s legal affairs since that time. Prior to that time, Ms. Vaccariello worked as an attorney for The Timken Company from 2003 to 2005.

Part II

Item 5.		Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

The Company’s Common Shares are traded on NASDAQ under the trading symbol “PLPC”. As of March 9, 2011, the Company had approximately 900 shareholders of record. The following table sets forth 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 (ii) the amount per share of cash dividends paid by the Company.

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.

		Year ended December 31
		2010												2009
Quarter		High				Low				Dividend				High				Low				Dividend
First		$	44.14			$	34.60			$	0.20			$	47.65			$	28.26			$	0.20
Second			39.06				27.95				0.20				48.96				32.70				0.20
Third			35.64				27.50				0.20				44.16				33.06				0.20
Fourth			62.14				33.60				0.20				44.40				37.85				0.20

Equity Compensation Plan Information

Number of securities

Number of securities

remaining available for

to be issued upon

future issuance under

exercise of

Weighted-average

equity compensation

outstanding options,

exercise price of

plans (excluding

warrants and rights

outstanding options,

securities reflected in

Plan Category

(a)

warrants and rights

column (a)

Equity compensation plans approved by security holders

183,233

$

34.46

177,403

Equity compensation plans not approved by security holders

72,057

$

35.89

—

Total

255,290

177,403

Performance Graph

Set forth below is a line graph comparing the cumulative total return of a hypothetical investment in the Company’s Common Shares with the cumulative total return of hypothetical investments in the NASDAQ Market Index and the Hemscott Industry Group 627 (Industrial Electrical Equipment) Index based on the respective market price of each investment at December 31, 2005, December 31, 2006, December 31, 2007, December 31, 2008, December 31, 2009, and December 31, 2010, assuming in each case an initial investment of $100 on December 31, 2005, and reinvestment of dividends.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Preformed Line Products, the NASDAQ Composite Index
and a Hemscott Group Index

COMPANY / INDEX / MARKET		2005				2006				2007				2008				2009				2010
PREFORMED LINE PRODUCTS CO			100.00				84.34				145.96				114.00				110.57				150.95
NASDAQ MARKET INDEX			100.00				111.74				124.67				73.77				107.12				125.93
HEMSCOTT GROUP INDEX			100.00				132.35				181.83				95.26				135.74				173.54

Purchases of Equity Securities

On August 4, 2010, the Company announced the Board of Directors authorized a plan to repurchase up to 250,000 of Preformed Line Products common shares. The repurchase plan does not have an expiration date. There were no repurchases for the three-month period ended December 31, 2010.

Item 6.		Selected Financial Data

		2010				2009				2008				2007				2006
		(Thousands of dollars, except per share data)
Net Sales and Income
Net sales		$	338,305			$	257,206			$	269,742			$	233,289			$	196,910
Operating income			28,480				19,460				23,988				21,133				16,359
Income before income taxes and discontinued operations			30,183				29,593				24,760				21,321				17,180
Income from continuing operations, net of tax			23,008				22,833				17,042				13,820				11,827
Net income			23,008				22,833				17,911				14,213				12,103
Net income (loss) attributable to noncontrolling interest, net of tax			(105	)			(524	)			288				54				—
Net income attributable to PLPC			23,113				23,357				17,623				14,159				12,103
Per Share Amounts
Income from continuing operations attributable to PLP shareholders — basic		$	4.41			$	4.46			$	3.17			$	2.57			$	2.11
Net income attributable to PLPC common shareholders — basic			4.41				4.46				3.34				2.64				2.16
Income from continuing operations attributable to PLPC shareholders — diluted			4.33				4.35				3.14				2.54				2.09
Net income attributable to PLPC common shareholders — diluted			4.33				4.35				3.30				2.61				2.14
Dividends declared			0.80				0.80				0.80				0.80				0.80
PLPC Shareholders’ equity			37.21				32.58				26.09				27.82				24.47
Other Financial Information
Current assets		$	167,342			$	138,440			$	112,670			$	123,450			$	100,374
Total assets			280,979				235,372				190,875				203,866				170,852
Current liabilities			56,558				46,340				35,248				42,349				32,372
Long-term debt (including current portion)			10,650				4,429				3,147				4,959				4,361
Capital leases			590				239				112				373				478
PLPC Shareholders’ equity			196,140				170,966				136,265				149,721				131,148

On December 18, 2009, the Company completed a business combination acquiring certain subsidiaries and other assets from Tyco Electronics. The 2009 results were impacted by a $9.1 million gain, after taxes, on the acquisition, or $1.74 per basic share and $1.69 per diluted share. On May 30, 2008, the Company divested its Superior Modular Products subsidiary (SMP). The net sales and income and per share amounts sections for the years noted above have been restated to provide comparable information excluding the divestiture of the SMP operations.

Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and related Notes To Consolidated Financial Statements included in Item 8 in this report.

Preformed Line Products Company (the “Company”, “PLPC”, “we”, “us”, or “our”) was incorporated in Ohio in 1947. We are an international designer and manufacturer of products and systems employed in the construction and maintenance of overhead and underground networks for the energy, telecommunication, cable operators, information (data communication), and other similar industries. Our primary products support, protect, connect, terminate, and secure cables and wires. We also provide solar hardware systems and mounting hardware for a variety of solar power applications. Our goal is to continue to achieve profitable growth as a leader in the innovation, development, manufacture, and marketing of technically advanced products and services related to energy, communications, and cable systems and to take advantage of this leadership position to sell additional quality products in familiar markets. We have 17 sales and manufacturing operations in 14 different countries.

RECENT DEVELOPMENTS/ ACQUISITIONS

As a result of several global acquisitions since 2007 and corresponding significant changes in the Company’s internal structure, we realigned our business units as of the fourth quarter of 2010, into four operating segments to better capitalize on business development opportunities, improve ongoing services, enhance the utilization of our worldwide resources and global sourcing initiatives and to manage the Company better.

We report our segments in four geographic regions: PLP-USA, The Americas, EMEA (Europe, Middle East & Africa) and Asia-Pacific in accordance with accounting standards codified in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 280, Segment Reporting. Each segment distributes a full range of our primary products. Our PLP-USA segment is comprised of our U.S. operations manufacturing our traditional products primarily supporting our domestic energy and telecommunications products. Our other three segments, The Americas, EMEA and Asia-Pacific support the Company’s energy, telecommunications, data communication and solar products in each respective geographical region.

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

The amount of each segment’s performance reported is the measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segment and assessing its performance. We evaluate segment performance and allocate resources based on several factors primarily based on sales and net income. The segment information of all prior periods has been recast to conform to the current segment presentation.

On May 15, 2010, we agreed to purchase Electropar Limited (Electropar), a New Zealand corporation.

Electropar Limited designs, manufactures and markets pole line and substation hardware for the global electrical utility industry. Electropar is based in New Zealand with a subsidiary operation in Australia. We believe that the acquisition of Electropar has and will continue to strengthen our position in the power distribution, transmission and substation hardware markets and expand our presence in the Asia-Pacific region.

The acquisition of Electropar closed on July 31, 2010. Pursuant to the Purchase Agreement, we acquired all of the equity outstanding of Electropar for NZ$20.3 million or $14.8 million U.S. dollars, net of a customary post-closing working capital adjustment of $.2 million. The Purchase Agreement includes customary representations, warranties, covenants and indemnification provisions. In addition, we may be required to make an additional earn-out consideration payment up to NZ$2 million or $1.5 million U.S. dollars based on Electropar achieving a financial performance target (Earnings Before Interest, Taxes, Depreciation and Amortization) over the twelve months ending July 31, 2011. The fair value of the contingent consideration arrangement is determined by estimating the expected (probability-weighted) earn-out payment discounted to present value. Based upon our initial evaluation of the range of outcomes for this contingent consideration, we have accrued $.4 million for the additional earn-out consideration payment as of the acquisition date. Electropar has been included in our Asia-Pacific reporting segment.

On December 18, 2009, the Company and Tyco Electronics Group S.A. (Tyco Electronics) completed a Stock and Asset Purchase Agreement, pursuant to which we acquired from Tyco Electronics its Dulmison business for $16 million and the assumption of certain liabilities. The acquisition of Dulmison strengthened our position in the power distribution and transmission hardware market and expanded our presence in the Asia-Pacific region. As a result of the acquisition, we added operations in Indonesia and Malaysia and strengthened our existing positions in Australia, Thailand, Mexico and the United States.

We apply the purchase method of accounting to our acquisitions pursuant to FASB ASC 805, Business Combinations. Under this method, we allocate the cost of business acquisitions to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition, commonly referred to as the purchase price allocation. As part of the purchase price allocations for our business acquisitions, identifiable intangible assets are recognized as assets apart from goodwill if they arise from contractual or other legal rights, or if they are capable of being separated or divided from the acquired business and sold, transferred, licensed, rented, or exchanged. The purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair values, with any excess recorded as goodwill. We determine the fair values of such assets and liabilities, generally in consultation with third-party valuation advisors. Such fair value assessments require significant judgments and estimates such as projected cash flows, discount rates, royalty rates and remaining useful lives that can differ materially from actual results.

The current accounting standards requires us to record inventories at their respective fair values as of the acquisition date. To estimate the fair values of inventories acquired, we estimated the approximate selling price of these inventories and then subtracted the necessary expenses to sell and support the sale of these inventories. Specifically, the estimated selling price of the inventory was estimated by “grossing up” the inventories book values by an expected gross profit margin. We then subtract only certain operating expenses that would be incurred to dispose of the inventory items.

The current accounting standards, as previously noted, requires us to report the fair values of acquired tangible and intangible assets at the acquisition date fair value. In relation to our two most recent acquisitions previously noted, inventories were written up a net amount of $1.6 million and the acquired intangible assets (consisting of customer relationships, trade names, technology, and customer backlog) were valued at $10 million. For the year ended December 31, 2010, our operating income of $28.5 million was decreased by $1.7 million for the sales of acquired finished goods inventories that had been recorded at acquisition date fair value coupled with $.9 million of intangible amortization expense. Also, our 2011 operating results will be impacted by $.6 million as the result of amortizing the fair value of inventories and intangible amortization expense.

Operating results were also impacted by acquisition related costs of $1.1 million for the twelve month period ended December 31, 2010. These costs were for legal, accounting, valuation, other professional services and travel related costs. These costs were included in general and administrative costs in our statement of consolidated income.

DISCONTINUED OPERATONS

Our consolidated financial statements were impacted by the divestiture of Superior Modular Products (SMP) on May 30, 2008. We sold our SMP subsidiary for $11.7 million, which resulted in a $.8 million gain, net of tax, and included $1.5 million to be held in escrow for one year. We have not provided any significant continuing involvement in the operations of SMP after the closing of the sale. For tax purposes, the sale of SMP generated a capital loss, which was not deductible except for amounts used to offset capital gains in 2008 and 2009. A full valuation allowance was provided against the deferred tax asset on the remaining portion of the capital loss carryover. The operating results of SMP are presented in our statements of consolidated income as discontinued operations, net of tax. For the year ended December 31, 2008, income from discontinued operation, net of tax was $.9 million, or $.16 per diluted share.

MARKET OVERVIEW

Our business continues to be concentrated in the energy, communications and solar markets. During the past several years, industry consolidation continued as distributors and service provider consolidations took place in our major markets. This trend is expected to continue in 2011. The sluggish global economy coupled with a depressed U.S. housing market has and could continue to affect construction projects and negatively impact growth opportunities in our core markets in the U.S. and countries such as Spain, Poland and Great Britain where the financial situation is expected to be similar going forward.

In 2010, we again experienced growth in our energy and solar markets. We continued to see the investment in renewable energy projects, new transmission grids, new technologies, and upgrading and maintenance of the existing energy infrastructure. We expect the distribution energy market to be relatively flat in 2011 but anticipate continued growth in demand for transmission and fiber optic products.

We believe that the acquisition of Dulmison from Tyco Electronics in December 2009 and Electropar in July 2010 have further contributed to the Company’s leadership position and will enable the Company to enhance the scope of its product lines and the technology it provides to this important market. Dulmison’s spacer, spacer-damper and stockbridge damper product lines fit well and complement PLP’s product offerings and enable the Company to offer the most comprehensive line of products in the industry. We further strengthened our overall presence in the Asia-Pacific region with the acquisition of Electropar in Auckland, New Zealand. Electropar is a manufacturer of substation, distribution and transmission products supplying both the Australian and New Zealand electricity markets. With demand for electrical power continuing to increase, especially in many fast growing areas of the world, the Company’s leadership position in the market will enable it to take advantage of prospects for continued growth as the transmission grid is enhanced and extended.

Our international business is more concentrated in the energy markets. Historically, our international sales were primarily related to the distribution portion of the energy market but have grown through acquisition and new product development to include a significant contribution from the transmission market. We believe that we are well positioned to supply the needs of the world’s diverse energy market requirements as a result of our strategically located operations and array of product designs and technologies.

The Company’s communication business in 2010 faced challenges throughout the world. Many communications customers cut back on capital and operational spending as the global economic downturn negatively impacted consumer spending on communication services. The U.S. was hit especially hard as communication carriers diverted operational funds to wireless communication projects where they could realize a faster return on their spending and investments. Also, the broadband stimulus program that was announced early in 2009 failed to gain additional traction throughout the year and the administrative burden of the program has further delayed the deployment of funds. Through all of this, the Company maintained its focus on the customer and put resources towards new product development efforts. These efforts were directed at customer premise and demarcation applications which are the final connections between the network and the end consumer.

As economic conditions improve and stimulus funds eventually start flowing into projects, we believe our efforts in these areas will lead to growth in the communications business. Opportunities for growth also look promising in Central and South America where deployment of fixed line telecommunications services and broadband penetration rates remain low as a percentage of the total population.

Preface

Our consolidated financial results for the years ended December 31, 2010, 2009, and 2008 include the financial results of our solar energy operation, Direct Power and Water (DPW), acquired on March 22, 2007, Belos, in Poland, acquired on September 6, 2007, BlueSky Energy Pty Ltd. (BlueSky) a joint venture entered into on May 21, 2008, Dulmison, acquired on December 18, 2009, and Electropar, acquired on July 31, 2010.

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the U.S. (GAAP). Our discussions of the financial results include non-GAAP measures (primarily the impact of foreign currency and the gain on acquisition of business under FASB ASC 805 (“bargain purchase gain”) noted below) to provide additional information concerning our financial results and provide information that is useful to the assessment of our performance and operating trends.

Our net sales for the year ended December 31, 2010 increased $81.1 million, or 32%, compared to 2009. Our net sales increase was caused by a 41% increase in foreign net sales in addition to a 20% increase in U.S. net sales. Our foreign and U.S. net sales increases were primarily attributable to global business combinations, new business, improving market conditions, particularly outside the U.S., and favorable foreign currency exchange rates. Our financial statements are subject to fluctuations in the exchange rates of foreign currencies in relation to the U.S. dollar. As foreign currencies strengthen against the U.S. dollar, our revenues and costs increase as the foreign currency-denominated financial statements translate into more dollars. The fluctuations of foreign currencies during 2010, especially the Australian dollar, South African rand and Brazilian real, had a positive impact on net revenues of $14.1 million as compared to 2009. Excluding the effect of currency translation, 2010 net sales increased in all four of our reportable segments compared to 2009. Our gross profit decreased to 32% from 33% in 2009 as a percentage of net sales mostly due to an overall increase in raw material costs. Excluding the effect of currency translation, gross profit increased $18.6 million, or 22%, compared to 2009. Overall, cost and expenses, as a percentage of net sales, decreased 2% points compared to 2009. Excluding the effect of currency translation, costs and expenses increased $11.7 million, or 18%, as both U.S. and foreign costs and expenses increased 18%. The primary reasons costs and expenses increased compared to 2009 was due to continued investment in personnel, research and engineering costs, acquisition and integration related costs, and amortization expense related to acquired intangible assets. Excluding the effect of currency translation and as a result of the preceding, operating income of $28.5 million increased $7.5 million, or 39%. Due to the acquisition of Dulmison, we realized a $9.1 million bargain purchase gain which was included in Other income (expense) in December 2009. Net income in 2010 of $23 million increased $.2 million compared to 2009. Excluding the bargain purchase gain from 2009, net income would have increased $9.3 million compared to 2009.

Despite the global economic conditions, we are seeing an improvement in our global marketplace and our financial condition continues to remain strong. We continue to generate cash flows from operations, have proactively managed working capital and have controlled capital spending. We currently have a debt to equity ratio of 6% and can borrow needed funds at an attractive interest rate under our credit facility. While current worldwide conditions necessitate that we concentrate our efforts on maintaining our financial strength, we believe there are many available opportunities for growth. We will pursue these opportunities as appropriate in the current environment in order to improve our competitive position in the future.

The following table sets forth a summary of the Company’s consolidated income statements and the percentage of net sales for the years ended December 31, 2010, 2009 and 2008. The Company’s past operating results are not necessarily indicative of future operating results.

		Year ended December 31
Thousands of dollars		2010								2009								2008
Net sales		$	338,305				100	%		$	257,206				100	%		$	269,742				100	%
Cost of products sold			230,089				68	%			172,438				67	%			182,475				68	%
GROSS PROFIT			108,216				32	%			84,768				33	%			87,267				32	%
Costs and expenses			79,736				24	%			65,308				25	%			63,279				23	%
OPERATING INCOME			28,480				8	%			19,460				8	%			23,988				9	%
Other income			1,703				1	%			10,133				4	%			772				0	%
INCOME BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS			30,183				9	%			29,593				12	%			24,760				9	%
Income taxes			7,175				2	%			6,760				3	%			7,718				3	%
INCOME FROM CONTINUING OPERATIONS, NET OF TAX			23,008				7	%			22,833				9	%			17,042				6	%
Income from discontinued operations, net of tax			—				0	%			—				0	%			869				0	%
NET INCOME		$	23,008				7	%		$	22,833				9	%		$	17,911				7	%

2010 Results of Operations compared to 2009

Highlights:

	•		Net Sales increased 32% to $338.3 million, a record for the Company, from $257.2 million in 2009.
	•		Operating income increased 46% to $28.5 million from $19.5 million in 2009.
	•		Net income of $23 million was also a record for the Company.
	•		Bank debt to equity ratio of 6% and 4% as of December 31, 2010 and 2009.

Net Sales. In 2010, net sales were $338.3 million, an increase of $81.1 million, or 32%, compared to 2009. Excluding the effect of currency translation, net sales increased $67 million as summarized in the following table:

		Year ended December 31
														Change				Change
														due to				excluding
														currency				currency				%
thousands of dollars		2010				2009				Change				translation				tranlation				change
Net sales
PLP-USA		$	118,325			$	103,910			$	14,415			$	—			$	14,415				14	%
The Americas			79,695				62,161				17,534				5,567				11,967				19
EMEA			50,073				46,863				3,210				1,007				2,203				5
Asia-Pacific			90,212				44,272				45,940				7,502				38,438				87
Consolidated		$	338,305			$	257,206			$	81,099			$	14,076			$	67,023				26	%

The increase in PLP-USA net sales of $14.4 million, or 14%, was due to a sales volume increase of $10.4 million and sales mix increases of $6.5 million partially offset by lower average prices when compared to 2009. We estimate that approximately $10 million of the $14.4 million increase in PLP-USA net sales is attributable to the acquisition of Dulmison in December 2009. International net sales for the year ended December 31, 2010 were favorably affected by $14.1 million when local currencies were converted to U.S. dollars. The following discussions of international net sales exclude the effect of currency translation. The Americas net sales of $79.7 million increased $12 million, or 19%, primarily due to the increased volume in solar sales coupled with stronger overall market demand in energy volume sales in the region. In EMEA, net sales increased $2.2 million, or 5%, due to stronger market conditions in the region, particularly in the market in Poland due to the strengthening of Poland’s economy. In Asia-Pacific, net sales increased $38.4 million, or 87%. Approximately $33.3 million was generated by our two most recent acquisitions. The balance was due to an increase in sales volume.

Gross Profit. Gross profit of $108.2 million for 2010 increased $23.4 million, or 28%, compared to 2009. Excluding the effect of currency translation, gross profit increased 22% as summarized in the following table:

		Year Ended December 31
														Change				Change
														due to				excluding
														currency				currency				%
thousands of dollars		2010				2009				Change				translation				translation				change
Gross profit
PLP-USA		$	37,946			$	33,727			$	4,219			$	—			$	4,219				13	%
The Americas			23,105				20,535				2,570				1,742				828				4
EMEA			17,070				15,354				1,716				482				1,234				8
Asia-Pacific			30,095				15,152				14,943				2,585				12,358				82
Consolidated		$	108,216			$	84,768			$	23,448			$	4,809			$	18,639				22	%

PLP-USA gross profit of $37.9 million increased $4.2 million compared to 2009. PLP-USA gross profit increased $7.4 million due to higher sales partially offset by an increase in material costs of $1.8 million coupled with an increase in personnel related costs of $.8 million and increased freight of $.6 million on greater net sales. International gross profit for the year ended December 31, 2010 was favorably impacted by $4.8 million when local currencies were translated to U.S. dollars. The following discussion of international gross profit excludes the effect of currency translation. The Americas gross profit increase of $.8 million was primarily the result of $3.1 million from higher net sales partially offset by a decrease in production margins of $2.2 million coupled with slightly higher overall material costs in the region. The EMEA gross profit increase of $1.2 million was the result of $.6 million from higher net sales coupled with better product margins. Asia-Pacific gross profit of $30.1 million increased $12.4 million compared to 2009. The majority of the increase in gross profit was related to the sales realized through the acquisitions of Dulmison in December 2009 and Electropar in July 2010.

Our 2010 gross profit was impacted by the sale of inventories which were adjusted to fair value on their respective acquisition dates. The Dulmison and Electropar acquisitions were accounted for pursuant to the current business combination standards. In accordance with the standards, we recorded, as of their respective acquisition dates, the acquired inventories at their respective fair values. We have sold and therefore recognized $1.7 million of the acquired finished goods inventories fair value adjustment in Cost of products sold.

Costs and expenses. Cost and expenses of $79.7 million for the year ended December 31, 2010 increased $14.4 million, or 22%, compared to 2009. Excluding the effect of currency translation, costs and expenses increased 18% as summarized in the following table:

		Year ended December 31
														Change				Change
														due to				excluding
														currency				currency				%
thousands of dollars		2010				2009				Change				translation				translation				change
Costs and expenses
PLP-USA		$	39,110			$	33,872			$	5,238			$	—			$	5,238				15	%
The Americas			13,198				9,982				3,216				1,010				2,206				22
EMEA			8,415				8,940				(525	)			145				(670	)			(7	)
Asia-Pacific			19,013				12,514				6,499				1,571				4,928				39
Consolidated		$	79,736			$	65,308			$	14,428			$	2,726			$	11,702				18	%

PLP-USA costs and expenses increased $5.2 million primarily due to an increase in personnel related costs of $2.2 million, $.4 million due to an increase in travel related expenses, an increase in commission expense of $.7 million due to the increase and mix of commissionable sales, a $1 million increase in consulting expense and a $.1 million increase in intangible asset amortization expense related to the Dulmison acquisition. PLP-USA costs and expenses also increased $.9 million due to a decrease in other operating income primarily related to a $.4 million lower cash surrender value on life insurance policies compared to 2009, a decrease on gains on sale of capital assets of $.3 million and a decrease of $.1 million due to a lower gain on foreign currency translations. International costs and expenses for the year ended December 31, 2010 were unfavorably impacted by $2.7 million when local currencies were translated to U.S. dollars compared to 2009. The following discussions of international costs and expenses exclude the effect of currency translation. The Americas costs and expenses increased $2.2 million primarily due to an increase in employee headcount in the region, mainly attributable to our investment in research and engineering to support our future growth, coupled with higher personnel related costs and $.5 million related to higher sales commissions. EMEA costs and expenses decreased $.7 million. EMEA’s costs and expenses decrease was due to a $1.4 million gain on currency transactions partially offset by an increase in employee related costs coupled with higher sales commissions of $.2 million. Asia-Pacific costs and expenses increased $4.9 million compared to 2009. The Dulmison and Electropar acquisitions added $4 million to costs and expenses compared to 2009. Also contributing $.9 million to the costs and expenses increase was our legacy locations located in our Asia-Pacific reportable segment. The increase in our legacy locations costs and expenses was primarily due to personnel related costs coupled with higher depreciation expense and research and engineering costs. Overall, Asia-Pacific costs and expenses for the year ended December 31, 2010 were $.8 million higher due to the aggregate amortization expense of intangible assets acquired in our Dulmison and Electropar business combinations. Asia-Pacific commissions increased $.3 million compared to 2009. Also, Asia-Pacific recognized $1.7 million in December 2009 related to employee termination benefits for certain Dulmison employees related to the Dulmison Australia asset acquisition.

Other income. Other income for the year ended December 31, 2010 of $1.7 million was $8.4 million lower compared to 2009. The primary reason was in December 2009, we recorded a $9.1 million bargain purchase gain related to the acquisition of Dulmison. Partially offsetting the bargain purchase gain in 2009 was a $1.2 million gain realized in 2010 as a result of revaluing our forward foreign exchange contract to fair value. This forward foreign exchange contract was entered into on June 7, 2010 to reduce our exposure to foreign currency rate changes related to the purchase price of Electropar, which closed on July 31, 2010. Also contributing to the decrease in other income was a $.3 million increase in non-operational expenses related to our foreign jurisdictions coupled with the increase in interest expense at several of our foreign and domestic locations.

Income taxes. Income taxes for the year ended December 31, 2010 of $7.2 million were $.4 million higher than 2009. The effective tax rate on net income was 23.8% and 22.8% in 2010 and 2009, respectively. The 2010 effective tax rate is lower than the 35% US federal statutory tax rate primarily due to increased earnings in jurisdictions with lower tax rates than the US federal statutory rate in jurisdictions where such earnings are permanently reinvested and the recognition of previously unrecognized tax benefits resulting from expiration of statutes of limitation. The 2009 effective tax rate is lower than the US federal 34% statutory tax rate primarily due to the bargain purchase gain not being recognized for tax purposes, increased earnings in jurisdictions with lower tax rates than the US federal statutory rate in jurisdictions where such earnings are permanently reinvested, and the recognition of previously unrecognized tax benefits resulting from expiration of statutes of limitation.

Net income. As a result of the preceding items, net income for the year ended December 31, 2010 was $23 million, compared to $22.8 million for the year ended December 31, 2009. Excluding the effect of currency translation, net income decreased $.9 million as summarized in the following table:

		Year ended December 31
														Change				Change
														due to				excluding
														currency				currency				%
thousands of dollars		2010				2009				Change				translation				translation				change
Net income
PLP-USA		$	4,687			$	4,352			$	335			$	—			$	335				8	%
The Americas			6,356				6,763				(407	)			471				(878	)			(13	)
EMEA			6,031				3,528				2,503				176				2,327				66
Asia-Pacific			5,934				8,190				(2,256	)			467				(2,723	)			(33	)
Consolidated		$	23,008			$	22,833			$	175			$	1,114			$	(939	)			(4	)%

PLP-USA net income increased $.3 million as a result of an increase in operating income of $.2 million coupled with an increase in other income of $.4 million partially offset by an increase in income taxes. International net income for the year ended December 31, 2010 was favorably affected by $1.1 million when local currencies were converted to U.S. dollars. The following discussion of international net income excludes the effect of currency translation. The Americas net income decreased $.9 million due primarily to the $1.4 million decrease in operating income coupled with the $.2 million decrease in other income partially offset by lower taxes of $.8 million. EMEA net income increased $2.3 million primarily as a result of the increase in operating income of $2.5 million partially offset by a decrease in other income and income taxes. Asia-Pacific net income decreased $2.7 million primarily as a result of the $8.5 million decrease in other income, primarily due to the bargain purchase gain realized in December 2009, coupled with $.5 million from an increase in income taxes partially offset by $6.3 million from higher operating income.

2009 Results of Operations compared to 2008

Net Sales. In 2009, net sales were $257.2 million, a decrease of $12.5 million, or 5%, from 2008. Excluding the effect of currency translation, net sales decreased $.4 million as summarized in the following table:

		Year ended December 31,
														Change				Change
														due to				excluding
														currency				currency				%
thousands of dollars		2009				2008				Change				translation				tranlation				change
Net sales
PLP-USA		$	103,910			$	111,721			$	(7,811	)		$	—			$	(7,811	)			(7)	%
The Americas			62,161				60,343				1,818				(3,714	)			5,532				9
EMEA			46,863				59,224				(12,361	)			(6,743	)			(5,618	)			(9	)
Asia-Pacific			44,272				38,454				5,818				(1,727	)			7,545				20
Consolidated		$	257,206			$	269,742			$	(12,536	)		$	(12,184	)		$	(352	)			—	%

The decrease in PLP-USA net sales of $7.8 million, or 7%, was due to approximately 80% sales volume due to weaker market demand and 20% mix decreases. International net sales in 2009 were unfavorably affected by $12.2 million when converted to U.S. dollars, as a result of a stronger U.S dollar to certain foreign currencies. The following discussions of international net sales exclude the effect of currency translation. The Americas net sales of $62.2 million increased $5.5 million, or 9% compared to 2008 primarily as a result of increased volume in energy sales coupled with an increase in solar sales. Also, net sales were $.7 million higher due to the settlement of sales tax related proceedings with Brazil’s government. Our Brazil operation determined that their location paid higher sales related taxes due to the country’s high index of inflation from 1988-1995. In December 2009, Brazil settled legal proceedings, receiving $.7 million in refunds. Historically these sales related taxes were an offset against net sales, and Brazil recorded these tax credits in net sales for December 2009. EMEA net sales decreased $5.6 million, or 9%, primarily due to lower sales volume. The sales volume declines in Europe, were directly related to the continuation of the slow European economy in those regions. Asia-Pacific net sales increased $7.5 million, or 20%, compared to 2008. The net sales increase is primarily related to an overall increase in sales growth/ volume in the region, coupled with better product mix and higher sales due to our BlueSky acquisition contributing sales for the full year of 2009.

Gross Profit. Gross Profit of $84.8 million for 2009 decreased $2.5 million, or 3%, compared to 2008. Excluding the effect of currency translation, gross profit increased 2% as summarized in the following table:

		Year ended December 31,
														Change				Change
														due to				excluding
														currency				currency				%
thousands of dollars		2009				2008				Change				translation				translation				change
Gross profit
PLP-USA		$	33,727			$	35,973			$	(2,246	)		$	—			$	(2,246	)			(6	)%
The Americas			20,535				18,616				1,919				(1,133	)			3,052				16
EMEA			15,354				19,113				(3,759	)			(2,127	)			(1,632	)			(9	)
Asia-Pacific			15,152				13,565				1,587				(584	)			2,171				16
Consolidated		$	84,768			$	87,267			$	(2,499	)		$	(3,844	)		$	1,345				2	%

PLP-USA gross profit of $33.7 million decreased by $2.2 million compared to 2008. PLP-USA gross profit decreased due to lower sales volume partially offset by slightly improved product margins. The following discussion of international gross profit excludes the effect of currency translation. The Americas gross profit increase of $3.1 million was the result of $1.7 million from higher net sales coupled with improved product margins. Contributing to The Americas’s overall increase in gross profit of $1.3 million was the $.7 million Brazil sales tax related settlement in December 2009 as noted in the Net Sales discussion. EMEA gross profit decrease of $1.6 million was the result of $1.2 million from lower net sales coupled with a decrease in production margin of $1.2 million partially offset by lower material costs. The Asia-Pacific gross profit of $2.2 million was the result of $3.1 million from higher net sales coupled with an improvement in manufacturing efficiencies of $1.3 million partially offset by an increase in material costs of $2.2 million.

Cost and expenses. Cost and expenses for the year ended December 31, 2009 increased $2 million, or 3%, compared to 2008. Excluding the favorable effect of currency translation, cost and expenses increased 7% as summarized in the following table:

		Year ended December 31,
														Change				Change
														due to				excluding
														currency				currency				%
thousands of dollars		2009				2008				Change				translation				translation				change
Costs and expenses
PLP-USA		$	33,872			$	33,633			$	239			$	—			$	239				1	%
The Americas			9,982				10,033				(51	)			(899	)			848				8
EMEA			8,940				9,438				(498	)			(1,469	)			971				10
Asia-Pacific			12,514				10,175				2,339				(214	)			2,553				25
Consolidated		$	65,308			$	63,279			$	2,029			$	(2,582	)		$	4,611				7	%

PLP-USA costs and expenses increased $.2 million primarily due to an increase in employee related costs of $1.6 million, acquisition related costs of $1.2 million, consulting expenses of $.6 million, and repairs and maintenance of $.3 million, partially offset by a decrease in professional fees of $.9 million, travel expenses of $.3 million, and depreciation of $.1 million. This increase was also offset by a reduction in other operating income (expenses) — net due to a gain on foreign currency translations of $1.2 million, gains on sale of capital assets of $.1 million, and an increase in the cash surrender values of life insurance policies of $.5 million. International cost and expenses for the year ended December 31, 2009 were favorably impacted by $2.6 million when international costs in local currency were translated to U.S. dollars compared to 2008. The following discussions of international costs and expenses exclude the effect of currency translation. The Americas costs and expenses increased $.8 million due primarily to higher personnel related costs coupled with an increase in consulting expenses, sales commissions due to higher commissionable sales in the overall segment, and research and engineering related costs. EMEA costs and expenses increased $1 million due to higher personnel related costs coupled with an increase in advertising, administrative and travel expenses. Asia-Pacific costs and expenses increased $2.6 million primarily due to $.5 million related to having a full year of BlueSky’s costs and expenses in 2009, $.4 million related to Dulmison acquisition related costs, an increase in personnel related costs and higher consulting expenses. Asia-Pacific also accrued $1.6 million in December 2009 for employee termination benefits for certain Dulmison employees related to the Dulmison Australia asset acquisition.

Other income. Other income for the year ended December 31, 2009 of $10.1 million increased $9.4 million compared to 2008. In 2009, we recorded a $9.1 million gain related to the acquisition of Dulmison from Tyco Electronics. The purchase price of the acquisition has been allocated to the net tangible and intangible assets acquired, with the excess of the fair value of assets acquired over the purchase price recorded as a gain.

Income taxes. Income taxes from continuing operations for the year ended December 31, 2009 of $6.8 million were $1 million lower than 2008. The effective tax rate on income taxes from continuing operations was 22.8% and 31.2% in 2009 and 2008, respectively. The 2009 effective tax rate is lower than the 34% statutory tax rate primarily due to the bargain purchase gain not recognized for tax purposes, increased earnings in jurisdictions with lower tax rates than the US federal statutory tax rate in jurisdictions where such earnings are permanently reinvested, and the recognition of previously unrecognized tax benefits resulting from the expiration of statutes of limitation. The 2008 effective tax rate is lower than the US federal statutory tax rate of 34% primarily due to increased earnings in jurisdictions with lower tax rates than the US federal statutory tax rate in jurisdictions where such earnings are permanently reinvested and the recognition of unrecognized tax benefits resulting from the expiration of statutes of limitation.

Income from continuing operations, net of tax. As a result of the preceding items, income from continuing operations, net of tax, for the year ended December 31, 2009, was $22.8 million, compared to income from continuing operations, net of tax, of $17 million for 2008. Excluding the effect of currency translation income, from continuing operations, net of tax, increased 40% as summarized in the following table:

		Year Ended December 31,
														Change				Change
														due to				excluding
														currency				currency				%
thousands of dollars		2009				2008				Change				translation				translation				change
Income from continuing operations, net of tax
PLP-USA		$	4,352			$	4,877			$	(525	)		$	—			$	(525	)			(11	)%
The Americas			6,763				5,227				1,536				(123	)			1,659				32
EMEA			3,528				6,162				(2,634	)			(472	)			(2,162	)			(35	)
Asia-Pacific			8,190				776				7,414				(493	)			7,907				1,019
		$	22,833			$	17,042			$	5,791			$	(1,088	)		$	6,879				40	%

PLP-USA income from continuing operations, net of tax, decreased $.5 million as a result of a $2.4 million decrease in operating income partially offset by the increase in other income of $1.2 million and a decrease in income taxes of $.7 million. The following discussions of international income from continuing operations, net of tax, exclude the effect of currency translation. The Americas income from continuing operations, net of tax, increased $1.7 million primarily as a result of the increase in operating income of $2.2 million partially offset by a increase in income taxes of $.5 million. EMEA income from continuing operations, net of tax, decreased $2.2 million as a result of a $2.6 million decrease in operating income coupled with a decrease in interest income partially offset by a decrease in taxes of $.5 million. Asia-Pacific income from continuing operations, net of tax, increased $7.9 million primarily as a result of an increase in other income (expense) related to the bargain purchase gain of $8.3 million coupled with a decrease in income taxes of $.4 million partially offset by a decrease in operating income.

Working Capital, Liquidity and Capital Resources

Management Assessment of Liquidity

We measure liquidity on the basis of our ability to meet short-term and long-term operating funding needs, fund additional investments, including acquisitions, and make dividend payments to shareholders. Significant factors affecting the management of liquidity are cash flows from operating activities, capital expenditures, cash dividends, business acquisitions, and access to bank lines of credit and our ability to attract long-term capital with satisfactory terms.

Our investments include expenditures required for equipment and facilities as well as expenditures in support of our strategic initiatives. In 2010, we used cash of $12.3 million for capital expenditures and in July 2010, we completed the acquisition of Electropar for $14.8 million in cash and the assumption of certain liabilities. We believe that the acquisition of Electropar will continue to strengthen our position in the power distribution, transmission and substation hardware markets and expand our presence in the Asia-Pacific region. Additional information regarding business acquisitions is included in Note M — Business Combinations in the Notes to the Consolidated Financial Statements.

We ended the fourth quarter of 2010 with $22.7 million of cash and cash equivalents. The Company has adequate sources of liquidity and we believe we have the ability to generate cash to meet existing or reasonably likely future cash requirements. Our cash and cash equivalents are held in various locations throughout the world and are unrestricted. At December 31, 2010, the majority of our cash and cash equivalents are held outside the U.S. We expect accumulated non-U.S. cash balances will remain outside of the U.S. and that we will meet U.S. liquidity needs through future cash flows, use of U.S. cash balances, external borrowings, or some combination of these sources.

We complete comprehensive reviews of our significant customers and their creditworthiness by analyzing financial statements for customers where we have identified a measure of increased risk. We closely monitor payments and developments which may signal possible customer credit issues. We currently have not identified any potential material impact on our liquidity from customer credit issues.

Our financial position remains strong and our current ratio at December 31, 2010 and 2009 was 3.0 to 1. At December 31, 2010, our unused availability under our main credit facility was $21.7 million and our bank debt to equity percentage was 6%. The revolving credit agreement contains, among other provisions, requirements for maintaining levels of working capital, net worth and profitability. At December 31, 2010, we were in compliance with these covenants.

We expect that our major source of funding for 2011 and beyond will be our operating cash flows and our existing cash and cash equivalents. We believe our future operating cash flows will be more than sufficient to cover debt repayments, other contractual obligations, capital expenditures and dividends. In addition, we believe our borrowing capacity provides substantial financial resources. We do not believe we would increase our debt to a level that would have a material adverse impact upon results of operations or financial condition.

Sources and Uses of Cash

Cash decreased $1.4 million for the year ended December 31, 2010. Net cash provided by operating activities was $28.5 million. The major investing and financing uses of cash were capital expenditures of $12.3 million, business acquisitions of $14.3 million, net of cash acquired, and dividends of $4.3 million partially offset by net debt borrowings of $2.1 million.

Net cash provided by operating activities decreased $.3 million compared to 2009 primarily as a result of an increase in operating assets (net of operating liabilities) of $10.1 million offset by an increase in net income of $.2 million and an increase in non-cash items of $9.5 million (2009 included a non-cash bargain purchase gain of $9.1 million).

Net cash used in investing activities of $25.8 million represents an increase of $3.1 million when compared to cash used in investing activities in 2009. In July 2010, we purchased Electropar for NZ$20.3 million or $14.8 million, including cash acquired of $.4 million. In December 2009, we purchased from Tyco Electronics Group S.A. its Dulmison business for $16 million, including cash acquired of $4.1 million. We realized a bargain purchase gain of $9.1 million on our purchase of the Dulmison business. In October 2009, we formed a joint venture with Proxisafe Ltd for an initial cash payment of $.5 million. Additional payouts during 2009 for acquisitions of $.8 million were for DPW contingent consideration payments. Capital expenditures increased $1.6 million in the year ended December 31, 2010 when compared to the same period in 2009 primarily related to machinery and equipment investments at the majority of our locations.

Cash used in financing activities was $2.9 million compared to $3.2 million in 2009. This decrease was primarily a result of higher debt borrowings in 2010 compared to 2009 partially offset by common shares repurchased of $1.1 million during 2010.

We have commitments under operating leases primarily for office and manufacturing space, transportation equipment, office and computer equipment and capital leases primarily for equipment. One such lease is for our aircraft with a lease commitment through April 2012. Under the terms of the lease, we maintain the risk to make up a deficiency from market value attributable to damage, extraordinary wear and tear, excess air hours or exceeding maintenance overhaul schedules required by the Federal Aviation Administration. At the present time, we believe our risks, if any, to be small because the estimated market value of the aircraft approximates its residual value.

Contractual obligations and other commercial commitments are summarized in the following tables:

		Payments Due by Period
						Less than 1												After 5
Contractual Obligations		Total				year				1-3 years				4-5 years				years
Thousands of dollars
Notes payable to bank (A)		$	1,246			$	1,246			$	—			$	—			$	—
Long-term debt (B)			10,865				1,370				9,495				—				—
Capital leases			590				189				268				133				—
Operating leases			17,011				2,525				2,755				1,448				10,283
Purchase commitments			9,641				9,641				—				—				—
Acquisition related obligations (C)			483				483				—				—				—
Pension contribution and other retirement plans (D)			1,130				1,130				—				—				—
Income taxes payable, non-current (E)			—				—				—				—				—

		Amount of Commitment Expiration by Period
						Less than 1												After 5
Other Commercial Commitments		Total				year				1-3 years				4-5 years				years
Thousands of dollars
Letters of credit		$	6,901			$	5,152			$	1,676			$	73			$	—
Guarantees			2,357				371				1,986				—				—

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgment and uncertainties, and potentially may result in materially different outcomes under different assumptions and conditions.

Sales Recognition

Our revenue recognition policies are in accordance with FASB ASC 605, Revenue Recognition. We recognize sales when title passes to the customer either when goods are shipped or when they are delivered based on the terms of the sale, there is persuasive evidence of an agreement, the price is fixed or determinable and collectability is reasonably assured. Revenue related to shipping and handling costs billed-to customers are included in net sales and the related shipping and handling costs are included in cost of products sold.

Receivable Allowances

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We record estimated allowances for uncollectible accounts receivable based upon the number of days the accounts are past due, the current business environment, and specific information such as bankruptcy or liquidity issues of customers. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. During 2010, we recorded a provision for doubtful accounts of $.5 million. The allowance for doubtful accounts represents approximately 2% of our trade receivables at December 31, 2010 and 2009.

Reserve for credit memos

We maintain an allowance for future sales credits related to sales recorded during the year. Our estimated allowance is based on historical sales credits issued in the subsequent year related to the prior year and any significant open return good authorizations as of the balance sheet date. Our allowance is updated on a quarterly basis. The reserve for credit memos represents 1% of our trade receivables at December 31, 2010 and less than 1% of our trade receivables at December 31, 2009.

Excess and Obsolescence Reserves

We provide excess and obsolescence reserves to state inventories at the lower of cost or estimated market value. We identify inventory items which have had no usage or are in excess of the usages over the historical 12 to 24 months. A management team with representatives from marketing, manufacturing, engineering and finance reviews these inventory items, determines the disposition of the inventory and assesses the estimated market value based on their knowledge of the product and market conditions. These conditions include, among other things, future demand for product, product utility, unique customer order patterns or unique raw material purchase patterns, changes in customer and quality issues. At December 31, 2010 and 2009, the allowance for excess and obsolete inventory was 6% and 8%, respectively, of gross inventory. If the impact of market conditions deteriorates from those projected by management, additional inventory reserves may be necessary.

Impairment of Long-Lived Assets

We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the discounted cash flows estimated to be generated by those assets are less than the carrying value of those items. Our cash flows are based on historical results adjusted to reflect the best estimate of future market and operating conditions. The net carrying value of assets not recoverable is then reduced to fair value. The estimates of fair value represent the best estimate based on industry trends and reference to market rates and transactions.

Goodwill

We perform our annual impairment test for goodwill utilizing a discounted cash flow methodology, market comparables, and an overall market capitalization reasonableness test in computing fair value by reporting unit. We then compare the fair value of the reporting unit with its carrying value to assess if goodwill has been impaired. Based on the assumptions as to growth, discount rates and the weighting used for each respective valuation methodology, results of the valuations could be significantly changed. However, we believe that the methodologies and weightings used are reasonable and result in appropriate fair values of the reporting units.

Our measurement date for our annual impairment test is January 1 of each year. We perform interim impairment tests if trigger events or changes in circumstances indicate the carrying amount may be impaired. There were no trigger events during 2010 and as such, only an annual impairment test was performed.

Deferred Tax Assets

Deferred taxes are recognized at currently enacted tax rates for temporary differences between the financial reporting and income tax bases of assets and liabilities and operating loss and tax credit carryforwards. We establish a valuation allowance to record our deferred tax assets at an amount that is more likely than not to be realized. In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of their recorded amount, an adjustment to the valuation allowance would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the valuation allowance would be charged to expense in the period such determination was made.

Uncertain Tax Positions

We identify tax positions taken on the federal, state, local and foreign income tax returns filed or to be filed. A tax position can include: a reduction in taxable income reported in a previously filed tax return or expected to be reported on a future tax return that impacts the measurement of current or deferred income tax assets or liabilities in the period being reported; a decision not to file a tax return; an allocation or a shift of income between jurisdictions; the characterization of income or a decision to exclude reporting taxable income in a tax return; or a decision to classify a transaction, entity or other position in a tax return as tax exempt. We determine whether a tax position is an uncertain or a routine business transaction tax position that is more-likely-than-not to be sustained at the full amount upon examination.

Under FASB ASC 740 (formerly FIN 48), tax benefits from uncertain tax positions that reduce our current or future income tax liability, are reported in our financial statements only to the extent that each benefit was recognized and measured under a two step approach. The first step requires us to assess whether each tax position based on its technical merits and facts and circumstances as of the reporting date, is more-likely-than-not to be sustained upon examination. The second step measures the amount of tax benefit that we recognize in the financial statements, based on a cumulative probability approach. A tax position that meets the more-likely-than-not threshold that is not highly certain is measured based on the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority, assuming that the tax authority has examined the position and has full knowledge of all relevant information.

FASB ASC 740 requires subjectivity of judgments to identify outcomes and to assign probability in order to estimate the settlement amount. We provide estimates in order to determine settlement amounts. During the year ended December 31, 2010, we recognized a benefit of less than $.1 million of uncertain tax positions. At December 31, 2010, the total reserve for uncertain tax positions is $1.1 million.

Pensions

We record obligations and expenses related to pension benefit plans based on actuarial valuations, which include key assumptions on discount rates, expected returns on plan assets and compensation increases. These actuarial assumptions are reviewed annually and modified as appropriate. The effect of modifications is generally recorded or amortized over future periods. The discount rate of 5.6% at December 31, 2010 reflects an analysis of yield curves as of the end of the year and the schedule of expected cash needs of the plan. The expected long-term return on plan assets of 8.0% reflects the plan’s historical returns and represents our best estimate of the likely future returns on the plan’s asset mix. We believe the assumptions used in recording obligations under the plans are reasonable based on prior experience, market conditions and the advice of plan actuaries. However, an increase in the discount rate would decrease the plan obligations and the net periodic benefit cost, while a decrease in the discount rate would increase the plan obligations and the net periodic benefit cost. In addition, an increase in the expected long-term return on plan assets would decrease the net periodic pension cost, while a decrease in expected long-term return on plan assets would increase the net periodic pension cost.

Recently Adopted Accounting Pronouncements

In June 2009, the FASB updated guidance included in FASB ASC 810-10, related to the consolidation of variable interest entities. This guidance will require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. In addition, this updated guidance amends the quantitative approach for determining the primary beneficiary of a variable interest entity. FASB ASC 810-10 amends certain guidance for determining whether an entity is a variable interest entity and adds additional reconsideration events for determining whether an entity is a variable interest entity. Further, this guidance requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. This updated guidance is effective as of the beginning of the first annual reporting period and interim reporting periods that begin after November 15, 2009. The adoption of this guidance did not have an impact on our consolidated financial statements or disclosures.

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820). This Update provides amendments to Subtopic 820-10 and related guidance within U.S. GAAP to require disclosure of the transfers in and out of Levels 1 and 2 and a schedule for Level 3 that separately identifies purchases, sales, issuances and settlements and requires more detailed disclosures regarding valuation techniques and inputs. We adopted this new standard effective January 1, 2010 and it had no impact on our consolidated financial statements or disclosures.

Recently Issued Accounting Pronouncements

Changes to accounting principles generally accepted in the United States of America (U.S. GAAP) are established by the FASB in the form of accounting standards updates (ASU’s) to the FASB’s Accounting Standards Codification.

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

In October 2009, the FASB issued Accounting Standards Update No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements — a consensus of the FASB Emerging Issues Task Force (ASU 2009-13). ASU 2009-13 addresses the accounting for sales arrangements that include multiple products or services by revising the criteria for when deliverables may be accounted for separately rather than as a combined unit. Specifically, this guidance establishes a selling price hierarchy for determining the selling price of a deliverable, which is necessary to separately account for each product or service. This hierarchy provides more options for establishing selling price than existing guidance. ASU 2009-13 is required to be applied prospectively to new or materially modified revenue arrangements in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. We do not expect that the adoption of ASU 2009-13 will have a material impact on our consolidated results of operations or financial condition.

In December 2010, the FASB issued ASU No. 2010-29, which updates the guidance in FASB ASC Topic 805, Business Combinations. The objective of ASU 2010-29 is to address diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. The amendments in ASU 2010-29 specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments affect any public entity as defined by FASB ASC 805 that enters into business combinations that are material on an individual or aggregate basis. The amendments in ASU 2010-29 are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. We believe the adoption of this guidance will not have an impact on our consolidated financial position or results of operations.

In December 2010, the FASB issued ASU No. 2010-28, which updates the guidance in FASB ASC Topic 350, Intangibles—Goodwill & Other. The amendments in ASU 2010-28 affect all entities that have recognized goodwill and have one or more reporting units whose carrying amount for purposes of performing Step 1 of the goodwill impairment test is zero or negative. The amendments in ASU 2010-28 modify Step 1 so that for those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with existing guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. This guidance will become effective for us at the beginning of our second quarter of fiscal 2011. The adoption of this guidance is not expected to have an impact on our financial position or results of operations.

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

The Company is exposed to market risk, including changes in interest rates. The Company is subject to interest rate risk on its variable rate revolving credit facilities and term notes, which consisted of borrowings of $11.9 million at December 31, 2010. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $.1 million for the year ended December 31, 2010.

The Company’s primary currency rate exposures are related to foreign denominated debt, intercompany debt, forward exchange contracts, foreign denominated receivables and cash and short-term investments. A hypothetical 10% change in currency rates would have a favorable/unfavorable impact on fair values of $4.1 million and on income before tax of less than $.2 million.

Item 8.		Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
of Preformed Line Products Company

We have audited the accompanying consolidated balance sheets of Preformed Line Products Company as of December 31, 2010 and 2009, and the related consolidated statements of income, cash flows, and shareholders’ equity for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Preformed Line Products Company at December 31, 2010 and 2009, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

As discussed in Note B to the financial statements, in 2009 the Company changed its method of computing depreciation from an accelerated method to a straight-line method for the Company’s assets in the United States. Also, as discussed in Note A to the financial statements, in 2009 the Company changed its method of accounting for business combinations.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Preformed Line Products Company’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 10, 2011 expressed an unqualified opinion thereon.

/s/Ernst & Young LLP

Cleveland, Ohio
March 11, 2011

PREFORMED LINE PRODUCTS COMPANY

		December 31
		2010				2009
		(Thousands of dollars, except
		share and per share data)
ASSETS
Cash and cash equivalents		$	22,655			$	24,097
Accounts receivable, less allowances of $1,213 ($995 in 2009)			56,102				49,245
Inventories — net			73,121				56,036
Deferred income taxes			4,784				2,737
Prepaids			9,069				4,263
Other current assets			1,611				2,062
TOTAL CURRENT ASSETS			167,342				138,440
Property and equipment — net			76,266				67,766
Other intangibles — net			12,735				8,087
Goodwill			12,346				6,925
Deferred income taxes			3,615				4,877
Other assets			8,675				9,277
TOTAL ASSETS		$	280,979			$	235,372
LIABILITIES AND SHAREHOLDERS’ EQUITY
Notes payable to banks		$	1,246			$	3,181
Current portion of long-term debt			1,276				1,330
Trade accounts payable			27,001				18,764
Accrued compensation and amounts withheld from employees			9,848				8,345
Accrued expenses and other liabilities			9,088				8,375
Accrued profit-sharing and other benefits			4,464				3,890
Dividends payable			1,087				1,076
Income taxes payable and deferred income taxes			2,548				1,379
TOTAL CURRENT LIABILITIES			56,558				46,340
Long-term debt, less current portion			9,374				3,099
Unfunded pension obligation			9,473				8,678
Income taxes payable, noncurrent			1,768				1,898
Deferred income taxes			3,606				1,515
Other noncurrent liabilities			4,735				3,021
SHAREHOLDERS’ EQUITY
PLPC Shareholders’ equity:
Common shares — $2 par value per share, 15,000,000 shares authorized, 5,270,977 and 5,248,298 issued and outstanding, net of 586,746 and 554,059 treasury shares at par, respectively			10,542				10,497
Common shares issued to rabbi trust			(1,200	)			—
Paid in capital			8,748				5,885
Retained earnings			184,060				165,953
Accumulated other comprehensive loss			(6,010	)			(11,369	)
TOTAL PLPC SHAREHOLDERS’ EQUITY			196,140				170,966
Noncontrolling interest			(675	)			(145	)
TOTAL SHAREHOLDERS’ EQUITY			195,465				170,821
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	280,979			$	235,372

See notes to consolidated financial statements.

PREFORMED LINE PRODUCTS COMPANY

		Year ended December 31
		2010				2009				2008
		(In thousands, except per share data)
Net sales		$	338,305			$	257,206			$	269,742
Cost of products sold			230,089				172,438				182,475
GROSS PROFIT			108,216				84,768				87,267
Costs and expenses
Selling			29,520				22,702				23,555
General and administrative			39,865				33,993				30,014
Research and engineering			12,040				9,216				8,870
Other operating (income) expenses — net			(1,689	)			(603	)			840
			79,736				65,308				63,279
OPERATING INCOME			28,480				19,460				23,988
Other income (expense)
Gain on acquisition of business			—				9,087				—
Interest income			374				380				846
Interest expense			(649	)			(523	)			(544	)
Other income			1,978				1,189				470
			1,703				10,133				772
INCOME BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS			30,183				29,593				24,760
Income taxes			7,175				6,760				7,718
INCOME FROM CONTINUING OPERATIONS, NET OF TAX			23,008				22,833				17,042
Income from discontinued operations, net of tax			—				—				869
NET INCOME			23,008				22,833				17,911
Net income (loss) attributable to noncontrolling interest, net of tax			(105	)			(524	)			288
NET INCOME ATTRIBUTABLE TO PLPC		$	23,113			$	23,357			$	17,623
BASIC EARNINGS PER SHARE
Income per share from continuing operations attributable to PLPC common shareholders		$	4.41			$	4.46			$	3.17
Discontinued operations attributable to PLPC common shareholders		$	—			$	—			$	0.17
Net income attributable to PLPC common shareholders		$	4.41			$	4.46			$	3.34
DILUTED EARNINGS PER SHARE
Income per share from continuing operations attributable to PLPC shareholders		$	4.33			$	4.35			$	3.14
Discontinued operations attributable to PLPC common shareholders		$	—			$	—			$	0.16
Net incme attributable to PLPC common shareholders		$	4.33			$	4.35			$	3.30
Cash dividends declared per share		$	0.80			$	0.80			$	0.80
Weighted-average number of shares outstanding — basic			5,242				5,232				5,279
Weighted-average number of shares outstanding — diluted			5,335				5,366				5,339
Amount attributable to PLPC common shareholders
Income from continuing operations, net of tax		$	23,113			$	23,357			$	16,754
Discontinued operations, net of tax			—				—				869
Net Income		$	23,113			$	23,357			$	17,623