UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
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(Registrant’s telephone number, including area code)
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of common shares outstanding as of May 2, 2022:
Securities registered pursuant to Section 12(b) of the Act:
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Table of Contents
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Item 1. |
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3 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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18 |
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Item 3. |
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25 |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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27 |
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28 |
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2
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PREFORMED LINE PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEETS
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March 31, 2022 |
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December 31, 2021 |
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(Thousands of dollars, except share and per share data) |
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(Unaudited) |
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ASSETS |
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Cash, cash equivalents and restricted cash |
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$ |
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$ |
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Accounts receivable, less allowances of $ |
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Inventories – net |
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Prepaid expenses |
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Other current assets |
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TOTAL CURRENT ASSETS |
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Property, plant and equipment – net |
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Operating lease, right-of-use assets |
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Goodwill |
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Other intangible assets – net |
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Deferred income taxes |
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Other assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Trade accounts payable |
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$ |
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$ |
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Notes payable to banks |
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Operating lease liabilities, current |
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Current portion of long-term debt |
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Accrued compensation and other benefits |
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Accrued expenses and other liabilities |
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Dividends payable |
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Income taxes payable |
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TOTAL CURRENT LIABILITIES |
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Long-term debt, less current portion |
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Pension obligation |
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Operating lease liabilities, non-current |
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Deferred income taxes |
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Other noncurrent liabilities |
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SHAREHOLDERS’ EQUITY |
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Shareholders’ equity: |
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Common shares - $ |
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Common shares issued to rabbi trust, |
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Deferred compensation liability |
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Paid-in capital |
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Retained earnings |
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Treasury shares, at cost, |
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Accumulated other comprehensive loss |
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TOTAL PREFORMED LINE PRODUCTS, COMPANY SHAREHOLDERS’ EQUITY |
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Noncontrolling interest |
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TOTAL SHAREHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
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$ |
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$ |
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See notes to consolidated financial statements (unaudited).
3
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
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Three Months Ended March 31 |
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2022 |
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2021 |
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(Thousands of dollars, except earnings per share data) |
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Net sales |
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$ |
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$ |
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Cost of products sold |
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GROSS PROFIT |
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Costs and expenses |
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Selling |
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General and administrative |
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Research and engineering |
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Other operating expense – net |
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OPERATING INCOME |
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Other income (expense) |
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Interest income |
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Interest expense |
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Other income – net |
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INCOME BEFORE INCOME TAXES |
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Income tax expense |
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NET INCOME |
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$ |
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$ |
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Net (gain) loss attributable to noncontrolling interests |
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NET INCOME ATTRIBUTABLE TO PREFORMED |
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$ |
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$ |
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AVERAGE NUMBER OF SHARES OF COMMON STOCK |
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Basic |
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Diluted |
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EARNINGS PER SHARE OF COMMON STOCK |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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See notes to consolidated financial statements (unaudited).
4
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(UNAUDITED)
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Three Months Ended March 31 |
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2022 |
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2021 |
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(Thousands of dollars) |
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Net income |
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$ |
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$ |
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Other comprehensive income (loss), net of tax |
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Foreign currency translation adjustment |
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Recognized net actuarial gain (net of tax provision of $ |
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Other comprehensive gain (loss), net of tax |
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Comprehensive (gain) loss attributable to noncontrolling interests |
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Comprehensive income attributable to Preformed Line Products Company shareholders |
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$ |
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$ |
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See notes to consolidated financial statements (unaudited).
5
PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
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Three Months Ended March 31 |
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2022 |
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2021 |
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(Thousands of dollars) |
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OPERATING ACTIVITIES |
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Net income |
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$ |
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$ |
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Adjustments to net cash provided by (used in) operations: |
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Depreciation and amortization |
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Deferred income taxes |
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Share-based compensation expense |
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Loss on exit of business |
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Gain on sale of property and equipment |
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Gain from company-owned life insurance policy |
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Other – net |
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Changes in operating assets and liabilities |
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NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES |
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INVESTING ACTIVITIES (1) |
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Capital expenditures |
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Proceeds from the sale of property and equipment |
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Proceeds from company-owned life insurance policy |
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Acquisition of businesses, net of cash |
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NET CASH USED IN INVESTING ACTIVITIES |
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FINANCING ACTIVITIES(1) |
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Decrease in notes payable to banks |
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Proceeds from long-term debt |
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Payments of long-term debt |
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Dividends paid |
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Proceeds from issuance of common shares |
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Purchase of common shares for treasury |
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Purchase of common shares for treasury from related parties |
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
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Effects of exchange rate changes on cash, cash equivalents and restricted cash |
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Net decrease in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash at beginning of year |
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CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF |
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$ |
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$ |
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(1)
See notes to consolidated financial statements (unaudited).
6
PREFORMED LINE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands, except share and per share data, unless specifically noted)
NOTE A – BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Preformed Line Products Company and subsidiaries (the “Company” or “PLPC”) have been prepared in accordance with United States of America (U.S.) generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from these estimates. In the opinion of management, these consolidated financial statements contain all estimates and adjustments, consisting of normal recurring accruals, required to fairly present the financial position, results of operations, and cash flows for the interim periods. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full-year ending December 31, 2022.
Noncontrolling interests are presented in the Company’s consolidated financial statements as if parent company investors (controlling interests) and other minority investors (noncontrolling interests) in partially-owned subsidiaries have similar economic interests in a single entity. As a result, investments in noncontrolling interests are reported as equity in the Company’s consolidated financial statements. Additionally, the Company’s consolidated financial statements include
The Consolidated Balance Sheet at December 31, 2021 has been derived from the audited consolidated financial statements but does not include all of the information and notes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes to consolidated financial statements included in the Company’s 2021 Annual Report on Form 10-K filed on March 4, 2022 with the Securities and Exchange Commission.
Certain prior year amounts have been reclassified to conform to the current year presentation.
Recent accounting pronouncements and new accounting standards to be adopted
The Company considers the applicability and impact of all ASUs. In October 2021, the Financial Accounting Standards Board ("FASB") issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Liabilities from Contracts with Customers.” This ASU requires an acquiring entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The ASU is effective for fiscal years and interim periods beginning after December 15, 2022, with early adoption permitted. The Company is evaluating the impact of adopting this ASU.
No other recently issued or effective ASUs had, or are expected to have, a material impact on the Company's results of operations, financial condition or liquidity.
NOTE B – REVENUE
Revenue recognition
Sales are recognized when obligations under the terms of the contract are satisfied and control of promised goods or services has transferred to our customers. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services and is primarily based on shipping terms. Sales are measured as the amount of consideration the Company expects to receive in exchange for transferring products.
7
Disaggregated revenue
The Company’s revenues by segment and product type are as follows:
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Three Months Ended March 31, 2022 |
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Product Type |
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PLP-USA |
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The Americas |
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EMEA |
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Asia-Pacific |
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Consolidated |
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Energy |
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Communications |
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Special Industries |
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Total |
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Three Months Ended March 31, 2021 |
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Product Type |
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PLP-USA |
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The Americas |
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EMEA |
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Asia-Pacific |
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Consolidated |
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Energy |
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Communications |
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Special Industries |
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Total |
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Credit losses for receivables
The Company maintains an allowance for credit losses for estimated losses resulting from the inability of its customers to make required payments. The Company uses a current expected credit loss model in order to immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments, mainly trade receivables. Additionally, the allowance is based upon identified delinquent accounts, customer payment patterns and other analyses of historical data trends. Receivable balances are written off against an allowance for credit losses after a final determination has been made.
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Three Months Ended March 31 |
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2022 |
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2021 |
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Allowance for credit losses, beginning of period |
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$ |
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$ |
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Additions charged to costs and expenses |
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Write-offs |
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Foreign exchange and other |
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Allowance for credit losses, end of period |
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$ |
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$ |
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NOTE C – OTHER FINANCIAL STATEMENT INFORMATION
Inventories – net
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March 31, 2022 |
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December 31, 2021 |
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Raw materials |
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$ |
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$ |
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Work-in-process |
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Finished Goods |
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Excess of current cost over LIFO cost |
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Net Inventory |
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$ |
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$ |
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Cost of inventories for certain material is determined using the last-in-first-out (LIFO) method and totaled approximately $
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Property, plant and equipment – net
Major classes of Property, plant and equipment are stated at cost and were as follows:
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March 31, 2022 |
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December 31, 2021 |
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Land and improvements |
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$ |
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$ |
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Buildings and improvements |
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Machinery, equipment and aircraft |
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Construction in progress |
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Less accumulated depreciation |
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$ |
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$ |
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Legal proceedings
The Company can be party to a variety of pending legal proceedings and claims arising in the normal course of business, including, but not limited to, litigation relating to employment, workers’ compensation, product liability, environmental and intellectual property. The Company has liability insurance to cover many of these claims.
Although the outcomes of these matters are not predictable with certainty, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In the event the Company determines that a loss is not probable, but is reasonably possible, and the likelihood to develop what the Company believes to be a reasonable range of potential loss exists, the Company will include disclosure related to such matters. To the extent that there is a reasonable possibility the losses could exceed amounts already accrued, the Company will adjust the accrual in the period in which the determination is made, disclose an estimate of the additional loss or range of loss and if the amount of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made. As of March 31, 2022 and December 31, 2021, the Company has accrued approximately $
The Company and its subsidiaries Helix Uniformed Ltd. (“Helix”) and Preformed Line Products (Canada) Limited (“PLPC Canada”), were each named, jointly and severally, with each of SNC-Lavalin ATP, Inc. (“SNC ATP”), HD Supply Canada Inc., by its trade names HD Supply Power Solutions and HD Supply Utilities (“HD Supply”), and Anixter Power Solutions Canada Inc. (the corporate successor to HD Supply, “Anixter” and, together with the Company, PLPC Canada, Helix, SNC ATP and HD Supply, the “Defendants”) in a complaint filed by
The Complaint states that the Plaintiff engaged SNC ATP to design, engineer, procure and construct numerous power distribution and transmission facilities in Alberta (the “Projects”) and that through SNC ATP and HD Supply (now Anixter), spacer dampers manufactured by Helix were procured and installed in the Projects. The Complaint alleges that the spacer dampers have and may continue to become loose, open and detach from the conductors, resulting in damage and potential injury and a failure to perform the intended function of providing spacing and damping to the Project. The Plaintiff is seeking an estimated $
The Company believes the claims against it are without merit and intends to vigorously defend against such claims. The Company is unable to predict the outcome of this case, however, it has recorded a reserve for the low end of the range for potential loss associated with this matter. If this matter is concluded in a manner adverse to the Company, it could have a material effect on the Company’s financial results.
The Company is not a party to any other pending legal proceedings that the Company believes would, individually or in the aggregate, have a material adverse effect on its financial condition, results of operations or cash flow.
Insurance Settlement
On January 2, 2022, Director Emeritus Barbara P. Ruhlman passed away at the age of 89. Mrs. Ruhlman was member of the Company’s Board of Directors from 1988 to 2016, at which time she elected to resign and was appointed as the Company’s Director Emeritus. Mrs. Ruhlman was the daughter of the Company’s founder, Thomas F. Peterson, and was the mother of the Company’s current Chief Executive Officer, Robert G. Ruhlman. A Company-owned life insurance policy was maintained for Mrs. Ruhlman until her death. During the period ended March 31, 2022, the Company received approximately $
9
NOTE D – SHAREHOLDERS' EQUITY
The following table reflects the changes in shareholders' equity for the three months ended March 31, 2022 and 2021:
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Accumulated Other |
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Common |
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Common |
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Deferred |
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Paid in |
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Retained |
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Treasury |
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Cumulative |
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Unrecognized |
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Total |
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Noncontrolling |
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Total |
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(In thousands, except share and per share data) |
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Balance at December 31, 2021 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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||||||
Net income |
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|||||||||||
Foreign currency translation adjustment |
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Recognized net actuarial gain, net of tax provision of $ |
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Total comprehensive income |
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|||||||||||
Share-based compensation |
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Purchase of |
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( |
) |
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( |
) |
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( |
) |
||||||||
Issuance of |
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|||||||||||
Common shares issued to rabbi trust of |
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( |
) |
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||||||||||
Cash dividends declared - $. |
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( |
) |
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( |
) |
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( |
) |
||||||||
Balance at March 31, 2022 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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||||||
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Accumulated Other |
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||||||||||||||
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Common |
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Common |
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Deferred |
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Paid in |
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Retained |
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Treasury |
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Cumulative |
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Unrecognized |
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Total |
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Noncontrolling |
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Total |
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|||||||||||
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(In thousands, except share and per share data) |
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|||||||||||
Balance at December 31, 2020 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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||||||
Net income |
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( |
) |
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||||||||||
Foreign currency translation adjustment |
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( |
) |
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( |
) |
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( |
) |
||||||||
Recognized net actuarial gain, net of tax provision of $ |
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|||||||||||
Total comprehensive income |
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( |
) |
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||||||||||
Share-based compensation |
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( |
) |
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Purchase of |
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( |
) |
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( |
) |
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( |
) |
||||||||
Issuance of |
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|||||||||||
Common shares distributed from rabbi trust of |
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( |
) |
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||||||||||
Cash dividends declared - $. |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
|||||||
Balance at March 31, 2021 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
|
||||||
NOTE E – PENSION PLANS
The Company uses a December 31 measurement date for the Preformed Line Products Company Employees’ Retirement Plan (the “Plan”)
|
|
Three Months Ended March 31 |
|
|||||
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2022 |
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2021 |
|
||
Service cost |
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$ |
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$ |
|
||
Interest cost |
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|
||
Expected return on plan assets |
|
|
( |
) |
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( |
) |
Recognized net actuarial loss |
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|
||
Net periodic pension benefit |
|
$ |
( |
) |
|
$ |
( |
) |
10
There were
NOTE F – ACCUMULATED OTHER COMPREHENSIVE INCOME ("AOCI")
The following tables set forth the total changes in AOCI by component, net of tax:
|
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Three Months Ended March 31, 2022 |
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|
Three Months Ended March 31, 2021 |
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||||||||||||||||||
|
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Unrecognized |
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Currency |
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Total |
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Unrecognized |
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Currency |
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Total |
|
||||||
Balance at January 1 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
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$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before |
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|
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Gain (loss) on foreign currency |
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( |
) |
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( |
) |
||||
Amounts reclassified from AOCI: |
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Amortization of defined benefit |
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Net current period other |
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( |
) |
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( |
) |
||||
Balance at March 31 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
NOTE G – COMPUTATION OF EARNINGS PER SHARE
Basic earnings per share were computed by dividing Net income by the weighted-average number of common shares outstanding for each respective period. Diluted earnings per share were calculated by dividing Net income by the weighted-average of all potentially dilutive common stock that was outstanding during the periods presented.
The calculation of basic and diluted earnings per share for the three months ended March 31, 2022 and 2021 was as follows:
|
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Three Months Ended March 31 |
|
|||||
|
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2022 |
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2021 |
|
||
Numerator |
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|
||
Net income |
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$ |
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$ |
|
||
Denominator |
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|
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Determination of shares |
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Weighted-average common shares outstanding |
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Dilutive effect – share-based awards |
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Diluted weighted-average common shares outstanding |
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|
||
Earnings per common share |
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|
||
Basic |
|
$ |
|
|
$ |
|
||
Diluted |
|
$ |
|
|
$ |
|
||
For the three months ended March 31, 2022 and 2021,
11
NOTE H – GOODWILL AND OTHER INTANGIBLES
The Company’s finite and indefinite-lived intangible assets consist of the following:
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March 31, 2022 |
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December 31, 2021 |
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|
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Gross Carrying |
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Accumulated |
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Gross Carrying |
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Accumulated |
|
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Finite-lived intangible assets |
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|
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Patents |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
||
Land use rights |
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( |
) |
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( |
) |
||
Trademarks |
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( |
) |
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( |
) |
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Technology |
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( |
) |
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( |
) |
||
Customer relationships |
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( |
) |
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( |
) |
||
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
||
Indefinite-lived intangible assets |
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|
||||
Goodwill |
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$ |
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$ |
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|
||||
The aggregate amortization expense for other intangibles with finite lives for the three months ended March 31, 2022 was $
The Company’s measurement date for its annual impairment test for goodwill is October 1st of each year. The Company performs additional interim impairment assessments as circumstances warrant.
The Company may use both quantitative and qualitative approaches when testing goodwill for impairment. For selected reporting units where the qualitative approach is utilized, a qualitative evaluation of events and circumstances impacting the reporting unit is performed to determine if it is more likely than not that the fair value of the reporting unit exceeds its carrying amount. If that determination is made, no further evaluation is necessary. Otherwise, the Company performs a quantitative impairment test on the reporting unit.
For the quantitative approach, the Company uses a combination of the income approach, which uses a discounted cash flow methodology, and the market approach, which uses comparable market multiples in computing fair value by reporting unit. The Company then compares the fair value of the reporting unit with its carrying value to assess if goodwill has been impaired. The fair value estimates are subjective and sensitive to significant assumptions, such as revenue growth rates, operating margins, the weighted-average cost of capital, and estimated market multiples, of which are affected by expectations of future market or economic conditions. The Company believes that the methodologies, significant assumptions, and weightings used are reasonable and result in appropriate fair values of the reporting units.
Given the continued decline in the Company’s results in the Asia-Pacific region and the uncertainty surrounding COVID-19 including the lingering impacts of the numerous variants, the Company concluded that an indicator of impairment was present and conducted an interim impairment review of its goodwill in the Asia-Pacific reporting unit as of September 30, 2021. Based on the interim impairment assessment and annual assessment at October 1, 2021, the Asia-Pacific reporting unit’s fair value exceeded its carrying value by approximately
The Company re-evaluated the results of its Asia-Pacific region at March 31, 2022 and did not identify additional impairment indicators. The Company will continue to evaluate the results of its Asia-Pacific region and conduct interim testing if additional impairment indicators are present in future quarters. At March 31, 2022, the Asia-Pacific reporting unit's goodwill was $
No indicators of impairment were identified for the Company's other reporting units.
The Company’s only intangible asset with an indefinite life is goodwill. The changes in the carrying amount of goodwill, by segment, for the three months ended March 31, 2022 are as follows:
|
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USA |
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The Americas |
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EMEA |
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Asia-Pacific |
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|
Total |
|
|||||
Balance at January 1, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Currency translation |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Balance at March 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
12
The 2022 additions to goodwill relate to the acquisitions of Maxxweld Conectores Eletricos Ltda. and Holplast, s.r.o. See Note N for additional information about acquisitions of businesses.
NOTE I – FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The Company measures and records certain assets and liabilities at fair value. A fair value hierarchy is used for those assets and liabilities measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of the following three levels:
Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 Inputs other than Level 1 inputs that are either directly or indirectly observable, which may include:
Level 3 Inputs to the valuation methodology are unobservable and developed using estimates and assumptions developed by the
Company which reflect those that a market participant would use.
The following table summarizes the Company’s assets and liabilities, recorded and measured at fair value, on the Company’s Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021:
Description |
|
Balance as of |
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Supplemental profit sharing plan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total Liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Description |
|
Balance as of |
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Supplemental profit sharing plan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total Liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company operates internationally and enters into intercompany transactions denominated in foreign currencies. Consequently, the Company is subject to market risk arising from exchange rate movements between the dates when foreign currency transactions occur and the dates they are settled. The Company currently uses foreign currency forward contracts to reduce the risk related to some of these transactions. These contracts usually have maturities of
13
The Company has a non-qualified Supplemental Profit Sharing Plan for its executives and directors. The liability for this unfunded Supplemental Profit Sharing Plan was $
NOTE J – BUSINESS SEGMENT INFORMATION
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing performance.
The following tables present a summary of the Company’s reportable operating segments for the three months ended March 31, 2022 and 2021. Financial results for the PLP-USA segment include the elimination of all segments’ intercompany profit in inventory.
|
|
Three Months Ended March 31 |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net sales |
|
|
|
|
|
|
||
PLP-USA |
|
$ |
|
|
$ |
|
||
The Americas |
|
|
|
|
|
|
||
EMEA |
|
|
|
|
|
|
||
Asia-Pacific |
|
|
|
|
|
|
||
Total net sales |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Intersegment sales |
|
|
|
|
|
|
||
PLP-USA |
|
$ |
|
|
$ |
|
||
The Americas |
|
|
|
|
|
|
||
EMEA |
|
|
|
|
|
|
||
Asia-Pacific |
|
|
|
|
|
|
||
Total intersegment sales |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Gross profit |
|
|
|
|
|
|
||
PLP-USA |
|
$ |
|
|
$ |
|
||
The Americas |
|
|
|
|
|
|
||
EMEA |
|
|
|
|
|
|
||
Asia-Pacific |
|
|
|
|
|
|
||
Gross profit |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Net income attributable to Preformed Line Products Company shareholders |
|
|
|
|
|
|
||
PLP-USA |
|
$ |
|
|
$ |
|
||
The Americas |
|
|
( |
) |
|
|
|
|
EMEA |
|
|
|
|
|
|
||
Asia-Pacific |
|
|
( |
) |
|
|
( |
) |
Total net income attributable to Preformed Line Products Company shareholders |
|
$ |
|
|
$ |
|
||
NOTE K – INCOME TAXES
The Company’s effective tax rate was
14
The Company provides valuation allowances against deferred tax assets when it is more likely than not that some portion or all of its deferred tax assets will not be realized. During the period ended March 31, 2022, the Company recorded additional valuation allowances in various jurisdictions on their deferred tax assets, that are not expected to be realizable.
For the three-month period ending March 31, 2022, the Company did
NOTE L – DEBT ARRANGEMENTS
On January 19, 2021, the Company received funding for a term loan from PNC Equipment Finance, LLC in the principal amount of $
On March 2, 2022, the Company amended its credit facility ("the Facility") to increase the capacity from $
On April 25, 2019, the Company borrowed $
On August 16, 2021, the Company’s New Zealand subsidiary borrowed $
For the periods ended March 31, 2022 and December 31, 2021, the Company’s Asia-Pacific segment had $
NOTE M – PRODUCT WARRANTY RESERVE
The Company records an accrual for estimated warranty costs to Costs of products sold in the Statements of Consolidated Income. These amounts are recorded in Accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets. The Company records and accounts for its warranty reserve based on specific claim incidents. Should the Company become aware of a specific potential warranty claim for which liability is probable and reasonably estimable, a specific charge is recorded and accounted for accordingly. Adjustments are made quarterly to the accruals as claim information changes.
The following is a rollforward of the product warranty reserve:
|
|
Three Months Ended March 31 |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Beginning of period balance |
|
$ |
|
|
$ |
|
||
Additions charged to income |
|
|
|
|
|
|
||
Warranty usage |
|
|
( |
) |
|
|
( |
) |
Currency translation |
|
|
|
|
|
( |
) |
|
End of period balance |
|
$ |
|
|
$ |
|
||
15
NOTE N – ACQUISITIONS OF BUSINESSES
Acquisition of Maxxweld Conectores Electricos Ltda.
On January 4, 2022, the Company acquired Maxxweld Conectores Eletricos Ltda.("Maxxweld"), a Brazilian entity headquartered in Curitiba, Brazil, from its shareholders. Maxxweld designs and manufactures substation connector systems and accessory hardware for high voltage AC systems. The acquisition of Maxxweld expands and strengthens the Company's operational and technical capabilities in the region while supporting its overall substation strategy. The purchase price was approximately $
The acquisition of Maxxweld has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date.
|
|
Preliminary Allocation |
|
|
Accounts receivable |
|
$ |
|
|
Inventory |
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
Property, plant and equipment and other assets |
|
|
|
|
Other intangible assets |
|
|
|
|
Accounts payable |
|
|
( |
) |
Other current liabilities |
|
|
( |
) |
Other non-current liabilities |
|
|
( |
) |
Total identifiable net assets |
|
|
|
|
Goodwill |
|
|
|
|
Total consideration, net of cash received |
|
$ |
|
|
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Maxxweld. As a result of the acquisition, goodwill of $
From the date of the acquisition through March 31, 2022, the Company’s Consolidated Financial Statements included Maxxweld sales of approximately $
Acquisition of Holplast, s.r.o.
On March 1, 2022, the Company acquired all issued and outstanding shares of Holplast, s.r.o (“Holplast”), an entity headquartered in Prostejov, Czech Republic, from its shareholder. Holplast specializes in injection molding and expands the Company’s operational capabilities in the region and strengthens the Company’s position in the global communications market. The purchase price was approximately $
The acquisition of Holplast has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date.
16
|
|
|
|
|
|
|
Preliminary Allocation |
|
|
Cash |
|
$ |
|
|
Accounts receivable |
|
|
|
|
Inventory |
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
Property, plant and equipment and other assets |
|
|
|
|
Accounts payable |
|
|
( |
) |
Other current liabilities |
|
|
( |
) |
Other non-current liabilities |
|
|
( |
) |
Total identifiable net assets |
|
|
|
|
Goodwill |
|
|
|
|
Total consideration, inclusive of cash and debt |
|
$ |
|
|
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Holplast. Other non-current liabilities assumed is mainly comprised of long-term debt totaling approximately $
The Company’s 2022 Consolidated Financial Statements include Holplast’s results of operations, which were not material, and are reported in The EMEA segment from the date of acquisition through March 31, 2022.
NOTE O – EXIT OF RUSSIAN OPERATIONS
Due to the ongoing conflict in Ukraine and overt hostilities shown by Russia in the conflict, the Company determined to exit its Russian operations in March 2022, at which time exit activities began. The Russia operations did not have a material impact to the consolidated financial statements with net sales of $
17
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the readers of our consolidated financial statements better understand our results of operations, financial condition and present business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and related notes included elsewhere in this report.
The MD&A is organized as follows:
OVERVIEW
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, mounting hardware for a variety of solar power applications, and fiber optic and copper splice closures. PLPC is respected around the world for quality, dependability and market-leading customer service. Our goal is to continue to achieve profitable growth as a leader in the research, innovation, development, manufacturing, and marketing of technically advanced products and services related to energy, communications and cable systems and respond to key infrastructure priorities around the world, including bolstering grid reliability, strengthening grid resilience to climate events, upgrading aging infrastructure, enhancing communication networks and transitioning to renewable energy. We have 30 sales and manufacturing operations in 22 different countries.
We report our segments in four geographic regions: PLP-USA (including corporate), The Americas (includes operations in North and South America without PLP-USA), 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, communications and special industries products. Our other three segments, The Americas, EMEA and Asia-Pacific support our energy, communications and special industries 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 operating segment and the Company rather than the results of any individual business component of the segment.
We evaluate segment performance and allocate resources based on several factors primarily based on sales and net income.
PREFACE
The following discussion describes our results of operations for the three months ended March 31, 2022 and 2021. Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP). Our discussions of the financial results include non-GAAP measures (e.g., foreign currency impact) to provide additional information concerning our financial results and provide information that we believe is useful to the readers of our consolidated financial statements in the assessment of our performance and operating trends.
While the ongoing COVID-19 pandemic has not had a material effect on our overall results, it has continued to create challenges for us in countries that have significant outbreak mitigation strategies, namely, countries in our Asia-Pacific business segment, which led to temporary project postponements and has continued to impact results in this segment. We are continuing to actively monitor the impact of COVID-19 on current and future periods and actively manage costs and our liquidity position to provide additional flexibility while still supporting our customers and their specific needs. We cannot predict the duration or scope of the COVID-19 pandemic or the magnitude of its impact on our business and results of operations. In addition, the impact of COVID-19 could potentially exacerbate other risks discussed, any of which could have a material adverse effect on the Company. We continue to assess all challenges related to COVID-19 and plan accordingly. The extent of any future impact is dependent upon several factors including those described in the
18
Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on March 4, 2022.
Overall customer demand has remained strong, which is reflected in net sales of $138.2 million for the three months ended March 31, 2022, an increase of $20.7 million year-over-year. However, we have also experienced significant commodity and transportation cost inflation that has impacted our profit margins. To mitigate the ongoing inflationary pressures, we implemented several price increases in the U.S. and internationally in 2021 and again in 2022. Due to the large volume in our order backlog, we continue to experience tailwinds from these 2021 increases into 2022, however, continued cost inflation in these areas may require further price adjustments to maintain profit margin, and any price increases may have a negative effect on demand.
The geopolitical environment has created challenges in the operating environment particularly in eastern Europe. Due to the ongoing conflict in Ukraine and overt hostilities shown by Russia in the conflict, the Company determined to wind down its Russian operations in March 2022. The Russia operations did not have a material impact to the consolidated financial statements with net sales of $0.1 million and $0.2 million for the three-month periods ending March 31, 2022 and 2021, respectively, and annual sales of $1.0 million for the 2021 fiscal year. As a result of the decision to wind-down operations, asset impairment, one-time termination benefits and other impacts were recorded in the period ending March 31, 2022, as outlined below.
Our consolidated financial statements are subject to fluctuations in the exchange rates of foreign currencies in relation to the U.S. dollar. The fluctuations of foreign currencies during the three months ended March 31, 2022 had a $2.5 million unfavorable effect on net sales. There was an unfavorable effect of $0.2 million on net income for the three months ended March 31, 2022. On a reportable segment basis, the impact of foreign currency on net sales and net income for the three months ended March 31, 2022 was as follows:
|
|
Foreign Currency Translation Impact |
|
|||||
|
|
Three Months Ended March 31, 2022 |
|
|||||
|
|
Net Sales |
|
|
Net Income |
|
||
(Thousands of dollars) |
|
|
|
|
|
|
||
The Americas |
|
$ |
(136 |
) |
|
$ |
106 |
|
EMEA |
|
|
(1,668 |
) |
|
|
(363 |
) |
Asia-Pacific |
|
|
(742 |
) |
|
|
57 |
|
Total |
|
$ |
(2,546 |
) |
|
$ |
(200 |
) |
The following table reflects the impact of foreign currency fluctuations on operating income for the three months ended March 31, 2022 and 2021:
|
|
Foreign Currency Impact |
|
|||||
|
|
Three Months Ended March 31 |
|
|||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
||
Operating income |
|
$ |
9,451 |
|
|
$ |
10,768 |
|
Translation gain |
|
|
(522 |
) |
|
|
0 |
|
Transaction (gain) loss |
|
|
(1,883 |
) |
|
|
615 |
|
Net loss (gain) on forward currency |
|
|
2,065 |
|
|
|
(327 |
) |
Operating income excluding currency |
|
$ |
9,111 |
|
|
$ |
11,056 |
|
Despite the current geopolitical environment, and aside from the uncertainty created by the COVID-19 outbreak, we believe our business fundamentals and our financial position are sound and we are strategically well-positioned. We remain focused on assessing our business structure, global facilities and overall capacity in conjunction with the requirements of local manufacturing in the markets that we serve. The growth in PLP-USA net sales required additional investment within our PLP-USA facilities, both in the form of operational capacity as well as increased warehouse space. These investments in our U.S. operations will allow us to further enhance the service we provide to our U.S. customers beginning in late 2022. If necessary, we will modify redundant processes and further utilize our global manufacturing network to manage costs, increase sales volumes and deliver value to our customers. We have continued to invest in the business to expand into new markets for the Company, evaluate strategic mergers and acquisitions, improve efficiency, develop new products, and increase our capacity. We currently have a bank debt to equity ratio of 23.7% and have the continued ability to borrow needed funds at a competitive interest rate under the Facility.
19
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2022 COMPARED TO THREE MONTHS ENDED MARCH 31, 2021
The following table sets forth a summary of the Company’s Statements of Consolidated Income and the percentage of net sales for the three months ended March 31, 2022 and 2021. The Company’s past operating results are not necessarily indicative of future operating results.
|
|
Three Months Ended March 31 |
|
|||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|||||||||||
Net sales |
|
$ |
138,223 |
|
|
100.0% |
|
|
$ |
117,553 |
|
|
100.0% |
|
|
$ |
20,670 |
|
||
Cost of products sold |
|
|
96,272 |
|
|
|
69.6 |
|
|
|
77,361 |
|
|
|
65.8 |
|
|
|
18,911 |
|
GROSS PROFIT |
|
|
41,951 |
|
|
|
30.4 |
|
|
|
40,192 |
|
|
|
34.2 |
|
|
|
1,759 |
|
Costs and expenses |
|
|
32,500 |
|
|
|
23.5 |
|
|
|
29,424 |
|
|
|
25.0 |
|
|
|
3,076 |
|
OPERATING INCOME |
|
|
9,451 |
|
|
|
6.8 |
|
|
|
10,768 |
|
|
|
9.2 |
|
|
|
(1,317 |
) |
Other income (expense), net |
|
|
4,690 |
|
|
|
3.4 |
|
|
|
(214 |
) |
|
|
(0.2 |
) |
|
|
4,904 |
|
INCOME BEFORE INCOME TAXES |
|
|
14,141 |
|
|
|
10.2 |
|
|
|
10,554 |
|
|
|
9.0 |
|
|
|
3,587 |
|
Income tax expense |
|
|
1,840 |
|
|
|
1.3 |
|
|
|
3,377 |
|
|
|
2.9 |
|
|
|
(1,537 |
) |
NET INCOME |
|
|
12,301 |
|
|
|
8.9 |
|
|
|
7,177 |
|
|
|
6.1 |
|
|
|
5,124 |
|
Net (gain) loss attributable to noncontrolling interests |
|
|
(16 |
) |
|
|
(0.0 |
) |
|
|
2 |
|
|
|
0.0 |
|
|
|
(18 |
) |
NET INCOME ATTRIBUTABLE TO |
|
$ |
12,285 |
|
|
8.9% |
|
|
$ |
7,179 |
|
|
6.1% |
|
|
$ |
5,106 |
|
||
Net sales. Net sales were $138.2 million for the three months ended March 31, 2022, an increase of $20.7 million, or 18%, from the three months ended March 31, 2021. Excluding the unfavorable effect of currency translation, net sales for the three months ended March 31, 2022 increased $23.2 million compared to the same period in 2021, or 20%, as summarized in the following table:
|
|
Three Months Ended March 31 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
75,924 |
|
|
$ |
56,231 |
|
|
$ |
19,693 |
|
|
$ |
0 |
|
|
$ |
19,693 |
|
|
|
35 |
% |
The Americas |
|
|
18,963 |
|
|
|
17,521 |
|
|
|
1,442 |
|
|
|
(136 |
) |
|
|
1,578 |
|
|
|
9 |
|
EMEA |
|
|
27,472 |
|
|
|
23,481 |
|
|
|
3,991 |
|
|
|
(1,668 |
) |
|
|
5,659 |
|
|
|
24 |
|
Asia-Pacific |
|
|
15,864 |
|
|
|
20,320 |
|
|
|
(4,456 |
) |
|
|
(742 |
) |
|
|
(3,714 |
) |
|
|
(18 |
) |
Consolidated |
|
$ |
138,223 |
|
|
$ |
117,553 |
|
|
$ |
20,670 |
|
|
$ |
(2,546 |
) |
|
$ |
23,216 |
|
|
|
20 |
% |
The year-over-year increase in PLP-USA net sales of $19.7 million, or 35%, was primarily due to a volume increase in energy and communication product sales. International net sales for the three months ended March 31, 2022 experienced an unfavorable impact of $2.5 million when local currencies were converted to U.S. dollars. The following discussion of net sales excludes the effect of currency translation. The Americas net sales of $19.0 million increased $1.6 million, or 9%, primarily due to the contributions from the Company's acquisition of Maxxweld. EMEA net sales of $27.5 million increased $5.7 million, or 24%, primarily due to a volume increase in energy product sales within the region. Asia-Pacific net sales of $15.9 million decreased $3.7 million, or 18%, compared to 2021 primarily due to a volume decrease in energy products, partially resulting from the continuing effects of the disruption to the region's economy caused by the COVID-19 pandemic.
20
Gross profit. Gross profit was $42.0 million and $40.2 million for the three months ended March 31, 2022 and 2021, respectively. Excluding the unfavorable effect of currency translation, gross profit increased $2.0 million, or 5%, as summarized in the following table:
|
|
Three Months Ended March 31 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
26,264 |
|
|
$ |
21,077 |
|
|
$ |
5,187 |
|
|
$ |
0 |
|
|
$ |
5,187 |
|
|
|
25 |
% |
The Americas |
|
|
5,365 |
|
|
|
5,544 |
|
|
|
(179 |
) |
|
|
25 |
|
|
|
(204 |
) |
|
|
(4 |
) |
EMEA |
|
|
6,374 |
|
|
|
8,134 |
|
|
|
(1,760 |
) |
|
|
(194 |
) |
|
|
(1,566 |
) |
|
|
(19 |
) |
Asia-Pacific |
|
|
3,948 |
|
|
|
5,437 |
|
|
|
(1,489 |
) |
|
|
(115 |
) |
|
|
(1,374 |
) |
|
|
(25 |
) |
Consolidated |
|
$ |
41,951 |
|
|
$ |
40,192 |
|
|
$ |
1,759 |
|
|
$ |
(284 |
) |
|
$ |
2,043 |
|
|
|
5 |
% |
PLP-USA gross profit of $26.3 million increased $5.2 million compared to the same period in 2021 mainly as a result of increased sales volume of $19.7 million, offset by the negative impact of rising commodity prices, freight costs, and inflation. International gross profit for the three months ended March 31, 2022 was unfavorably impacted by $0.3 million when local currencies were translated to U.S. dollars. The following discussion of gross profit excludes the effects of currency translation. The Americas gross profit decrease of $0.2 million was primarily the result of an unfavorable shift in sales product mix. EMEA’s gross profit decreased $1.6 million, mainly due to inventory write-offs of $0.4 million related to the exit of Russia operations as well as higher freight and raw material costs. Asia-Pacific’s gross profit decrease was the result of a year-over-year reduction in sales of $3.7 million, partially offset by manufacturing cost savings.
Costs and expenses. Costs and expenses of $32.5 million for the three months ended March 31, 2022 increased $3.1 million, or 10%. Excluding the favorable effect of currency translation, costs and expenses increased $3.9 million, or 13%, as summarized in the following table:
|
|
Three Months Ended March 31 |
|
|||||||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
|
||||||
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
15,750 |
|
|
$ |
13,134 |
|
|
$ |
2,616 |
|
|
$ |
0 |
|
|
$ |
2,616 |
|
|
|
20 |
% |
The Americas |
|
|
5,130 |
|
|
|
3,721 |
|
|
|
1,409 |
|
|
|
(74 |
) |
|
|
1,483 |
|
|
|
40 |
|
EMEA |
|
|
6,741 |
|
|
|
6,464 |
|
|
|
277 |
|
|
|
(563 |
) |
|
|
840 |
|
|
|
13 |
|
Asia-Pacific |
|
|
4,879 |
|
|
|
6,105 |
|
|
|
(1,226 |
) |
|
|
(169 |
) |
|
|
(1,057 |
) |
|
|
(17 |
) |
Consolidated |
|
$ |
32,500 |
|
|
$ |
29,424 |
|
|
$ |
3,076 |
|
|
$ |
(806 |
) |
|
$ |
3,882 |
|
|
|
13 |
% |
PLP-USA costs and expenses of $15.8 million for the three months ended March 31, 2022 increased when compared to the same period in 2021 due to increases in commission and personnel-related expenses. International costs and expenses for the three months ended March 31, 2022 were favorably impacted by $0.8 million when local currencies were translated to U.S. dollars. The following discussion of costs and expenses excludes the effect of currency translation. The Americas costs and expenses of $5.1 million increased by $1.5 million mainly due to purchase accounting adjustments of approximately $0.4 million, a one time asset write-off at the Company’s Argentina subsidiary of $0.3 million as well as higher personnel-related expenses. EMEA costs and expenses of $6.7 million increased $0.8 million mainly due to asset impairment and severance charges of $0.5 million related to the exit of Russia operations as well as higher personnel-related expenses. Asia-Pacific costs and expenses of $4.9 million decreased by $1.1 million primarily due to a gain recognized for the sale of capital assets and reduced personnel-related costs.
Other income (expense), net. Other income (expense), net for the three months ended March 31, 2022 and 2021 was $4.7 million and $0.2 million, respectively. The increase in Other income, net for the three months ended March 31, 2022 was primarily related to the settlement of a Company-owned life insurance policy that was maintained for Director Emeritus Barbara P. Ruhlman until her death in January 2022. The cash proceeds of approximately $6.9 million resulted in a gain of $4.4 million recorded in Other income, net.
Income taxes. Income taxes for the three months ended March 31, 2022 and 2021 were $1.8 million and $3.4 million, based on pre-tax income of $14.1 million and $10.6 million, respectively. The effective tax rate for the three months ended March 31, 2022 and 2021 was 13% and 32%, respectively, compared to the U.S. federal statutory rate of 21%. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amount of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. For the period ending March 31, 2022, lower income tax
21
expense was recorded primarily due to a non-taxable benefit of $4.4 million related to the proceeds from a settlement of a Company-owned life insurance policy that was maintained for Director Emeritus Barbara P. Ruhlman until her death in January 2022, in addition to a decrease in unfavorable permanent adjustments.
Net income. As a result of the preceding items, net income for the three months ended March 31, 2022 was $12.3 million, compared to $7.2 million for the three months ended March 31, 2021, an increase of $5.1 million as summarized in the following table:
|
|
Three Months Ended March 31 |
|||||||||||||||||||||||
(Thousands of dollars) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
Change |
|
|
% |
||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PLP-USA |
|
$ |
13,239 |
|
|
$ |
5,576 |
|
|
$ |
7,663 |
|
|
$ |
0 |
|
|
$ |
7,663 |
|
|
|
137 |
|
% |
The Americas |
|
|
(71 |
) |
|
|
1,192 |
|
|
|
(1,263 |
) |
|
|
106 |
|
|
|
(1,369 |
) |
|
|
(115 |
) |
|
EMEA |
|
|
282 |
|
|
|
1,195 |
|
|
|
(913 |
) |
|
|
(363 |
) |
|
|
(550 |
) |
|
|
(46 |
) |
|
Asia-Pacific |
|
|
(1,165 |
) |
|
|
(784 |
) |
|
|
(381 |
) |
|
|
57 |
|
|
|
(438 |
) |
|
|
56 |
|
|
Consolidated |
|
$ |
12,285 |
|
|
$ |
7,179 |
|
|
$ |
5,106 |
|
|
$ |
(200 |
) |
|
$ |
5,306 |
|
|
|
74 |
|
% |
PLP-USA’s net income for the three months ended March 31, 2022 increased $7.7 million compared to the same period in 2021, primarily due to an increase in operating income of $2.6 million driven by higher sales volumes combined with an increase in net other income of $3.9 million primarily related to the gain from proceeds on insurance settlement, as well as a decrease in income tax expense of $1.1 million. The following discussion of net income excludes the effect of currency translation. The Americas net income decreased $1.4 million mainly as a result of a decrease in operating income due to higher costs of $1.5 million, partially offset by a decrease in income tax expense of $0.3 million. EMEA net income decreased $0.6 million mainly as a result of a $2.0 million decrease in operating income due to the impact of the exit from our the Russian operations, partially offset by an increase in other income, net of $0.9 million and a decrease in income tax expense of $0.3 million. Asia-Pacific net income decreased $0.4 due to a decrease in operating income of $0.3 million from reduced sales volumes combined with an increase of income tax expense of $0.2 million.
POLICIES AND ESTIMATES
Our critical accounting policies are consistent with the information set forth in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K for the year ended December 31, 2021 filed on March 4, 2022 with the Securities and Exchange Commission and are, therefore, not presented herein.
WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES
Management Assessment of Liquidity
We measure liquidity on the basis of our ability to meet short-term and long-term operating needs, repay debt, fund additional investments, including acquisitions, and make dividend payments to shareholders. Significant factors affecting the management of liquidity are cash flows from operating activities, capital expenditures, cash dividends, business acquisitions and access to bank lines of credit.
Our investments include expenditures required for equipment and facilities as well as expenditures in support of our strategic initiatives. During the first three months of 2022, we used cash of $8.0 million for capital expenditures and $13.0 million for acquisitions of businesses. We ended the first three months of 2022 with $34.6 million of cash, cash equivalents and restricted cash (collectively, “Cash”). Our Cash is held in various locations throughout the world. At March 31, 2022, the majority of our Cash was held outside the United States (“U.S.”). We expect most accumulated non-U.S. Cash balances will remain outside of the U.S. and that we will meet U.S. liquidity needs through future operating 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.
22
Total debt, including notes payable, at March 31, 2022 was $78.1 million. At March 31, 2022, our unused availability under the Facility was $56.4 million and our bank debt to equity percentage was 23.7%. On March 2, 2022, we amended the Facility to increase the capacity from $65.0 million to $90.0 million. As part of this amendment, the index used to determine the interest rate changed from LIBOR to the Bloomberg Short Term Bank Yield Index (“BSBY”). The interest rate will now be defined as BSBY plus 1.125% unless the Company’s funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 2.25 to 1, at which point the BSBY spread becomes 1.500%. The amendment also allows the Company to change its rate from BSBY to the Secured Overnight Financing Rate (“SOFR”) at the Company’s discretion. The amendment extended the maturity from June 30, 2024 to March 2, 2026. All other terms remain the same. The Facility agreement contains, among other provisions, requirements for maintaining levels of net worth and profitability. At March 31, 2022 and December 31, 2021, we were in compliance with these covenants.
We expect that our major source of funding for 2022 and beyond will be our operating cash flows and our existing Cash as well as the Facility. We earn a significant amount of our operating income outside the U.S., which, except for current earnings in certain jurisdictions, is deemed to be indefinitely reinvested in foreign jurisdictions.
As we cannot predict the duration or scope of the continuing COVID-19 pandemic or long-term impacts of the conflict in Ukraine and the impacts on our customers and suppliers, the negative financial impact to our financial results and liquidity cannot be reasonably estimated but could be material. We are actively managing the business to maintain cash flow and a favorable liquidity position. We believe that our future cash flows, together with these factors, will be more than sufficient to cover debt repayments, other contractual obligations, capital expenditures and dividends for the next twelve months and thereafter for the foreseeable future. In addition, we believe our borrowing capacity provides substantial financial resources, if needed, to supplement funding of capital expenditures and/or acquisitions. We also believe that we can expand our borrowing capacity, if necessary, however, we do not believe we would increase our debt to a level that would have a material adverse impact upon results of operations or financial condition.
Sources and Uses of Cash
Cash decreased $1.8 million compared to December 31, 2021. Net Cash used in operating activities was $5.2 million. The most significant net investing and financing uses of Cash in the three months ended March 31, 2022 were payments of long-term debt, acquisitions of businesses and capital expenditures, partially offset by debt proceeds and proceeds from a company-owned life insurance policy. Currency had a negative $0.8 million impact on Cash when translating foreign denominated financial statements to U.S. dollars.
Net Cash used in operating activities for the three months ended March 31, 2022 was $5.2 million compared to $13.2 million provided by operating activities in the comparable prior year three-month period. The $18.8 million net decrease was primarily a result of an increase in Cash used by operating assets, net of operating liabilities, due to increases in accounts receivable and inventory partially offset by an increase in net income of $5.1 million.
Net Cash used in investing activities of $10.9 million for the three months ended March 31, 2022 increased $7.5 million when compared to Cash used in investing activities in the three months ended March 31, 2021. The change was primarily related to the acquisition of businesses in the three months ended March 31, 2022 as well as the year-over-year increase in capital expenditures.
Cash provided by financing activities for the three months ended March 31, 2022 was $15.1 million compared to cash used in financing activities of $20.5 million during the three months ended March 31, 2021. The $35.6 million increase was primarily the result of an increase in proceeds from debt, net of borrowings, in 2022 compared to 2021.
We have commitments under operating leases, primarily for office and manufacturing space, transportation equipment, office and computer equipment and capital leases primarily for equipment. See the Consolidated Balance Sheets for related operating lease assets and liabilities.
As of March 31, 2022, the Company had total outstanding guarantees of $9.6 million. Additionally, certain domestic and foreign customers require the Company to issue letters of credit or performance bonds as a condition of placing an order. As of March 31, 2022, the Company had total outstanding letters of credit of $0.9 million.
FORWARD LOOKING STATEMENTS
Cautionary Statement for “Safe Harbor” Purposes Under The Private Securities Litigation Reform Act of 1995
This Form 10-Q and other documents we file with the SEC contain forward-looking statements regarding the Company’s and management’s beliefs and expectations. As a general matter, forward-looking statements are those focused upon future plans, objectives or performance (as opposed to historical items) and include statements of anticipated events or trends and expectations and beliefs relating to matters not historical in nature. Such forward-looking statements are subject to uncertainties and factors relating to the Company’s operations and business environment, all of which are difficult to predict and many of which are beyond the Company’s
23
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:
24
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company operates manufacturing facilities and offices around the world and uses fixed and floating rate debt to finance the Company’s global operations. As a result, the Company is subject to business risks inherent in non-U.S. activities, including political and economic uncertainty, import and export limitations and market risk related to changes in interest rates and foreign currency exchange rates. The Company believes that the political and economic risks related to the Company’s international operations are mitigated due to the geographic diversity in which the Company’s international operations are located.
Effective July 1, 2018, Argentina was designated as a highly inflationary economy as the projected three-year cumulative inflation rate exceeded 100%. As such, beginning July 1, 2018, the functional currency for the Company’s Argentina subsidiary became the U.S. dollar. Revenue from operations in Argentina represented less than 1% of total consolidated net sales for three months ended March 31, 2022 and 2021.
As of March 31, 2022, the Company had $0.4 million in assets related to foreign currency forward exchange contracts outstanding. The Company does not hold derivatives for trading purposes.
The Company’s primary currency rate exposures are related to foreign denominated debt, intercompany debt, foreign denominated receivables and payables and cash and short-term investments. A hypothetical 10% change in currency rates would have a favorable/unfavorable impact on fair values on such instruments of $4.8 million and a $0.1 million favorable/unfavorable impact on income before income taxes at March 31, 2022.
The Company is exposed to market risk, including changes in interest rates and foreign exchange rates since we conduct business in a variety of foreign currencies. The Company is subject to interest rate risk on its variable rate revolving credit facilities and term notes, which consisted of long-term borrowings of $63.9 million at March 31, 2022. A 100 basis point increase in the interest rate would have resulted in an increase in interest expense of approximately $0.3 million for the three months ended March 31, 2022.
As discussed elsewhere in this report, the outbreak of COVID-19 could negatively impact the Company’s business and results of operations. Since we cannot predict the duration or scope of the COVID-19 pandemic, the potential negative financial impact to the Company’s results cannot be reasonably estimated but could be material.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s Principal Executive Officer and Principal Accounting Officer have concluded that the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended, were effective as of March 31, 2022.
Changes in Internal Control over Financial Reporting
There were no other changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)) of the Securities and Exchange Act of 1934, as amended, during the three months ended March 31, 2022 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
25
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information regarding the Company’s current legal proceedings is presented in Note C of the Notes to the Consolidated Financial Statements.
ITEM 1A. RISK FACTORS
There were no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 4, 2022. In addition, the impact of COVID-19 could potentially exacerbate other risks discussed, any of which could have a material adverse effect on the Company. The situation continues to change and additional impacts may arise that the Company is not aware of currently.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 28, 2021, the Board of Directors authorized a plan to repurchase up to an additional 191,163 of Preformed Line Products Company common shares, resulting in a total of 250,000 shares available for repurchase with no expiration date. The following table reflects repurchases for the three-month period ended March 30, 2022:
Period |
|
Total |
|
|
Average |
|
|
Total Number of |
|
|
Maximum Number |
|
||||
January |
|
|
951 |
|
|
$ |
60.89 |
|
|
|
8,021 |
|
|
|
241,979 |
|
February |
|
|
1,100 |
|
|
|
58.14 |
|
|
|
9,121 |
|
|
|
240,879 |
|
March |
|
|
27,384 |
|
|
|
61.04 |
|
|
|
36,505 |
|
|
|
213,495 |
|
Total |
|
|
29,435 |
|
|
|
|
|
|
|
|
|
|
|||
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
26
ITEM 6. EXHIBITS
|
|
|
|
|
|
10.1 |
|
|
|
|
|
10.2 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document. |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
104 |
|
Cover Page Interactive Data (embedded with the Inline XBRL document. |
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
May 6, 2022 |
|
/s/ Robert G. Ruhlman |
|
|
Robert G. Ruhlman |
|
|
Chairman, President and Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
May 6, 2022 |
|
/s/ Andrew S. Klaus |
|
|
Andrew S. Klaus |
|
|
Chief Financial Officer |
|
|
(Principal Accounting Officer) |
28
Exhibit 10.1
AMENDMENT NO. 7
TO AMENDED AND RESTATED LOAN AGREEMENT
This AMENDMENT NO. 7 TO AMENDED AND RESTATED LOAN AGREEMENT (this “Amendment”) is entered into as of March 2, 2022, by and among PREFORMED LINE PRODUCTS COMPANY, an Ohio corporation (“PLP”), PREFORMED LINE PRODUCTS (AUSTRALIA) PTY LTD., a corporation incorporated under the laws of the Commonwealth of Australia (“PLP Australia”), BELOS-PLP S.A., a company organized under the laws of Poland (“PLP Poland”), PT PREFORMED LINE PRODUCTS INDONESIA, a company organized under the laws of Indonesia, PLP SUBCON GMBH, a limited liability company established and existing under the laws of Austria (“PLP Austria”, and collectively with PLP, PLP Australia, PLP Poland and PLP Indonesia, the “Borrowers” and each a “Borrower”), and PNC BANK, NATIONAL ASSOCIATION, a national banking association, its successors and assigns, as lender (“Bank”).
WITNESSETH:
WHEREAS, PLP, PLP Australia and Bank have entered into that certain Amended and Restated Loan Agreement, dated as of September 24, 2015, as amended pursuant to that certain (1) Amendment No. 1 to Amended and Restated Loan Agreement, dated as of November 6, 2015, by and among PLP, PLP Australia, and Bank, (2) Amendment No. 2 to Amended and Restated Loan Agreement, dated as of August 22, 2016, by and among PLP, PLP Australia, and Bank, (3) Joinder and Amendment No. 3 to Amended and Restated Loan Agreement, dated as of March 13, 2018, by and among PLP, PLP Australia, PLP Poland, and Bank, (4) Amendment No. 4 to Amended and Restated Loan Agreement, dated as of November 30, 2018, by and among PLP, PLP Australia, PLP Poland, and Bank, (5) Amendment No. 5 to Amended and Restated Loan Agreement, dated as of April 25, 2019, by and among PLP, PLP Australia, PLP Poland, PLP Indonesia, and Bank, and (6) Joinder and Amendment No. 6 to Amended and Restated Loan Agreement, dated as of March 25, 2020, by and among PLP, PLP Australia, PLP Poland, PLP Indonesia, PLP Austria and Bank (as amended by this Amendment, and as further amended, restated, modified or supplemented from time to time, the “Loan Agreement”), pursuant to which Bank has made certain loans and financial accommodations available to the Borrowers; and
WHEREAS, the parties desire to otherwise amend the Loan Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto do hereby agree as follows:
4860-4455-2459, v.3
Each defined term used herein and not otherwise defined herein shall have the meaning ascribed to such term in the Loan Agreement.
The Loan Agreement is hereby amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text) as set forth in the pages of the Loan Agreement attached as Exhibit A hereto.
Each of the Borrowers hereby represents and warrants to Bank as follows:
4.1 The Amendment. This Amendment has been duly and validly executed by an authorized officer of such Borrower and constitutes the legal, valid and binding obligation of such Borrower enforceable against such Borrower in accordance with its terms.
4.2 Loan Agreement. The Loan Agreement, as amended by this Amendment, remains in full force and effect and remains the valid and binding obligation of each Borrower enforceable against each Borrower in accordance with its terms. Each Borrower hereby ratifies and confirms the Loan Agreement.
4.3 Claims and Defenses. As of the date of this Amendment, no Borrower has any defenses, claims, counterclaims or setoffs with respect to the Loan Agreement or its Obligations thereunder or with respect to any actions of Bank or any of its respective officers, directors, shareholders, employees, agents or attorneys, and each Borrower irrevocably and absolutely waives any such defenses, claims, counterclaims and setoffs and releases Bank and each of its respective officers, directors, shareholders, employees, agents and attorneys from the same.
4.4 Representations and Warranties. The representations and warranties of each Borrower contained in the Loan Agreement (as amended hereby) and the other Loan Documents (as amended in connection herewith), are true and correct.
4.5 No Event of Default. No Event of Default or condition which, but for the giving of notice or passage of time, would give rise to an Event of Default has occurred and is continuing.
2
4.6 Material Adverse Change. No material adverse change has occurred since the date of the most recent Financial Statements delivered to the Bank.
Each of the Borrowers hereby acknowledges and agrees that the terms and provisions hereof shall not affect in any way any payment, performance, observance or other obligations or liabilities of such Borrower under the Loan Agreement or under any of the other Loan Documents, all of which obligations and liabilities shall remain in full force and effect and extend to the further loans, extensions of credit and other obligations incurred under the Loan Documents, and each of which obligations and liabilities are hereby ratified, confirmed and reaffirmed in all respects.
In addition to all of the other conditions and agreements set forth herein, the effectiveness of this Amendment is subject to each of the following conditions precedent:
6.1 Amendment No. 7 to Amended and Restated Loan Agreement. Bank shall have received an original counterpart of this Amendment, executed and delivered by a duly authorized officer of each Borrower.
6.2 Twelfth Amended and Restated Line of Credit Note. Bank shall have received that certain Twelfth Amended and Restated Line of Credit Note, dated as of the date hereof, executed and delivered by a duly authorized officer of PLP, PLP Australia, PLP Poland, and PLP Austria, in favor of Bank.
6.3 Resolutions; Officer’s Certificate of PLP. Bank shall have received (a) a copy of the resolutions, in form and substance satisfactory to Bank, of the Board of Directors (or equivalent) of PLP authorizing the execution, delivery and performance of this Amendment and all other agreements, documents and instruments executed in connection therewith, (b) a certificate of the Secretary or Assistant Secretary of PLP, as to the incumbency and signature of the officers of PLP executing this Amendment and all other agreements, documents or instruments executed in connection therewith, together with evidence of the incumbency of each such Secretary or Assistant Secretary, and (c) a certificate of the Secretary or Assistant Secretary of PLP as to the Articles of Incorporation of PLP and as to the Code of Regulations of PLP.
6.4 Fees and Expenses. Borrowers shall have paid all fees of Bank in connection with this Amendment including, without limitation, all legal fees.
3
6.5 Other Documents and Deliveries. Bank shall have received such other agreements, documents, and instruments executed in connection with this Amendment and any other materials as reasonably requested by Bank.
7.1 Governing Law. This Amendment shall be governed by and construed in accordance with the law of the State of Ohio, without regard to principles of conflict of law.
7.2 Severability. Each provision of this Amendment shall be interpreted in such manner as to be valid under applicable law, but if any provision hereof shall be invalid under applicable law, such provision shall be ineffective to the extent of such invalidity, without invalidating the remainder of such provision or the remaining provisions hereof.
7.3 Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart hereof by facsimile shall be effective as manual delivery of such counterpart; provided, however, that, each party hereto will promptly thereafter deliver counterpart originals of such counterpart facsimiles delivered by or on behalf of such party.
7.4 Nonwaiver. The execution, delivery, performance and effectiveness of this Amendment shall not operate nor be deemed to be nor construed as a waiver (i) of any right, power or remedy of Bank under the Loan Agreement, nor (ii) of any term, provision, representation, warranty or covenant contained in the Loan Agreement or any other documentation executed in connection therewith. Further, none of the provisions of this Amendment shall constitute, be deemed to be or construed as, a waiver of any Event of Default under the Loan Agreement, as amended by this Agreement.
7.5 Reference to and Effect on the Loan Agreement. Upon the effectiveness of this Amendment, each reference in the Loan Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import shall mean and be a reference to the Loan Agreement, as amended hereby, and each reference to the Loan Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Loan Agreement shall mean and be a reference to the Loan Agreement, as amended hereby.
[Remainder of this page intentionally left blank; Signature page follows]
4
IN WITNESS WHEREOF, Borrowers have caused this Amendment No. 7 to Amended and Restated Loan Agreement to be duly executed and delivered by its duly authorized officer as of the date first above written.
PREFORMED LINE PRODUCTS COMPANY |
|
By: |
/s/ Andrew S. Klaus |
Name: |
Andrew S. Klaus |
Title: |
Chief Financial Officer |
PREFORMED LINE PRODUCTS (AUSTRALIA) PTY LTD |
|
By: |
/s/ Robert G. Ruhlman |
Name |
Robert G. Ruhlman |
Title: |
Chairman |
BELOS-PLP S.A. |
|
By: |
/s/ Robert G. Ruhlman |
Name: |
Robert G. Ruhlman |
Title: |
Chairman |
PT PREFORMED LINE PRODUCTS INDONESIA |
|
By: |
/s/ Robert G. Ruhlman |
Name: |
Robert G. Ruhlman |
Title: |
Chairman |
PLP SUBCON GMBH |
|
By: |
/s/ Robert G. Ruhlman |
Name: |
Robert G. Ruhlman |
Title: |
Chairman |
ACCEPTED BY: |
|
|
|
PNC BANK, NATIONAL ASSOCIATION, as Bank |
|
By: |
/s/ Sherri A. Barr |
Name: |
Sherri A. Barr |
Title: |
Senior Vice President |
5
Exhibit A
Amended and Restated Loan Agreement
See attached.
4860-4455-2459, v.3
The term “Subsidiary” shall mean a corporation or other business entity if shares constituting a majority of its outstanding capital stock (or other form of ownership) or constituting a majority of the voting power in any election of directors (or shares constituting both majorities) are (or upon exercise of any outstanding warrants, options or other rights would be) owned directly or indirectly at the time in question by the corporation or other business entity in question or another “Subsidiary” of that corporation or other business entity or any combination of the foregoing.
(a) the sum of (i) the aggregate undrawn balance of all then outstanding subject LCs plus (ii) the aggregate amount of all unreimbursed draws of all then outstanding subject LCs (the “LC Exposure”) would exceed Fifteen Million Dollars ($15,000,000) or
(b) the sum of the then aggregate outstanding Revolving Loans plus the then LC Exposure would exceed $65,000,00090,000,000.
(a) be issued in such form as Bank may reasonably require,
(b) be either a commercial letter of credit used solely for the importation of goods in the ordinary course of any Borrower’s business or a standby letter of credit, and
(c) be denominated in Dollars or Agreed Foreign Currencies (as such terms are defined in the Revolving Note).
(a) Bank’s standard percentage fee of the face amount of each commercial import letter of credit, or
(b) the product of (i) the then Applicable Margin (as defined in the Note) multiplied by (ii) the face amount of each standby letter of credit,
4860-4455-2459, v.3
4887-8925-5180, v.4
2
would not at any time exceed an amount equal to ten million dollars ($10,000,000) at any one time outstanding for all Companies.
5.4. Loans or Advances. Purchase or hold beneficially any stock, other securities or evidences of indebtedness of, or make or have outstanding, any loans or advances to, or otherwise extend credit to, or make any investment or acquire any interest whatsoever in, any other person, firm, corporation or other entity, except (i) investments disclosed on the Borrowers’ Historical Financial Statements, (ii) any existing or future advances made to an officer or employee of any Borrower solely for the purpose of paying ordinary and reasonable business expenses of any Borrower, (iii) any existing or future investment in direct obligations of the United States of America or any agency thereof, in certificates of deposit issued by the Bank, or in any other money-market investment if it carries the highest quality rating of any nationally-recognized rating agency; provided, however, that no investment permitted pursuant to this clause (iii) shall mature more than ninety (90) days after the date when made, (iv) any endorsement of a check or other medium of payment for deposit or collection, or any similar transaction in the normal course of business, (v) purchases or other acquisitions of all or substantially all of the capital stock of any corporation or other business enterprise expressly permitted under Section 5.8, or (vi) any existing or future investment, advance or loan; provided, however, that after giving effect thereto the aggregate amount of all investments, advances and loans (exclusive of investments, advances and loans permitted under clauses (i) through (v) of this Section 5.4) made by the Companies would not at any time exceed an aggregate amount equal to fifteen million dollars ($15,000,000) for all Companies.
5.5. Merger or Transfer of Assets. Liquidate or dissolve, or merge or consolidate with or into any person, firm, corporation or other entity, or sell, lease, transfer or otherwise dispose of all or any substantial part of its property, assets (other than (y) transfers of inventory in the ordinary course of business and (z) other assets in the ordinary course of business having a value of not more than $5,000,000 in any fiscal year of PLP), operations or business, whether now owned or hereafter acquired, except, so long as both immediately before and after giving effect thereto, no Default of Event of Default exists or shall exist, a merger or consolidation involving only Subsidiaries of PLP, any merger of PLP with one or more of its Subsidiaries in which PLP is the surviving corporation, or any dissolution and liquidation of a Subsidiary of any Borrower.
5.6. Change in Business, Management or Ownership. Make or permit any change in its form of organization (except pursuant to a transaction permitted pursuant to Section 5.5), or the nature of its business as carried on as of the date hereof.
5.7. Dividends. Declare or pay any dividends on or make any distribution with respect to any class of its equity or ownership interest, or purchase, redeem, retire or otherwise acquire any of its equity; provided, however, that PLP may declare and pay dividends (in cash or in kind) so long as (i) no Default or Event of Default shall then exist or would thereupon occur, and (ii) the amount or value of such dividend, when added to the amount and/or value of all dividends made by PLP in the fiscal year in which such dividend is proposed to be made, does not exceed five million dollars ($5,000,000); and provided, further, that any Subsidiary of PLP may declare and pay dividends to (in cash or in kind) PLP; and provided, further, that PLP may purchase, redeem, retire or otherwise acquire any of its equity so long as (i) no Default or Event of Default shall then exist or would thereupon occur, and (ii) the dollar amount of such purchase, redemption, retirement or acquisition, when added to the dollar amounts of all purchases, redemptions, retirements or acquisitions of its equity made by PLP during the period commencing after March __, 2020 2, 2022 and ending on the date of the proposed transaction, does not exceed forty million dollars ($40,000,000).
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than those referred to in Section 6.1 above) and such failure or default shall continue unremedied or uncured for a period of thirty (30) days after the earlier of knowledge by any Company of such failure or default or notice thereof from the Bank; providedthat in no event shall this Section 6.2 in any way serve to increase any of the grace periods set forth in Section 10 of the Revolving Note, Section 8 of the Term Note, or in any other Loan Document.
6.3. Breach of Warranty. Any Financial Statement, representation, warranty or certificate made or furnished by any Borrower or any other Company to the Bank in connection with this Agreement shall be false, incorrect or incomplete in any material respect when made.
6.4. Other Default. The occurrence of an Event of Default as defined in the Note or any of the Loan Documents.
Upon the occurrence and during the continuance of an Event of Default, the Bank will have all rights and remedies specified in the Note and the Loan Documents and all rights and remedies (which are cumulative and not exclusive) available under applicable law or in equity.
7. Conditions. The Bank’s obligation to make any advance under the Loan is subject to the conditions that as of the date of the advance:
7.1. Conditions to Effectiveness of this Agreement. The obligations of the Bank to enter into this Agreement shall not become effective until the date on which each of the conditions set forth below:
(a) This Agreement. Bank shall have received an original counterpart of this Agreement, executed and delivered by a duly authorized officer of each Borrower.
(b) Fees and Expenses. Borrowers shall have paid all fees of Bank in connection with this Agreement including, without limitation, all legal fees.
(c) Other Documents and Deliveries. Bank shall have received such other agreements, documents, and instruments executed in connection with this Agreement and any other materials as reasonably requested by Bank.
7.2 Conditions to Each Advance. In addition to the satisfaction of the conditions set forth in Section 7.1 above, the obligation of the Bank to make a Revolving Loan and to issue, amend, renew or extend any subject LC, is subject to the satisfaction of the following conditions:
(a) The representations and warranties of each Borrower set forth in this Agreement shall be true and correct on and as of the date of such Loan or the date of issuance, amendment, renewal or extension of such letter of credit, as applicable.
(b) At the time of and immediately after giving effect to such Revolving Loan or the issuance, amendment, renewal or extension of such subject LC, as applicable, no Default or Event of Default shall have occurred and be continuing.
(c) After giving effect to any Revolving Loan or the issuance of any subject LC, the aggregate outstanding balance of the Revolving Loans plus the aggregate face amount of all outstanding subject LCs shall not exceed $65,000,00090,000,000.
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Each Revolving Loan and each issuance, amendment, renewal or extension of a subject LC shall be deemed to constitute a representation and warranty by each Borrower on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section.
8. Expenses. Each Borrower agrees to pay the Bank, upon the execution of this Agreement, and otherwise on demand, all reasonable out-of-pocket costs and expenses incurred by the Bank in connection with the preparation, negotiation and delivery of this Agreement and the other Loan Documents, and any modifications thereto, and the collection of all of the obligations arising under this Agreement and the other Loan Documents, including but not limited to enforcement actions, relating to the Loan, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions or proceedings arising out of or relating to this Agreement, including reasonable fees and expenses of counsel (which may include costs of in-house counsel), expenses for auditors, appraisers and environmental consultants, lien searches, recording and filing fees and taxes.
9. Increased Costs; Yield Protection. On written demand, together with written evidence of the justification therefor, the Borrowers agree to pay the Bank all direct costs incurred, anylosses suffered or payments made by theBank as a result of any Change in Law (hereinafter defined), imposing any reserve, deposit, allocation of capital or similar requirement (including without limitation, Regulation D of the Board of Governors of the Federal Reserve System) on the Bank, its holding company or any of their respective assets relative to the Loan. “Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any governmental authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any governmental authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued. In addition, each Borrower agrees to indemnify the Bank against any liabilities, losses or expenses (including loss of margin, any loss or expense sustained or incurred in liquidating or employing deposits from third parties, and any loss or expense incurred in connection with funds acquired to effect, fund or maintain any advance (or any part thereof) bearing interest under the Daily LIBOR or LIBOR BSBY Floating Rate or BSBY Rate with an interest period in excess of 7 days) which the Bank sustains or incurs as a consequence of either (i) a Borrower’s failure to make a payment on the due date thereof, (ii) a Borrower’s revocation (expressly, by later inconsistent notices or otherwise) in whole or in part of any notice given to Bank to request, convert, renew or prepay any advance, or (iii) a Borrower’s payment, prepayment or conversion of any advance bearing interest under the Daily LIBOR or LIBOR BSBY Floating Rate or BSBY Rate with an interest period in excess of 7 days on a day other than the last day of the applicable LIBOR Interest Period, including but not limited to the Cost of Prepayment. “Cost of Prepayment” means an additional amount, if any (in each case as specified by Bank in a certificate setting forth the basis of such computation), as is necessary to compensate Bank for any loss or costs (including, without limitation, any costs of exchange and costs of hedging) incurred by the Bank as a consequence of any of the actions described in clause (iii) of the preceding sentence. The Cost of Prepayment shall also apply to any payments made after acceleration of the maturity of the Note. The Bank’s determination of an amount payable under this paragraph shall, in the absence of manifest error, be conclusive and shall be payable on demand.
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Exhibit 10.2
TWELFTH AMENDED AND RESTATED LINE OF CREDIT NOTE
$90,000,000 |
March 2, 2022 |
FOR VALUE RECEIVED, PREFORMED LINE PRODUCTS COMPANY, a corporation incorporated under the laws of the State of Ohio (“PLP”) with an address at 660 Beta Drive, Mayfield Village, Ohio 44143, PREFORMED LINE PRODUCTS (AUSTRALIA) PTY LTD, a corporation incorporated under the laws of the Commonwealth of Australia (“PLP Australia”) with an address at 190 Power Street, Glendenning NSW 2761, Australia, BELOS-PLP S.A., a company organized under the laws of Poland (“PLP Poland”), with an address at 43-301 Bielsko-Biała, ul. Gen. J. Kustronia 74, Poland, PLP SUBCON GMBH, a limited liability company established and existing under the laws of Austria (“PLP Austria”) with an address at Schwefel 93/7, 6850 Dornbirn, Austria (PLP, PLP Australia, PLP Poland, and PLP Austria are each a “Borrower” and collectively, the “Borrowers”), jointly and severally, promise to pay to the order of PNC BANK, NATIONAL ASSOCIATION (the “Bank”), in lawful money of the United States of America in immediately available funds at its offices located at 1900 East Ninth Street, Cleveland, Ohio 44114, or at such other location as the Bank may designate from time to time, the principal sum of NINETY MILLION DOLLARS ($90,000,000) (the “Facility”) or such lesser amount as may be advanced to or for the benefit of the Borrowers hereunder, together with interest accruing on the outstanding principal balance from the date hereof, all as provided below.
This Twelfth Amended and Restated Line of Credit Note evidences, but does not extinguish or satisfy, and is not a novation of, the pre-existing indebtedness of PLP, PLP Australia, and PLP Poland to the Bank under, and amends and restates that certain Eleventh Amended and Restated Line of Credit Note, dated December 28, 2021, in the original principal amount of $65,000,000, made by PLP, PLP Australia, PLP Austria and PLP Poland in favor of Bank, amending and restating that certain Tenth Amended and Restated Line of Credit Note, dated April 17, 2020, in the original principal amount of $65,000,000, made by PLP, PLP Australia, and PLP Poland in favor of Bank, amending and restating that certain Ninth Amended and Restated Line of Credit Note, dated August 26, 2019, in the original principal amount of $65,000,000, made by PLP, PLP Australia, and PLP Poland in favor of Bank, amending and restating that certain Eighth Amended and Restated Line of Credit Note, dated November 30, 2018, in the original principal amount of $65,000,000, made by PLP, PLP Australia, and PLP Poland in favor of Bank, amending and restating that certain Seventh Amended and Restated Line of Credit Note, dated March 13, 2018, in the original principal amount of $65,000,000, made by PLP, PLP Australia, and PLP Poland in favor of Bank, amending and restating that certain Sixth Amended and Restated Line of Credit Note, dated as of August 22, 2016, in the original principal amount of $65,000,000, made by PLP and PLP Australia in favor of the Bank, amending and restating that certain Fifth Amended and Restated Line of Credit Note, dated as of September 24, 2015, in the original principal amount of $50,000,000, made by PLP and PLP Australia in favor of the Bank, amending and restating that certain Fourth Amended and Restated Line of Credit Note, dated as of January 23, 2014, in the original principal amount of $50,000,000, made by PLP in favor of the Bank, amending and restating that certain Third Amended and Restated Line of Credit Note, dated as of May 24, 2012, in the original principal amount of $90,000,000, made by PLP in favor of the Bank, amending and restating that certain Second Amended and Restated Line of Credit Note, dated as of November 7, 2011, in the original principal amount of $70,000,000, made by PLP in favor of the Bank, amending and restating that certain Amended and Restated Line of Credit Note, dated as of May 31, 2011, in the original principal amount of $35,000,000, made by PLP in favor of the Bank, amending and restating that certain Line of Credit Note, dated as of February 5, 2010, in the original principal amount of $30,000,000, made by PLP in favor of the Bank (collectively, the “Original Note”). All agreements, instruments, documents and obligations related to the Original Note remain in full force and effect.
1. Advances. (a) The Borrower Representative (as defined in the Loan Agreement (as hereinafter defined)) may request advances, repay and request additional advances hereunder until the Expiration Date, subject to the terms and conditions of this Note and the Loan Documents (as hereinafter defined). The “Expiration Date” shall mean March 2, 2026, or such later date as may be designated by the Bank by written notice from the Bank to the Borrower Representative. Each Borrower acknowledges and agrees that in no event will the Bank be under any obligation to extend or renew the Facility or this Note beyond the Expiration Date. The Borrower Representative may request advances hereunder upon giving oral or written notice to the Bank by 11:00 a.m. (Cleveland, Ohio time) (a) on the day of the proposed advance, in the case of advances to bear interest under the Base Rate Option (as hereinafter defined) and (b) three (3) Business Days prior to the proposed advance, in the case of advances to bear interest under the Daily BSBY Floating Rate Option (as hereinafter defined), followed promptly thereafter by the Borrower Representative’s written confirmation to the Bank of any oral notice. The aggregate unpaid principal amount of advances under this Note plus the LC Exposure (as defined in the Loan Agreement (as hereinafter defined)) shall not exceed the face amount of this Note.
(b) The Borrower Representative may request that advances under this Note and subject LCs under the Loan Documents be made or issued in an Agreed Foreign Currency. As used herein, the term “Agreed Foreign Currencies” shall mean Australian Dollars, Polish Zloty, Euros, and any other foreign currency requested by the Borrower Representative and approved by the Bank in its sole discretion, and “Agreed Foreign Currency” shall mean any one of such currencies. Other than the Australian Loan and the Polish Loan, each advance under this Note made in an Agreed Foreign Currency shall bear interest at the Daily BSBY Floating Rate Option in accordance with the terms hereof. The Bank may, with respect to advances made in an Agreed Foreign Currency, engage in reasonable rounding of the Agreed Foreign Currency amounts requested.
(c) All advances under this Note and subject LCs under the Loan Documents made or issued in Agreed Foreign Currencies shall be governed by the Bank’s standard fees, charges, agreements, policy guidelines and other terms and provisions relating to such advances and issuances as in effect from time to time (collectively, the “Bank’s Standard Foreign Currency Terms”), in addition to the specific provisions set forth herein. In the event of any conflict between the Bank’s Standard Foreign Currency Terms and the terms of this Note or any other Loan Document, the Bank’s Standard Foreign Currency Terms shall govern.
(d) All payments due hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, imports, deductions, charges or withholdings imposed by any jurisdiction or taxing authority, domestic or foreign, and all liabilities with respect thereto, excluding (i) taxes imposed on the Bank's net income and (ii) taxes imposed on the Bank’s net income and franchise taxes imposed on the Bank, by the jurisdiction of the Bank’s lending office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges withholdings and liabilities being hereinafter referred to as “Taxes”). If any Borrower shall be required by law to deduct or withhold any Taxes from or in respect of any sum payable hereunder (i) the sum payable shall be increased as may be necessary so that after making all required deductions and withholdings (including deductions applicable to additional sums payable under this paragraph) the Bank will receive an amount equal to the sum the Bank would have received had no such deductions or withholdings been made, and (ii) each Borrower agrees to pay the full amount deducted or withheld to the relevant taxation authority or other authority in accordance with applicable law and promptly provide to the Bank the official receipt or other document evidencing such payment. In addition, each Borrower agrees to pay any present or future stamp or document taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Note (hereinafter referred to as “Other Taxes”). If any Taxes or Other Taxes required to be paid by any Borrower hereunder are not
2
paid and are imposed on and paid by the Bank, the Borrowers shall indemnify the Bank and reimburse the Bank for the amount of such payment, together with any interest, penalties and expenses in connection therewith, whether or not such tax shall have been correctly or legally imposed. Such reimbursement shall be made within thirty (30) days from the date the Bank makes written demand therefor.
The specification herein that payment be made in the relevant Agreed Foreign Currency or Dollars, as the case may be, at 1900 East Ninth Street, Cleveland, Ohio 44114 or such other location as may be designated by the Bank from time to time, is of the essence hereof. If payment is not made in the currency due hereunder or under any other Loan Document (the “Contractual Currency”) or if any court or tribunal shall render a judgment or order for the payment of amounts due hereunder or under any other Loan Document and such judgment is expressed in a currency other than the Contractual Currency, each Borrower shall indemnify and hold the Bank harmless against any deficiency in terms of the amount received by the Bank arising or resulting from any variation as between (i) the rate of exchange at which the Contractual Currency is converted into the currency actually received or the currency in which the judgment is expressed (the “Received Currency”) and (ii) the rate of exchange at which the Bank would, in accordance with normal banking procedures, be able to purchase the Contractual Currency with the Received Currency by the Bank on the Business Day following receipt of the Received Currency. If the court or tribunal has fixed the date on which the rate of exchange is determined for the conversion of the judgment currency into the Contractual Currency (the “Conversion Date”) and if there is a change in the rate of exchange prevailing between the Conversion Date and the date of receipt by the Bank, then the Borrowers will, notwithstanding such judgment or order, pay such additional amount as may be necessary to ensure that the amount paid in the Received Currency when converted at the rate of exchange prevailing on the date of receipt will produce the amount then due to the Bank from the Borrowers hereunder in the Contractual Currency.
If a Borrower shall wind up, liquidate, dissolve or become bankrupt while there remains outstanding (i) any amounts owing to the Bank under this Note or under any other Loan Document, (ii) any damages owing to the Bank in respect of a breach of any of the terms hereof or (iii) any judgment or order rendered in respect of such amounts or damages, each Borrower shall indemnify and hold the Bank harmless against any deficiency in terms of the Contractual Currency in the amounts received by the Bank arising or resulting from any variation as between (a) the rate of exchange at which the Contractual Currency is converted into another currency (the “Liquidation Currency”) for purposes of such winding-up, liquidation, dissolution or bankruptcy with regard to the amount in the Contractual Currency due or contingently due hereunder or under any other Loan Document or under any judgment or order into which the relevant obligations hereunder or under any other Loan Document shall have been merged and (b) the rate of exchange at which the Bank could, in accordance with normal banking procedures be able to purchase the Contractual Currency with the Liquidation Currency at the earlier of (1) the date of payment of such amounts or damages and (2) the final date or dates for the filing of proofs of a claim in a winding-up, liquidation, dissolution or bankruptcy. As used in the preceding sentence, the “final date” or “dates for the filing of proofs of a claim in a winding-up, liquidation, dissolution or bankruptcy” shall be the date fixed by the liquidator or other appropriate person or otherwise applicable under the applicable law as being the last practicable date as of which the liabilities of a Borrower may be ascertained for such winding-up, liquidation, dissolution or bankruptcy before payment by the liquidator or other appropriate person in respect thereof.
2. Rate of Interest. Each advance outstanding under this Note will bear interest at a rate or rates per annum as may be selected by the Borrowers from the interest rate options set forth below (other than advances denominated in Australian Dollars which shall bear interest at the rate per annum set forth in subpart (iv) below and other than advances denominated in Polish Zloty which shall bear interest at the rate per annum set forth in subpart (v) below) (each, an “Option”):
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(i) Base Rate Option. A rate of interest per annum which is at all times equal to (A) the Base Rate plus (B) the Applicable Margin per annum, then in effect. If and when the Base Rate (or any component thereof) changes, the rate of interest with respect to any advance to which the Base Rate Option applies will change automatically without notice to the Borrowers, effective on the date of any such change. There are no required minimum interest periods for advances bearing interest under the Base Rate Option.
(ii) Daily BSBY Floating Rate Option. In the case of BSBY Rate Loans denominated in Dollars, a rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the BSBY Screen Rate as determined for each applicable Interest Period plus the Applicable Margin.
(iii) Benchmark Option. A rate per annum which is at all times equal to (A) Benchmark plus (B) the Applicable Margin per annum. If and when Benchmark (or any component thereof) changes, the rate of interest with respect to any advance to which the Benchmark applies will change automatically without notice to the Borrowers, effective on the date of any such change.
(iv) Australian Dollar Loans. The rate per annum equal to (A) the Australian Bank Bill Swap Bid Rate or the successor thereto as approved by the Bank as published by Bloomberg (or on any successor or substitute service providing rate quotations comparable to those currently provided by such service, as determined by the Bank from time to time), rounded to the nearest 1/100th of 1% (with .005% being rounded up) per annum at approximately 10:00 a.m., Sydney, Australia time, two (2) Business Days prior to the commencement of such Australian Dollar Loan Interest Period, as the rate for deposits in Australian Dollars with a maturity comparable to such Australian Dollar Loan Interest Period plus (B) the Applicable Margin per annum, then in effect, for the applicable Australian Dollar Loan Interest Period.
(v) Polish Zloty Loans. The rate per annum equal to (A) WIBOR plus (B) the Applicable Margin per annum, then in effect, for the applicable Polish Zloty Loan Interest Period.
(vi) Terms Applicable to Advances in Affected Currencies.
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5
6
7
then the Bank shall have the rights specified in subsection (L) below
then the Bank shall have the rights specified in Section 4(j)(iii) Bank’s Rights of this Section 2(vi).
8
9
(vii) Benchmark Replacement
10
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For purposes hereof, the following terms shall have the following meanings:
“Adjustment Date” means the date, with respect to each fiscal quarter of PLP in each fiscal year, commencing with the first (1st) fiscal quarter end immediately following the date hereof, that is the first day of the first calendar month after the date on which PLP delivers the financial statements required hereunder to be delivered with respect to such fiscal quarter, together with a Compliance Certificate.
“Affected Currency” means Euros.
“Applicable Margin” shall mean, for any day, with respect to any advance made under the Facility, (i) from the date hereof until the first Adjustment Date thereafter, (x) the percentage per annum applicable to subject LCs, Base Rate Option, Daily BSBY Floating Rate Option, Benchmark
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Option, Australian Dollar Loans or Polish Zloty Loans, as the case may be in Tier 1 in the table set forth below, and (ii) from and after such first Adjustment Date and any subsequent Adjustment Date, the percentage per annum applicable to subject LCs, Base Rate Option, Daily BSBY Floating Rate Option, Benchmark Option, Australian Dollar Loans or Polish Zloty Loans, as the case may be, corresponding to the level of the Funded Debt to EBITDA Ratio in the table set forth below for the trailing twelve month period ending on the last day of the most recently completed fiscal quarter prior to the applicable Adjustment Date, provided, however, that notwithstanding clauses (i) and (ii) above, to the extent that either (A) the financial statements or the Compliance Certificate required to be delivered following any fiscal quarter are not delivered by the due date therefor, or (B) any Event of Default has occurred and is continuing, then the Applicable Margin shall be, from and after such due date or the date of such Event of Default (as applicable) until the date on which such financial statements and Compliance Certificate are delivered or such Event of Default is no longer continuing (as applicable), the percentage per annum applicable to subject LCs, Base Rate Option, Daily BSBY Floating Rate Option, Benchmark Option, Australian Dollar Loans or Polish Zloty Loans, as the case may be, set forth in Tier 2; provided, further, however, that nothing in herein shall limit the applicability of Section 6 with respect to the imposition of a default rate of interest:
|
Funded Debt to EBITDA Ratio |
Applicable Margin |
Applicable Margin (bps) |
Applicable Margin (bps) |
Applicable Margin (bps) |
Applicable Margin (bps) |
Applicable Margin For Polish Zloty Loans (bps) |
Tier 1 |
Less than or equal to 2.25x |
0 |
112.5 |
112.5 |
112.5 |
112.5 |
112.5 |
Tier 2 |
Greater than 2.25x |
37.5 |
150 |
150 |
150 |
150 |
150 |
“Australian Bank Bill Swap Bid Rate” shall mean the bank bill interest rate, the wholesale interbank rate within Australia as published by the Australian Financial Markets Association (AFMA). It is the borrowing rate among the country’s top market makers, and is widely used as the benchmark interest rate for financial instruments.
“Australian Dollar Loan Interest Period” shall mean, as to any advance to which the Australian Bank Bill Swap Bid Rate applies, the period of thirty (30) days, commencing on the date of disbursement of an advance (or the date of conversion of an advance to the Australian Bank Bill Swap Bid Rate, as the case may be) and each successive period of thirty (30) days thereafter; provided that, if an Australian Dollar Loan Interest Period would end on a day which is not a Business Day, it shall end on the next succeeding Business Day unless such day falls in the next succeeding calendar month in which case the Australian Dollar Loan Interest Period shall end on the next preceding Business Day.
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“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, for any (A) Affected Currency, as applicable, (x) if the then-current Benchmark for such Affected Currency is a term rate, any tenor for such Benchmark that is or may be used for determining the length of an Interest Period or (y) otherwise, any payment period for interest calculated with reference to such Benchmark for such Affected Currency, as applicable, pursuant to this Note as of such date and (B) currency other than any Affected Currency (x) if the then-current Benchmark is a term rate or is based on a term rate, any tenor for such Benchmark that is or may be used for determining such Benchmark or the length of an Interest Period under the terms of the Facility as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to paragraph (e) of this Note (Unavailability of Tenor of Benchmark), or (y) if the then-current Benchmark is not a term rate nor based on a term rate, any payment period for interest calculated with reference to such Benchmark under the terms of the Facility as of such date. For the avoidance of doubt, the Available Tenor for the Daily BSBY Floating Rate and the Daily Simple RFR is one month.
“Base Rate” shall mean the highest of (A) the Prime Rate, and (B) the sum of the Federal Funds Open Rate plus fifty (50) basis points (0.50%), and (C) the sum of the Daily BSBY Floating Rate plus one hundred (100) basis points (1.0%), so long as the Daily BSBY Floating Rate is offered, ascertainable and not unlawful.
“Benchmark” means, initially, (A) with respect to any Obligations, interest, fees, commissions, or other amounts denominated in, or calculated with respect to Affected Currencies the Daily Simple RFR or Term RFR applicable for such Affected Currency, and includes any replacement for such Benchmark implemented in accordance with the provisions of the Agreement and (B) with respect to any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to currencies other than Affected Currencies, the BSBY Rate; provided that if a Benchmark Transition Event, a Term SOFR Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date have occurred with respect to the BSBY Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to paragraph (b) of this Note (Benchmark Replacement).
“Benchmark Replacement” means, (A) with respect to any Affected Currency for any Available Tenor for the applicable Benchmark Replacement Date: the sum of (A) the alternate benchmark rate that has been selected by the Bank as the replacement for the then-current Benchmark for the applicable Available Tenor giving due consideration to any evolving or then-prevailing market convention, including any applicable recommendations made by the Relevant Governmental Body, for U.S. dollar-denominated syndicated credit facilities at such time and (B) the related Benchmark Replacement Adjustment; provided, that if the Benchmark Replacement as determined above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of the Agreement and the other Loan Documents; and provided further, that any such Benchmark Replacement shall be administratively feasible as determined by the Bank in its sole discretion; and provided further, that with respect to a Term RFR Transition Event for any Affected Currency, on the Term RFR Transition Date the “Benchmark Replacement” shall be the Term RFR for such Affected Currency and (B) with respect to any currency other than any Affected Currency for any Available Tenor, the first alternative set forth in the order below that can be determined by the Bank on the applicable Benchmark Replacement Date; provided, however, if the Borrowers have outstanding an interest rate swap with the Bank on the Benchmark Replacement Date to hedge, in whole or part, the floating rate risk under the Facility:
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provided that, in the case of clause (1), such Unadjusted Benchmark Replacement is displayed on a screen or other information service that publishes such rate from time to time as selected by the Bank in its reasonable discretion; provided, further, that, with respect to a Term SOFR Transition Event, on the applicable Benchmark Replacement Date, the “Benchmark Replacement” shall revert to and shall be determined as set forth in clause (1) of this definition, all in accordance with paragraph (g) (Secondary Term SOFR Conversion) above. If the Benchmark Replacement as determined pursuant to clause (1), (2) or (3) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes hereof and of the other Loan Documents.
“Benchmark Replacement Adjustment” means, (A) with respect to any replacement of the then-current Benchmark relating to an Affected Currency with an Unadjusted Benchmark Replacement for any applicable Available Tenor for any setting of such Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Bank for the applicable Corresponding Tenor giving due consideration to any evolving or then-prevailing market convention, including any applicable recommendations made by the Relevant Governmental Body, for U.S. dollar-denominated syndicated credit facilities at such time; provided that, if the then-current Benchmark is a term rate, more than one tenor of such Benchmark is available as of the applicable Benchmark Replacement Date and the applicable Unadjusted Benchmark Replacement will not be a term rate, the Available Tenor of such Benchmark for purposes of this definition of “Benchmark Replacement Adjustment” shall be deemed to be the Available Tenor that has approximately the same length (disregarding business day adjustments) as the payment period for interest calculated with reference to such Unadjusted Benchmark Replacement and (B) with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement for any Available Tenor for any setting of such Unadjusted Benchmark Replacement:
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Available Tenor |
Benchmark Replacement Adjustment* |
One-Week |
0.03839% (3.839 basis points) |
One-Month |
0.11448% (11.448 basis points) |
Two-Months |
0.18456% (18.456 basis points) |
Three-Months |
0.26161% (26.161 basis points) |
Six-Months |
0.42826% (42.826 basis points) |
* These values represent the ARRC/ISDA recommended spread adjustment values available here: https://assets.bbhub.io/professional/sites/10/IBOR-Fallbacks-LIBOR-Cessation_Announcement_20210305.pdf. |
|
provided that, if the then-current Benchmark is a term rate, more than one tenor of such Benchmark is available as of the applicable Benchmark Replacement Date and the applicable Unadjusted Benchmark Replacement will not be a term rate, the Available Tenor of such Benchmark for purposes of this definition of “Benchmark Replacement Adjustment” shall be deemed to be the Available Tenor that has approximately the same length (disregarding business day adjustments) as the payment period for interest calculated with reference to such Unadjusted Benchmark Replacement.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback periods, the applicability of breakage provisions and other technical, administrative or operational matters) that the Bank decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Bank in a manner substantially consistent with market practice (or, if the Bank decides that adoption of any portion of such market
16
practice is not administratively feasible or if the Bank determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Bank decides is reasonably necessary in connection with the administration of the Facility and the Loan Documents).
“Benchmark Replacement Date” means (A) with respect to any Affected Currency, a date and time determined by the Bank, which date shall be at the end of an Interest Period, if applicable, and no later than the earliest to occur of the following events with respect to the then-current Benchmark:
(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (A) the date of the public statement or publication of information referenced therein and (B) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof);
(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the date determined by the Bank, which date shall promptly follow the date of the public statement or publication of information referenced therein; or
(3) in the case of a Term RFR Transition Event, the date that is set forth in the Term RFR Notice provided to the Borrowers pursuant to this Section titled “Benchmark Replacement Setting”, which date shall be at least 30 days from the date of the Term RFR Notice.
For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination and (ii) the “Benchmark Replacement Date” will be deemed to have occurred in the case of clauses (1), (2), or (3) of this definition with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).and
(B) with respect to any currency other than any Affected Currency the earliest to occur of the following events with respect to the then-current Benchmark:
(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof);
(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the date determined by the Bank, which date shall promptly follow the date of the public statement or publication of information referenced therein;
(3) in the case of a Term SOFR Transition Event, the date that is set forth in the Term SOFR Notice provided to the Borrowers pursuant to this Note, which date shall be at least 30 days from the date of the Term SOFR Notice; or
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(4) in the case of an Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Borrowers.
For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination and (ii) the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means (A) the occurrence of one or more of the following events, with respect to any then-current Benchmark for any Affected Currency:
(1) a public statement or publication of information, by or on behalf of the administrator of such Benchmark for such Affected Currency (or the published component used in the calculation thereof), announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark for such Affected Currency (or such component thereof), permanently or indefinitely; provided that, at the time of such statement or publication there is no successor administrator that will continue to provide any Available Tenor of such Benchmark for such Affected Currency (or component thereof);
(2) a public statement or publication of information by an Official Body having jurisdiction over the Bank, the regulatory supervisor for the administrator of such Benchmark for such Affected Currency (or the published component used in the calculation thereof), the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark for such Affected Currency (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark for such Affected Currency (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark for such Affected Currency (or such component), which states that the administrator of such Benchmark for such Affected Currency (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark for such Affected Currency (or such component thereof) permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark for such Affected Currency (or such component thereof); or
(3) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) or an Official Body having jurisdiction over the Bank announcing that all Available Tenors of such Benchmark (or such component thereof) are no longer representative; and
(B) with respect to any currency other than any Affected Currency, the occurrence of one or more of the following events with respect to the then-current Benchmark:
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For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Unavailability Period” means the period (if any) (x) beginning at the time that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with this Note in accordance with Section 2(vi)(M) [Benchmark Replacement Setting for Affected Currencies], and (y) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with this Note.
“Borrowing Tranche” means specified portions of advanced outstanding under this Note as follows: (i) any Daily BSBY Floating Rate Option advances or Benchmark Option advances which have the same Interest Period under the same advance shall constitute one Borrowing Tranche, and (ii) all Base Rate Loans shall constitute one Borrowing Tranche.
“BSBY Rate” means (a) for any Interest Period with respect to a BSBY Rate Loan, the rate per annum determined by the Bank by dividing (the resulting quotient rounded upwards, at the Bank’s discretion, to the nearest 1/100th of 1%) (i) the rate per annum equal to BSBY Screen Rate two (2) Business Days prior to the first day of such Interest Period and having a term comparable to such Interest Period; provided that if the rate is not published on such determination date, then the rate per annum for purposes of this clause (i) shall be the BSBY Screen Rate on the first Business Day immediately prior thereto, by (ii) a number equal to 1.00 minus the BSBY Reserve Percentage; provided, further, if the BSBY Rate, determined as provided above, would be less than the Floor, then the BSBY Rate shall be deemed to be the Floor. The BSBY Rate shall be adjusted automatically without notice to the Borrower Representative on and as of the effective date of any change in the BSBY Reserve Percentage.
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“BSBY Rate Loan” means a Loan that bears interest based on the BSBY Rate.
“BSBY Reserve Percentage” shall mean, as of any day, the maximum effective percentage in effect on such day, if any, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including, without limitation, supplemental, marginal and emergency reserve requirements) with respect to BSBY Screen Rate funding.
“BSBY Screen Rate” means the Bloomberg Short-Term Bank Yield Index rate administered by Bloomberg and published by Bloomberg (or such other commercially available source providing such quotations as may be designated by the Bank from time to time).
“Business Day” shall mean any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized or required by law to be closed for business in Cleveland, Ohio; provided that, (i) when used in connection with an amount that bears interest at a rate based on BSBY or any direct or indirect calculation or determination of BSBY, the term “Business Day” means any such day that is also a U.S. Government Securities Business Day and (ii) if the applicable Business Day relates to any direct or indirect calculation or determination of, or is used in connection with any interest rate settings, fundings, disbursements, settlements, payments, or other dealings with respect to any RFR Loan, the term “Business Day” means any such day that is also an RFR Business Day.
“Change of Control” shall mean (a) the Ruhlman Family shall cease to own directly or beneficially at least 25% of the outstanding voting Equity Interests of PLP on a fully diluted basis, in each case free and clear of all liens or other encumbrances; (b) PLP shall cease to own, free and clear of all liens or other encumbrances, at least the percentage of the outstanding voting Equity Interests of each of its subsidiaries on a fully diluted basis as is indicated on the corporate structure chart delivered to Bank in connection with the initial closing of the Loan Agreement (as hereinafter defined); (c) occupation of a majority of the seats (other than vacant seats) on the board of directors of PLP or any of its subsidiaries, as the case may be, by Persons who were neither (i) nominated by the board of directors of such entity nor (ii) appointed by directors so nominated; (d) the acquisition of direct or indirect Control of PLP by any Person or group other than the Ruhlman Family; or (e) PLP shall cease to own, free and clear of all liens or other encumbrances 100% of the outstanding voting Equity Interests of PLP Australia, PLP Poland, and PLP Austria.
“Company” shall have the meaning ascribed thereto in the Loan Agreement (as hereinafter defined).
“Conforming Changes” means, with respect to the BSBY Screen Rate, BSBY Rate or Daily BSBY Floating Rate or any Benchmark Replacement in relation thereto, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Bank decides may be appropriate to reflect the adoption and implementation of the BSBY Screen Rate, BSBY Rate or Daily BSBY Floating Rate or such Benchmark Replacement and to permit the administration thereof by the Bank in a manner substantially consistent with market practice (or, if the Bank decides that adoption of any portion of such market practice is not administratively feasible or if the Bank determines that no market practice for the administration of the BSBY Screen Rate, BSBY Rate or Daily BSBY Floating Rate or the Benchmark
20
Replacement exists, in such other manner of administration as the Bank decides is reasonably necessary in connection with the administration of this Note and the other Loan Documents).
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
“Corresponding Tenor” with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or an interest payment period having approximately the same length (disregarding business day adjustment) as such Available Tenor.
“Daily BSBY Floating Rate” means, for any day, a rate of interest per annum determined by the Bank by dividing (the resulting quotient rounded upwards, at the Bank’s discretion, to the nearest 1/100th of 1%) (a) the BSBY Screen Rate for such day for a term of one (1) month, by (b) a number equal to 1.00 minus the BSBY Reserve Percentage; provided, that if the Daily BSBY Floating Rate, determined as provided above, would be less than the Floor, then the Daily BSBY Floating Rate shall be deemed to be the Floor. The rate of interest will be adjusted automatically as of each Business Day based on changes in the Daily BSBY Floating Rate without notice to the Borrower Representative.
“Daily BSBY Floating Rate Loan” means a Loan that bears interest at a rate based on the Daily BSBY Floating Rate.
“Daily BSBY Floating Rate Option” means the option of the Borrowers to have Loans bear interest at the rate and under the terms specified in Section 2(ii).
“Daily Simple RFR” means, for any day (an “RFR Day”), a rate per annum determined by the Bank, for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to any applicable Daily Simple RFR below by dividing (the resulting quotient rounded upwards, at the Bank’s discretion, to the nearest 1/100 of 1%) (a) the applicable Daily Simple RFR set forth below by (b) a number equal to 1.00 minus the RFR Reserve Percentage: Euro, €STR for the day (such day, adjusted as applicable as set forth herein, the “€STR Lookback Day”) that is two (2) Business Days prior to (A) if such RFR Day is a Business Day, such RFR Day or (B) if such RFR Day is not a Business Day, the Business Day immediately preceding such RFR Day, in each case, as such €STR is published by the €STR Administrator on the €STR Administrator’s Website; provided that if the sum of the adjusted rate as determined above plus the applicable RFR Adjustment would be less than the Floor, such rate shall be deemed to be the Floor for purposes of the Agreement. The adjusted Daily Simple RFR rate for each outstanding RFR Loan shall be adjusted automatically as of the effective date of any change in the RFR Reserve Percentage. The Bank shall give prompt notice to the Borrower Representative of the adjusted Daily Simple RFR as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.
If by 5:00 pm (local time for the applicable RFR) on the second (2nd) Business Day immediately following any Daily Simple RFR Lookback Day, the RFR in respect of such Daily Simple RFR Lookback Day has not been published on the applicable RFR Administrator’s Website and a Benchmark Replacement for the applicable Daily Simple RFR has not been instituted in accordance with the provisions of the Agreement, then the RFR for such Daily Simple RFR Lookback Day will be the RFR as published in respect of the first preceding Business Day for which such RFR was published on the RFR Administrator’s Website; provided that any RFR determined pursuant to this sentence shall be utilized for purposes of calculation of Daily Simple RFR for no more than three (3) consecutive RFR Days. Any change in Daily Simple RFR due to a change in the
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applicable RFR shall be effective from and including the effective date of such change in the RFR without notice to the Borrowers.
“Daily Simple RFR Lookback Days” means, €STR Lookback Day.
“Daily Simple RFR Option” means the option of the Borrowers to have Loans bear interest at the rate and under the terms specified in Section 2(e)(B) [Daily Simple RFR Option].
“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate (which may include a lookback) being established by the Bank in accordance with the conventions for this rate selected or recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for business loans; provided, that if the Bank decides that any such convention is not administratively feasible for the Bank, then the Bank may establish another convention in its reasonable discretion.
“Dollar Equivalent” means, for any amount, at the time of determination thereof, (a) if such amount is expressed in an Affected Currency, the equivalent of such amount in Dollars determined by using the rate of exchange for the purchase of Dollars with the Affected Currency last provided (either by publication or otherwise provided to the Bank, as applicable) by the applicable Bloomberg source (or such other publicly available source for displaying exchange rates as determined by the Bank, as applicable, from time to time) on the date that is the applicable Daily RFR Lookback Day (for amounts relating to RFR Loans and Letters of Credit denominated in an Affected Currency to which a Daily Simple RFR would apply) immediately preceding the date of determination, or otherwise on the date which is two (2) Business Days immediately preceding the date of determination or otherwise with respect to Loans to which any other Interest Rate Option applies, the lookback date applicable thereto (or if such service ceases to be available or ceases to provide such rate of exchange, the equivalent of such amount in Dollars as determined by the Bank, as applicable using any method of determination it deems appropriate in its sole discretion) and (b) if such amount is denominated in any other currency, the equivalent of such amount in Dollars as determined by the Bank, as applicable, using any method of determination it deems appropriate in its sole discretion. Any determination by the Bank pursuant to this definition shall be conclusive absent manifest error.
“Early Opt-in Election” means, if the then-current Benchmark is the BSBY Rate, the occurrence of:
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.
“€STR” means a rate equal to the Euro Short Term Rate as administered by the €STR Administrator.
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“€STR Administrator” means the European Central Bank (or any successor administrator of the Euro Short Term Rate).
“€STR Administrator’s Website” means the European Central Bank’s website, currently at http://www.ecb.europa.eu, or any successor source for the Euro Short Term Rate identified as such by the €STR Administrator from time to time.
“Euro” or “€” mean the single currency of the Participating Member States.
“Fallback Rate” means the Base Rate.
“Federal Funds Open Rate” shall mean, for any day, the rate per annum (based on a year of 360 days and actual days elapsed) which is the daily federal funds open rate as quoted by ICAP North America, Inc. (or any successor) as set forth on the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such other substitute Bloomberg Screen that displays such rate), or as set forth on such other recognized electronic source used for the purpose of displaying such rate as selected by the Bank (an “Alternate Source”) (or if such rate for such day does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on any Alternate Source, or if there shall at any time, for any reason, no longer exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate Source, a comparable replacement rate determined by the Bank at such time (which determination shall be conclusive absent manifest error); provided however, that if such day is not a Business Day, the Federal Funds Open Rate for such day shall be the “open” rate on the immediately preceding Business Day. The rate of interest charged shall be adjusted as of each Business Day based on changes in the Federal Funds Open Rate without notice to the Borrowers.
“Floor” means a rate of interest per annum equal to zero basis points (0%).
“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
“IOSCO Principles” means the International Organization of Securities Commissions’ (IOSCO) Principles for Financial Benchmarks, as the same may be amended or supplemented from time to time.
“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto.
“Official Body” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).
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“Participating Member State” means any member state of the European Union that has the euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Polish Zloty Loan Interest Period” shall mean, as to any advance to which WIBOR applies, the period of thirty (30) days, commencing on the date of disbursement of an advance (or the date of conversion of an advance to WIBOR, as the case may be) and each successive period of thirty (30) days thereafter; provided that, if a Polish Zloty Loan Interest Period would end on a day which is not a Business Day, it shall end on the next succeeding Business Day unless such day falls in the next succeeding calendar month in which case the Polish Zloty Loan Interest Period shall end on the next preceding Business Day.
“Prime Rate” shall mean the rate publicly announced by the Bank from time to time as its prime rate. The Prime Rate is determined from time to time by the Bank as a means of pricing some loans to its borrowers. The Prime Rate is not tied to any external rate of interest or index, and does not necessarily reflect the lowest rate of interest actually charged by the Bank to any particular class or category of customers.
“Published Rate” shall mean the one-month Bloomberg Short-Term Bank Yield Index rate administered by Bloomberg and published by Bloomberg or another commercially available source providing such quotations as may be designated by the Bank from time to time.
“Reference Time” means, with respect to any setting of the then-current Benchmark, the time determined by the Bank in its reasonable discretion.
“Relevant Governmental Body” means (A) with respect to a Benchmark Replacement in respect of Loans denominated in any Affected Currency, (1) the central bank for the Affected Currency in which such Benchmark Replacement is denominated or any central bank or other supervisor which is responsible for supervising either (A) such Benchmark Replacement or (B) the administrator of such Benchmark Replacement or (2) any working group or committee officially endorsed or convened by (A) the central bank for the Affected Currency in which such Benchmark Replacement is denominated, (B) with respect to any currency other than any Affected Currency any central bank or other supervisor that is responsible for supervising either (i) such Benchmark Replacement or (ii) the administrator of such Benchmark Replacement, (C) a group of those central banks or other supervisors or (D) the Financial Stability Board or any part thereof and (B) the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.
“RFR” means, for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to Euro, €STR.
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“RFR Adjustment” means with respect to RFR Loans or Term RFR Rate Loans, the adjustment set forth in the table below corresponding to such Affected Currency for the corresponding Daily Simple RFR Option or Term RFR Option:
Currency |
Adjustment to |
Adjustment to |
Euros |
0.0456% |
0.0456% |
“RFR Administrator” means the €STR Administrator.
“RFR Administrator’s Website” means the €STR Administrator’s Website.
“RFR Business Day” means as applicable, for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to Euro, a TARGET Day.
“RFR Loan” means an advance under this Note that bears interest at a rate based on a Daily Simple RFR or, after the replacement of the then-current Benchmark for any Affected Currency for all purposes hereunder or under any Loan Document with a Term RFR pursuant to Section 2(vii)(P) [Term RFR Transition Event], the Term RFR for such Affected Currency, as the context may require.
“RFR Reserve Percentage” means as of any day, the maximum effective percentage in effect on such day, if any, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including, without limitation, supplemental, marginal and emergency reserve requirements) with respect to RFR Loans.
“Ruhlman Family” shall mean Barbara P. Ruhlman Irrevocable Trust Dated July 29, 2008, Barbara P. Ruhlman, Robert G. Ruhlman, Abigail Ruhlman, Randall M. Ruhlman, J. Ryan Ruhlman, Maegan A. R. Cross, and each of such individual’s offspring.
“SOFR” means, with respect to any Business Day, a rate per annum equal to the secured overnight financing rate for such Business Day published by the SOFR Administrator on the SOFR Administrator’s Website on the immediately succeeding Business Day.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.
“TARGET2” means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilizes a single shared platform and which was launched on November 19, 2007.
“TARGET Day” means any day on which TARGET2 is open for the settlement of payments in Euros.
“Term RFR” means, with respect to the applicable Affected Currency for any Interest Period, a rate per annum determined by the Bank, for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to any applicable Term RFR Forward Looking
25
Rate by dividing (the resulting quotient rounded upwards, at the Bank’s discretion, to the nearest 1/100 of 1%) (a) the applicable Term RFR Forward Looking Rate by (b) a number equal to 1.00 minus the Term RFR Reserve Percentage; provided that if the sum of the adjusted rate as determined above plus the applicable RFR Adjustment would be less than the Floor, such rate shall be deemed to be the Floor for purposes of this Note. The adjusted Term RFR rate for each outstanding Term RFR Rate Loan shall be adjusted automatically as of the effective date of any change in the Term RFR Reserve Percentage. The Bank shall give prompt notice to the Borrower Representative of the adjusted Term RFR Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.
“Term RFR Forward Looking Rate” means, with respect to the applicable Affected Currency for any Interest Period, the forward-looking term rate for a period comparable to such Interest Period based on the RFR for such Affected Currency that is published by an authorized benchmark administrator and is displayed on a screen or other information service, each as identified or selected by the Bank in its reasonable discretion at approximately a time and as of a date prior to the commencement of such Interest Period determined by the Bank.
“Term RFR Notice” means a notification by the Bank to the Borrower Representative of the occurrence of a Term RFR Transition Event.
“Term RFR Option” means the option of the Borrower Representative to have advanced under this Note bear interest at the rate and under the terms specified in Section 2(e)(A) [Term RFR Option].
“Term RFR Rate Loan” means a Loan in an Affected Currency that bears interest at a rate based on Term RFR.
“Term RFR Transition Date” means, in the case of a Term RFR Transition Event, the date that is set forth in the Term RFR Notice provided to the Borrowers pursuant to Section 2(vii)(P) [Term RFR Transition Event], which date shall be at least 30 (thirty) calendar days from the date of the Term RFR Notice.
“Term RFR Transition Event” means, with respect to the applicable Affected Currency for any Interest Period, the determination by the Bank that (a) the applicable Term RFR for such Affected Currency is determinable for each Available Tenor, (b) the administration of such Term RFR is administratively feasible for the Bank, (c) the RFR Administrator publishes, publicly announces or makes publicly available that such Term RFR is administered in accordance with the IOSCO Principles, (d) such Term RFR is used as a benchmark rate in at least five currently outstanding syndicated credit facilities denominated in the applicable Affected Currency (and such syndicated credit facilities are identified and are publicly available for review), and (e) such Term RFR is recommended for use by a Relevant Governmental Body.
“Term SOFR” means, for the applicable Corresponding Tenor as of the applicable Reference Time, the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“Term SOFR Notice” means a notification by the Bank to the Borrowers of the occurrence of a Term SOFR Transition Event.
“Term SOFR Transition Event” means the determination by the Bank that (1) Term SOFR has been recommended for use by the Relevant Governmental Body, and is determinable for each
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Available Tenor, (2) the administration of Term SOFR is administratively feasible for the Bank and (3) a Benchmark Transition Event has previously occurred resulting in a Benchmark Replacement in accordance with this Note that is not Term SOFR.
“U.S. Government Securities Business Day” means any day except for (A) a Saturday or Sunday or (B) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
“WIBOR” shall mean, in relation to any Advance denominated in Zloty and any Polish Zloty Loan Interest Period:
(a) a rate per annum determined by the Bank to be equal to the WIBOR Screen Rate (rounded upwards to five decimal places); or
(b) in the event that no such WIBOR Screen Rate is available, the rate per annum determined by the Bank to be the arithmetic mean (rounded upwards to five decimal places) of the rates offered by prime banks in the Warsaw interbank market for deposits in the relevant Currency and with a term equivalent to such Polish Zloty Loan Interest Period,
in each case, at or about 11 a.m. (Warsaw time) on the first day of the relevant Polish Zloty Loan Interest Period.
“WIBOR Screen Rate” shall mean the percentage rate per annum determined by the Polish Association of Banking Dealers (Stowarzyszenie Dealerow Bankowych ACI Polska), as displayed on the appropriate page of the Reuters screen (and, if such page is replaced or service ceases to be available, the Bank may specify another page or service displaying the appropriate rate).
“Zloty” shall mean the lawful currency of Poland.
The foregoing notwithstanding, it is understood that the Borrowers may select different Options to apply simultaneously to different portions of the advances and may select up to six (6) different Borrowing Tranches to apply simultaneously to different portions of the advances bearing interest under the Daily BSBY Floating Rate Option or Benchmark Option. Interest hereunder will be calculated based on the actual number of days that principal is outstanding over a year of 360 days. In no event will the rate of interest hereunder exceed the maximum rate allowed by law.
3. Interest Rate Election. Subject to the terms and conditions of this Note, at the end of each interest period applicable to any advance, the Borrower Representative may renew the Option applicable to such advance or convert such advance to a different Option; provided that, during any period in which any Event of Default (as hereinafter defined) has occurred and is continuing, any advances bearing interest under the Daily BSBY Floating Rate Option or the Benchmark Option shall, at the Bank’s sole discretion, be converted at the end of the applicable Interest Period (or Available Tenor with respect to Term SOFR) (or immediately in the case of the Benchmark Option other than one with Term SOFR) to the Base Rate Option and the Daily BSBY Floating Rate Option and the Benchmark Option will not be available to the Borrowers with respect to any new advances (or with respect to the conversion or renewal of any existing advances) until such Event of Default has been cured by the Borrowers or waived by the Bank. The Borrower Representative shall notify the Bank of each election of an Option, each conversion from one Option to another, the amount of the advances then outstanding to be allocated to each Option and where relevant the
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interest periods therefor. In the case of converting to the Daily BSBY Floating Rate Option or the Benchmark Option, such notice shall be given at least three (3) Business Days prior to the commencement of any Interest Period or when the Borrower Representative would like to commence the Benchmark Option, as the case may be. If no interest period is specified in any such notice for which the resulting advance is to bear interest under the Daily BSBY Floating Rate Option, the Borrower Representative shall be deemed to have selected an Interest Period of one month’s duration. If no notice of election, conversion or renewal is timely received by the Bank with respect to any advance, the Borrower Representative shall be deemed to have elected the Base Rate Option. Any such election shall be promptly confirmed in writing by such method as the Bank may require.
4. Advance Procedures. A request for advance made by telephone must be promptly confirmed in writing by such method as the Bank may require. Each Borrower authorizes the Bank to accept telephonic requests for advances, and the Bank shall be entitled to rely upon the authority of the CFO, VP – Finance, Controller, General Counsel, or Treasury Manager providing such instructions. Each Borrower hereby indemnifies and holds the Bank harmless from and against any and all damages, losses, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses) which may arise or be created by the acceptance of such telephone requests or making such advances. The Bank will enter on its books and records, which entry when made will be presumed correct, the date and amount of each advance, the interest rate and interest period applicable thereto, as well as the date and amount of each payment; provided, however, that failure to make any such entry shall in no way detract from Borrowers’ obligations under this Note.
5. Payment Terms; Commitment Fee. The Borrowers shall pay accrued interest on the unpaid principal balance of this Note in arrears: (a) for the portion of advances bearing interest under the Base Rate Option and the Benchmark Option (other than Term SOFR), on the first day of each month during the term hereof, (b) for the portion of advances bearing interest under the Daily BSBY Floating Rate Option or Term SOFR with respect to the Benchmark Option, on the last day of the respective Interest Period or Available Tenor, as applicable, for such advance, (c) if any Interest Period or Benchmark Option Available Tenor is longer than three (3) months, then also on the three (3) month anniversary of such interest period and every three (3) months thereafter, and (d) for all advances, at maturity, whether by acceleration of this Note or otherwise, and after maturity, on demand until paid in full. All outstanding principal and accrued interest hereunder shall be due and payable in full on the Expiration Date. All advances under this Note shall be repaid and each payment of interest thereon shall be paid in the currency in which such advance was made. If for any reason any Borrower is prohibited by any law, rule, regulation or any other reason from making any required payment hereunder or under any of the other Loan Documents in an Agreed Foreign Currency, such Borrower will make such payment in Dollars in the Dollar Amount of such Agreed Foreign Currency payment amount.
If any payment under this Note shall become due on a Saturday, Sunday or public holiday under the laws of the State where the Bank’s office indicated above is located, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing interest in connection with such payment. Each Borrower hereby authorizes the Bank to charge such Borrower’s deposit account at the Bank for any payment when due hereunder. Payments received will be applied to charges, fees and expenses (including attorneys’ fees), accrued interest and principal in any order the Bank may choose, in its sole discretion.
The Borrowers shall pay to the Bank quarterly in arrears, on the last day of each calendar quarter, a commitment fee in the amount of the product of twenty (20) basis points (0.20%) per annum multiplied by the average daily unused amount of the Facility during the most recently ended quarter.
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Notwithstanding anything to the contrary set forth herein or in any of the other Loan Documents, if, after the making of any advance under this Note in any currency other than Dollars, currency control or exchange regulations are imposed in the country which issues such currency with the result that the type of currency in which such advance was made (the "Original Currency") no longer exists or a Borrower is not able to make payment to the Bank in such Original Currency, then all payments to be made by such Borrower hereunder in such currency shall instead be made when due in Dollars in an amount equal to the Dollar Amount (as of the date of repayment) of such payment due, it being the intention of the parties hereto that the Borrowers take all risks of the imposition of any such currency control or exchange regulations.
6. Late Payments; Default Rate. If any Borrower fails to make any payment of principal, interest or other amount coming due pursuant to the provisions of this Note within fifteen (15) calendar days of the date due and payable, such Borrower also shall pay to the Bank a late charge equal to the lesser of five percent (5%) of the amount of such payment or $100.00 (the “Late Charge”). Such fifteen (15) day period shall not be construed in any way to extend the due date of any such payment. Upon maturity, whether by acceleration, demand or otherwise, and at the Bank’s option upon the occurrence of any Event of Default (as hereinafter defined) and during the continuance thereof, each advance outstanding under this Note shall bear interest at a rate per annum (based on the actual number of days that principal is outstanding over a year of 360 days) which shall be two percentage points (2%) in excess of the interest rate in effect from time to time under this Note but not more than the maximum rate allowed by law (the “Default Rate”). The Default Rate shall continue to apply whether or not judgment shall be entered on this Note. Both the Late Charge and the Default Rate are imposed as liquidated damages for the purpose of defraying the Bank’s expenses incident to the handling of delinquent payments, but are in addition to, and not in lieu of, the Bank’s exercise of any rights and remedies hereunder, under the other Loan Documents or under applicable law, and any fees and expenses of any agents or attorneys which the Bank may employ. In addition, the Default Rate reflects the increased credit risk to the Bank of carrying a loan that is in default. Each Borrower agrees that the Late Charge and Default Rate are reasonable forecasts of just compensation for anticipated and actual harm incurred by the Bank, and that the actual harm incurred by the Bank cannot be estimated with certainty and without difficulty.
7. Prepayment; Reduction of Facility. The Borrowers shall have the right to prepay any advance hereunder at any time and from time to time, in whole or in part; subject, however, to payment of any break funding indemnification amounts owing pursuant to paragraph 8 below. The Borrowers shall have the right to reduce the Facility from time to time in a minimum of $1,000,000 increments.
8. Yield Protection; Break Funding Indemnification. The Borrowers shall pay to the Bank on written demand therefor, together with the written evidence of the justification therefor, all direct costs incurred, losses suffered or payments made by Bank by reason of any change in law or regulation or its interpretation imposing any reserve, deposit, allocation of capital, or similar requirement (including without limitation, Regulation D of the Board of Governors of the Federal Reserve System) on the Bank, its holding company or any of their respective assets. In addition, each Borrower agrees to indemnify the Bank against any liabilities, losses or expenses (including, without limitation, loss of margin, any loss or expense sustained or incurred in liquidating or employing deposits from third parties, and any loss or expense incurred in connection with funds acquired to effect, fund or maintain any advance (or any part thereof) bearing interest under the Daily BSBY Floating Rate Option) which the Bank sustains or incurs as a consequence of either (i) any Borrower’s failure to make a payment on the due date thereof, (ii) any Borrower’s revocation (expressly, by later inconsistent notices or otherwise) in whole or in part of any notice given to Bank to request, convert, renew or prepay any advance bearing interest under the Daily BSBY Floating Rate Option, or (iii) any Borrower’s payment or prepayment (whether voluntary, after acceleration of the maturity of this Note or otherwise) or conversion of any advance bearing interest under the Daily BSBY Floating Rate Option on a day other than the last day of the applicable Interest Period. A notice as to any amounts payable pursuant to this paragraph given to any Borrower by the Bank shall, in the absence of manifest error, be
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conclusive and shall be payable upon demand. Each Borrower’s indemnification obligations hereunder shall survive the payment in full of the advances and all other amounts payable hereunder.
9. Other Loan Documents. This Note is issued in connection with the Amended and Restated Loan Agreement between the Borrowers and the Bank, dated as of September 24, 2015 (as further amended, modified or renewed from time to time, the “Loan Agreement”), and the other agreements and documents now or hereafter executed and/or delivered in connection herewith or therewith or referred to herein or therein (including, without limitation, the subject LCs), the terms of which are incorporated herein by reference (this Note, the Loan Agreement, and such other agreements and documents, each as amended, modified or renewed from time to time, being collectively referred to as the “Loan Documents”), and is secured by the property (if any) described in the Loan Documents and by such other collateral as previously may have been or may in the future be granted to the Bank to secure this Note. Capitalized and other terms not defined herein shall have the meanings ascribed to them in the other Loan Documents.
10. Events of Default. The occurrence of any of the following events will be deemed to be an “Event of Default” under this Note: (i) (A) the nonpayment of (1) any principal under this Note when due and (2) interest, other indebtedness or any other amounts payable under this Note or any of the other Loan Documents (other than reimbursements referred to in clause (i)(B) of this Section 10) within ten (10) days after the same is due, and (B) failure to reimburse the Bank for any draft or other item paid by Bank pursuant to or otherwise in respect of any subject LC when obligated to do so; (ii) the occurrence of any event of default or any default and the lapse of any notice or cure period, or any Obligor’s failure to observe or perform any covenant or other agreement, under or contained in any Loan Document or any other document now or in the future, relating to, evidencing or securing any debt, liability or obligation of any Obligor to the Bank; (iii) the filing by or against any Obligor of any proceeding in bankruptcy, receivership, insolvency, reorganization, liquidation, conservatorship or similar proceeding (and, in the case of any such proceeding instituted against any Obligor, such proceeding is not dismissed or stayed within 30 days of the commencement thereof, provided that the Bank shall not be obligated to advance additional funds hereunder during such period); (iv) any assignment by any Obligor for the benefit of creditors, or any levy, garnishment, attachment or similar proceeding is instituted against any property of any Obligor held by or deposited with the Bank or the cessation of all or a substantial part of the business operations of any Obligor; (v) a default with respect to any other indebtedness of any Obligor for borrowed money, if the effect of such default is to cause or permit the acceleration of such debt, provided that this subsection shall not apply if and only so long as the aggregate unpaid principal balance of all such indebtedness in default does not exceed five million dollars ($5,000,000) at any one time outstanding; in this subsection, "default" means that (A) there shall have occurred (or shall exist) in respect of the indebtedness in question any event, condition or other thing that constitutes, or that with the giving of notice or the lapse of any applicable grace period or both would constitute, a default which accelerates (or permits any creditor or creditors or representative or creditors to accelerate) the maturity of any such indebtedness, (B) any such indebtedness (other than any payable on demand) shall not have been paid in full at its stated maturity, or (C) any such indebtedness payable on demand shall not have been paid in full within ten (10) banking days after any actual demand for payment); (vi) if at any time (A) the aggregate of all undischarged final judgments (excluding final judgments the execution of which, on the date of determination, are effectively stayed) against the Obligors or any thereof for the payment of money shall exceed $5,000,000 or (B) the aggregate of all liabilities of the Obligors arising from defaults under ERISA (as defined in the Loan Agreement) shall exceed $5,000,000; (vii) the commencement of any foreclosure or forfeiture proceeding, execution or attachment against any collateral securing the obligations of any Obligor to the Bank; (viii) any material adverse change in any Obligor’s business, assets, operations, financial condition or results of operations; (ix) any Obligor ceases doing business as a going concern; (x) any representation or warranty made by any Obligor to the Bank in any Loan Document or any other documents now or in the future evidencing or securing the obligations of any Obligor to the Bank, is false, erroneous or misleading in any material respect; (xi) if this Note or any guarantee executed by any Obligor is secured, the failure of any Obligor to
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provide the Bank with additional collateral if in the Bank’s opinion at any time or times, the market value of any of the collateral securing this Note or any guarantee has depreciated below that required pursuant to the Loan Documents or, if no specific value is so required, then in an amount deemed material by the Bank; (xii) the revocation or attempted revocation, in whole or in part, of any guarantee by any Obligor; or (xiii) the occurrence of a Change of Control. As used herein, the term “Obligor” means any Borrower, and any guarantor of the Borrowers’ obligations to the Bank existing on the date of this Note or arising in the future.
Upon the occurrence and during the continuance of an Event of Default: (a) the Bank shall be under no further obligation to make advances hereunder; (b) if an Event of Default specified in clause (iii) or (iv) above shall occur, the outstanding principal balance and accrued interest hereunder together with any additional amounts payable hereunder shall be immediately due and payable without demand or notice of any kind; (c) if any other Event of Default shall occur, the outstanding principal balance and accrued interest hereunder together with any additional amounts payable hereunder, at the Bank’s option and without demand or notice of any kind, may be accelerated and become immediately due and payable; (d) at the Bank’s option, this Note will bear interest at the Default Rate from the date of the occurrence of the Event of Default; and (e) the Bank may exercise from time to time any of the rights and remedies available under the Loan Documents or under applicable law.
11. Power to Confess Judgment. Each Borrower hereby irrevocably authorizes any attorney‑at‑law, including an attorney employed by or retained and paid by the Bank, to appear in any court of record in or of the State of Ohio, or in any other state or territory of the United States, at any time after the indebtedness evidenced by this Note becomes due, whether by acceleration or otherwise, to waive the issuing and service of process and to confess a judgment against any Borrower in favor of the Bank, and/or any assignee or holder hereof for the amount of principal and interest and expenses then appearing due from the Borrowers under this Note, together with costs of suit and thereupon to release all errors and waive all right of appeal or stays of execution in any court of record. Each Borrower hereby expressly (i) waives any conflict of interest of the attorney(s) retained by the Bank to confess judgment against any Borrower upon this Note, and (ii) consents to the receipt by such attorney(s) of a reasonable legal fee from the Bank for legal services rendered for confessing judgment against any Borrower upon this Note. A copy of this Note, certified by the Bank, may be filed in each such proceeding in place of filing the original as a warrant of attorney.
12. Right of Setoff. In addition to all liens upon and rights of setoff against any Borrower’s money, securities or other property given to the Bank by law, the Bank shall have, with respect to the Borrowers’ obligations to the Bank under this Note and to the extent permitted by law, a contractual possessory security interest in and a contractual right of setoff against, and each Borrower hereby grants the Bank a security interest in, and hereby assigns, conveys, delivers, pledges and transfers to the Bank, all of such Borrower’s right, title and interest in and to, all of such Borrower’s deposits, moneys, securities and other property now or hereafter in the possession of or on deposit with, or in transit to, the Bank or any other direct or indirect subsidiary of The PNC Financial Services Group, Inc., whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise, excluding, however, all IRA, Keogh, and trust accounts. Every such security interest and right of setoff may be exercised without demand upon or notice to the Borrowers. Every such right of setoff shall be deemed to have been exercised immediately upon the occurrence of an Event of Default hereunder without any action of the Bank, although the Bank may enter such setoff on its books and records at a later time.
13. Indemnity. Each Borrower agrees to indemnify each of the Bank, each legal entity, if any, who controls, is controlled by or is under common control with the Bank, and each of their respective directors, officers and employees (the “Indemnified Parties”), and to defend and hold each Indemnified Party harmless from and against any and all claims, damages, losses, liabilities and expenses (including all fees and charges of internal or external counsel with whom any Indemnified Party may consult and all expenses
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of litigation and preparation therefor) which any Indemnified Party may incur or which may be asserted against any Indemnified Party by any person, entity or Governmental Authority (including any person or entity claiming derivatively on behalf of any Borrower), in connection with or arising out of or relating to the matters referred to in this Note or in the other Loan Documents or the use of any advance hereunder, whether (a) arising from or incurred in connection with any breach of a representation, warranty or covenant by any Borrower, or (b) arising out of or resulting from any suit, action, claim, proceeding or governmental investigation, pending or threatened, whether based on statute, regulation or order, or tort, or contract or otherwise, before any court or Governmental Authority; provided, however, that the foregoing indemnity agreement shall not apply to any claims, damages, losses, liabilities and expenses solely attributable to an Indemnified Party's gross negligence or willful misconduct. The indemnity agreement contained in this Section shall survive the termination of this Note, payment of any advance hereunder and the assignment of any rights hereunder. Any Borrower may participate at its expense in the defense of any such action or claim.
14. Miscellaneous. All notices, demands, requests, consents, approvals and other communications required or permitted hereunder (“Notices”) must be in writing (except as may be agreed otherwise above with respect to borrowing requests) and will be effective upon receipt. Notices may be given in any manner to which the parties may separately agree. Without limiting the foregoing, first-class mail, facsimile transmission, electronic mail and commercial courier service are hereby agreed to as acceptable methods for giving Notices. Regardless of the manner in which provided, Notices may be sent to a party’s address as set forth above or to such other address as any party may give to the other for such purpose in accordance with this paragraph. No delay or omission on the Bank’s part to exercise any right or power arising hereunder will impair any such right or power or be considered a waiver of any such right or power, nor will the Bank’s action or inaction impair any such right or power. The Bank’s rights and remedies hereunder are cumulative and not exclusive of any other rights or remedies which the Bank may have under other agreements, at law or in equity. No modification, amendment or waiver of, or consent to any departure by the Borrowers from, any provision of this Note will be effective unless made in a writing signed by the Bank, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. The Borrowers agree to pay on demand, to the extent permitted by law, all costs and expenses incurred by the Bank in the enforcement of its rights in this Note and in any security therefor, including without limitation reasonable fees and expenses of the Bank’s counsel. If any provision of this Note is found to be invalid, illegal or unenforceable in any respect by a court, all the other provisions of this Note will remain in full force and effect. Each Borrower and all other makers and indorsers of this Note hereby forever waive presentment, protest, notice of dishonor and notice of non-payment. Each Borrower also waives all defenses based on suretyship or impairment of collateral. If this Note is executed by more than one Borrower, the obligations of such persons or entities hereunder will be joint and several. This Note shall bind each Borrower and its heirs, executors, administrators, successors and assigns, and the benefits hereof shall inure to the benefit of the Bank and its successors and assigns; provided, however, that no Borrower may assign this Note in whole or in part without the Bank’s written consent and the Bank at any time may assign this Note in whole or in part.
If for the purposes of obtaining judgment in any court it is necessary to convert a sum due from any Borrower hereunder in the currency expressed to be payable herein (the "specified currency") into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Bank could purchase the specified currency with such other currency at the Bank’s main office on the Business Day preceding that on which final, non‑appealable judgment is given. The obligations of the Borrowers in respect of any sum due to the Bank hereunder shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by Bank of any sum adjudged to be so due in such other currency Bank may in accordance with normal, reasonable banking procedures purchase the specified currency with such other currency. If the amount of the specified
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currency so purchased is less than the sum originally due to Bank in the specified currency, the Borrowers agree, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify Bank against such loss, and if the amount of the specified currency so purchased exceeds the sum originally due to Bank in the specified currency Bank agrees to remit such excess to the Borrowers.
If, as a result of the implementation of the European monetary union, (i) any Agreed Foreign Currency ceases to be lawful currency of the nation issuing the same and is replaced by the Euro, or (ii) any Agreed Foreign Currency and the Euro are at the same time recognized by any Governmental Authority of the nation issuing such currency as lawful currency of such nation and the Bank shall so request in a notice delivered to the Borrower Representative, then any amount payable hereunder by any party hereto in such Agreed Foreign Currency shall instead be payable in the Euro and the amount so payable shall be determined by translating the amount payable in such Agreed Foreign Currency to the Euro at the exchange rate recognized by the European Central Bank for the purpose of implementing European monetary union. Prior to the occurrence of the event or events described in clauses (i) and (ii) of the preceding sentence, each amount payable hereunder in any Agreed Foreign Currency will, except as otherwise provided herein, continue to be payable only in that Agreed Foreign Currency.
Each Borrower agrees, at the request of the Bank to compensate the Bank for any loss, cost, expense or reduction in return that the Bank shall reasonably determine shall be incurred or sustained by Bank as a result of the implementation of European monetary union and that would not have been incurred or sustained but for the transactions provided for herein. A certificate of the Bank setting forth the Bank’s determination of the amount or amounts necessary to compensate the Bank shall be delivered to the Borrower Representative and shall be conclusive absent manifest error so long as such determination is made on a reasonable basis. The Borrowers shall pay the Bank the amount shown as due on any such certificate within ten (10) days after receipt thereof.
Each Borrower agrees, at the time of or at any time following the implementation of any changes to the European monetary union, to use reasonable efforts to enter into an agreement amending this Note in order to reflect the implementation of such changes, and to place the Bank and the Borrowers in the position with respect to the settlement of payments of the Euro as they would have been with respect to the settlement of the Agreed Foreign Currency it replaced.
This Note has been delivered to and accepted by the Bank and will be deemed to be made in the State where the Bank’s office indicated above is located. This Note will be interpreted and the rights and liabilities of the Bank and the Borrowers determined in accordance with the laws of the State where the Bank’s office indicated above is located, excluding its conflict of laws rules. Each Borrower hereby irrevocably consents to the exclusive jurisdiction of any state or federal court in the county or judicial district where the Bank’s office indicated above is located; provided that nothing contained in this Note will prevent the Bank from bringing any action, enforcing any award or judgment or exercising any rights against any Borrower individually, against any security or against any property of any Borrower within any other county, state or other foreign or domestic jurisdiction. Each Borrower acknowledges and agrees that the venue provided above is the most convenient forum for both the Bank and the Borrowers. Each Borrower waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Note.
15. Anti-Money Laundering/International Trade Law Compliance. Each Borrower represents and warrants to the Bank, as of the date of this Note, the date of each advance of proceeds under the Facility, the date of any renewal, extension or modification of the Facility, and at all times until the Facility has been terminated and all amounts thereunder have been indefeasibly paid in full, that: (a) no Covered Entity (i) is a Sanctioned Person; (ii) has any of its assets in a Sanctioned Country or in the possession, custody or
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control of a Sanctioned Person; or (iii) does business in or with, or derives any of its operating income from investments in or transactions with, any Sanctioned Country or Sanctioned Person in violation of any law, regulation, order or directive enforced by any Compliance Authority; (b) the proceeds of the Facility will not be used to fund any operations in, finance any investments or activities in, or, make any payments to, a Sanctioned Country or Sanctioned Person in violation of any law, regulation, order or directive enforced by any Compliance Authority; (c) the funds used to repay the Facility are not derived from any unlawful activity; and (d) each Covered Entity is in compliance with, and no Covered Entity engages in any dealings or transactions prohibited by, any laws of the United States, including but not limited to any Anti-Terrorism Laws. Each Borrower covenants and agrees that it shall immediately notify the Bank in writing upon the occurrence of a Reportable Compliance Event.
As used herein: “Anti-Terrorism Laws” means any laws relating to terrorism, trade sanctions programs and embargoes, import/export licensing, money laundering, or bribery, all as amended, supplemented or replaced from time to time; “Compliance Authority” means each and all of the (a) U.S. Treasury Department/Office of Foreign Assets Control, (b) U.S. Treasury Department/Financial Crimes Enforcement Network, (c) U.S. State Department/Directorate of Defense Trade Controls, (d) U.S. Commerce Department/Bureau of Industry and Security, (e) U.S. Internal Revenue Service, (f) U.S. Justice Department, and (g) U.S. Securities and Exchange Commission; “Covered Entity” means each Borrower, its affiliates and subsidiaries, all guarantors, pledgors of collateral, all owners of the foregoing, and all brokers or other agents of each Borrower acting in any capacity in connection with the Facility; “Reportable Compliance Event” means that any Covered Entity becomes a Sanctioned Person, or is indicted, arraigned, investigated or custodially detained, or receives an inquiry from regulatory or law enforcement officials, in connection with any Anti-Terrorism Law or any predicate crime to any Anti-Terrorism Law, or self-discovers facts or circumstances implicating any aspect of its operations with the actual or possible violation of any Anti-Terrorism Law; “Sanctioned Country” means a country subject to a sanctions program maintained by any Compliance Authority; and “Sanctioned Person” means any individual person, group, regime, entity or thing listed or otherwise recognized as a specially designated, prohibited, sanctioned or debarred person or entity, or subject to any limitations or prohibitions (including but not limited to the blocking of property or rejection of transactions), under any order or directive of any Compliance Authority or otherwise subject to, or specially designated under, any sanctions program maintained by any Compliance Authority.
16. WAIVER OF JURY TRIAL. Each Borrower irrevocably waives any and all rights such Borrower may have to a trial by jury in any action, proceeding or claim of any nature relating to this Note, any documents executed in connection with this Note or any transaction contemplated in any of such documents. Each Borrower acknowledges that the foregoing waiver is knowing and voluntary.
Each Borrower acknowledges that it has read and understood all the provisions of this Note, including the confession of judgment and the waiver of jury trial, and has been advised by counsel as necessary or appropriate.
[Remainder of Page Intentionally Left Blank]
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WITNESS the due execution hereof as a document under seal, as of the date first written above, with the intent to be legally bound hereby.
WARNING‑BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. |
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By: |
/s/ Andrew S. Klaus |
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By: |
/s/ Robert G. Ruhlman |
Name: |
Andrew S. Klaus |
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Name: |
Robert G. Ruhlman |
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Title: |
Chairman |
WARNING‑BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. |
WITNESS / ATTEST: |
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PREFORMED LINE PRODUCTS (AUSTRALIA) PTY LTD |
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By: |
/s/ Andrew S. Klaus |
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By: |
/s/ Robert G. Ruhlman |
Name: |
Andrew S. Klaus |
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Name: |
Robert G. Ruhlman |
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Title: |
Chairman |
WARNING‑BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. |
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WITNESS / ATTEST: |
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BELOS-PLP S.A. |
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By: |
/s/ Andrew S. Klaus |
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By: |
/s/ Robert G. Ruhlman |
Name: |
Andrew S. Klaus |
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Name: |
Robert G. Ruhlman |
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Title: |
Chairman |
WARNING‑BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. |
WITNESS / ATTEST: |
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PLP SUBCON GMBH. |
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By: |
/s/ Andrew S. Klaus |
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By: |
/s/ Robert G. Ruhlman |
Name: |
Andrew S. Klaus |
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Name: |
Robert G. Ruhlman |
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Title: |
Chairman |
36
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert G. Ruhlman, certify that:
Date: May 6, 2022 |
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/s/ Robert G. Ruhlman |
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Robert G. Ruhlman |
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Chairman, President and Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Andrew S. Klaus, certify that:
Date: May 6, 2022 |
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/s/ Andrew S. Klaus |
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Andrew S. Klaus |
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Chief Financial Officer (Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert G. Ruhlman, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
May 6, 2022 |
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/s/ Robert G. Ruhlman |
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Robert G. Ruhlman |
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Chairman, President and Chief Executive Officer |
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(Principal Executive Officer) |
A signed original of this written statement required by Section 906 has been provided to Preformed Line Products Company and will be retained by Preformed Line Products Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Andrew S. Klaus, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
May 6, 2022 |
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/s/ Andrew S. Klaus |
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Andrew S. Klaus |
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Chief Financial Officer |
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(Principal Accounting Officer) |
A signed original of this written statement required by Section 906 has been provided to Preformed Line Products Company and will be retained by Preformed Line Products Company and furnished to the Securities and Exchange Commission or its staff upon request.