Summary of PREFORMED LINE PRODUCTS CO

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Restatement of third quarter 2007
After the filing of the Company's third quarter 2007 Form 10-Q which included the consolidated financial statements for the three and nine month periods ended September 30, 2007, the Company determined that (a) the write-off of goodwill related to its Thailand operations of $.2 million should have been recorded during the first quarter of 2007, (b) the $.2 million charge related to the step-up in inventory valuation in the purchase price allocation for the acquisition of Direct Power and Water Corporation (DPW) on March 22, 2007 should have been recorded during the second quarter of 2007, and (c) intercompany profit of $.9 million in inventory at September 30, 2007 should not have been recognized in earnings until the inventory was sold to a third party. The $.9 million adjustment consists of $.6 million of profit in inventory remaining at the end of the first quarter, $.2 million of profit in inventory remaining at the end of the second quarter, and $.1 million of profit in inventory remaining at the end of third quarter. As a result, the Company has restated the accompanying consolidated financial statements for the three and nine month periods ended September 30, 2007.
OVERVIEW
Preformed Line Products Company and its subsidiaries (the "Company", "PLPC", "we", "us", or "our") is an international designer and manufacturer of products and systems employed in the construction and maintenance of overhead and underground networks for the energy, telecommunication, cable operators, information (data communication), and other similar industries. Our primary products support, protect, connect, terminate, and secure cables and wires. We also provide solar hardware systems and mounting hardware for a variety of solar power applications. Our goal is to continue to achieve profitable growth as a leader in the innovation, development, manufacture, and marketing of technically advanced products and services related to energy, communications, and cable systems and to take advantage of this leadership position to sell additional quality products in familiar markets.
The reportable segments are PLP-USA, Australia, Brazil, South Africa, Canada, Poland, and All Other. Our PLP-USA segment is comprised of our U.S. operations primarily supporting our domestic energy and telecommunications products. The Australia segment is comprised of all of our operations in Australia supporting energy, telecommunications, data communications and solar products. Our Brazil, South Africa, and Canada segments are comprised of the manufacturing and sales operations from those locations which meet at least one of the criteria of a reportable segment. Our final segment is Poland, which is comprised of a manufacturing and sales operation, and has been included as a segment to comply with reporting segments for 75% of consolidated sales. Our remaining operations are included in All Other as none of these operations meet the criteria for a reportable segment and individually represent less that 10% for each of our combined net sales, net income, and assets.
DISCONTINUED OPERATION
Our consolidated financial statements were impacted by the divestiture of Superior Modular Products (SMP) on May 30, 2008. We sold our SMP subsidiary for $11.7 million and recognized a $.5 million gain, net of tax, on the sale of the business, which includes expenses incurred related to the divestiture of SMP, and a holdback of $1.5 million to be held in escrow for a period of one year. We have not provided any significant continuing involvement in the operations of SMP after the closing of the sale. For tax purposes, the sale of SMP generated a capital loss, which was not deductible except for amounts used to offset capital gains in the current year and from a preceding year. A full valuation allowance was provided against the deferred tax asset on the remaining portion of the capital loss carryover.
The operating results of SMP are presented in our consolidated statements of operations as discontinued operations, net of tax, and all periods presented have been reclassified. For the three month period ended September 30, 2008, income (loss) from discontinued operations was less than $(.1) million, or $(.01) per diluted share, compared to income of $.1 million, or $.02 per diluted share, for the same period in 2007. Income from discontinued operations for the nine month period ended September 30, 2008 was $.7 million, or $.14 per diluted share, compared to income from discontinued operations of $.1 million, or $.02 per diluted share, for the same period in 2007.

Table of Contents

Preface
Our net sales for the three month period ended September 30, 2008 increased $13.5 million, or 22%, and gross profit increased $4 million, or 19%, compared to the same period in 2007. The favorable impact of the change in the conversion rate of local currencies to U.S. dollars for the three month period ended September 30, 2008 compared to the same period in 2007 contributed $1.7 million to the increase in net sales. Our net sales for the three month period ended September 30, 2008 increased $5.4 million as a result of the acquisition of Belos SA (Belos) located in Poland in the third quarter of 2007. Additionally, PLP-USA net sales increased $5 million for the three month period ended September 30, 2008 compared to the same period in 2007. Gross profit for the three month period ended September 30, 2008 increased $4 million, or 19%, primarily as a result of increased sales but was partially offset by a $2.9 million, a 22% increase in costs and expenses when compared to the same period in 2007. As a result, income from continued operations of $6.5 million, or $1.23 per diluted share, increased $1 million, or $.22 per diluted share, compared to the three month period ended September 30, 2007.
Our net sales for the nine month period ended September 30, 2008 increased $38.7 million, or 23%, and gross profit increased $9.4 million, or 16%, compared to the same period in 2007. The favorable impact of the change in the conversion rate of local currencies to U.S. dollars for the nine month period ended September 30, 2008 compared to the same period in 2007, contributed $8.4 million to the increase in net sales. Our net sales were affected by the acquisition of Belos late in the third quarter of 2007, resulting in an increase in net sales of $14.8 million. Additionally, PLP-USA and South Africa net sales combined increased $9 million for the nine month period ended September 30, 2008 compared to the same period in 2007. Gross profit for the nine month period ended September 30, 2008 increased $9.4 million as a result of increased sales but was partially offset by a $7.5 million, or 19%, increase in costs and expenses. As a result, income from continued operations of $14.1 million, or $2.64 per diluted share, increased $2 million, $.39 per diluted share, compared to the nine month period ended September 30, 2007.

THREE MONTH PERIOD ENDED SEPTEMBER 30, 2008 COMPARED TO THREE MONTH PERIOD ENDED
SEPTEMBER 30, 2007
Net Sales. For the three month period ended September 30, 2008, net sales were
$74 million, an increase of $13.5 million, or 22%, from the same period in 2007
as summarized in the following table:

                                          Three month periods ended September 30,
                                                                  Change
                                                                  due to
                                                                 currency                        %
                                                                conversion         Net          Net
thousands of dollars     2008         2007        Change       rate changes       change      change
Net sales
PLP-USA                $ 30,021     $ 24,995     $  5,026     $            -     $  5,026          20 %
Australia                 7,754        7,956         (202 )              422         (624 )        (8 )
Brazil                    8,244        7,396          848              1,114         (266 )        (4 )
South Africa              3,416        2,562          854               (273 )      1,127          44
Canada                    2,613        2,781         (168 )                6         (174 )        (6 )
Poland                    6,984        1,595        5,389                  -        5,389          NM
All Other                14,920       13,128        1,792                478        1,314          10

Consolidated           $ 73,952     $ 60,413     $ 13,539     $        1,747     $ 11,792          20 %

NM - not meaningful
The increase in PLP-USA net sales of $5 million, or 20%, was due to sales volume increases of $4.5 million and price/mix increases of $.5 million primarily related to our energy sales. We anticipate a slight increase in sales for the remainder of 2008, although we believe PLP-USA sales for the year will continue to be impacted by the slowing economy and housing market. Excluding the effect of currency conversion, Australia net sales decreased $.6 million, or 8%, primarily as a result of lower energy volume sales compared to the same period in 2007. Excluding the effect of currency conversion, Brazil net sales decreased $.3 million, or 4%, primarily as a result of decreased energy and data communication sales offset by increased telecommunication sales. Excluding the effect of currency conversion, South Africa net sales increased $1.1 million, or 44%, due to increased sales volume in the energy market. Canada net sales decreased $.2 million, or 6%, due to lower sales volume within their markets. Poland net sales of $7 million increased $5.4 million due to the inclusion of Belos in our consolidated results for the three month period ended September 30, 2008, as compared to inclusion of less than one month in the same period of 2007. Excluding the effect of currency conversion, All Other net sales increased $1.3 million, or 10%, compared to 2007, primarily as a result of a $.5 million favorable impact of the change in the conversion rate of local currencies to U.S. dollars for the three month period ended September 30, 2008 compared to the same period in 2007 and an increase in energy sales volume. We continue to see competitive pricing pressures globally which will continue to impact sales and profitability.

Table of Contents

Gross profit. Gross profit of $25.5 million for the three month period ended September 30, 2008 increased $4 million, or 19%, compared to the same period in 2007 as summarized in the following table:

                                            Three month periods ended September 30,
                                                                     Change
                                                                     due to
                                                                    currency                       %
                                                                   conversion         Net         Net
thousands of dollars     2008           2007         Change       rate changes      change       change
                                     (restated)
Gross profit
PLP-USA                $ 10,730     $      9,171     $ 1,559     $            -     $ 1,559           17 %
Australia                 2,603            2,599           4                144        (140 )         (5 )
Brazil                    2,484            2,375         109                331        (222 )         (9 )
South Africa              1,456            1,044         412               (117 )       529           51
Canada                    1,144            1,264        (120 )                2        (122 )        (10 )
Poland                    2,174              360       1,814                  -       1,814           NM
All Other                 4,872            4,625         247                209          38            1

Consolidated           $ 25,463     $     21,438     $ 4,025     $          569     $ 3,456           16 %

NM - not meaningful
PLP-USA gross profit of $10.7 million for the three month period ended September 30, 2008 increased $1.6 million, or 17%, compared to the same period in 2007. PLP-USA gross profit increased $2.4 million due to higher net sales and lower per unit manufacturing costs partially offset by $.8 million in increased product costs primarily as a result of higher material costs. Australia gross profit remained flat as a result of the favorable impact of converting local currency into U.S. dollars compared to the third quarter 2007 conversion rates and a decrease in gross profit due to lower net sales. Brazil gross profit increased $.1 million as a result of a $.3 million favorable impact when local currency was converted to U.S. dollars compared to the third quarter 2007 conversion rates. Excluding the effect of currency conversion, South Africa gross profit increased $.5 million due to increased sales partially offset by higher material costs. Excluding the effect of currency conversion, Canada gross profit decreased $.1 million primarily due to lower net sales. An increase of $1.8 million of our consolidated gross profit is as a result of the inclusion of Poland gross profit for the full three month period ended September 30, 2008. All Other gross profit increased $.2 million primarily due to increased sales and a favorable impact due to the change in conversion rates compared to the same period in 2007 when certain currencies were converted to U.S. dollars.

Table of Contents

Cost and expenses. Cost and expenses for the three month period ended September 30, 2008 increased $2.9 million, or 22%, compared to the same period in 2007 as summarized in the following table:

                                           Three month periods ended September 30,
                                                                  Change
                                                                  due to
                                                                 currency                       %
                                                                conversion         Net         Net
  thousands of dollars     2008         2007       Change      rate changes      change      change
  Costs and expenses
  PLP-USA                $  8,117     $  7,032     $ 1,085     $           -     $ 1,085          15 %
  Australia                 1,921        1,469         452                95         357          24
  Brazil                    1,750        1,284         466               224         242          19
  South Africa                345          373         (28 )             (27 )        (1 )         -
  Canada                      407          441         (34 )               2         (36 )        (8 )
  Poland                      894          192         702                 -         702          NM
  All Other                 2,871        2,580         291                86         205           8

  Consolidated           $ 16,305     $ 13,371     $ 2,934     $         380     $ 2,554          19 %

NM - not meaningful
The increase in PLP-USA costs and expenses of $1.1 million was primarily due to an increase in personnel related costs and professional fees partially offset by a reduction in advertising and promotional expense. Australia costs and expenses primarily changed due to higher personnel expenses and additional personnel due to the BlueSky Energy Pty Ltd (BlueSky) acquisition on May 21, 2008. Brazil and South Africa's costs and expenses increased primarily due to higher personnel related costs. Canada costs and expenses primarily changed due to the impact when certain local currencies were converted to U.S. dollars compared to the third quarter 2007 conversion rates. Poland costs and expenses increased $.7 million due to the acquisition of Belos in the third quarter of 2007. All Other costs and expenses increased primarily due to a $.2 million increase in personnel related expenses.
Operating income. Our operating income of $9.2 million for the three month period ended September 30, 2008 increased $1.1 million, or 14%, compared to the same period in 2007 primarily due to the $4 million increase in gross profit partially offset by the $2.9 million increase in costs and expenses. PLP-USA operating income of $3.8 million increased $.5 million, or 15%, primarily due to the increase in gross profit of $1.6 million partially offset by an increase in costs and expenses. Australia operating income of $.3 million decreased $.4 million due primarily to an increase in costs and expenses. Brazil operating income of $.7 million decreased $.3 million as a result of an increase of $.5 million in costs and expenses partially offset by an increase in gross profit. South Africa operating income of $1 million increased $.4 million primarily as a result of the $.4 million increase in gross profit. Canada operating income of $.6 million decreased $.1 million primarily as a result of the $.1 million decrease in gross profit. Poland operating income of $1.3 million was a result of their $2.2 million of gross profit being offset by $.9 million in costs and expenses. All Other operating income of $1.5 million remained relatively unchanged compared to the same period in 2007. Other income. Other income (expense) for the three month period ended September 30, 2008 of $.3 million remains relatively flat compared to the same period in 2007.
Income taxes. Income tax expenses from continuing operations for the three month period ended September 30, 2008 of $2.8 million were $.1 million higher than the same period in 2007. The effective tax rate for the three month period ended September 30, 2008 was 30% compared to 33% in 2007. The effective tax rate for three month period ended September 30, 2008 is lower than the statutory federal rate of 34% primarily due to increased earnings in jurisdictions with lower tax rates and a decrease in unrecognized tax benefits for uncertain tax positions.

Table of Contents

Income from continuing operations. As a result of the preceding items, income from continuing operations for the three month period ended September 30, 2008 was $6.5 million, or $1.23 per diluted share, compared to income from continuing operations of $5.5 million, or $1.01 per diluted share, for the same period in 2007 as summarized in the following table:

                                                 Three month periods ended September 30,
                                                                          Change
                                                                          due to
                                                                         currency                          %
                                                                        conversion          Net           Net
thousands of dollars       2008            2007           Change       rate changes        change        change
                                        (restated)
Income from continuing
operations
PLP-USA                   $ 2,935      $      2,200      $    735      $           -      $    735            33 %
Australia                     245               491          (246 )               19          (265 )         (54 )
Brazil                        327               762          (435 )               51          (486 )         (64 )
South Africa                  706               369           337                (57 )         394           107
Canada                        435               448           (13 )                -           (13 )          (3 )
Poland                        764               117           647                  -           647            NM
All Other                   1,045             1,109           (64 )               84          (148 )         (13 )

Consolidated              $ 6,457      $      5,496      $    961      $          97      $    864            16 %

NM - not meaningful
PLP-USA income from continuing operations of $2.9 million increased $.7 million compared to the same period in 2007 as a result of the $.5 million increase in operating income and a reduction in income tax expense. Australia income from continuing operations of $.2 million decreased $.2 million primarily due to the $.4 million decrease in operating income being partially offset by lower income tax expense. Brazil income from continuing operations of $.3 million decreased $.4 primarily as a result of a decrease in operating income. South Africa income from continuing operations of $.7 million increased $.3 million as a result of the $.4 million increase in operating profit being partially off set by higher income tax expense. Canada income from continuing operations remained flat as a result of the $.1 million decrease in operating income with a corresponding reduction in income tax expense. Poland income from continuing operations of $.8 million is a result of $1.3 million in operating income being partially offset by income tax expense and minority interest of $.5 million. All Other income from continuing operations of $1 million decreased $.1 million primarily as a result of a decrease in operating income compared to the same period in 2007.

Table of Contents

NINE MONTH PERIOD ENDED SEPTEMBER 30, 2008 COMPARED TO NINE MONTH PERIOD ENDED
SEPTEMBER 30, 2007
Net Sales. For the nine month period ended September 30, 2008, net sales were
$209.2 million, an increase of $38.7 million, or 23%, from the same period in
2007 as summarized in the following table:

                                            Nine month periods ended September 30,
                                                                    Change
                                                                    due to
                                                                   currency                        %
                                                                  conversion         Net          Net
thousands of dollars     2008          2007         Change       rate changes       change      change
Net sales
PLP-USA                $  85,725     $  79,001     $  6,724     $            -     $  6,724           9 %
Australia                 22,442        21,721          721              2,281       (1,560 )        (7 )
Brazil                    24,183        18,738        5,445              3,814        1,631           9
South Africa               7,553         5,832        1,721               (627 )      2,348          40
Canada                     7,685         7,721          (36 )              564         (600 )        (8 )
Poland                    16,358         1,595       14,763                  -       14,763          NM
All Other                 45,233        35,856        9,377              2,353        7,024          20

Consolidated           $ 209,179     $ 170,464     $ 38,715     $        8,385     $ 30,330          18 %

NM - not meaningful
PLP-USA net sales increased $6.7 million, or 9%. The increase in PLP-USA sales is due to both volume and price/mix increases related primarily to energy sales. This increase in energy sales volume was partially offset by a decrease in the communications market. Excluding the effect of currency conversion, Australia net sales decreased $1.6 million, or 7%, primarily due to lower energy sales volume. Excluding the effect of currency conversion, Brazil net sales increased $1.6 million, or 9% primarily due to increased volume in the energy and telecommunication markets. Excluding the effect of currency conversion, South Africa net sales increased $2.3 million, or 40%, primarily due to a result of increased sales volume in the energy market. Excluding the effect of currency conversion, Canada net sales decreased $.6 million as a result of lower communication sales volume. Belos, our Polish operation, was acquired in September 2007. Poland net sales of $16.4 million were included in our consolidated results for the nine month period ended September 30, 2008, but only $1.6 million was included in the nine month period ended in 2007. Excluding the effect of currency conversion, All Other net sales increased $7 million primarily a result of a $2 million increase in energy sales volume compared to the same period in 2007 and the inclusion of DPW sales in our consolidated results for the entire nine month period ended September 30, 2008 versus just four months in the nine month period ended September 30, 2007.

Table of Contents

Gross profit. Gross profit of $68.1 million for the nine month period ended September 30, 2008 increased $9.4 million, or 16%, compared to the same period in 2007 as summarized in the following table:

                                            Nine month periods ended September 30,
                                                                     Change
                                                                     due to
                                                                    currency                       %
                                                                   conversion         Net         Net
thousands of dollars     2008           2007         Change       rate changes      change       change
                                     (restated)
Gross profit
PLP-USA                $ 28,414     $     27,078     $ 1,336     $            -     $ 1,336            5 %
Australia                 6,976            7,020         (44 )              697        (741 )        (11 )
Brazil                    5,998            5,790         208                927        (719 )        (12 )
South Africa              3,444            2,585         859               (288 )     1,147           44
Canada                    3,425            3,336          89                248        (159 )         (5 )
Poland                    4,605              360       4,245                  -       4,245           NM
All Other                15,283           12,552       2,731                838       1,893           15

Consolidated           $ 68,145     $     58,721     $ 9,424     $        2,422     $ 7,002           12 %

NM - not meaningful
PLP-USA gross profit of $28.4 million for the nine month period ended September 30, 2008 increased $1.3 million, or 5%, compared to the same period in 2007. PLP-USA gross profit increased due to higher net sales and lower per unit manufacturing costs partially offset by higher material costs. Excluding the effect of currency conversion, Australia gross profit decreased $.7 million due to a decrease in net sales and higher per unit manufacturing costs offset by lower material costs. Brazil gross profit increased $.2 million as a result of a $.9 million favorable impact when local currency was converted to U.S. dollars compared to 2007 conversion rates and increased sales volume of $1.3 million. These gross profit increases were offset by higher material costs, an increase in per unit manufacturing related costs, and a favorable excess and obsolescence reserve adjustment of $.6 million included in the nine month period ended September 30, 2007.
During 2007, management's comprehensive review of the components of our Brazilian operation's excess and obsolescence reserve calculation revealed that the details of the reserve account included an inappropriate reserve of $.6 million at December 31, 2006. Based on the timing of the completion of . . .