PREFORMED LINE PRODUCTS COPLPC
PREFORMED LINE PRODUCTS CO Income Taxes Disclosure
Note 9 - Income Taxes
Income before income taxes was derived from the following sources:
| 2024 | 2023 | 2022 | |||||||||||||||
| United States | $ | 19,476 | $ | 57,736 | $ | 58,887 | |||||||||||
| Foreign | 31,294 | 24,608 | 14,817 | ||||||||||||||
| Total income before income taxes | $ | 50,770 | $ | 82,344 | $ | 73,704 | |||||||||||
The components of income taxes for the years ended December 31 are as follows:
| 2024 | 2023 | 2022 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 2,646 | $ | 12,263 | $ | 12,529 | |||||||||||
| Foreign | 9,613 | 6,654 | 7,346 | ||||||||||||||
| State and local | 316 | 2,322 | 2,086 | ||||||||||||||
| 12,575 | 21,239 | 21,961 | |||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 2,139 | (1,866) | 577 | ||||||||||||||
| Foreign | (1,507) | 11 | (3,326) | ||||||||||||||
| State and local | 452 | (377) | 93 | ||||||||||||||
| 1,084 | (2,232) | (2,656) | |||||||||||||||
| Income taxes | $ | 13,659 | $ | 19,007 | $ | 19,305 | |||||||||||
The differences between the provision for income taxes at the U.S. federal statutory rate and the tax shown in the Statements of Consolidated Income for the years ended December 31 are summarized as follows:
| 2024 | 2023 | 2022 | |||||||||||||||
| Federal tax at statutory rate | 21.0% | 21.0% | 21.0% | ||||||||||||||
| Non-deductible officers' compensation | 4.0 | 1.5 | 1.4 | ||||||||||||||
| Non-U.S. tax rate variances | 3.2 | 2.0 | (2.4) | ||||||||||||||
| Global intangible low-taxed income | 2.3 | 3.6 | 0.9 | ||||||||||||||
| Other, net | 1.8 | (0.4) | 0.7 | ||||||||||||||
| Valuation allowance | 0.5 | 0.7 | 2.9 | ||||||||||||||
| State and local taxes, net of federal benefit | 0.5 | 2.2 | 2.2 | ||||||||||||||
| Uncertain tax positions | 0.1 | — | 0.7 | ||||||||||||||
| Other Life Insurance Proceeds | — | — | (1.2) | ||||||||||||||
| Goodwill Impairment | — | — | 2.7 | ||||||||||||||
| Other U.S. federal permanent items | (0.1) | (0.2) | (0.1) | ||||||||||||||
| Tax credits | (0.8) | (1.3) | (0.3) | ||||||||||||||
| Other stock compensation | (2.4) | (1.5) | (0.3) | ||||||||||||||
| Foreign tax credits | (3.2) | (4.5) | (2.0) | ||||||||||||||
| Effective income tax rate | 26.9% | 23.1% | 26.2% | ||||||||||||||
Income tax expense for the periods ended December 31, 2024, 2023, and 2022 was $13.7 million, $19.0 million, and $19.3 million, respectively. The increase in the effective tax rate from 2023 to 2024 was primarily due to the limitations on the deductibility of compensation and the unfavorable impact from the mix of income earned in jurisdictions with a higher tax rate than the U.S. This was partially offset by a favorable impact from increase in excess tax benefit on share-based compensation.
Income taxes paid in the years ending December 31, 2024, 2023, and 2022 were $13.1 million, $21.9 million, and $14.6 million, respectively.
Deferred Income Tax Assets and Liabilities
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities were as follows:
| 2024 | 2023 | ||||||||||
| Deferred tax assets: | |||||||||||
| Research and development capitalization | $ | 6,483 | $ | 5,522 | |||||||
| Benefit plan reserves | 5,947 | 6,200 | |||||||||
| Inventory valuation reserves | 3,077 | 4,041 | |||||||||
| Other accrued expenses | 2,128 | 972 | |||||||||
| Net operating loss carryforwards | 1,967 | 1,940 | |||||||||
| Foreign tax credit | 1,337 | 1,018 | |||||||||
| Allowance for credit losses | 1,298 | 1,329 | |||||||||
| Accrued compensation and benefits | 1,147 | 1,374 | |||||||||
| Unrealized foreign exchange | 56 | 314 | |||||||||
| Gross deferred tax assets | 23,440 | 22,710 | |||||||||
| Valuation allowance | (2,725) | (2,567) | |||||||||
| Net deferred tax assets | 20,715 | 20,143 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and other basis differences | (15,179) | (13,382) | |||||||||
| Intangibles | (2,003) | (2,579) | |||||||||
| Other | (753) | (609) | |||||||||
| Deferred tax liabilities | (17,935) | (16,570) | |||||||||
| Net deferred tax assets | $ | 2,780 | $ | 3,573 | |||||||
| 2024 | 2023 | ||||||||||
| Change in net deferred tax assets: | |||||||||||
| Ordinary movement | $ | (1,084) | $ | 2,232 | |||||||
| Deferred tax balances from business acquisitions | — | 153 | |||||||||
| Items of other comprehensive loss | 267 | 216 | |||||||||
| Currency translation | 24 | (79) | |||||||||
| Other | — | (108) | |||||||||
| Total change in net deferred tax assets | $ | (793) | $ | 2,414 | |||||||
As of December 31, 2024, various international subsidiaries had gross net operating losses totaling $7.9 million, resulting in deferred tax assets of $2.0 million. Of the international net operating losses, $1.0 million carryforward indefinitely, while the remainder, if not utilized, will expire between 2026 and 2033. It is more likely than not that certain net operating loss carryforwards will not be realized; therefore, we have recorded a valuation allowance of $1.2 million against them. The net operating loss carryforwards are subject to various annual limitations under the tax laws of the different jurisdictions.
The Company considers earnings in our non-U.S. subsidiaries to be permanently reinvested and therefore did not record any associated deferred income taxes on such earnings. Accordingly, the Company intends to continue to invest approximately $139.3 million of such earnings, as well as our capital in these subsidiaries, indefinitely outside of the U.S.
Unrecognized Income Tax Benefits
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits related to uncertain tax positions, excluding interest and penalties, for the year ended December 31:
| 2024 | 2023 | 2022 | |||||||||||||||
| Balance at January 1 | $ | 410 | $ | 482 | $ | — | |||||||||||
| Additions for tax positions of prior years | — | — | 482 | ||||||||||||||
| Settlements with tax authorities | — | (72) | — | ||||||||||||||
| Expiration of statutes of limitations | — | — | — | ||||||||||||||
| Balance at December 31 | $ | 410 | $ | 410 | $ | 482 | |||||||||||
The decrease in unrecognized tax benefits from 2022 to 2023 was related to a settlement with foreign tax authorities. The Company records accrued interest as well as penalties related to unrecognized tax benefits as part of the provision for income taxes. The accrued interest and penalties related to the gross unrecognized tax benefits, excluded from above, was de minimis in all years presented.
Preformed Line Products Company and its subsidiaries file income tax return in the United States and various countries around the world. With few exceptions, the Company is no longer subject to United States federal examinations by tax authorities for years before 2020 and foreign, state, and local examinations by authorities for years before 2018.
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About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.