8-K
DOUGLAS DYNAMICS, INC (PLOW)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 24, 2020
DOUGLAS
DYNAMICS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-34728 | 13-4275891 |
|---|---|---|
| (State or other<br><br> <br>jurisdiction of<br><br> <br>incorporation) | (Commission File<br><br> <br>Number) | (IRS Employer<br><br> <br>Identification No.) |
7777 North 73rd Street, Milwaukee, Wisconsin 53223
(Address of principal executive offices, including zip code)
(414) 354-2310
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $.01 per share | PLOW | New York Stock Exchange |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
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. ¨
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
On February 24, 2020, Douglas Dynamics, Inc. issued a press release announcing its financial results for the quarter ended December 31, 2019. A copy of the press release is attached hereto as Exhibit 99.1. The information in this Item 2.02 and the exhibit hereto are furnished to, but not filed with, the Securities and Exchange Commission.
| Item 9.01. | Financial Statements and Exhibits. |
|---|
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits. The following exhibit is being furnished herewith:
(99.1) Press release dated February 24, 2020.
(104) The cover page from this Current Report on Form 8-K, formatted in Inline XBRL
| 2 |
| --- |
DOUGLAS DYNAMICS, INC.
Exhibit Index to Current Report on Form 8-K
Exhibit
Number
| (99.1) | Press release dated February 24, 2020. |
|---|---|
| (104) | The cover page from this Current<br>Report on Form 8-K, formatted in Inline XBRL |
| 3 |
| --- |
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 hereunto duly authorized.
| DOUGLAS DYNAMICS, INC. | ||
|---|---|---|
| Date:<br> February 24, 2020 | By: | /s/ Sarah Lauber |
| Sarah Lauber | ||
| Chief Financial Officer and Secretary |
| 4 |
| --- |
Exhibit 99.1
For further information contact:
Douglas Dynamics, Inc.
Nathan Elwell
847-530-0249
investorrelations@douglasdynamics.com
DOUGLAS DYNAMICS REPORTS FOURTH QUARTER
AND FULL YEAR 2019 RESULTS
Produced Strong Finish To 2019 With RecordNet Sales & Improved Operational Performance
Full Year 2019 Highlights:
| · | Produced record Net Sales of $572 million |
|---|---|
| · | Net Income increased to $49 Million, or $2.11 per diluted share |
| --- | --- |
| · | Record Adjusted Net Income of $56 Million, or $2.42 per diluted share |
| --- | --- |
| · | Adjusted EBITDA increased by 12% to a record $108 Million |
| --- | --- |
| · | Achieved record Net Cash from Operating Activities of $77 Million |
| --- | --- |
| · | Announced quarterly dividend increase to $0.28 per share for 2020 first quarter |
| --- | --- |
February 24, 2020 — Milwaukee,Wisconsin — Douglas Dynamics, Inc. (NYSE: PLOW), North America’s premier manufacturer and upfitter of work truck attachments and equipment, today announced financial results for the fourth quarter and full year ended December 31, 2019.
“Our performance in 2019 highlights the dedication towards continuous improvement displayed by everyone at Douglas Dynamics,” explained Bob McCormick, President and CEO. “We are proud of our performance this year, delivering strong growth and near record results overall, which is even more impressive given the slightly below average snowfall last winter, chassis constraints and uneven economic conditions. We remain focused on the factors within our control, making steady progress towards our long-term goals in the years ahead.”
Consolidated Fourth Quarter 2019Results
| $ in millions<br> <br>(except Margins & EPS) | Q4 2019 | Q4 2018 | ||||
|---|---|---|---|---|---|---|
| Net Sales | $ | 160.3 | $ | 151.8 | ||
| Gross Profit Margin | 28.9 | % | 29.0 | % | ||
| Income from Operations | $ | 25.0 | $ | 24.6 | ||
| Net Income | $ | 11.6 | $ | 14.7 | ||
| Diluted EPS | $ | 0.50 | $ | 0.63 | ||
| Adjusted EBITDA | $ | 29.9 | $ | 28.8 | ||
| Adjusted EBITDA Margin | 18.7 | % | 18.9 | % | ||
| Adjusted Net Income | $ | 16.7 | $ | 14.4 | ||
| Adjusted Diluted EPS | $ | 0.72 | $ | 0.62 |
Douglas Dynamics – Fourth Quarter and Full Year2019
Page 2
| · | Record fourth quarter Net Sales were mainly attributable to ongoing favorable demand trends across<br>both segments. |
|---|---|
| · | Gross Profit Margin and Adjusted EBITDA Margin were in-line with the prior year. |
| --- | --- |
| · | Net income was negatively impacted by one-time expense of $5.0 million, net of tax, following the<br>Company’s planned termination of its pension plans during the quarter. |
| --- | --- |
Work Truck Attachments Segment FourthQuarter 2019 Results
| $ in millions<br> <br>(except Adjusted EBITDA Margin) | Q4 2019 | Q4 2018 | ||||
|---|---|---|---|---|---|---|
| Net Sales | $ | 79.9 | $ | 77.3 | ||
| Adjusted EBITDA | $ | 21.3 | $ | 20.2 | ||
| Adjusted EBITDA Margin | 26.7 | % | 26.1 | % | ||
| · | Net Sales increased approximately 3% and Adjusted EBITDA increased 5% over the prior year, based<br>on the timing of price recovery on higher material costs. | |||||
| --- | --- |
Work Truck Solutions Segment FourthQuarter 2019 Results
| $ in millions<br> <br>(except Adjusted EBITDA Margin) | Q4 2019 | Q4 2018 | ||||
|---|---|---|---|---|---|---|
| Net Sales | $ | 80.4 | $ | 74.5 | ||
| Adjusted EBITDA | $ | 8.6 | $ | 8.6 | ||
| Adjusted EBITDA Margin | 10.7 | % | 11.5 | % | ||
| · | Net Sales increased 8% over the prior year, mainly attributable to increased demand and price recovery<br>on higher material costs, combined with ongoing improvements in class 8 chassis supply predictability. | |||||
| --- | --- | |||||
| · | Adjusted EBITDA was primarily in-line compared with the prior year, while Adjusted EBITDA Margin<br>declined by 80 basis points due to increased labor and health care costs. | |||||
| --- | --- |
Consolidated Full Year 2019 Results
| $ in millions<br> <br>(except Margins & EPS) | FY 2019 | FY 2018 | ||||
|---|---|---|---|---|---|---|
| Net Sales | $ | 571.7 | $ | 524.1 | ||
| Gross Profit Margin | 29.5 | % | 29.6 | % | ||
| Income from Operations | $ | 86.6 | $ | 73.5 | ||
| Net Income | $ | 49.2 | $ | 43.9 | ||
| Diluted EPS | $ | 2.11 | $ | 1.89 | ||
| Adjusted EBITDA | $ | 108.1 | $ | 96.4 |
Douglas Dynamics – Fourth Quarter and Full Year2019
Page 3
| $ in millions<br> <br>(except Margins & EPS) | FY 2019 | FY 2018 | ||||
|---|---|---|---|---|---|---|
| Adjusted EBITDA Margin | 18.9 | % | 18.4 | % | ||
| Adjusted Net Income | $ | 56.3 | $ | 47.4 | ||
| Adjusted Diluted EPS | $ | 2.42 | $ | 2.04 | ||
| · | Full year Net Sales increased 9% to an all-time record of $572 million, primarily due to higher<br>volumes driven by ongoing positive demand, price recovery on higher material costs and improved chassis predictability. | |||||
| --- | --- | |||||
| · | Gross Profit Margin was in-line with the prior year, with improvements due to DDMS and operational<br>efficiencies being offset by higher labor and healthcare costs and the dilutive effect of price recovery on equivalent material<br>inflation. | |||||
| --- | --- | |||||
| · | Net Income increased by 12% over the prior year, while Adjusted Net Income increased to an all-time<br>record of $56.3 million, 19% higher compared to 2018. | |||||
| --- | --- | |||||
| · | Adjusted EBITDA increased to an all-time record of $108.1 million and Adjusted EBITDA Margin increased<br>by 50 basis points. | |||||
| --- | --- |
Work Truck Attachments Segment FullYear 2019 Results
| $ in millions<br> <br>(except Adjusted EBITDA Margin) | FY 2019 | FY 2018 | ||||
|---|---|---|---|---|---|---|
| Net Sales | $ | 293.6 | $ | 275.2 | ||
| Adjusted EBITDA | $ | 80.7 | $ | 80.4 | ||
| Adjusted EBITDA Margin | 27.5 | % | 29.2 | % | ||
| · | Net Sales increased 7% over the prior year, a near record, even with below average snowfall. New<br>product launches focused on non-truck equipment, increased parts and accessories sales, as well as price recovery on higher material<br>costs were the main drivers. | |||||
| --- | --- | |||||
| · | Adjusted EBITDA was slightly up compared to the prior year, due to increases in volume, partially<br>offset by increased labor and healthcare costs. | |||||
| --- | --- | |||||
| · | Adjusted EBITDA Margin was 170 basis points lower as a result of the increased healthcare and labor<br>costs and the dilutive effect of price recovery on equivalent material inflation. | |||||
| --- | --- |
Work Truck Solutions Segment FullYear 2019 Results
| $ in millions<br> <br>(except Adjusted EBITDA Margin) | FY 2019 | FY 2018 | ||||
|---|---|---|---|---|---|---|
| Net Sales | $ | 278.1 | $ | 248.8 | ||
| Adjusted EBITDA | $ | 27.4 | $ | 16.0 | ||
| Adjusted EBITDA Margin | 9.8 | % | 6.4 | % | ||
| · | Net Sales increased 12% over the prior year, primarily driven by strong demand across Class 4 through<br>8 end markets along with price recovery on higher material costs and greater predictability of chassis supply. | |||||
| --- | --- |
Douglas Dynamics – Fourth Quarter and Full Year2019
Page 4
| · | Adjusted EBITDA increased by 70% while Adjusted EBITDA Margin improved by 340 basis points compared<br>to the prior year, mainly attributable to higher volumes, global sourcing efforts, DDMS improvement initiatives and continued lower<br>spending. |
|---|
Dividend & Liquidity
| · | A quarterly cash dividend of $0.2725 per share of the Company's common stock was declared on December<br>9, 2019, and paid on December 31, 2019, to stockholders of record as of the close of business on December 20, 2019. |
|---|---|
| · | In addition, the Company’s Board of Directors approved and declared a quarterly cash dividend<br>of $0.28 per share for the first quarter of 2020, which equates to a projected full year annual increase in the dividend of $0.03<br>per diluted share. The declared dividend will be paid on March 31, 2020 to stockholders of record as of the close of business on<br>March 20, 2020. |
| --- | --- |
| · | Net Cash Provided by Operating Activities for 2019 increased to a record $77.3 million from $58.2<br>million during 2018. Free Cash Flow for full year 2019 increased to $65.8 million from $48.5 million for full year 2018, as a result<br>of favorable changes in working capital relating to a decrease in inventory levels that were built up in anticipation of tariffs<br>and rising prices. |
| --- | --- |
Outlook
“Our 2020 outlook reflects ongoing confidence in our progress towards our long-term goals,” McCormick noted. “In the near term, we believe labor shortages, supply chain constraints, and ongoing chassis delivery issues will hinder our growth somewhat, but expect to see gradual improvements in Class 8 chassis delivery times during the second half of 2020. We remain focused on making the necessary investments in the business, continuing to develop our people, and delivering improvements through DDMS to ensure we successfully execute our long-term growth plan.”
The 2020 financial outlook is as follows:
| · | Net Sales are expected to be between $530 million and $590 million. |
|---|---|
| · | Adjusted EBITDA is predicted to range from $95 million to $120 million. |
| --- | --- |
| · | Adjusted Earnings Per Share Are expected to be in the range of $1.95 per share to $2.75 per<br> share. |
| · | The effective tax rate is expected to be between 23% and 25%. |
| --- | --- |
| · | The 2020 outlook assumes that that the Company’s core markets will experience average snowfall<br>levels. |
| --- | --- |
Earnings Conference Call Information
The Company will host a conference call on Tuesday, February 25, 2020 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). To join the conference call, please dial (877) 369-6591 domestically, or (253) 237-1176 internationally.
The call will also be available via the Investor Relations section of the Company’s website at www.douglasdynamics.com. For those who cannot listen to the live broadcast, replays will be available for one week following the call.
Douglas Dynamics – Fourth Quarter and Full Year2019
Page 5
About Douglas Dynamics
Home to the most trusted brands in the industry, Douglas Dynamics is North America’s premier manufacturer and up-fitter of commercial work truck attachments and equipment. For more than 70 years, the Company has been innovating products that not only enable people to perform their jobs more efficiently and effectively, but also enable businesses to increase profitability. Through its proprietary Douglas Dynamics Management System (DDMS), the Company is committed to continuous improvement aimed at consistently producing the highest quality products, at industry-leading levels of service and delivery that ultimately drive shareholder value. The Douglas Dynamics portfolio of products and services is separated into two segments: First, the Work Truck Attachments segment, which includes commercial snow and ice control equipment sold under the FISHER®, SNOWEX® and WESTERN® brands. Second, the Work Truck Solutions segment, which includes the up-fit of market leading attachments and storage solutions under the HENDERSON® brand, and the DEJANA® brand and its related sub-brands.
Use of Non-GAAP Financial Measures
This press release contains financial information calculated other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The non-GAAP measures used in this press release are Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted Earnings Per Share, and Free Cash Flow. The Company believes that these non-GAAP measures are useful to investors and other external users of its consolidated financial statements in evaluating the Company’s operating performance as compared to that of other companies. Reconciliations of these non-GAAP measures to the nearest comparable GAAP measures can be found immediately following the Consolidated Statements of Cash Flows included in this press release.
Adjusted EBITDA represents net income before interest, taxes, depreciation, and amortization, as further adjusted for stock-based compensation, severance, litigation proceeds, pension termination costs, non-cash purchase accounting adjustments and certain charges related to certain unrelated legal fees and consulting fees. The Company uses Adjusted EBITDA in evaluating the Company’s operating performance because it provides the Company and its investors with additional tools to compare its operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect the Company’s core operations. The Company’s management also uses Adjusted EBITDA for planning purposes, including the preparation of its annual operating budget and financial projections, and to evaluate the Company’s ability to make certain payments, including dividends, in compliance with its senior credit facilities, which is determined based on a calculation of “Consolidated Adjusted EBITDA” that is substantially similar to Adjusted EBITDA.
Adjusted Net Income and Adjusted Diluted Earnings Per Share represents net income and earnings per share (as defined by GAAP), excluding the impact of stock-based compensation, severance, litigation proceeds, pension termination costs, non-cash purchase accounting adjustments, and certain charges related to certain unrelated legal fees and consulting fees, net of their income tax impact. Management believes that Adjusted Net Income and Adjusted Diluted Earnings Per Share are useful in assessing the Company’s financial performance by eliminating expenses and income that are not reflective of the underlying business performance.
Douglas Dynamics – Fourth Quarter and Full Year2019
Page 6
Free Cash Flow is a non-GAAP financial measure that we define as net cash provided by (used in) operating activities less capital expenditures. Free Cash Flow should be evaluated in addition to, and not considered a substitute for, other financial measures such as Net Income and Net Cash Provided by Operating Activities. We believe that free cash flow represents our ability to generate additional cash flow from our business operations.
With respect to the Company’s 2020 guidance, the Company is not able to provide a reconciliation of the non-GAAP financial measures to GAAP because it does not provide specific guidance for the various extraordinary, nonrecurring, or unusual charges and other certain items. These items have not yet occurred, are out of the Company’s control and/or cannot be reasonably predicted. As a result, reconciliation of the non-GAAP guidance measures to GAAP is not available without unreasonable effort and the Company is unable to address the probable significance of the unavailable information.
Forward Looking Statements
This press release contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation, product demand, the payment of dividends, and availability of financial resources. These statements are often identified by use of words such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "should," "could," "may," "plan," "project," "predict," "will" and similar expressions and include references to assumptions and relate to our future prospects, developments, and business strategies. Such statements involve known and unknown risks, uncertainties and other factors that could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, weather conditions, particularly lack of or reduced levels of snowfall and the timing of such snowfall, including as a result of global climate change, our inability to maintain good relationships with our distributors, our inability to maintain good relationships with the original equipment manufacturers with whom we currently do significant business, lack of available or favorable financing options for our end-users, distributors or customers, the potential that we may be required to recognize goodwill impairment attributable to our Work Truck Solutions segment, increases in the price of steel or other materials, including as a result of tariffs, necessary for the production of our products that cannot be passed on to our distributors, increases in the price of fuel or freight, a significant decline in economic conditions, the inability of our suppliers and original equipment manufacturer partners to meet our volume or quality requirements, inaccuracies in our estimates of future demand for our products, our inability to protect or continue to build our intellectual property portfolio, the effects of laws and regulations and their interpretations on our business and financial condition, our inability to develop new products or improve upon existing products in response to end-user needs, losses due to lawsuits arising out of personal injuries associated with our products, factors that could impact the future declaration and payment of dividends, our inability to compete effectively against competition, our inability to achieve the projected financial performance with the assets of Dejana Truck & Utility Equipment Company, Inc., which we acquired in 2016, and unexpected costs or liabilities related to such acquisitions, as well as those discussed in the section entitled “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2018. You should not place undue reliance on these forward-looking statements. In addition, the forward-looking statements in this release speak only as of the date hereof and we undertake no obligation, except as required by law, to update or release any revisions to any forward-looking statement, even if new information becomes available in the future.
Douglas Dynamics – Fourth Quarter and Full Year2019
Page 7
Financial Statements
Douglas Dynamics, Inc.
Consolidated Balance Sheets
(In thousands)
| December 31, | December 31, | |||
|---|---|---|---|---|
| 2019 | 2018 | |||
| (unaudited) | (unaudited) | |||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 35,665 | $ | 27,820 |
| Accounts receivable, net | 87,871 | 81,485 | ||
| Inventories | 77,942 | 81,996 | ||
| Inventories - truck chassis floor plan | 6,539 | 4,204 | ||
| Refundable income taxes paid | - | - | ||
| Prepaid and other current assets | 3,511 | 3,590 | ||
| Total current assets | 211,528 | 199,095 | ||
| Property, plant, and equipment, net | 58,444 | 55,195 | ||
| Goodwill | 241,006 | 241,006 | ||
| Other intangible assets, net | 163,722 | 174,678 | ||
| Operating lease - right of use asset | 22,557 | - | ||
| Other long-term assets | 8,438 | 6,219 | ||
| Total assets | $ | 705,695 | $ | 676,193 |
| Liabilities and stockholders' equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 16,113 | $ | 18,703 |
| Accrued expenses and other current liabilities | 26,496 | 23,306 | ||
| Floor plan obligations | 6,539 | 4,204 | ||
| Operating lease liability - current | 3,822 | - | ||
| Income taxes payable | 2,990 | 106 | ||
| Current portion of long-term debt | 22,143 | 32,749 | ||
| Total current liabilities | 78,103 | 79,068 | ||
| Retiree health benefit obligation | 6,338 | 6,240 | ||
| Pension obligation | -- | 2,129 | ||
| Deferred income taxes | 47,211 | 48,198 | ||
| Long-term debt, less current portion | 222,081 | 242,946 | ||
| Operating lease liablility - noncurrent | 18,981 | - | ||
| Other long-term liabilities | 19,818 | 14,856 | ||
| Total stockholders' equity | 313,163 | 282,756 | ||
| Total liabilities and stockholders' equity | $ | 705,695 | $ | 676,193 |
Douglas Dynamics – Fourth Quarter and Full Year2019
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Douglas Dynamics, Inc.
Consolidated Statements of Income
(In thousands,except share and per share data)
| Three Month Period Ended | Twelve Month Period Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | |||||||||
| (unaudited) | (unaudited) | |||||||||||
| Net sales | $ | 160,298 | $ | 151,825 | $ | 571,710 | $ | 524,067 | ||||
| Cost of sales | 113,959 | 107,731 | 402,893 | 369,177 | ||||||||
| Gross profit | 46,339 | 44,094 | 168,817 | 154,890 | ||||||||
| Selling, general, and administrative expense | 18,608 | 16,677 | 71,288 | 69,958 | ||||||||
| Intangibles amortization | 2,739 | 2,867 | 10,956 | 11,472 | ||||||||
| Income from operations | 24,992 | 24,550 | 86,573 | 73,460 | ||||||||
| Interest expense, net | (4,172 | ) | (4,523 | ) | (16,782 | ) | (16,943 | ) | ||||
| Pension termination | (6,609 | ) | - | (6,609 | ) | - | ||||||
| Other expense, net | (149 | ) | (279 | ) | (565 | ) | (758 | ) | ||||
| Income before taxes | 14,062 | 19,748 | 62,617 | 55,759 | ||||||||
| Income tax expense | 2,502 | 5,052 | 13,451 | 11,854 | ||||||||
| Net income | $ | 11,560 | $ | 14,696 | $ | 49,166 | $ | 43,905 | ||||
| Weighted average number of common shares outstanding: | ||||||||||||
| Basic | 22,795,412 | 22,700,991 | 22,779,057 | 22,681,888 | ||||||||
| Diluted | 22,831,077 | 22,726,913 | 22,813,711 | 22,704,856 | ||||||||
| Earnings per share: | ||||||||||||
| Basic earnings per common share attributable to common shareholders | $ | 0.50 | $ | 0.64 | $ | 2.13 | $ | 1.91 | ||||
| Earnings per common share assuming dilution attributable to common shareholders | $ | 0.50 | $ | 0.63 | $ | 2.11 | $ | 1.89 | ||||
| Cash dividends declared and paid per share | $ | 0.27 | $ | 0.27 | $ | 1.09 | $ | 1.06 |
Douglas Dynamics – Fourth Quarter and Full Year2019
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Douglas Dynamics, Inc.
Consolidated Statements of Cash Flows
(In thousands)
| Twelve Month Period Ended | ||||||
|---|---|---|---|---|---|---|
| December 31,<br><br> 2019 | December 31,<br><br> 2018 | |||||
| (unaudited) | ||||||
| Operating activities | ||||||
| Net income | $ | 49,166 | $ | 43,905 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 19,212 | 19,085 | ||||
| Loss on disposal of fixed assets | - | 185 | ||||
| Amortization of deferred financing costs and debt discount | 1,214 | 1,214 | ||||
| Stock-based compensation | 3,239 | 4,550 | ||||
| Provision for losses on accounts receivable | 1,361 | 531 | ||||
| Deferred income taxes | (2,123 | ) | 9,551 | |||
| Earnout liability | (417 | ) | (900 | ) | ||
| Changes in operating assets and liabilities, net of acquisitions: | ||||||
| Accounts receivable | (7,747 | ) | (511 | ) | ||
| Inventories | 4,054 | (12,347 | ) | |||
| Prepaid assets, refundable income taxes paid and other assets | (2,140 | ) | (1,114 | ) | ||
| Accounts payable | (2,562 | ) | 3,039 | |||
| Accrued expenses and other current liabilities | 6,491 | 312 | ||||
| Benefit obligations and other long-term liabilities | 7,548 | (9,319 | ) | |||
| Net cash provided by operating activities | 77,296 | 58,181 | ||||
| Investing activities | ||||||
| Capital expenditures | (11,533 | ) | (9,690 | ) | ||
| Net cash used in investing activities | (11,533 | ) | (9,690 | ) | ||
| Financing activities | ||||||
| Shares withheld on restricted stock vesting paid for employees’ taxes | (50 | ) | (23 | ) | ||
| Dividends paid | (25,183 | ) | (24,383 | ) | ||
| Repayment of long-term debt | (32,685 | ) | (33,140 | ) | ||
| Net cash used in financing activities | (57,918 | ) | (57,546 | ) | ||
| Change in cash and cash equivalents | 7,845 | (9,055 | ) | |||
| Cash and cash equivalents at beginning of year | 27,820 | 36,875 | ||||
| Cash and cash equivalents at end of year | $ | 35,665 | $ | 27,820 | ||
| Non-cash operating and financing activities | ||||||
| Truck chassis inventory acquired through floorplan obligations | $ | 44,929 | $ | 38,129 |
Douglas Dynamics – Fourth Quarter and Full Year2019
Page 10
Douglas Dynamics, Inc.
Net Income to Adjusted EBITDA reconciliation (unaudited)
(In thousands)
| Three month period ended December 31, | Twelve month period ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Net income | $ | 11,560 | $ | 14,696 | $ | 49,166 | $ | 43,905 | ||||
| Interest expense - net | 4,172 | 4,523 | 16,782 | 16,943 | ||||||||
| Income tax expense | 2,502 | 5,052 | 13,451 | 11,854 | ||||||||
| Depreciation expense | 2,138 | 2,003 | 8,256 | 7,613 | ||||||||
| Intangibles amortization | 2,739 | 2,867 | 10,956 | 11,472 | ||||||||
| EBITDA | 23,111 | 29,141 | 98,611 | 91,787 | ||||||||
| Stock-based compensation | 178 | 370 | 3,239 | 4,550 | ||||||||
| Pension termination | 6,609 | - | 6,609 | - | ||||||||
| Purchase accounting (1) | (200 | ) | (900 | ) | (417 | ) | (900 | ) | ||||
| Other charges (2) | 212 | 158 | 63 | 1,006 | ||||||||
| Adjusted EBITDA | $ | 29,910 | $ | 28,769 | $ | 108,105 | $ | 96,443 |
(1) Reflects $217 reversal of earn-out compensation related to Henderson in the year ended December 31, 2019. Represents $200 reversal of earn-out compensation related to Dejana for the quarter and year ended December 31, 2019. Represents $900 reversal of earn-out compensation related to Dejana for the quarter and year ended December 31, 2018.
(2) Reflects one time, unrelated legal, severance and consulting fees, and loss on disposal of fixed assets related to facility relocation for the periods presented.
Douglas Dynamics, Inc.
Segment Disclosures (unaudited)
(In thousands)
| Three Months Ended<br><br> December 31, 2019 | Three Months Ended<br><br> December 31, 2018 | Twelve Months Ended<br><br> December 31, 2019 | Twelve Months Ended<br><br> December 31, 2018 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Work Truck Attachments | ||||||||||||
| Net Sales | $ | 79,937 | $ | 77,313 | $ | 293,630 | $ | 275,244 | ||||
| Adjusted EBITDA | $ | 21,324 | $ | 20,170 | $ | 80,747 | $ | 80,396 | ||||
| Adjusted EBITDA Margin | 26.7 | % | 26.1 | % | 27.5 | % | 29.2 | % | ||||
| Work Truck Solutions | ||||||||||||
| Net Sales | $ | 80,361 | $ | 74,512 | $ | 278,080 | $ | 248,823 | ||||
| Adjusted EBITDA | $ | 8,586 | $ | 8,599 | $ | 27,358 | $ | 16,047 | ||||
| Adjusted EBITDA Margin | 10.7 | % | 11.5 | % | 9.8 | % | 6.4 | % |
Douglas Dynamics – Fourth Quarter and Full Year2019
Page 11
Douglas Dynamics, Inc.
Reconciliation of Net Income to Adjusted Net Income (unaudited)
(In thousands, except share and per share data)
| Three month period ended December 31, | Twelve month period ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Net income | $ | 11,560 | $ | 14,696 | $ | 49,166 | $ | 43,905 | ||||
| Adjustments: | ||||||||||||
| Stock based compensation | 178 | 370 | 3,239 | 4,550 | ||||||||
| Pension termination | 6,609 | - | 6,609 | - | ||||||||
| Purchase accounting (1) | (200 | ) | (900 | ) | (417 | ) | (900 | ) | ||||
| Other charges (2) | 212 | 158 | 63 | 1,006 | ||||||||
| Tax effect on adjustments | (1,699 | ) | 92 | (2,373 | ) | (1,164 | ) | |||||
| Adjusted net income | $ | 16,660 | $ | 14,416 | $ | 56,287 | $ | 47,397 | ||||
| Weighted average basic common shares outstanding | 22,795,412 | 22,700,991 | 22,779,057 | 22,681,888 | ||||||||
| Weighted average common shares outstanding assuming dilution | 22,831,077 | 22,726,913 | 22,813,711 | 22,704,856 | ||||||||
| Adjusted earnings per common share - dilutive | $ | 0.72 | $ | 0.62 | $ | 2.42 | $ | 2.04 | ||||
| GAAP diluted earnings per share | $ | 0.50 | $ | 0.63 | $ | 2.11 | $ | 1.89 | ||||
| Adjustments net of income taxes: | ||||||||||||
| Stock based compensation | - | 0.02 | 0.11 | 0.15 | ||||||||
| Pension termination | 0.22 | - | 0.22 | - | ||||||||
| Purchase accounting (1) | (0.01 | ) | (0.03 | ) | (0.02 | ) | (0.03 | ) | ||||
| Other charges (2) | 0.01 | - | - | 0.03 | ||||||||
| Adjusted diluted earnings per share | $ | 0.72 | $ | 0.62 | $ | 2.42 | $ | 2.04 |
(1) Reflects $217 reversal of earn-out compensation related to Henderson in the year ended December 31, 2019. Represents $200 reversal of earn-out compensation related to Dejana for the quarter and year ended December 31, 2019. Represents $900 reversal of earn-out compensation related to Dejana for the quarter and year ended December 31, 2018.
(2) Reflects one time, unrelated legal, severance and consulting fees, and loss on disposal of fixed assets related to facility relocation for the periods presented.
Douglas Dynamics, Inc.
Free Cash Flow reconciliation (unaudited)
(In thousands)
| Three month period ended December 31, | Twelve month period ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Net cash provided by operating activities | $ | 98,465 | $ | 76,085 | $ | 77,296 | $ | 58,181 | ||||
| Acquisition of property and equipment | (3,732 | ) | (3,388 | ) | (11,533 | ) | (9,690 | ) | ||||
| Free cash flow | $ | 94,733 | $ | 72,697 | $ | 65,763 | $ | 48,491 |