Part I. Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2023, covering Balance Sheets, Income, Cash Flows, and Equity - The company operates in two segments: **Work Truck Attachments** (commercial snow/ice management) and **Work Truck Solutions** (municipal snow/ice control and truck up-fitting services)[19](index=19&type=chunk)[20](index=20&type=chunk) - The **Work Truck Attachments** segment is highly seasonal, with sales influenced by snowfall levels, leading to lower Q1 sales due to pre-season programs in Q2 and Q3[22](index=22&type=chunk) [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $2,900 | $20,670 | | Accounts receivable, net | $48,223 | $86,765 | | Inventories | $184,583 | $136,501 | | Total current assets | $247,607 | $252,921 | | Total assets | $585,288 | $596,891 | | **Liabilities & Equity** | | | | Accounts payable | $23,081 | $49,252 | | Short term borrowings | $52,000 | $0 | | Total current liabilities | $114,405 | $100,431 | | Long-term debt, less current portion | $192,298 | $195,299 | | Total stockholders' equity | $216,400 | $237,102 | | Total liabilities and stockholders' equity | $585,288 | $596,891 | [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net sales | $82,545 | $102,601 | | Gross profit | $11,275 | $21,064 | | Loss from operations | $(13,797) | $(2,939) | | Net loss | $(13,110) | $(3,908) | | Diluted loss per share | $(0.58) | $(0.18) | | Cash dividends declared and paid per share | $0.30 | $0.29 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(56,916) | $(25,993) | | Net cash used in investing activities | $(2,748) | $(2,198) | | Net cash provided by (used in) financing activities | $41,894 | $(561) | | Change in cash and cash equivalents | $(17,770) | $(28,752) | | Cash and cash equivalents at end of period | $2,900 | $8,212 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Disaggregated Revenue by Segment (in thousands) | Segment | Q1 2023 Revenue | Q1 2022 Revenue | | :--- | :--- | :--- | | Work Truck Attachments | $19,246 | $45,776 | | Work Truck Solutions | $63,299 | $56,825 | | **Total Revenue** | **$82,545** | **$102,601** | - On January 5, 2023, the company amended its Credit Agreement, increasing the revolving commitment by **$50 million** to a total of **$150 million**[61](index=61&type=chunk) - As of March 31, 2023, the company had **$205.0 million** outstanding on its term loan and **$52.0 million** on its revolving credit facility, with **$97.5 million** remaining availability[65](index=65&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial results, noting a **19.6% decrease in net sales to $82.5 million** and an increased **net loss of $13.1 million**, primarily due to low snowfall impacting Work Truck Attachments sales - Low snowfall during the 2022-2023 winter season, approximately **14% below the 10-year average**, significantly impacted the company's results, especially in key East Coast markets[105](index=105&type=chunk)[134](index=134&type=chunk) - Ongoing inflationary pressures on materials and labor are expected to impact 2023 profitability, with mitigation efforts through price increases and surcharges potentially affecting margins due to timing differences[140](index=140&type=chunk) Segment Net Sales (in thousands) | Segment | Q1 2023 | Q1 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Work Truck Attachments | $19,246 | $45,776 | $(26,530) | (58.0)% | | Work Truck Solutions | $63,299 | $56,825 | $6,474 | 11.4% | | **Total Net Sales** | **$82,545** | **$102,601** | **$(20,056)** | **(19.6)%** | Segment Adjusted EBITDA (in thousands) | Segment | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Work Truck Attachments | $(10,231) | $3,044 | $(13,275) | | Work Truck Solutions | $2,857 | $1,592 | $1,265 | | **Total Adjusted EBITDA** | **$(7,374)** | **$4,636** | **$(12,010)** | [Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate fluctuations on variable-rate debt and commodity price risk from steel, managed through interest rate swaps and price adjustments - The company faces interest rate risk from its variable-rate term loan (**$205.0 million** outstanding) and revolving credit facility (**$52.0 million** outstanding as of March 31, 2023)[148](index=148&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk) - Interest rate swap agreements mitigate volatility, including a **$175,000** notional swap through May 2024 and a **$125,000** notional swap from May 2024 through June 2026[67](index=67&type=chunk)[69](index=69&type=chunk)[150](index=150&type=chunk) - Steel is a primary commodity risk, representing **19.0% of Q1 2023 revenue**, managed through price increases and surcharges without hedging instruments[152](index=152&type=chunk) [Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of the period end[153](index=153&type=chunk) - No material changes occurred in internal control over financial reporting during the quarter[154](index=154&type=chunk) Part II. Other Information [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various ordinary course litigation matters, none of which are expected to materially impact operations or financial position - No litigation is expected to have a material adverse effect on the company's financial position[156](index=156&type=chunk) [Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) No significant changes to the company's risk factors were reported from those in the Annual Report on Form 10-K for FY2022 - No significant changes to risk factors were reported for the period[158](index=158&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not sell unregistered equity securities or repurchase shares in Q1 2023, leaving **$44.0 million** available under the stock repurchase plan - No unregistered securities were sold during the three months ended March 31, 2023[159](index=159&type=chunk) Issuer Purchases of Equity Securities (Q1 2023) | Period | Total number of shares purchased | Average price paid per share | Approximate dollar value of shares still available to be purchased under the program (000's) | | :--- | :--- | :--- | :--- | | Jan 2023 | 0 | $ - | $44,000 | | Feb 2023 | 0 | $ - | $44,000 | | Mar 2023 | 0 | $ - | $44,000 | | **Total** | **0** | **$ -** | **$44,000** | [Defaults Upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[163](index=163&type=chunk) [Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures for the period - None[164](index=164&type=chunk) [Other Information](index=42&type=section&id=Item%205.%20Other%20Information) The company reported no other information for the period - None[165](index=165&type=chunk) [Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including CEO/CFO certifications and inline XBRL financial statements - Exhibits filed include **CEO/CFO certifications (31.1, 31.2, 32.1)** and **Inline XBRL data (101, 104)**[166](index=166&type=chunk)

Financial Data and Key Metrics Changes - The company reported net sales of $82.5 million and gross profit of $11.3 million for Q1 2023, down from $102.6 million and $21.1 million in Q1 2022, respectively, primarily due to lower volumes from reduced snowfall [18][19] - GAAP net loss was $13.1 million or negative $0.58 per diluted share, compared to a loss of $3.9 million or negative $0.18 per diluted share in the prior year [19] - Adjusted EBITDA was negative $7.4 million, a decline from positive $4.6 million in the same period last year, significantly impacted by lower sales volumes [27] Business Line Data and Key Metrics Changes - The Work Truck Attachments segment generated net sales of $19.3 million, down from $45.8 million in Q1 2022, with adjusted EBITDA at negative $10.2 million compared to positive $3 million last year, affected by low snowfall [20] - The Work Truck Solutions segment saw an 11.4% increase in net sales to $63.3 million from $56.8 million in the previous year, with adjusted EBITDA nearly doubling from $1.6 million to $2.9 million, driven by higher volumes and improved pricing [21][12] Market Data and Key Metrics Changes - The snow season ended approximately 14% below the 10-year average, with the East Coast experiencing its lowest snowfall in decades, impacting dealer inventories and preseason orders [28] - Dealer inventories were above the 5-year average at the end of the season, which is expected to affect preseason orders as they restock for the next winter [9] Company Strategy and Development Direction - The company remains committed to achieving $3 of EPS by 2025, viewing the current low snowfall as a short-term issue that does not affect long-term targets [5][24] - The company is implementing a "low snowfall playbook" to mitigate impacts, including curtailing discretionary spending and delaying some investments [28][31] - Positive demand dynamics in snow and ice control are emerging, driven by customer demand for immediate services and an expanding snow belt [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the medium to long-term outlook despite current challenges, noting improvements in material price inflation and labor market conditions [7] - The company anticipates that supply chain disruptions will gradually improve, allowing for growth in the Solutions segment [13][29] - Management emphasized the importance of focusing on controllable factors to enhance profitability and prepare for future growth [45] Other Important Information - SG&A expenses increased to $25.1 million, primarily due to inflationary pressures [26] - The company paid a quarterly cash dividend of $0.295 per share, maintaining its commitment to dividends despite the current challenges [32] Q&A Session Summary Question: How to bridge the gap from 2023 guidance to 2025 targets? - Management identified four key drivers: return to average snowfall, new product introductions, baseline profit improvements, and price versus cost improvements [39] Question: What is the East Coast's significance in the Attachments business? - Management indicated that the East Coast is a significant market, and adjustments in dealer inventories will impact preseason orders [40] Question: Update on chassis supply constraints? - Management noted that while there are pockets of improvement, the situation remains unpredictable, and they are focused on improving baseline profitability in the meantime [44] Question: Will the dividend policy change due to reduced earnings outlook? - Management confirmed that the dividend remains a priority and will not change despite the current challenges [50] Question: Can the company still reach the low end of its guidance with weak snowfall in Q4? - Management stated that the guidance accounts for various snowfall outcomes and that they believe they can still meet the low end of the range [52] Question: Outlook for inventory levels and cash flow? - Management projected decent free cash flow for the year and indicated that inventory levels will normalize as the year progresses [56]

Average Over Past Five Years2: FCF: ~$46 Million FCF as a % of Adjusted Net Income: ~110%3 CapEx: ~2% of Sales | --- | |------------------------| | Strong Balance Sheet | | Growing Free Cash Flow | | Support Growth Plans | $48 $66 $39 $49 $28 $0 $10 $20 $30 $40 $50 $60 $70 $80 2018 2019 2020 2021 2022 Free Cash Flow (FCF)1($ in millions) $46 5-year Avg. 1 Free Cash Flow defined as cash from operating activities less capital expenditures and Free Cash Flow Conversion is defined as Free Cash Flow / cash from ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Douglas Dynamics manufactures and upfits commercial work truck attachments and equipment across two segments: Work Truck Attachments and Work Truck Solutions [Overview](index=5&type=section&id=Item%201.%20Business%20-%20Overview) The company operates through two segments: Work Truck Attachments for snow and ice control products, and Work Truck Solutions for municipal products and vehicle upfitting - The company operates through two segments: **Work Truck Attachments** (brands: FISHER®, SNOWEX®, WESTERN®) and **Work Truck Solutions** (brands: HENDERSON®, DEJANA®)[19](index=19&type=chunk) - In 2022, snow and ice control equipment accounted for **85% of net sales** in the Work Truck Attachments segment, with parts and accessories comprising the rest[20](index=20&type=chunk) - The Work Truck Solutions segment serves approximately **2,800 customers**, including governmental agencies and municipalities, as a premier upfitter for Class 3-8 trucks[24](index=24&type=chunk) [Our Industry](index=6&type=section&id=Item%201.%20Business%20-%20Our%20Industry) Industry demand for Work Truck Attachments is driven by equipment replacement cycles and prior season snowfall, while Work Truck Solutions is influenced by macroeconomic trends and municipal budgets - Demand for snow and ice control equipment is primarily driven by the replacement cycle, with snowplows typically replaced every **9 to 12 years**[26](index=26&type=chunk) - Annual sales are significantly influenced by the prior snow season's snowfall levels, as heavy snowfall increases equipment wear and tear[27](index=27&type=chunk) - The company implemented significant price increases in **2021 and 2022**, ranging from mid-single digits to low double-digits, in response to inflation[31](index=31&type=chunk) [Our Competitive Strengths](index=8&type=section&id=Item%201.%20Business%20-%20Our%20Competitive%20Strengths) The company's competitive strengths include strong brand equity, a broad product offering, an extensive distributor network, operational efficiency, robust cash flow, and an experienced management team - Key competitive strengths include strong brand equity, a broad product line, an extensive North American distributor network with approximately **3,100 points of sale**, operational efficiency, strong cash flow, and an experienced management team[36](index=36&type=chunk)[37](index=37&type=chunk)[39](index=39&type=chunk) [Our Business Strategy](index=9&type=section&id=Item%201.%20Business%20-%20Our%20Business%20Strategy) The company's business strategy focuses on maximizing cash flow through product innovation, network optimization, aggressive asset management, and a lean enterprise platform (DDMS) - The core business strategy aims to maximize cash flow for reinvestment, dividends, debt reduction, and stock repurchases[43](index=43&type=chunk) - Key strategic pillars include continuous product innovation, optimization of the distributor and customer network, aggressive asset management, and a flexible, lean manufacturing platform (DDMS)[43](index=43&type=chunk)[44](index=44&type=chunk)[46](index=46&type=chunk) [Order Backlog](index=10&type=section&id=Item%201.%20Business%20-%20Order%20Backlog) The company's total order backlog increased from **$315.4 million** in 2021 to **$368.7 million** in 2022 Order Backlog Comparison | Date | Backlog (in millions) | | :--- | :--- | | December 31, 2022 | $368.7 | | December 31, 2021 | $315.4 | [Human Capital Management](index=11&type=section&id=Item%201.%20Business%20-%20Human%20Capital%20Management) As of December 31, 2022, Douglas Dynamics employed **1,813 people**, emphasizing a culture of integrity, teamwork, and talent development through initiatives like Douglas Dynamics University - As of December 31, 2022, the company employed **1,813 people**, with all but **14** based in the US and no union representation[53](index=53&type=chunk) - The company promotes talent development through its internal **Douglas Dynamics University (DDU)**, offering a balanced approach of instruction, interaction, and application[59](index=59&type=chunk) [Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to snowfall dependency, economic conditions, supply chain disruptions, operational reliance on suppliers and distributors, cybersecurity, debt load, and regulatory compliance [Risks Related to Weather and Seasonality](index=14&type=section&id=Item%201A.%20Risk%20Factors%20-%20Weather%20and%20Seasonality) The company's financial results, especially for Work Truck Attachments, are highly dependent on snowfall levels, with reduced snowfall potentially leading to lower sales and cash flow - The company's financial results, particularly for the Work Truck Attachments segment, depend primarily on snowfall levels, where a lack of snowfall can adversely affect sales and cash flow[75](index=75&type=chunk) [Risks Related to Economic Conditions](index=15&type=section&id=Item%201A.%20Risk%20Factors%20-%20Economic%20Conditions) Economic conditions, including potential downturns, reduced government spending, and volatile steel prices (13% of 2022 revenue), pose significant risks to the company's demand and margins - The price of steel poses a significant risk, as raw steel purchases were equivalent to approximately **13% of revenue in 2022**, with volatility potentially impacting gross margins[89](index=89&type=chunk) - The COVID-19 pandemic has adversely impacted the business through supply chain disruptions and difficulty obtaining chassis, with potential for continued effects[85](index=85&type=chunk) [Risks Related to Business and Operations](index=17&type=section&id=Item%201A.%20Risk%20Factors%20-%20Business%20and%20Operations) Operational risks include dependence on outside suppliers and OEMs for components and chassis, potential cybersecurity breaches, reliance on senior management, and maintaining distributor relationships - The company relies on outside suppliers and OEMs for components and truck chassis, facing difficulties in **2020, 2021, and 2022** due to computer chip shortages that deferred sales[96](index=96&type=chunk) - The business depends on its network of distributors, and losing a substantial portion of this base could significantly reduce sales[100](index=100&type=chunk) [Risks Related to Capital Structure](index=23&type=section&id=Item%201A.%20Risk%20Factors%20-%20Capital%20Structure) As of December 31, 2022, the company's **$207.7 million** senior secured indebtedness poses risks to financial flexibility and exposes it to interest rate fluctuations - As of December 31, 2022, the company had approximately **$207.7 million** of senior secured indebtedness, which could adversely affect operations and cash flow[122](index=122&type=chunk) - Borrowings under senior credit facilities are at variable interest rates, exposing the company to interest rate risk that could increase debt service obligations[124](index=124&type=chunk) [Properties](index=25&type=section&id=Item%202.%20Properties) The company's facilities include a leased corporate headquarters in Milwaukee, five owned manufacturing sites, fifteen leased facilities across eight states, and a leased sourcing office in China Key Company Facilities (as of Dec 31, 2022) | Location | Ownership | Function | | :--- | :--- | :--- | | Milwaukee, Wisconsin | Leased | Corporate headquarters | | Milwaukee, Wisconsin | Owned | Work Truck Attachments | | Rockland, Maine | Owned | Work Truck Attachments | | Madison Heights, Michigan | Owned | Work Truck Attachments | | Manchester, Iowa | Owned | Work Truck Solutions | | Huntley, Illinois | Owned | Work Truck Solutions | [Legal Proceedings](index=25&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various litigation, primarily product liability and intellectual property disputes, none of which management deems material to operations or financial position - The company is engaged in various litigation, including product liability and intellectual property disputes, but management does not believe any current litigation is material[131](index=131&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=27&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE under 'PLOW', pays quarterly dividends, and initiated a **$50.0 million** stock repurchase plan in 2022, with **$44.0 million** remaining - The company's common stock trades on the NYSE under the symbol "**PLOW**"[141](index=141&type=chunk) 2022 Share Repurchase Activity | Period | Total Shares Purchased | Average Price Paid | Value (in millions) | | :--- | :--- | :--- | :--- | | Year Ended Dec 31, 2022 | 171,088 | $35.07 | $6.0 | | **Remaining Authorization** | | | **$44.0** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, net sales grew **13.8% to $616.1 million**, net income increased to **$38.6 million**, but gross margin declined due to inflation, and operating cash flow decreased to **$40.0 million** due to working capital changes [Results of Operations](index=29&type=section&id=Item%207.%20MD%26A%20-%20Results%20of%20Operations) In 2022, net sales increased **13.8% to $616.1 million** and net income grew to **$38.6 million**, driven by pricing and volume, despite gross margin contraction due to inflation Consolidated Statement of Income (Loss) Summary (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net sales | $616,068 | $541,453 | $480,154 | | Gross profit | $151,456 | $141,872 | $128,280 | | Income (loss) from operations | $58,753 | $51,135 | $(75,140) | | Net income (loss) | $38,609 | $30,691 | $(86,553) | Net Sales by Segment (in thousands) | Segment | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Work Truck Attachments | $382,296 | $325,707 | $252,838 | | Work Truck Solutions | $233,772 | $215,746 | $227,316 | | **Total** | **$616,068** | **$541,453** | **$480,154** | - In 2020, the company recorded a significant goodwill impairment charge of **$127.9 million** related to its Municipal and Dejana reporting units, primarily due to COVID-19 economic conditions[154](index=154&type=chunk)[180](index=180&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Item%207.%20MD%26A%20-%20Liquidity%20and%20Capital%20Resources) The company's liquidity at year-end 2022 included **$20.7 million** cash and **$99.5 million** borrowing availability, with operating cash flow decreasing to **$40.0 million** due to working capital changes Cash Flow Summary (in thousands) | Cash Flow Activity | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $40,030 | $60,535 | $53,366 | | Net cash used in investing activities | $(12,047) | $(11,208) | $(14,490) | | Net cash used in financing activities | $(44,277) | $(53,393) | $(33,511) | - The **$17.1 million** decrease in 2022 operating cash flow was primarily due to unfavorable working capital changes, including increased accounts receivable and inventory[215](index=215&type=chunk) - In January 2023, the company increased its revolving credit facility commitment by **$50.0 million** to a total of **$150.0 million**[207](index=207&type=chunk) [Non-GAAP Financial Measures](index=40&type=section&id=Item%207.%20MD%26A%20-%20Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like Adjusted EBITDA, which increased **9.2% to $86.8 million** in 2022, and Adjusted diluted EPS, which rose to **$1.84**, while free cash flow decreased to **$28.0 million** Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net income (loss) | $38,609 | $30,691 | $(86,553) | | Adjustments (Interest, Taxes, D&A, etc.) | $40,943 | $35,952 | $159,655 | | Other Adjustments (Stock Comp, Impairment, etc.) | $7,228 | $12,793 | $1,790 | | **Adjusted EBITDA** | **$86,780** | **$79,536** | **$74,892** | Adjusted Net Income and EPS | | 2022 | 2021 | | :--- | :--- | | Adjusted net income (non-GAAP, in thousands) | $43,514 | $39,392 | | Adjusted earnings per common share - dilutive (non-GAAP) | $1.84 | $1.67 | - Free cash flow, defined as net cash from operations less capital expenditures, decreased to **$28.0 million** in 2022 from **$49.3 million** in 2021[226](index=226&type=chunk)[229](index=229&type=chunk) [Future Obligations and Commitments](index=45&type=section&id=Item%207.%20MD%26A%20-%20Future%20Obligations%20and%20Commitments) As of December 31, 2022, total contractual cash obligations were **$270.1 million**, primarily comprising **$207.7 million** in long-term debt and **$41.3 million** in interest payments Contractual Obligations as of December 31, 2022 (in thousands) | Obligation Type | Total | Less than 1 year | 1 - 3 years | 3 - 5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt | $207,737 | $11,137 | $33,525 | $163,075 | $ - | | Operating leases | $21,038 | $5,678 | $8,800 | $4,383 | $2,177 | | Interest on long-term debt | $41,331 | $12,791 | $23,363 | $5,177 | $ - | | **Total** | **$270,106** | **$29,606** | **$65,688** | **$172,635** | **$2,177** | [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate fluctuations on variable-rate debt, partially mitigated by swaps, and commodity price risk from steel, which it attempts to offset through price adjustments - The company is exposed to interest rate risk from its variable-rate debt, where a hypothetical **1% change** in interest rates would have altered 2022 interest expense by **$0.4 million** on the term loan[260](index=260&type=chunk)[262](index=262&type=chunk) - The company uses interest rate swap agreements to reduce interest rate volatility, holding swaps with notional amounts of **$175.0 million** and **$125.0 million** as of December 31, 2022[263](index=263&type=chunk) - The company faces commodity price risk from steel, a primary raw material, attempting to mitigate cost increases through price adjustments, though not always successfully or timely[266](index=266&type=chunk) [Controls and Procedures](index=48&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of December 31, 2022, management and the independent auditor concluded that the company's disclosure controls and internal control over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were effective as of **December 31, 2022**[269](index=269&type=chunk) - Management believes the company's internal control over financial reporting was effective as of **December 31, 2022**, based on the COSO framework[274](index=274&type=chunk) Part III [Corporate Governance, Compensation, and Other Matters](index=49&type=section&id=Item%2010-14.%20Corporate%20Governance%2C%20Compensation%2C%20and%20Other%20Matters) Information for Items 10-14, covering corporate governance, compensation, and related matters, is incorporated by reference from the 2023 Proxy Statement, with **531,267** securities available for future issuance - Information for Items 10-14, covering directors, executive compensation, security ownership, and related transactions, is incorporated by reference from the company's Proxy Statement[279](index=279&type=chunk)[282](index=282&type=chunk)[288](index=288&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2022) | Plan Category | Securities to be issued upon exercise | Securities remaining available for future issuance | | :--- | :--- | :--- | | Equity Compensation plans approved by security holders | 214,085 | 531,267 | Part IV [Exhibits and Financial Statement Schedules](index=51&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists documents filed as part of the Form 10-K, including consolidated financial statements and an Exhibit Index for all filed exhibits - All required financial statement schedules have been omitted as the necessary information is included in the Notes to the Consolidated Financial Statements[290](index=290&type=chunk) Financial Statements and Notes [Report of Independent Registered Public Accounting Firm](index=57&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued unqualified opinions on the company's consolidated financial statements and internal control over financial reporting, identifying Dejana tradename impairment testing as a Critical Audit Matter - Deloitte & Touche LLP issued an unqualified opinion, concluding that the financial statements are presented fairly and internal control over financial reporting is effective[305](index=305&type=chunk) - Impairment testing of the Dejana indefinite-lived intangible tradename was identified as a Critical Audit Matter due to the significant auditor judgment required for management's estimates on future revenue, royalty rates, and discount rates[313](index=313&type=chunk)[314](index=314&type=chunk) [Consolidated Financial Statements](index=60&type=section&id=Consolidated%20Financial%20Statements) As of December 31, 2022, total assets were **$596.9 million** and shareholders' equity **$237.1 million**, with 2022 net sales of **$616.1 million** and net income of **$38.6 million** Consolidated Balance Sheet Summary (in thousands) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total current assets | $252,921 | $220,431 | | Total assets | $596,891 | $572,476 | | Total current liabilities | $100,431 | $81,916 | | Total long-term debt | $195,299 | $206,058 | | Total shareholders' equity | $237,102 | $214,610 | Consolidated Statement of Income Summary (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net sales | $616,068 | $541,453 | $480,154 | | Gross profit | $151,456 | $141,872 | $128,280 | | Net income (loss) | $38,609 | $30,691 | $(86,553) | | Diluted EPS | $1.63 | $1.29 | $(3.81) | [Notes to Consolidated Financial Statements](index=65&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies and financial data, including the **$127.9 million** goodwill impairment in 2020, debt structure, segment performance, and stock-based compensation - In 2020, the company recorded goodwill impairment charges totaling **$127.9 million** ($47.8 million for Municipal and $80.1 million for Dejana) due to the negative business climate from the COVID-19 pandemic and chassis availability issues[365](index=365&type=chunk) - On January 5, 2023, the company amended its credit agreement, increasing the revolving credit commitment by **$50.0 million** to a total of **$150.0 million**[525](index=525&type=chunk) Segment Performance Summary (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Net Sales** | | | | | Work Truck Attachments | $382,296 | $325,707 | $252,838 | | Work Truck Solutions | $233,772 | $215,746 | $227,316 | | **Adjusted EBITDA** | | | | | Work Truck Attachments | $78,211 | $77,369 | $62,532 | | Work Truck Solutions | $8,569 | $2,167 | $12,360 |

Douglas Dynamics, Inc. (NYSE:PLOW) Q4 2022 Earnings Conference Call February 21, 2023 10:00 AM ET Company Participants Sarah Lauber – Executive Vice President and Chief Financial Officer Bob McCormick – President and Chief Executive Officer Conference Call Participants Mike Shlisky – D.A. Davidson Tim Wojs – Baird Greg Burns – Sidoti & Co. Operator Good morning, and welcome to the Douglas Dynamics Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Form 10-Q (Mark One) 11270 W Park Place Ste 300 Milwaukee, Wisconsin 53224 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-34728 DOUGLAS DYNAMICS, INC. (Exact name of regis ...

Financial Data and Key Metrics Changes - In Q3 2022, net sales increased by 30% to $166.1 million, with gross profit rising by 35% to $41.3 million compared to Q3 2021, driven by increased volume and pricing adjustments [27][28] - GAAP net income reached $13.3 million or $0.56 per diluted share, an increase of approximately 89% from $7 million or $0.30 per diluted share in 2021 [28] - Adjusted EBITDA improved to $25.1 million, up from $15.5 million in the same period last year, reflecting higher volumes and improved price realization [29][30] Business Segment Data and Key Metrics Changes - Work Truck Attachments segment net sales increased by 33% to $108.2 million, with adjusted EBITDA rising by 55% to $22.9 million, attributed to increased volumes and price realization [32][33] - Work Truck Solutions segment reported net sales of $57.9 million, a 25% increase, with adjusted EBITDA improving to $2.2 million from $700,000 in the prior year, despite ongoing supply chain challenges [34][35] Market Data and Key Metrics Changes - Demand for products and services remained strong, with minimal customer order cancellations and a robust backlog, particularly in municipal customers who are less affected by economic downturns [15][16] - The backlog is approximately 15% higher than at the end of 2021, indicating sustained demand despite supply chain constraints [64] Company Strategy and Development Direction - The company is focused on long-term growth initiatives, including vertical integration and new product launches, such as the redesigned pusher plow and the DynaPro dump body [18][20] - The company is open to acquisitions and is in a strong financial position to pursue opportunities, particularly with private family-owned companies [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating macroeconomic challenges and maintaining a positive demand outlook, despite supply chain constraints expected to persist into 2023 [26][44] - The company raised and narrowed its 2022 guidance, expecting net sales between $600 million and $630 million and adjusted EBITDA ranging from $80 million to $95 million [42][43] Other Important Information - The company maintained its quarterly cash dividend of $0.29 per share and did not repurchase shares during the quarter, focusing instead on working capital adjustments [41] - Capital expenditures for the first nine months of 2022 totaled $8.9 million, reflecting ongoing investments in growth initiatives [40] Q&A Session Summary Question: Confidence in collecting accounts receivable by year-end - Management expressed confidence in collecting pre-season receivables, noting that the increase in accounts receivable aligns with historical patterns [48] Question: Expectations for margins in Q1 2023 - Management indicated that while they do not foresee significant headwinds dissipating, they are navigating challenges more consistently, which should help margins [51] Question: Chassis supply challenges and shipment increases - Management attributed increased shipments to improved efficiency and productivity, despite ongoing chassis supply challenges [52][53] Question: Planned expansion at DEJANA to handle backlog - Management stated that current facilities have sufficient capacity to handle increased volume when chassis supply improves, without needing additional fixed costs [54] Question: Margin expansion sustainability - Management noted that better price-cost dynamics were observed in Q3 and expect this trend to continue into Q4 and 2023 [58][59] Question: Backlog growth and supply chain status - Management confirmed that while backlog did not grow sequentially, it remains high and is approximately 15% higher than at the end of 2021 [64] Question: Handling increased chassis supply if it becomes available - Management affirmed that they are prepared to handle increased chassis supply efficiently without significant inefficiencies [67]

Financial Performance - Net sales for the three months ended June 30, 2022, were $187.6 million, an increase of 19.1% compared to $157.5 million for the same period in 2021[106] - Net sales for the six months ended June 30, 2022, were $290.2 million, reflecting an increase of 11.2% from $260.9 million in the same period of 2021[106] - The Work Truck Attachments segment reported net sales of $130.4 million for the three months ended June 30, 2022, up from $104.6 million in the same period of 2021, a rise of $25.8 million[107] - The Work Truck Solutions segment achieved net sales of $57.2 million for the three months ended June 30, 2022, compared to $52.9 million in the same period of 2021[107] - Net sales for the Work Truck Solutions segment were $57.2 million for the three months ended June 30, 2022, an increase of 8.1% from $52.9 million in the same period in 2021[108] Profitability - Gross profit for the three months ended June 30, 2022, was $51.2 million, representing a gross margin of 27.3%, down from 31.0% in the same period of 2021[105] - Income from operations for the three months ended June 30, 2022, was $25.6 million, which is 13.6% of net sales, compared to 15.3% in the same period of 2021[105] - Net income for the three months ended June 30, 2022, was $17.7 million, or 9.5% of net sales, compared to $14.1 million, or 9.0% in the same period of 2021[105] - Gross profit for the three months ended June 30, 2022 was $51.2 million, a 4.9% increase from $48.8 million in the same period in 2021[110] - Net income for the three months ended June 30, 2022 was $17.7 million, an increase of 25.5% from $14.1 million in the same period in 2021[116] Expenses - Cost of sales increased by $27.6 million or 25.4% to $136.3 million for the three months ended June 30, 2022, compared to $108.7 million for the same period in 2021[109] - Selling, general and administrative expenses rose by $1.0 million or 4.0% to $25.7 million for the three months ended June 30, 2022, compared to $24.7 million in the same period of 2021[111] Cash Flow and Liquidity - Total liquidity as of June 30, 2022 was $47.1 million, a decrease from approximately $136.1 million as of December 31, 2021[121] - Net cash provided by operating activities decreased by $71.3 million to $(58.2) million for the six months ended June 30, 2022, compared to $13.1 million in the same period in 2021[126] - Cash and cash equivalents were $6.0 million as of June 30, 2022, down from $37.0 million as of December 31, 2021[125] - Free cash flow for the three months ended June 30, 2022 was ($35.6) million, a decrease of $22.2 million compared to ($13.4) million in the same period in 2021[129] - Free cash flow for the six months ended June 30, 2022 was ($63.8) million, a decrease of $72.4 million compared to $8.6 million in the same period in 2021[129] Tax and Adjusted Metrics - The effective tax rate increased to 23.2% for the three months ended June 30, 2022, compared to 5.5% for the same period in 2021[114] - Adjusted EBITDA for the three months ended June 30, 2022 was $34.1 million, compared to $33.5 million in the same period in 2021, an increase of $0.6 million[136] - Adjusted EBITDA for the six months ended June 30, 2022 was $38.7 million, a decrease of $5.4 million compared to $44.1 million in the same period in 2021[136] - Adjusted net income for the three months ended June 30, 2022 was $20.1 million, compared to $21.3 million in the same period in 2021[142] - Adjusted diluted earnings per share for the three months ended June 30, 2022 was $0.85, compared to $0.91 in the same period in 2021[142] Market Conditions and Operational Challenges - The company experienced a significant decline in snowfall, approximately 12% below the ten-year average for the snow season ended March 2022, impacting demand[107] - Inflation in materials and labor significantly impacted profitability in the three and six months ended June 30, 2022, with expectations of ongoing inflationary pressures affecting profitability for the remainder of 2022[145] - The decrease in free cash flow is primarily due to lower cash provided by operating activities of $71.3 million[129] Debt and Interest Rate Management - As of June 30, 2022, the company had outstanding borrowings of $213.3 million under its term loan and $58.0 million under its revolving credit facility[154][156] - A hypothetical 1% increase in interest rates would have increased interest incurred on the term loan by $0.1 million for the three months ended June 30, 2022[154] - The company employs a highly variable cost structure, allowing adjustments based on sales volume fluctuations[155] - Interest rate swap agreements are in place to mitigate exposure to interest rate volatility, with a notional amount of $125,000 effective from May 31, 2024, to June 9, 2026[155] Steel Cost Management - Steel purchases as a percentage of revenue increased to 11.6% for the three months ended June 30, 2022, compared to 10.0% for the same period in 2021, and 15.8% for the six months ended June 30, 2022, compared to 11.1% in 2021[157] - The company anticipates being able to mitigate increased steel costs through temporary and permanent surcharges, although timing differences may affect gross margins[145][157] - The company does not use derivative or hedging instruments to manage steel price risk, which could lead to declining gross margins if costs cannot be passed onto distributors[157] Seasonal Trends - The Work Truck Attachments segment experiences significant seasonality, with sales heavily influenced by snowfall levels, particularly from October to March[147] - Pre-season sales programs are utilized to manage seasonal impacts, generating over two-thirds of sales volume during the second and third quarters[148]

Financial Data and Key Metrics Changes - The company reported record second quarter net sales of $187.6 million, up from $157.5 million in the same period last year, representing a year-over-year increase of approximately 19.4% [13] - Gross profit for the quarter was $51.2 million, compared to $48.8 million in the prior year, indicating a growth of about 4.9% [13] - Consolidated adjusted EBITDA was $34.1 million, relatively flat compared to $33.5 million in the corresponding period of the prior year [15] - GAAP net income increased to $17.7 million or $0.75 per diluted share, up from $14.1 million or $0.60 per diluted share in 2021 [16] Business Segment Data and Key Metrics Changes - The Work Truck Attachments segment achieved record net sales of $130.4 million, more than 25% higher than the $104.6 million reported last year, with adjusted EBITDA of $33.6 million, slightly up from $32.2 million [18] - The Work Truck Solutions segment reported net sales of $57.2 million, an increase from $52.9 million in the same period last year, but adjusted EBITDA decreased to $513,000 from $1.3 million [21] Market Data and Key Metrics Changes - The company noted strong demand across both segments, with preseason orders in the Attachments segment being particularly robust [5][11] - Dealer inventories and sentiment remain positive, indicating a favorable market outlook [8] Company Strategy and Development Direction - The company is focused on continuous improvement across all divisions to drive long-term financial targets [12] - New product introductions are expected to positively impact revenue and earnings in 2023 [12] - The company is actively monitoring the competitive landscape for potential M&A opportunities [27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing inflationary pressures and supply chain disruptions but noted that the situation is more stable compared to the previous year [6][11] - The company has narrowed its full-year guidance for net sales to between $590 million and $630 million, with adjusted EBITDA expected to range from $75 million to $95 million [28] - Management expressed confidence in the demand trends and the ability to manage through industry-wide headwinds [11][29] Other Important Information - The company reported a net debt leverage ratio of 3.2x, up from 2.1x at the same point last year [24] - Total liquidity at the end of the quarter was approximately $47.1 million, down from $114.3 million a year ago [24] Q&A Session Summary Question: How would you characterize this year's early order season in the attachment business? - Management noted that preseason orders were stronger than anticipated, with dealers ramping up order books due to supply challenges [31][32] Question: How far out does the backlog stretch in the Solutions segment? - The backlog is estimated to be between one and two years' worth of revenue, with strong demand still present [33][34] Question: Can you review the impact of price costs in the second quarter? - The company has covered inflation dollar for dollar, but the Solutions segment has been more impacted due to long-term contracts [41][42] Question: How is the company positioned regarding labor if demand surprises to the upside? - The labor pool is relatively fixed due to the skilled nature of the work, but the company is prepared to manage initial surges in demand [45][47] Question: What is the expectation for free cash flow in 2022? - Free cash flow is expected to be slightly lower than last year, with working capital being a significant variable due to inflation [48][49]

Douglas Dynamics, Inc. (NYSE:PLOW) Q1 2022 Results Conference Call May 3, 2022 10:00 AM ET Company Participants Sarah Lauber - CFO Bob McCormick - CEO Conference Call Participants Timothy Wojs - Baird Mike Shlisky - D.A. Davidson Chris McGinnis - Sidoti Operator Good day, and thank you for standing by. Welcome to the Douglas Dynamics First Quarter 2022 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to Sarah Lauber, Chief Financial Officer. Sarah Lauber Thank ...