Douglas Dynamics(PLOW) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements and comprehensive notes for the periods ended June 30, 2025, and December 31, 2024 Unaudited Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates Condensed Consolidated Balance Sheets (in thousands) | Item | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :-------------- | :------------------ | | Total Assets | $671,471 | $589,983 | | Current Assets | $326,749 | $238,225 | | Total Liabilities | $398,130 | $305,696 | | Total Stockholders' Equity | $273,264 | $264,215 | - Total assets increased by $81.49 million (13.8%) from December 31, 2024, to June 30, 2025, primarily driven by increases in accounts receivable and inventories[8] Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income This section details the company's financial performance, including net sales, gross profit, and net income over specified periods Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $194,327 | $199,902 | $309,394 | $295,557 | | Gross profit | $60,296 | $61,303 | $88,435 | $80,223 | | Income from operations | $36,995 | $36,303 | $40,197 | $29,881 | | Net income | $25,954 | $24,338 | $26,102 | $15,986 | | Basic EPS | $1.10 | $1.03 | $1.10 | $0.68 | | Diluted EPS | $1.09 | $1.02 | $1.09 | $0.66 | | Cash dividends declared and paid per share | $0.30 | $0.30 | $0.59 | $0.59 | - For the six months ended June 30, 2025, net sales increased by 4.7% and net income increased by 63.3% compared to the same period in 2024[9] Unaudited Condensed Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, in thousands) | Activity | 2025 (in thousands) | 2024 (in thousands) | | :------------------------------------ | :----- | :----- | | Net cash used in operating activities | $(12,721) | $(19,114) | | Net cash used in investing activities | $(5,126) | $(2,751) | | Net cash provided by financing activities | $20,708 | $1,905 | | Change in cash and cash equivalents | $2,861 | $(19,960) | | Cash and cash equivalents at end of period | $7,980 | $4,196 | - Net cash used in operating activities decreased by $6.39 million, while net cash provided by financing activities significantly increased by $18.80 million for the six months ended June 30, 2025, compared to the prior year[12] Unaudited Condensed Consolidated Statements of Shareholders' Equity This section presents changes in the company's equity, reflecting net income, dividends, and stock transactions Condensed Consolidated Statements of Shareholders' Equity (Six Months Ended June 30, in thousands) | Item | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | | :------------------------------------ | :---------------- | :------------ | | Total Stockholders' Equity | $264,215 | $273,264 | | Net income | $26,102 | | | Dividends paid | $(13,926) | | | Repurchase of common stock | $(6,000) | | - Total stockholders' equity increased by $9.05 million for the six months ended June 30, 2025, driven by net income, partially offset by dividends and share repurchases[14] Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed disclosures on accounting policies and financial statement components 1. Basis of presentation This note outlines the accounting principles used for interim financial statements and identifies the company's operating segments - The interim financial statements are prepared in accordance with GAAP for interim financial information, omitting some fiscal year-end footnotes[16] - The Company operates in two segments: Work Truck Attachments and Work Truck Solutions[17] 2. Revenue Recognition This note details the company's revenue recognition policies and presents total revenue by segment and contract liabilities Total Revenue by Segment (Six Months Ended June 30, in thousands) | Segment | 2025 (in thousands) | 2024 (in thousands) | Change (%) | | :-------------------- | :----- | :----- | :--------- | | Work Truck Attachments | $144,571 | $141,977 | 1.8% | | Work Truck Solutions | $164,823 | $153,580 | 7.3% | | Total Revenue | $309,394 | $295,557 | 4.7% | Contract Liabilities (Six Months Ended June 30, in thousands) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :-------------------- | :----- | :----- | | Balance at Beginning of Period | $5,063 | $4,009 | | Additions | $15,413 | $14,569 | | Deductions | $(7,557) | $(7,014) | | Balance at End of Period | $12,919 | $11,564 | 3. Credit Losses This note details the allowance for credit losses, including changes and balances by segment Allowance for Credit Losses (Six Months Ended June 30, in thousands) | Segment | Balance at Dec 31, 2024 (in thousands) | Additions charged to earnings (in thousands) | Writeoffs (in thousands) | Changes to reserve, net (in thousands) | Balance at June 30, 2025 (in thousands) | | :-------------------- | :---------------------- | :---------------------------- | :-------- | :---------------------- | :----------------------- | | Work Truck Attachments | $1,768 | $200 | $(8) | $(3) | $1,957 | | Work Truck Solutions | $604 | $115 | $(2) | $18 | $735 | | Total | $2,372 | $315 | $(10) | $15 | $2,692 | - The total allowance for credit losses increased to $2.69 million at June 30, 2025, from $2.37 million at December 31, 2024[27] 4. Fair Value This note describes the fair value measurements of financial assets and liabilities, categorized by input levels Financial Assets and Liabilities Measured at Fair Value (in thousands) | Item | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :-------------- | :---------------- | | Assets: | | | | Non-qualified benefit plan assets | $11,362 | $10,482 | | Interest rate swaps | $1,337 | $2,340 | | Steel hedging instrument | $76 | - | | Total Assets | $12,775 | $12,822 | | Liabilities: | | | | Long-term debt | $147,725 | $147,526 | | Steel hedging instrument | - | $54 | | Total Liabilities | $147,725 | $147,580 | - Fair value measurements are categorized into Level 1, Level 2, or Level 3 inputs, with most significant inputs being Level 2 (observable market inputs)[28][31][33] 5. Inventories This note provides a breakdown of inventory components and changes, including truck chassis inventory Inventories (in thousands) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :-------------- | :---------------- | | Finished goods | $68,877 | $67,897 | | Work-in-process | $19,183 | $13,337 | | Truck chassis inventory | $21,839 | $10,146 | | Raw material and supplies | $43,387 | $45,654 | | Total Inventories | $153,286 | $137,034 | - Truck chassis inventory financed through floor plan obligations increased significantly from $2,612 thousand at December 31, 2024, to $20,216 thousand at June 30, 2025[34] 6. Property, plant and equipment This note details the net carrying amount of property, plant, and equipment, including accumulated depreciation Property, Plant and Equipment, Net (in thousands) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :-------------- | :---------------- | | Total property, plant and equipment | $135,077 | $130,172 | | Less accumulated depreciation | $(93,374) | $(88,861) | | Property, plant and equipment, net | $41,703 | $41,311 | - Net property, plant, and equipment increased slightly by $392 thousand from December 31, 2024, to June 30, 2025[35] 7. Leases This section provides an overview of the company's lease obligations and related expenses Lease Expense (in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------- | :------------------------------- | :----------------------------- | :------------------------------- | :----------------------------- | | Operating lease expense | $3,274 | $6,543 | $1,581 | $3,177 | | Short term lease cost | $156 | $279 | $60 | $153 | | Total lease cost | $3,430 | $6,822 | $1,641 | $3,330 | - In September 2024, the Company completed a sale-leaseback transaction for seven properties, generating gross proceeds of $64,150 thousand and recognizing a gain of $42,298 thousand[37] Operating Lease Liabilities (in thousands) | Item | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :-------------- | :---------------- | | Operating lease right-of-use assets | $66,420 | $70,801 | | Total operating lease liabilities | $68,205 | $72,179 | | Weighted Average Remaining Lease Term (months) | 149 | 151 | | Weighted Average Discount Rate | 7.10% | 7.05% | 8. Other Intangible Assets This note presents the net carrying amount of intangible assets and related amortization expenses Net Carrying Amount of Other Intangible Assets (in thousands) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :-------------- | :---------------- | | Trademark and tradenames | $77,600 | $77,600 | | Customer relationships | $30,458 | $33,044 | | Patents | $1,225 | $1,630 | | Trademarks | $1,167 | $1,276 | | Total | $110,450 | $113,550 | - Amortization expense for intangible assets was $3,100 thousand for the six months ended June 30, 2025, down from $4,260 thousand in the prior year[43] 9. Long-Term Debt This note details the company's long-term debt, including credit facilities, outstanding borrowings, and refinancing impacts - On March 26, 2025, the Company entered into an Amended and Restated Credit Agreement, providing a $150,000 thousand senior secured term loan and a $125,000 thousand senior secured revolving credit facility, maturing March 26, 2030[45] - Outstanding borrowings at June 30, 2025, included $147,725 thousand under the term loan and $42,000 thousand on the revolving credit facility, with $82,450 thousand remaining borrowing availability[47] - The refinancing resulted in a debt modification expense of $176 thousand and a loss on extinguishment of debt of $156 thousand for the six months ended June 30, 2025[46] 10. Accrued Expenses and Other Current Liabilities This note provides a breakdown of accrued expenses and other current liabilities, including payroll, benefits, and warranty Accrued Expenses and Other Current Liabilities (in thousands) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :-------------- | :---------------- | | Payroll and related costs | $9,555 | $9,876 | | Employee benefits | $7,132 | $6,391 | | Accrued warranty | $3,735 | $3,379 | | Other | $10,604 | $6,536 | | Total | $31,026 | $26,182 | - Accrued expenses and other current liabilities increased by $4.84 million from December 31, 2024, to June 30, 2025[57] 11. Warranty Liability This note details the changes in the company's warranty liability, including provisions and claims paid Warranty Liability Rollforward (Six Months Ended June 30, in thousands) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------- | :----- | :----- | | Balance at the beginning of the period | $5,559 | $6,957 | | Warranty provision | $2,083 | $1,672 | | Claims paid/settlements | $(1,943) | $(1,948) | | Balance at the end of the period | $5,699 | $6,681 | - The total warranty reserve increased to $5.70 million at June 30, 2025, from $5.56 million at December 31, 2024[58] 12. Earnings per Share This note presents the basic and diluted earnings per share calculations and related net income allocations Earnings Per Common Share (Six Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | Basic EPS | $1.10 | $0.68 | | Diluted EPS | $1.09 | $0.66 | - Net income allocated to common shareholders (diluted) for the six months ended June 30, 2025, was $25,781 thousand, compared to $15,588 thousand in 2024[61] 13. Employee Stock Plans This note details compensation expenses related to restricted stock units and performance share units - The Company recognized $2,919 thousand of compensation expense related to restricted stock unit awards and $785 thousand for performance share unit awards for the six months ended June 30, 2025[64][65] - Unrecognized compensation expense for restricted shares was approximately $5,681 thousand as of June 30, 2025, expected to be recognized through 2028[65] 14. Commitments and Contingencies This note discloses the company's involvement in litigation and management's assessment of potential financial impact - The Company is engaged in various litigation, including product liability and intellectual property disputes, in the ordinary course of business[66] - Management does not believe any pending litigation will have a material adverse effect on its consolidated financial position[66] 15. Segments This note provides detailed financial information for the company's operating segments, including net sales and Adjusted EBITDA Segment Net Sales (Six Months Ended June 30, in thousands) | Segment | 2025 (in thousands) | 2024 (in thousands) | Change (%) | | :-------------------- | :----- | :----- | :--------- | | Work Truck Attachments | $144,571 | $141,977 | 1.8% | | Work Truck Solutions | $164,823 | $153,580 | 7.3% | | Total | $309,394 | $295,557 | 4.7% | Segment Adjusted EBITDA (Six Months Ended June 30, in thousands) | Segment | 2025 (in thousands) | 2024 (in thousands) | Change (%) | | :-------------------- | :----- | :----- | :--------- | | Work Truck Attachments | $31,897 | $31,324 | 1.8% | | Work Truck Solutions | $20,151 | $13,905 | 45.0% | | Total | $52,048 | $45,229 | 15.1% | - The Work Truck Attachments segment focuses on commercial snow and ice management attachments, while the Work Truck Solutions segment includes municipal snow and ice control products and up-fit services[70][71] 16. Income Taxes This note explains the effective tax rate and deferred income taxes, highlighting temporary differences - The effective tax rate for the six months ended June 30, 2025, was 24.6%, lower than 27.9% in 2024, primarily due to the establishment of reserves for uncertain tax positions in the prior year[76] - Deferred income taxes reflect temporary differences, with the largest item being the difference between book and tax amortization of goodwill and other intangibles[77] 17. Restructuring and Impairment This note details restructuring expenses and impairment charges, particularly for internally developed software Restructuring Expenses (Six Months Ended June 30, 2024, in thousands) | Category | 2024 (in thousands) | | :-------------------------------- | :----- | | Severance and employee costs | $857 | | Write down of property, plant and equipment | $333 | | Legal, consulting and other costs | $212 | | Total | $1,402 | - Impairment charges of $1,224 thousand were recorded in the six months ended June 30, 2024, related to certain internally developed software in the Work Truck Attachments segment[79] 18. Recent Accounting Pronouncements This note discusses recently issued accounting standards and the company's evaluation of their potential impact - ASU 2024-03, 'Disaggregation of Income Statement Expenses,' is effective for annual periods beginning after December 15, 2026[80] - ASU 2023-09, 'Improvements to Income Tax Disclosures,' is effective for annual periods beginning after December 15, 2024[81] - The Company is evaluating the updated disclosure requirements of both new standards[80][81] 19. Changes in Accumulated Other Comprehensive Income by Component This note details changes in accumulated other comprehensive income, including unrealized gains/losses and reclassifications Changes in Accumulated Other Comprehensive Income (Six Months Ended June 30, 2025, in thousands) | Component | Balance at Dec 31, 2024 (in thousands) | Other comprehensive gain (loss) before reclassifications (in thousands) | Amounts reclassified from AOCI (in thousands) | Balance at June 30, 2025 (in thousands) | | :------------------------------------ | :---------------------- | :------------------------------------------------------- | :----------------------------- | :----------------------- | | Unrealized Net Gain (Loss) on Interest Rate Swap | $1,836 | $(1,491) | $749 | $1,094 | | Unrealized Net Gain (Loss) on Steel Hedging Swap | $(40) | $96 | — | $56 | | Retiree Health Benefit Obligation | $3,676 | — | $(24) | $3,652 | | Total | $5,472 | $(1,395) | $725 | $4,802 | - Accumulated other comprehensive income decreased by $670 thousand for the six months ended June 30, 2025, primarily due to unrealized losses on interest rate swaps and reclassifications to interest expense[82] 20. Stockholders' Equity This note provides details on the company's common stock repurchase plan and remaining authorization - The Board of Directors authorized a $50,000 thousand common stock repurchase plan on February 16, 2022, with no expiration date[83] - The Company repurchased approximately $6,000 thousand in shares during the six months ended June 30, 2025[84] - As of June 30, 2025, $38,000 thousand remained under the repurchase authorization[84] 21. Subsequent Events This note discloses significant events occurring after the reporting period, such as new tax legislation - On July 4, 2025, the 'One Big Beautiful Bill Act' (OBBBA) was signed into law, amending U.S tax law[85] - The Company is evaluating the impacts of OBBBA but does not currently expect its provisions to have a material impact on its effective tax rate for 2025[85] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of the company's financial performance, liquidity, and capital resources Forward-Looking Statements This section outlines forward-looking statements, associated risks, and uncertainties, including market and operational factors - The report contains forward-looking statements regarding future events, product demand, financial performance, and strategies, subject to known and unknown risks and uncertainties[88] - Key risk factors include weather conditions (snowfall), material price increases (steel, fuel), supply chain disruptions, economic conditions, and the ability to maintain OEM and distributor relationships[88] - The company also notes risks related to managing artificial intelligence and successfully implementing its new enterprise resource planning (ERP) system[88] Results of Operations The company's consolidated financial performance for the six months ended June 30, 2025, showed increased net sales and a significant rise in net income Overview This overview summarizes the company's consolidated financial performance, highlighting key changes in sales, profit, and income Consolidated Statements of Operations (Six Months Ended June 30, in thousands) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (%) | | :------------------------------------ | :----- | :----- | :--------- | | Net sales | $309,394 | $295,557 | 4.7% | | Gross profit | $88,435 | $80,223 | 10.2% | | Income from operations | $40,197 | $29,881 | 34.5% | | Net income | $26,102 | $15,986 | 63.3% | Consolidated Statements of Operations as % of Net Sales (Six Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | Net sales | 100.0% | 100.0% | | Cost of sales | 71.4% | 72.9% | | Gross profit | 28.6% | 27.1% | | Net income | 8.4% | 5.4% | Net Sales This section analyzes the drivers of consolidated net sales growth across the company's operating segments - Consolidated net sales increased by $13.8 million (4.7%) to $309.4 million for the six months ended June 30, 2025, compared to $295.6 million in 2024[95] - Work Truck Attachments segment sales increased by $2.6 million (1.8%) to $144.6 million for the six months ended June 30, 2025, due to improved snowfall in core markets[97] - Work Truck Solutions segment sales grew by $11.2 million (7.3%) to $164.8 million for the six months ended June 30, 2025, driven by price increase realization and improved municipal volumes[98] Cost of Sales This section details the changes in cost of sales and its impact on gross profit margins - Cost of sales increased by $5.7 million (2.6%) to $221.0 million for the six months ended June 30, 2025[99] - As a percentage of sales, cost of sales decreased to 71.4% for the six months ended June 30, 2025, from 72.9% in 2024, reflecting higher volumes, efficiencies, and product mix[99] Gross Profit This section discusses the increase in gross profit and its improvement as a percentage of net sales - Gross profit increased by $8.2 million (10.2%) to $88.4 million for the six months ended June 30, 2025[100] - As a percentage of net sales, gross profit improved to 28.6% for the six months ended June 30, 2025, from 27.1% in 2024, due to higher volumes, efficiencies, and product mix[100] Selling, General and Administrative Expense This section analyzes the changes in selling, general, and administrative expenses, including amortization and compensation - Selling, general, and administrative expenses (including intangibles amortization) decreased by $0.9 million (1.8%) to $48.2 million for the six months ended June 30, 2025[101] - The decrease was driven by lower intangibles amortization ($1.2 million) and employee benefits costs ($0.9 million), partially offset by higher stock-based compensation ($0.9 million) and incentive-based compensation ($0.5 million)[101] Impairment charges This section details impairment charges recorded, specifically related to internally developed software - Impairment charges of $1.2 million were recorded in the six months ended June 30, 2024, related to certain internally developed software at the Work Truck Attachments segment[102] Debt Modification Expense This section explains the debt modification expense incurred due to credit facility refinancing - A debt modification expense of $0.2 million was incurred in the six months ended June 30, 2025, due to fees associated with the refinancing of the company's term loan and revolving credit facilities[103] Loss on Extinguishment of Debt This section reports the loss recognized from the extinguishment of debt during the refinancing process - A loss on extinguishment of debt of $0.2 million was recognized in the six months ended June 30, 2025, resulting from the refinancing of the company's credit facilities[104] Interest Expense This section analyzes the changes in net interest expense, including impacts from borrowings and floor plan interest - Net interest expense for the six months ended June 30, 2025, decreased by $2.29 million to $5.36 million, primarily due to lower interest on revolver and term loan borrowings, partially offset by higher floor plan interest[105] Income Taxes This section discusses the effective tax rate and its drivers, including prior year uncertain tax positions - The effective tax rate for the six months ended June 30, 2025, was 24.6%, down from 27.9% in the prior year, mainly due to the establishment of reserves for uncertain tax positions in 2024[106] Net Income This section highlights the significant increase in net income and its improvement as a percentage of net sales - Net income for the six months ended June 30, 2025, increased significantly by $10.1 million to $26.1 million, compared to $16.0 million in the prior year[107] - As a percentage of net sales, net income rose to 8.4% for the six months ended June 30, 2025, from 5.4% in 2024[107] Discussion of Critical Accounting Policies and Estimates This section confirms no material changes to critical accounting policies and estimates since the last annual report - There have been no material changes to the company's critical accounting policies and estimates since those disclosed in its 2024 Annual Report on Form 10-K[108] Liquidity and Capital Resources This section discusses the company's liquidity, capital resources, and cash flow from operating, investing, and financing activities - Total liquidity as of June 30, 2025, was $90.5 million, comprising $8.0 million in cash and cash equivalents and $82.5 million of borrowing availability under the revolving credit facility[112] - Total liquidity decreased from $154.6 million as of December 31, 2024, primarily due to the seasonality of the business[112] - Net cash used in operating activities decreased by $6.4 million for the six months ended June 30, 2025, to $(12.7) million, primarily due to a $9.7 million increase in net income adjusted for reconciling items[116] - Net cash provided by financing activities increased by $18.8 million for the six months ended June 30, 2025, to $20.7 million, mainly due to net revolver borrowings[118] Free Cash Flow This section presents the company's free cash flow and its components, highlighting improvements from operating activities Free Cash Flow (Six Months Ended June 30, in thousands) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :------------------------------------ | :----- | :----- | | Net cash provided by (used in) operating activities | $(12,721) | $(19,114) | | Acquisition of property and equipment | $(5,126) | $(2,751) | | Free cash flow | $(17,847) | $(21,865) | - Free cash flow for the six months ended June 30, 2025, improved by $4.1 million to $(17.8) million, compared to $(21.9) million in the prior year, primarily due to lower cash used in operating activities[119] Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures used to evaluate operating performance - The company uses non-GAAP measures such as Free Cash Flow, Adjusted EBITDA, and Adjusted Net Income/EPS to evaluate operating performance and compare results consistently by removing the impact of certain non-core items[121][122][123][125][133] Adjusted EBITDA Reconciliation (Six Months Ended June 30, in thousands) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------- | :----- | :----- | | Net income | $26,102 | $15,986 | | EBITDA | $47,641 | $39,583 | | Stock-based compensation expense | $3,704 | $2,833 | | Impairment charges | - | $1,224 | | Debt modification expense | $176 | - | | Loss on extinguishment of debt | $156 | - | | Other charges | $371 | $1,589 | | Adjusted EBITDA | $52,048 | $45,229 | Adjusted Net Income and EPS Reconciliation (Six Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | Net income (GAAP) | $26,102 | $15,986 | | Adjusted net income (non-GAAP) | $29,407 | $20,005 | | GAAP diluted earnings per share | $1.09 | $0.66 | | Adjusted diluted earnings per share (non-GAAP) | $1.23 | $0.83 | Future Obligations and Commitments This section confirms no material changes to the company's future obligations and commitments during the period - There have been no material changes to the company's future obligations and commitments in the three months ended June 30, 2025[138] Impact of Inflation This section discusses the material impact of inflation on profitability and mitigation strategies, including price adjustments - Inflation in materials and labor had a material impact on profitability in the three and six months ended June 30, 2025, and 2024[139] - The company expects ongoing impacts from tariffs and inflationary pressures in the remainder of 2025[139] - Mitigation strategies include raising prices, but timing differences between cost increases and price realization may occur[139] Seasonality and Year-to-Year Variability This section explains the seasonal nature of the Work Truck Attachments segment and its impact on sales and working capital - The Work Truck Attachments segment is highly seasonal and variable, with sales heavily influenced by snowfall levels in the prior snow season (October to March)[140][141] - The company manages seasonality through a pre-season sales program, offering pricing, payment, and freight incentives to distributors in the second and third quarters[142] - Working capital requirements typically peak towards the end of the third quarter due to increased accounts receivable from pre-season sales[143] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, primarily from changes in interest rates and steel price fluctuations Interest Rate Risk This section details the company's exposure to interest rate risk from variable-rate borrowings and mitigation strategies - The company is exposed to interest rate risk due to variable-rate borrowings, including its term loan and revolving credit facility[148] - Interest rate swaps are utilized to mitigate a portion of the interest rate risk associated with the term loan[148] - A hypothetical 1% interest rate change would impact interest incurred by $0.1 million for both the $147.7 million term loan and $42.0 million revolving credit facility for the three months ended June 30, 2025[149][150] Commodity Price Risk This section outlines the company's exposure to commodity price risk, primarily from steel, and hedging strategies - The company faces commodity price risk from steel purchases, which constituted 6.5% of revenue for the six months ended June 30, 2025[151] - A steel hedging agreement was entered into on December 17, 2024, for a notional quantity of 3,000 short tons, effective August 1, 2025, through December 31, 2025, at a fixed payment of $819 per short ton[152] - The steel hedging instrument's fair value was positive $0.1 million at June 30, 2025, and negative $0.1 million at December 31, 2024[152] Item 4. Controls and Procedures This section addresses the effectiveness of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting, including the impact of a recent ERP system implementation Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2025 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[153] - These controls provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[153] Changes in Internal Control Over Financial Reporting This section reports on changes in internal control, including the impact of a recent ERP system implementation - In March 2025, the company completed an ERP system implementation at its Dejana subsidiary, leading to changes in processes and procedures[154] - This implementation is expected to either strengthen or minimally impact existing internal controls over financial reporting[154] - No other material changes in internal control over financial reporting occurred during the period[155] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, and other required disclosures Item 1. Legal Proceedings This section discloses the company's involvement in various legal proceedings, primarily product liability and intellectual property disputes - The company is engaged in various litigation, primarily product liability and intellectual property disputes[157] - Management does not believe any current litigation is material to the company's operations or financial position[157] Item 1A. Risk Factors This section confirms that there have been no significant changes to the risk factors previously identified in the company's most recent Annual Report on Form 10-K - No significant changes in risk factors from those described in the Annual Report on Form 10-K for the year ended December 31, 2024[158] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on the company's equity security transactions and dividend restrictions Unregistered Sales of Equity Securities This section confirms the absence of unregistered sales of equity securities during the three months ended June 30, 2025 - No unregistered sales of equity securities occurred during the three months ended June 30, 2025[159] Issuer Purchases of Equity Securities This section details the company's common stock repurchases under its authorized plan during the period Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total number of shares purchased | Average price paid per share | Number of shares purchased as part of publicly announced program | Approximate dollar value of shares still available to be purchased under the program (000's) | | :-------------------- | :------------------------------- | :--------------------------- | :--------------------------------------------------------------- | :---------------------------------------------------------------------------------------- | | 4/1/2025 - 5/8/2025 | - | - | - | $44,000 | | 5/9/2025 - 5/15/2025 | 210,059 | $28.56 | 210,059 | $38,000 | | 5/16/2025 - 6/30/2025 | - | - | - | $38,000 | | Total | 210,059 | $28.56 | 210,059 | $38,000 | - The company repurchased 210,059 shares of common stock for approximately $6.0 million during the three months ended June 30, 2025, under its $50 million repurchase plan[160][161] Dividend Payment Restrictions This section outlines restrictions on dividend payments imposed by the company's senior credit facilities - The company's senior credit facilities include restrictions on its ability to pay dividends and on its subsidiaries' ability to transfer assets to Douglas Dynamics, Inc[162] Item 3. Defaults Upon Senior Securities This section confirms that there were no reported defaults upon senior securities during the period - No defaults upon senior securities were reported[163] Item 4. Mine Safety Disclosures This section indicates that there are no mine safety disclosures to report for the period - No mine safety disclosures were reported[164] Item 5. Other Information This section provides information on other matters, specifically addressing Rule 10b5-1 trading plans Rule 10b5-1 Trading Plans This section confirms no director or officer adopted or terminated Rule 10b5-1 trading plans during the period - No director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[166] Item 6. Exhibits This section lists all documents filed as exhibits to the Quarterly Report on Form 10-Q - Exhibit 31.1: Certification of the Company's Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002[167] - Exhibit 31.2: Certification of the Company's Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002[167] - Exhibit 101: The financial statements from the quarterly report on Form 10-Q, formatted in inline XBRL[167] Signatures This section contains the official signatures for the Quarterly Report on Form 10-Q, confirming its submission by authorized personnel - The report was signed by Sarah Lauber, Executive Vice President and Chief Financial Officer of Douglas Dynamics, Inc[170] - The report was dated August 5, 2025[170]