Douglas Dynamics(PLOW) - 2023 Q1 - Quarterly Report

Part I. Financial Information Financial Statements 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][20] - 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] Unaudited Condensed Consolidated Balance Sheets 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) 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 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 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] - 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][149][151] Management's Discussion and Analysis of Financial Condition and Results of Operations 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][134] - 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] 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 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][149][151] - 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][69][150] - Steel is a primary commodity risk, representing 19.0% of Q1 2023 revenue, managed through price increases and surcharges without hedging instruments[152] Controls and Procedures 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] - No material changes occurred in internal control over financial reporting during the quarter[154] Part II. Other Information Legal Proceedings 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] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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] 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 The company reported no defaults upon senior securities during the period - None[163] Mine Safety Disclosures The company reported no mine safety disclosures for the period - None[164] Other Information The company reported no other information for the period - None[165] Exhibits 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]