Douglas Dynamics(US:PLOW)2021-11-03 05:40Financial Data and Key Metrics Changes - The company reported Q3 2021 net sales of $127.6 million, down from $133.8 million in Q3 2020, with gross profit decreasing to $30.6 million from $36.7 million [16] - GAAP net income was $7 million or $0.30 per diluted share, compared to $9.2 million and $0.39 in the prior year [16] - Adjusted EBITDA decreased to $15.5 million from $23.1 million year-over-year, primarily due to material and freight inflation and production constraints [17] Business Line Data and Key Metrics Changes - In the Work Truck Attachments segment, net sales increased to $81.4 million from $76.9 million, a 6% rise attributed to preseason price actions, but adjusted EBITDA fell to $14.8 million from $20.2 million due to inflation and labor issues [19] - The Work Truck Solutions segment saw net sales decline to $46.3 million from $56.9 million, with adjusted EBITDA dropping to $700,000 from $2.9 million, impacted by supply chain constraints [20] Market Data and Key Metrics Changes - Dealer inventories in the attachment business are at six-year lows, indicating strong demand despite supply chain challenges [10] - The company entered 2021 with record backlog levels, which have continued to increase, now more than 1.4 times the backlog at the start of the year [12] Company Strategy and Development Direction - The company is focused on long-term growth initiatives, including vertical integration and new product development, while managing short-term challenges [14] - Capital deployment priorities include maintaining a commitment to dividends and pursuing M&A opportunities when valuations align with long-term growth potential [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that supply chain disruptions, material price inflation, and labor shortages are expected to impact operations into 2022 [25] - Despite these challenges, the company remains optimistic about long-term demand trends and is positioned for success with a strong backlog [15][26] Other Important Information - SG&A expenses increased to $20.3 million due to wage and benefit inflation, while interest expense decreased to $2.2 million due to refinancing [18] - The effective tax rate for the quarter was 14.6%, significantly lower than the previous year due to discrete tax benefits [18] Q&A Session Summary Question: How is the company addressing pricing and cost inflation? - Management stated that they will cover inflation dollar for dollar and have implemented multiple price increases across all businesses [32] Question: What is the status of the labor pool and employee retention? - The company has increased wages across the board and is seeing an increase in job applicants, indicating progress in normalizing the labor pool [35] Question: Are there any risks of cancellations in the snow business due to seasonal factors? - Management reported strong orders and record backlog levels, indicating that cancellations are not expected despite potential delays [54] Question: How is the company managing chassis supply issues? - The company has not seen cancellations and maintains strong demand, with loyalty to existing chassis brands among customers [55]