Douglas Dynamics Reports Fourth Quarter and Full Year 2019 Results
Full Year 2019 Highlights:
- Produced record
Net Sales of $572 million - Net Income increased to
$49 Million , or $2.11 per diluted share - Record Adjusted Net Income of
$56 Million , or$2.42 per diluted share - Adjusted EBITDA increased by 12% to a record
$108 Million - Achieved record
Net Cash from Operating Activities of$77 Million - Announced quarterly dividend increase to
$0.28 per share for 2020 first quarter
“Our performance in 2019 highlights the dedication towards continuous improvement displayed by everyone at Douglas Dynamics,” explained
Consolidated Fourth Quarter 2019 Results
| $ in millions (except Margins & EPS) |
Q4 2019 | Q4 2018 |
| Gross Profit Margin | 28.9% | 29.0% |
| Income from Operations | ||
| Net Income | ||
| Diluted EPS | ||
| Adjusted EBITDA | ||
| Adjusted EBITDA Margin | 18.7% | 18.9% |
| Adjusted Net Income | ||
| Adjusted Diluted EPS |
- Record fourth quarter
Net Sales were mainly attributable to ongoing favorable demand trends across both segments. - Gross Profit Margin and Adjusted EBITDA Margin were in-line with the prior year.
- Net income was negatively impacted by one-time expense of
$5.0 million , net of tax, following the Company’s planned termination of its pension plans during the quarter.
Work Truck Attachments Segment Fourth Quarter 2019 Results
| $ in millions (except Adjusted EBITDA Margin) |
Q4 2019 | Q4 2018 |
| Adjusted EBITDA | ||
| Adjusted EBITDA Margin | 26.7% | 26.1% |
Net Sales increased approximately 3% and Adjusted EBITDA increased 5% over the prior year, based on the timing of price recovery on higher material costs.
Work Truck Solutions Segment Fourth Quarter 2019 Results
| $ in millions (except Adjusted EBITDA Margin) |
Q4 2019 | Q4 2018 |
| Adjusted EBITDA | ||
| Adjusted EBITDA Margin | 10.7% | 11.5% |
Net Sales increased 8% over the prior year, mainly attributable to increased demand and price recovery on higher material costs, combined with ongoing improvements in class 8 chassis supply predictability.- Adjusted EBITDA was primarily in-line compared with the prior year, while Adjusted EBITDA Margin declined by 80 basis points due to increased labor and health care costs.
Consolidated Full Year 2019 Results
| $ in millions (except Margins & EPS) |
FY 2019 | FY 2018 |
| Gross Profit Margin | 29.5% | 29.6% |
| Income from Operations | ||
| Net Income | ||
| Diluted EPS | ||
| Adjusted EBITDA | ||
| Adjusted EBITDA Margin | 18.9% | 18.4% |
| Adjusted Net Income | ||
| Adjusted Diluted EPS |
- Full year
Net Sales increased 9% to an all-time record of$572 million , primarily due to higher volumes driven by ongoing positive demand, price recovery on higher material costs and improved chassis predictability. - Gross Profit Margin was in-line with the prior year, with improvements due to DDMS and operational efficiencies being offset by higher labor and healthcare costs and the dilutive effect of price recovery on equivalent material inflation.
- Net Income increased by 12% over the prior year, while Adjusted Net Income increased to an all-time record of
$56.3 million , 19% higher compared to 2018. - Adjusted EBITDA increased to an all-time record of
$108.1 million and Adjusted EBITDA Margin increased by 50 basis points.
Work Truck Attachments Segment Full Year 2019 Results
| $ in millions (except Adjusted EBITDA Margin) |
FY 2019 | FY 2018 |
| Adjusted EBITDA | ||
| Adjusted EBITDA Margin | 27.5% | 29.2% |
Net Sales increased 7% over the prior year, a near record, even with below average snowfall. New product launches focused on non-truck equipment, increased parts and accessories sales, as well as price recovery on higher material costs were the main drivers.- Adjusted EBITDA was slightly up compared to the prior year, due to increases in volume, partially offset by increased labor and healthcare costs.
- Adjusted EBITDA Margin was 170 basis points lower as a result of the increased healthcare and labor costs and the dilutive effect of price recovery on equivalent material inflation.
Work Truck Solutions Segment Full Year 2019 Results
| $ in millions (except Adjusted EBITDA Margin) |
FY 2019 | FY 2018 |
| Adjusted EBITDA | ||
| Adjusted EBITDA Margin | 9.8% | 6.4% |
Net Sales increased 12% over the prior year, primarily driven by strong demand across Class 4 through 8 end markets along with price recovery on higher material costs and greater predictability of chassis supply.- Adjusted EBITDA increased by 70% while Adjusted EBITDA Margin improved by 340 basis points compared to the prior year, mainly attributable to higher volumes, global sourcing efforts, DDMS improvement initiatives and continued lower spending.
Dividend & Liquidity
- A quarterly cash dividend of
$0.2725 per share of the Company's common stock was declared onDecember 9, 2019 , and paid onDecember 31, 2019 , to stockholders of record as of the close of business onDecember 20, 2019 . - In addition, the Company’s Board of Directors approved and declared a quarterly cash dividend of
$0.28 per share for the first quarter of 2020, which equates to a projected full year annual increase in the dividend of$0.03 per diluted share. The declared dividend will be paid onMarch 31, 2020 to stockholders of record as of the close of business onMarch 20, 2020 . - Net Cash Provided by Operating Activities for 2019 increased to a record
$77.3 million from$58.2 million during 2018. Free Cash Flow for full year 2019 increased to$65.8 million from$48.5 million for full year 2018, as a result of favorable changes in working capital relating to a decrease in inventory levels that were built up in anticipation of tariffs and rising prices.
Outlook
“Our 2020 outlook reflects ongoing confidence in our progress towards our long-term goals,” McCormick noted. “In the near term, we believe labor shortages, supply chain constraints, and ongoing chassis delivery issues will hinder our growth somewhat, but expect to see gradual improvements in Class 8 chassis delivery times during the second half of 2020. We remain focused on making the necessary investments in the business, continuing to develop our people, and delivering improvements through DDMS to ensure we successfully execute our long-term growth plan.”
The 2020 financial outlook is as follows:
Net Sales are expected to be between$530 million and$590 million .- Adjusted EBITDA is predicted to range from
$95 million to$120 million . - Adjusted Earnings Per Share are expected to be in the range of
$1.95 per share to$2.75 per share. - The effective tax rate is expected to be between 23% and 25%.
- The 2020 outlook assumes that that the Company’s core markets will experience average snowfall levels.
Earnings Conference Call Information
The Company will host a conference call on
The call will also be available via the Investor Relations section of the Company’s website at www.douglasdynamics.com. For those who cannot listen to the live broadcast, replays will be available for one week following the call.
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Use of Non-GAAP Financial Measures
This press release contains financial information calculated other than in accordance with
Adjusted EBITDA represents net income before interest, taxes, depreciation, and amortization, as further adjusted for stock-based compensation, severance, litigation proceeds, pension termination costs, non-cash purchase accounting adjustments and certain charges related to certain unrelated legal fees and consulting fees. The Company uses Adjusted EBITDA in evaluating the Company’s operating performance because it provides the Company and its investors with additional tools to compare its operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect the Company’s core operations. The Company’s management also uses Adjusted EBITDA for planning purposes, including the preparation of its annual operating budget and financial projections, and to evaluate the Company’s ability to make certain payments, including dividends, in compliance with its senior credit facilities, which is determined based on a calculation of “Consolidated Adjusted EBITDA” that is substantially similar to Adjusted EBITDA.
Adjusted Net Income and Adjusted Diluted Earnings Per Share represents net income and earnings per share (as defined by GAAP), excluding the impact of stock-based compensation, severance, litigation proceeds, pension termination costs, non-cash purchase accounting adjustments, and certain charges related to certain unrelated legal fees and consulting fees, net of their income tax impact. Management believes that Adjusted Net Income and Adjusted Diluted Earnings Per Share are useful in assessing the Company’s financial performance by eliminating expenses and income that are not reflective of the underlying business performance.
Free Cash Flow is a non-GAAP financial measure that we define as net cash provided by (used in) operating activities less capital expenditures. Free Cash Flow should be evaluated in addition to, and not considered a substitute for, other financial measures such as Net Income and Net Cash Provided by Operating Activities. We believe that free cash flow represents our ability to generate additional cash flow from our business operations.
With respect to the Company’s 2020 guidance, the Company is not able to provide a reconciliation of the non-GAAP financial measures to GAAP because it does not provide specific guidance for the various extraordinary, nonrecurring, or unusual charges and other certain items. These items have not yet occurred, are out of the Company’s control and/or cannot be reasonably predicted. As a result, reconciliation of the non-GAAP guidance measures to GAAP is not available without unreasonable effort and the Company is unable to address the probable significance of the unavailable information.
Forward Looking Statements
This press release contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation, product demand, the payment of dividends, and availability of financial resources. These statements are often identified by use of words such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "should," "could," "may," "plan," "project," "predict," "will" and similar expressions and include references to assumptions and relate to our future prospects, developments, and business strategies. Such statements involve known and unknown risks, uncertainties and other factors that could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, weather conditions, particularly lack of or reduced levels of snowfall and the timing of such snowfall, including as a result of global climate change, our inability to maintain good relationships with our distributors, our inability to maintain good relationships with the original equipment manufacturers with whom we currently do significant business, lack of available or favorable financing options for our end-users, distributors or customers, the potential that we may be required to recognize goodwill impairment attributable to our Work Truck Solutions segment, increases in the price of steel or other materials, including as a result of tariffs, necessary for the production of our products that cannot be passed on to our distributors, increases in the price of fuel or freight, a significant decline in economic conditions, the inability of our suppliers and original equipment manufacturer partners to meet our volume or quality requirements, inaccuracies in our estimates of future demand for our products, our inability to protect or continue to build our intellectual property portfolio, the effects of laws and regulations and their interpretations on our business and financial condition, our inability to develop new products or improve upon existing products in response to end-user needs, losses due to lawsuits arising out of personal injuries associated with our products, factors that could impact the future declaration and payment of dividends, our inability to compete effectively against competition, our inability to achieve the projected financial performance with the assets of Dejana Truck &
Financial Statements
| Consolidated Balance Sheets | |||||
| (In thousands) | |||||
| 2019 | 2018 | ||||
| (unaudited) | (unaudited) | ||||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ | 35,665 | $ | 27,820 | |
| Accounts receivable, net | 8,78,71 | 8,14,85 | |||
| Inventories | 7,79,42 | 8,19,96 | |||
| Inventories - truck chassis floor plan | 65,39 | 42,04 | |||
| Refundable income taxes paid | - | - | |||
| Prepaid and other current assets | 35,11 | 35,90 | |||
| Total current assets | 21,15,28 | 19,90,95 | |||
| Property, plant, and equipment, net | 5,84,44 | 5,51,95 | |||
| 24,10,06 | 24,10,06 | ||||
| Other intangible assets, net | 16,37,22 | 17,46,78 | |||
| Operating lease - right of use asset | 2,25,57 | - | |||
| Other long-term assets | 8,438 | 6,219 | |||
| Total assets | $ | 70,56,95 | $ | 67,61,93 | |
| Liabilities and stockholders' equity | |||||
| Current liabilities: | |||||
| Accounts payable | $ | 16,113 | $ | 18,703 | |
| Accrued expenses and other current liabilities | 2,64,96 | 2,33,06 | |||
| Floor plan obligations | 65,39 | 42,04 | |||
| Operating lease liability - current | 38,22 | - | |||
| Income taxes payable | 2,990 | 106 | |||
| Current portion of long-term debt | 22,143 | 32,749 | |||
| Total current liabilities | 7,81,03 | 7,90,68 | |||
| Retiree health benefit obligation | 6,338 | 6,240 | |||
| Pension obligation | - | 2,129 | |||
| Deferred income taxes | 47,211 | 48,198 | |||
| Long-term debt, less current portion | 222,081 | 242,946 | |||
| Operating lease liability - noncurrent | 18,981 | - | |||
| Other long-term liabilities | 19,818 | 14,856 | |||
| Total stockholders' equity | 313,163 | 282,756 | |||
| Total liabilities and stockholders' equity | $ | 70,56,95 | $ | 67,61,93 | |
| Consolidated Statements of Income | ||||||||||||
| (In thousands, except share and per share data) | ||||||||||||
| Three Month Period Ended |
Twelve Month Period Ended |
|||||||||||
| (unaudited) | (unaudited) | |||||||||||
| Net sales | $ | 16,02,98 | $ | 15,18,25 | $ | 57,17,10 | $ | 52,40,67 | ||||
| Cost of sales | 11,39,59 | 10,77,31 | 40,28,93 | 36,91,77 | ||||||||
| Gross profit | 4,63,39 | 4,40,94 | 16,88,17 | 15,48,90 | ||||||||
| Selling, general, and administrative expense | 1,86,08 | 1,66,77 | 7,12,88 | 6,99,58 | ||||||||
| Intangibles amortization | 27,39 | 28,67 | 1,09,56 | 1,14,72 | ||||||||
| Income from operations | 2,49,92 | 2,45,50 | 8,65,73 | 7,34,60 | ||||||||
| Interest expense, net | (41,72 | ) | (45,23 | ) | (1,67,82 | ) | (1,69,43 | ) | ||||
| Pension termination | (66,09 | ) | - | (6,609 | ) | - | ||||||
| Other expense, net | (1,49 | ) | (2,79 | ) | (5,65 | ) | (7,58 | ) | ||||
| Income before taxes | 1,40,62 | 1,97,48 | 6,26,17 | 5,57,59 | ||||||||
| Income tax expense | 25,02 | 50,52 | 1,34,51 | 1,18,54 | ||||||||
| Net income | $ | 1,15,60 | $ | 1,46,96 | $ | 4,91,66 | $ | 4,39,05 | ||||
| Weighted average number of common shares outstanding: | ||||||||||||
| Basic | 22,795,412 | 22,700,991 | 22,779,057 | 22,681,888 | ||||||||
| Diluted | 22,831,077 | 22,726,913 | 22,813,711 | 22,704,856 | ||||||||
| Earnings per share: | ||||||||||||
| Basic earnings per common share attributable to common shareholders | $ | 0.50 | $ | 0.64 | $ | 2.13 | $ | 1.91 | ||||
| Earnings per common share assuming dilution attributable to common shareholders | $ | 0.50 | $ | 0.63 | $ | 2.11 | $ | 1.89 | ||||
| Cash dividends declared and paid per share | $ | 0.27 | $ | 0.27 | $ | 1.09 | $ | 1.06 | ||||
| Consolidated Statements of Cash Flows | |||||||
| (In thousands) | |||||||
| Twelve Month Period Ended | |||||||
| (unaudited) | |||||||
| Operating activities | |||||||
| Net income | $ | 49,166 | $ | 43,905 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 19,212 |
19,085 |
|||||
| Loss on disposal of fixed assets | - | 185 | |||||
| Amortization of deferred financing costs and debt discount | 1,214 |
1,214 |
|||||
| Stock-based compensation | 3,239 |
4,550 | |||||
| Provision for losses on accounts receivable | 1,361 | 531 | |||||
| Deferred income taxes | (2,123 | ) | 9,551 | ||||
| Earnout liability | (417 | ) | (900 | ) | |||
| Changes in operating assets and liabilities, net of acquisitions: | |||||||
| Accounts receivable | (7,747 | ) | (511 | ) | |||
| Inventories | 4,054 | (12,347 | ) | ||||
| Prepaid assets, refundable income taxes paid and other assets | (2,140 | ) | (1,114 | ) | |||
| Accounts payable | (2,562 | ) | 3,039 | ||||
| Accrued expenses and other current liabilities | 6,491 | 312 | |||||
| Benefit obligations and other long-term liabilities | 7,548 | (9,319 | ) | ||||
| Net cash provided by operating activities | 77,296 | 58,181 | |||||
| Investing activities | |||||||
| Capital expenditures | (11,533 | ) | (9,690 | ) | |||
| Net cash used in investing activities | (11,533 | ) | (9,690 | ) | |||
| Financing activities | |||||||
| Shares withheld on restricted stock vesting paid for employees’ taxes | (50 | ) | (23 | ) | |||
| Dividends paid | (25,183 | ) | (24,383 | ) | |||
| Repayment of long-term debt | (32,685 | ) | (33,140 | ) | |||
| Net cash used in financing activities | (57,918 | ) | (57,546 | ) | |||
| Change in cash and cash equivalents | 7,845 | (9,055 | ) | ||||
| Cash and cash equivalents at beginning of year | 27,820 | 36,875 | |||||
| Cash and cash equivalents at end of year | $ | 35,665 | $ | 27,820 | |||
| Non-cash operating and financing activities | |||||||
| Truck chassis inventory acquired through floorplan obligations | $ | 44,929 | $ | 38,129 | |||
| Net Income to Adjusted EBITDA reconciliation (unaudited) | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| Three month period ended |
Twelve month period ended |
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Net income | $ | 11,560 | $ | 14,696 | $ | 49,166 | $ | 43,905 | ||||||||
| Interest expense - net | 4,172 | 4,523 | 16,782 | 16,943 | ||||||||||||
| Income tax expense | 2,502 | 5,052 | 13,451 | 11,854 | ||||||||||||
| Depreciation expense | 2,138 | 2,003 | 8,256 | 7,613 | ||||||||||||
| Intangibles amortization | 2,739 | 2,867 | 10,956 | 11,472 | ||||||||||||
| EBITDA | 23,111 | 29,141 | 98,611 | 91,787 | ||||||||||||
| Stock-based compensation | 178 | 370 | 3,239 | 4,550 | ||||||||||||
| Pension termination | 6,609 | - | 6,609 | - | ||||||||||||
| Purchase accounting (1) | (200 | ) | (900 | ) | (417 | ) | (900 | ) | ||||||||
| Other charges (2) | 212 | 158 | 63 | 1,006 | ||||||||||||
| Adjusted EBITDA | $ | 29,910 | $ | 28,769 | $ | 108,105 | $ | 96,443 | ||||||||
| (1) Reflects |
||||||||||||||||
| (2) Reflects one time, unrelated legal, severance and consulting fees, and loss on disposal of fixed assets related to facility relocation for the periods presented. | ||||||||||||||||
| Segment Disclosures (unaudited) | ||||||||||||
| (In thousands) | ||||||||||||
| Three Months Ended |
Three Months Ended |
Twelve Months Ended |
Twelve Months Ended |
|||||||||
| Work Truck Attachments | ||||||||||||
| $ | 79,937 | $ | 77,313 | $ | 293,630 | $ | 275,244 | |||||
| Adjusted EBITDA | $ | 21,324 | $ | 20,170 | $ | 80,747 | $ | 80,396 | ||||
| Adjusted EBITDA Margin | 26.7% | 26.1% | 27.5% | 29.2% | ||||||||
| Work Truck Solutions | ||||||||||||
| $ | 80,361 | $ | 74,512 | $ | 278,080 | $ | 248,823 | |||||
| Adjusted EBITDA | $ | 8,586 | $ | 8,599 | $ | 27,358 | $ | 16,047 | ||||
| Adjusted EBITDA Margin | 10.7% | 11.5% | 9.8% | 6.4% | ||||||||
| Reconciliation of Net Income to Adjusted Net Income (unaudited) | ||||||||||||||||
| (In thousands, except share and per share data) | ||||||||||||||||
| Three month period ended |
Twelve month period ended |
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Net income | $ | 11,560 | $ | 14,696 | $ | 49,166 | $ | 43,905 | ||||||||
| Adjustments: | ||||||||||||||||
| Stock based compensation | 178 | 370 | 3,239 | 4,550 | ||||||||||||
| Pension termination | 6,609 | - | 6,609 | - | ||||||||||||
| Purchase accounting (1) | (200 | ) | (900 | ) | (417 | ) | (900 | ) | ||||||||
| Other charges (2) | 212 | 158 | 63 | 1,006 | ||||||||||||
| Tax effect on adjustments | (1,699 | ) | 92 | (2,373 | ) | (1,164 | ) | |||||||||
| Adjusted net income | $ | 16,660 | $ | 14,416 | $ | 56,287 | $ | 47,397 | ||||||||
| Weighted average basic common shares outstanding | 22,795,412 | 22,700,991 | 22,779,057 | 22,681,888 | ||||||||||||
| Weighted average common shares outstanding assuming dilution | 22,831,077 | 22,726,913 | 22,813,711 | 22,704,856 | ||||||||||||
| Adjusted earnings per common share - dilutive | $ | 0.72 | $ | 0.62 | $ | 2.42 | $ | 2.04 | ||||||||
| GAAP diluted earnings per share | $ | 0.50 | $ | 0.63 | $ | 2.11 | $ | 1.89 | ||||||||
| Adjustments net of income taxes: | ||||||||||||||||
| Stock based compensation | - | 0.02 | 0.11 | 0.15 | ||||||||||||
| Pension termination | 0.22 | - | 0.22 | - | ||||||||||||
| Purchase accounting (1) | (0.01 | ) | (0.03 | ) | (0.02 | ) | (0.03 | ) | ||||||||
| Other charges (2) | 0.01 | - | - | 0.03 | ||||||||||||
| Adjusted diluted earnings per share | $ | 0.72 | $ | 0.62 | $ | 2.42 | $ | 2.04 | ||||||||
| (1) Reflects |
||||||||||||||||
| (2) Reflects one time, unrelated legal, severance and consulting fees, and loss on disposal of fixed assets related to facility relocation for the periods presented. | ||||||||||||||||
| Free Cash Flow reconciliation (unaudited) | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| Three month period ended |
Twelve month period ended |
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Net cash provided by operating activities | $ | 98,465 | $ | 76,085 | $ | 77,296 | $ | 58,181 | ||||||||
| Acquisition of property and equipment | (3,732 | ) | (3,388 | ) | (11,533 | ) | (9,690 | ) | ||||||||
| Free cash flow | $ | 94,733 | $ | 72,697 | $ | 65,763 | $ | 48,491 | ||||||||
For further information contact:
847-530-0249
investorrelations@douglasdynamics.com
Source: Douglas Dynamics, Inc.
