0001558370-21-001470 | 10-K | XBRL Viewer

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Document and Entity Information - USD ($) $ in Millions	12 Months Ended
Document and Entity Information - USD ($) $ in Millions	Dec. 31, 2020	Feb. 23, 2021	Jun. 30, 2020
Document and Entity Information
Document Type	10-K
Document Annual Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 2020
Entity File Number	001-34728
Entity Registrant Name	DOUGLAS DYNAMICS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	13-4275891
Entity Address, Address Line One	7777 N 73rd Street
Entity Address, City or Town	Milwaukee
Entity Address, Postal Zip Code	53223
Entity Address, State or Province	WI
City Area Code	414
Local Phone Number	354-2310
Title of 12(b) Security	Common Stock, par value $.01 per share
Trading Symbol	PLOW
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Icfr Auditor Attestation Flag	true
Entity Common Stock, Shares Outstanding		22,857,457
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY
Entity Central Index Key	0001287213
Amendment Flag	false
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Public Float			$ 803

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 41,030	$ 35,665
Accounts receivable, net	83,195	87,871
Inventories	79,482	77,942
Inventories - truck chassis floor plan	8,146	6,539
Prepaid and other current assets	5,334	3,511
Total current assets	217,187	211,528
Property, plant, and equipment, net	64,320	58,444
Goodwill	113,134	241,006
Other intangible assets, net	152,791	163,722
Operating lease - right of use asset	21,441	22,557
Non-qualified benefit plan assets	9,041	7,270
Other long-term assets	1,288	1,168
Total assets	579,202	705,695
Current liabilities:
Accounts payable	16,284	16,113
Accrued expenses and other current liabilities	30,831	26,496
Floor plan obligations	7,885	6,539
Operating lease liability - current	4,326	3,822
Income tax payable	5,214	2,990
Current portion of long-term debt	1,666	22,143
Total current liabilities	66,206	78,103
Retiree health benefit obligation	15,804	14,017
Deferred income taxes	26,681	47,211
Long-term debt, less current portion	236,676	222,081
Operating lease liability - noncurrent	17,434	18,981
Other long-term liabilities	16,197	12,139
Commitments and contingencies (Note 16)
Stockholders' equity:
Common Stock, par value $0.01, 200,000,000 shares authorized, 22,857,457 and 22,795,412 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively	229	228
Additional paid-in capital	157,758	155,001
Retained earnings	47,712	160,748
Accumulated other comprehensive loss, net of tax	(5,495)	(2,814)
Total stockholders' equity	200,204	313,163
Total liabilities and stockholders' equity	$ 579,202	$ 705,695

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2020	Dec. 31, 2019
CONDENSED CONSOLIDATED BALANCE SHEETS
Common Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, shares authorized	200,000,000	200,000,000
Common Stock, shares issued	22,857,457	22,795,412
Common Stock, shares outstanding	22,857,457	22,795,412

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Net sales	$ 480,154	$ 571,710	$ 524,067
Cost of sales	351,874	402,893	369,177
Gross profit	128,280	168,817	154,890
Selling, general, and administrative expense	64,617	71,288	69,958
Impairment charges	127,872
Intangibles amortization	10,931	10,956	11,472
Income (loss) from operations	(75,140)	86,573	73,460
Interest expense, net	(20,238)	(16,782)	(16,943)
Debt modification expense	(3,542)
Pension termination		(6,609)
Other income (expense), net	91	(565)	(758)
Income (Loss) before taxes	(98,829)	62,617	55,759
Income tax expense (benefit)	(12,276)	13,451	11,854
Net income (loss)	$ (86,553)	$ 49,166	$ 43,905
Earnings (loss) per share:
Basic earnings (loss) per common share attributable to common shareholders (in dollars per share)	$ (3.81)	$ 2.13	$ 1.91
Earnings (loss) per common share assuming dilution attributable to common shareholders (in dollars per share)	(3.81)	2.11	1.89
Cash dividends declared per share (in dollars per share)	1.12	1.09	1.06
Cash dividends declared per share (in dollars per share)	$ 1.12	$ 1.09	$ 1.06

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$ (86,553)	$ 49,166	$ 43,905
Other comprehensive income (loss):
Adjustment for pension and postretirement benefit liability, net of tax of $34 in 2020, ($94) in 2019 and ($558) in 2018	(97)	351	1,568
Pension termination, net of tax of ($2,237)		6,380
Adjustment for interest rate swap, net of tax of $899 in 2020, $1,211 in 2019 and ($64) in 2018	(2,584)	(3,496)	84
Total other comprehensive income (loss), net of tax	(2,681)	3,235	1,652
Comprehensive income (loss)	$ (89,234)	$ 52,401	$ 45,557

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Adjustment for pension and postretirement benefit liability, tax	$ 34	$ (94)	$ (558)
Pension termination net of tax		(2,237)
Adjustment for interest rate swap, tax	$ 899	$ 1,211	$ (64)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Total
Balance at Dec. 31, 2017	$ 226	$ 147,287	$ 115,737	$ (6,572)	$ 256,678
Balance (in shares) at Dec. 31, 2017	22,590,897
Increase (Decrease) in Stockholders' Equity
Net loss			43,905		43,905
Dividends paid			(24,383)		(24,383)
Prior period adjustment \| ASC 2014-09			377		377
Adjustment for pension and postretirement benefit liability, net of tax of $34 in 2020, ($94) in 2019 and ($558) in 2018				1,568	1,568
Adjustment for interest rate swap, net of tax of $899 in 2020, $1,211 in 2019 and ($64) in 2018				84	84
Shares withheld on restricted stock vesting		(23)			(23)
Stock based compensation	$ 1	4,549			4,550
Stock based compensation (in shares)	110,094
Balance at Dec. 31, 2018	$ 227	151,813	136,765	(6,049)	282,756
Balance (in shares) at Dec. 31, 2018	22,700,991
Increase (Decrease) in Stockholders' Equity
Impact due to adoption \| ASU 2018-02			1,129	(1,129)
Net loss			49,166		49,166
Dividends paid			(25,183)		(25,183)
Adjustment for pension and postretirement benefit liability, net of tax of $34 in 2020, ($94) in 2019 and ($558) in 2018				351	351
Adjustment for interest rate swap, net of tax of $899 in 2020, $1,211 in 2019 and ($64) in 2018				(3,496)	(3,496)
Shares withheld on restricted stock vesting		(50)			(50)
Pension termination, net of tax of ($2,237)				6,380	6,380
Stock based compensation	$ 1	3,238			3,239
Stock based compensation (in shares)	94,421
Balance at Dec. 31, 2019	$ 228	155,001	160,748	(2,814)	313,163
Balance (in shares) at Dec. 31, 2019	22,795,412
Increase (Decrease) in Stockholders' Equity
Net loss			(86,553)		(86,553)
Dividends paid			(25,926)		(25,926)
Adjustment for pension and postretirement benefit liability, net of tax of $34 in 2020, ($94) in 2019 and ($558) in 2018				(97)	(97)
Adjustment for interest rate swap, net of tax of $899 in 2020, $1,211 in 2019 and ($64) in 2018				(2,584)	(2,584)
Shares withheld on restricted stock vesting		(72)			(72)
Stock based compensation	$ 1	2,829			2,830
Stock based compensation (in shares)	62,045
Balance at Dec. 31, 2020	$ 229	$ 157,758	47,712	$ (5,495)	200,204
Balance (in shares) at Dec. 31, 2020	22,857,457
Increase (Decrease) in Stockholders' Equity
Impact due to adoption \| ASU 2016-13			$ (557)		$ (557)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) $ in Thousands	12 Months Ended
	Dec. 31, 2020 USD ($)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Impact due to adoption, net of tax	$ 193
Adjustment for pension and postretirement benefit liability, tax	34
Adjustment for interest rate swap, tax	$ 899

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Operating activities
Net income (loss)	$ (86,553)	$ 49,166	$ 43,905
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	19,737	19,212	19,085
Amortization of deferred financing costs and debt discount	1,364	1,214	1,214
Debt modification expense	267
Loss on disposal of fixed assets			185
Stock-based compensation	2,830	3,239	4,550
Adjustments on derivatives not designated as hedges	2,854
Provision for losses on accounts receivable	1,081	1,361	531
Deferred income taxes	(19,598)	(2,123)	9,551
Impairment charges	127,872
Earnout liability	(2,017)	(417)	(900)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	3,038	(7,747)	(511)
Inventories	(1,801)	4,054	(12,347)
Prepaid assets, refundable income taxes and other assets	(3,715)	(2,140)	(1,114)
Accounts payable	(21)	(2,562)	3,039
Accrued expenses and other current liabilities	6,577	6,491	312
Benefit obligations and other long-term liabilities	1,451	7,548	(9,319)
Net cash provided by operating activities	53,366	77,296	58,181
Investing activities
Capital expenditures	(14,490)	(11,533)	(9,690)
Net cash used in investing activities	(14,490)	(11,533)	(9,690)
Financing activities
Shares withheld on restricted stock vesting paid for employees' taxes	(72)	(50)	(23)
Payments of financing costs	(1,133)
Borrowings on long-term debt	270,875
Dividends paid	(25,926)	(25,183)	(24,383)
Repayment of long-term debt	(277,255)	(32,685)	(33,140)
Net cash used in financing activities	(33,511)	(57,918)	(57,546)
Change in cash and cash equivalents	5,365	7,845	(9,055)
Cash and cash equivalents at beginning of year	35,665	27,820	36,875
Cash and cash equivalents at end of year	41,030	35,665	27,820
Non-cash operating and financing activities
Truck chassis inventory acquired through floorplan obligations	38,167	44,929	38,129
Pension settlement		6,609
Supplemental disclosure of cash flow information
Income taxes paid	4,279	13,283	8,465
Interest paid	$ 16,841	$ 15,779	$ 15,878

Description of business and basis of presentation

12 Months Ended

Dec. 31, 2020

Description of business and basis of presentation

Description of business and basis of presentation

1. Description of business and basis of presentation

Douglas Dynamics, Inc. (the “Company,”) is a premier manufacturer and upfitter of commercial vehicle attachments and equipment. The Company’s portfolio includes snow and ice management attachments sold under the BLIZZARD^®, FISHER^®, HENDERSON^®, SNOWEX^® and WESTERN^® brands, turf care equipment under the TURFEX^® brand, and industrial maintenance equipment under the SWEEPEX^® brand. The Company’s portfolio also includes the up-fit of market leading attachments and storage solutions under the HENDERSON® brand, and the DEJANA® brand and its related sub-brands. The Company is headquartered in Milwaukee, WI and currently owns manufacturing and upfit facilities in Milwaukee, WI, Manchester Iowa, Rockland, ME, Madison Heights, MI and Huntley, IL. The Company also leases fifteen manufacturing and upfit facilities located in Iowa, Maryland, Missouri, New Jersey, New York, Ohio, Pennsylvania, and Rhode Island. Additionally, the Company operates a sourcing office in China.

The Company conducts business in two segments: Work Truck Attachments and Work Truck Solutions. During the first quarter of 2019, the Company reorganized its business segments to reflect a new operating structure as a result of a change in how the Company’s chief operating decision maker allocates resources, makes operating decisions and assesses the performance of the business. Financial information regarding these segments is in Note 17 to the Consolidated Financial Statements.

Certain reclassifications have been made to the prior period financial statements to conform to the 2020 presentation related to non-qualified benefit plan assets and liabilities. There was a balance sheet reclassification of non-qualified benefit plan assets from Other long-term assets to Non-qualified benefit plan assets of $7,270 as of December 31, 2019. Additionally, there was a balance sheet reclassification of deferred compensation from Other long-term liabilities to Retiree benefits and deferred compensation of $7,679 as of December 31, 2019.

Recently adopted accounting standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “Financial Instruments - Credit Losses,” which modifies the measurement of expected credit losses for financial instruments held at the reporting date. The standard is effective for annual periods beginning after December 15, 2019. The Company adopted this standard in the first quarter of fiscal 2020. Upon adoption, the Company recognized the cumulative effect of adopting this guidance as an adjustment to the opening balance of retained earnings of $557, net of tax. The Company has identified and implemented changes to processes and controls to meet the standard’s updated reporting and disclosure requirements. See Note 2 for additional information.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform,” which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The Company adopted this standard in the first quarter of fiscal 2020 specifically related to its interest rate swap, where the Company asserts the forecasted transaction using the existing reference rate associated with the swap remains probable.

In August 2018, the FASB issued ASU 2018-14, “Compensation - Retirement benefits (Topic 715-20)”, which amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The ASU eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The ASU also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits. This ASU is effective for fiscal years ending after December 15, 2020 and must be applied on a retrospective basis. The Company adopted this standard in the fourth quarter of fiscal 2020, and there was no material impact to the Company as a result of its adoption.

See Note 22 for a summary of recent accounting pronouncements not yet adopted and the Company’s evaluation of their impact on the financial statements.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2020

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of consolidation

The accompanying consolidated financial statements include the accounts of Douglas Dynamics, Inc. and its direct wholly-owned subsidiary, Douglas Dynamics, L.L.C., and its wholly-owned subsidiaries, Douglas Dynamics Finance Company (an inactive subsidiary), Fisher, LLC, Henderson Enterprises Group, Inc., Henderson Products, Inc. and Dejana Truck & Utility Equipment Company, LLC (hereinafter collectively referred to as the “Company”). All intercompany balances and transactions have been eliminated in consolidation.

Use of estimates

The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Accordingly, actual results could differ from those estimates.

Cash and cash equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

Accounts receivable and allowance for credit losses

Effective January 1, 2020, the Company adopted new accounting guidance that significantly changes the impairment model for estimating credit losses on financial assets to a current expected credit losses (“CECL”) model that requires entities to estimate the lifetime expected credit losses on such assets, leading to earlier recognition of such losses. Under the new guidance, the Company is required to measure expected credit losses using forward-looking information to assess its allowance for credit losses. The guidance also requires the Company to consider of a broader range of reasonable and supportable information in estimating credit losses. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Effective January 1, 2020, the adoption of CECL accounting, through a modified-retrospective approach, caused an increase to the allowance for credit losses of approximately $400 and $350 for the Work Truck Attachments and Work Truck Solutions segments, respectively.

The Company carries its accounts receivable at their face amount less an allowance for credit losses. The majority of the Company’s accounts receivable are due from distributors of truck equipment and dealers of completed upfit trucks. Credit is extended based on an evaluation of a customer’s financial condition. A receivable is considered past due if payments have not been received within agreed upon invoice terms. Accounts receivable are written off after all collection efforts have been exhausted. The Company takes a security interest in the inventory as collateral for the receivable but often does not have a priority security interest. The Company has short-term accounts receivable at its Work Truck Attachments and Work Truck Solutions segments subject to evaluation for expected credit losses. Expected credit losses are estimated based on the loss-rate and probability of default methods. On a periodic basis, the Company evaluates its accounts receivable and establishes the allowance for credit losses based on specific customer circumstances, past events including collections and write-off history, current

conditions, and reasonable forecasts about the future. Management evaluated the need for an additional allowance for credit losses related to economic conditions arising from the COVID-19 pandemic. Management has not seen indications of customers going out of business and not being able to pay their bills (although the receivables may become more aged). Management believes customers of the Work Truck Attachments segment have long-standing relationships with the Company, and are mature dealers that are likely able to weather the pandemic. Many Work Truck Solutions customers are governments and municipal entities who management believes are highly unlikely to default. In addition management believes Work Truck Solutions has long-standing relationships with its customers, and the customers are in general mature dealers that are unlikely to default as a result of the pandemic. Therefore, as of December 31, 2020, no additional reserve related to the COVID-19 pandemic was deemed necessary. As of December 31, 2020 the Company had an allowance for credit losses on its trade accounts receivable of $1,480 and $1,449 at its Work Truck Attachments and Work Truck Solutions segments, respectively.

The following table rolls forward the activity related to credit losses for trade accounts receivable at each segment, and on a consolidated basis for the year ended December 31, 2020:


	Balance at		Adoption of		Additions				Changes to		Balance at
	December 31,		ASU 2016-03		charged to		Writeoffs		reserve, net		December 31,
	2019				earnings						2020
Year Ended December 31, 2020
Work Truck Attachments	$	600	$	400	$	401	$	(12)	$	91	$	1,480
Work Truck Solutions		887		350		680		(416)		(52)		1,449
Total	$	1,487	$	750	$	1,081	$	(428)	$	39	$	2,929

Financing program

The Company is party to a financing program in which certain distributors may elect to finance their purchases from the Company through a third party financing company. The Company provides the third party financing company recourse against the Company regarding the collectability of the receivable under the program due to the fact that if the third party financing company is unable to collect from the distributor the amounts due in respect of the product financed, the Company would be obligated to repurchase any remaining inventory related to the product financed and reimburse any legal fees incurred by the financing company. During the years ended December 31, 2020, 2019 and 2018, distributors financed purchases of $7,628, $8,644 and $8,497 through this financing program, respectively. At both December 31, 2020 and December 31, 2019, there were no uncollectible outstanding receivables related to sales financed under the financing program. The amount owed by distributors to the third party financing company under this program at December 31, 2020 and 2019 was $7,069 and $7,127, respectively. The Company was not required to repurchase any repossessed inventory for the years ended December 31, 2020, 2019 and 2018.

In the past, minimal losses have been incurred under this agreement. However, an adverse change in distributor retail sales could cause this situation to change and thereby require the Company to repurchase repossessed units. Any repossessed units are inspected to ensure they are current, unused product and are restocked and resold.

Interest Rate Swap

The Company is a counterparty to interest-rate swap agreements to hedge against the potential impact on earnings from increases in market interest rates. On June 13, 2019 the Company entered into an interest rate swap agreement to reduce its exposure to interest rate volatility. The interest rate swap has a notional amount of $175,000 effective for the period May 31, 2019 through May 31, 2024. The Company may have counterparty credit risk resulting from the interest rate swap, which it monitors on an on-going basis. The risk lies with one global financial institution. Under the interest rate swap agreement, the Company will either receive or make payments on a

monthly basis based on the differential between 2.495% and LIBOR (with a LIBOR floor of 1.0%). The interest rate swap was previously accounted for as a cash flow hedge. During the first quarter of 2020, the swap was determined to be ineffective. As a result, the swap was dedesignated on March 19, 2020, and the remaining losses currently included in Accumulated other comprehensive loss on the Consolidated Balance Sheets will be amortized into interest expense on a straight line basis through the life of the swap. The amount amortized from Accumulated other comprehensive loss into earnings during the year ended December 31, 2020 was $2,243. The amount expected to be amortized from Accumulated other comprehensive loss into earnings in the next twelve months is $2,991. A mark-to-market adjustment of $611 was recorded as Interest expense in the Consolidated Statements of Income for the year ended December 31, 2020, related to the swap.

The negative fair value of the interest rate swap, net of tax, is ($9,674) and ($5,023) at December 31, 2020 and December 31, 2019, respectively, of which ($7,608) and ($5,023) is included in Accumulated other comprehensive loss on the balance sheet as of December 31, 2020 and 2019, respectively. This fair value was determined using Level 2 inputs as defined in Accounting Standards Codification Topic (“ASC”) 820 - Fair Value Measurements and Disclosures.

Inventories

Inventories are stated at the lower of cost or market. Market is determined based on estimated realizable values. Inventory costs are primarily determined by the first-in, first-out (FIFO) method. The Company periodically reviews its inventory for slow moving, damaged and discontinued items and provides reserves to reduce such items identified to their recoverable amounts.

The Company records inventories to include truck chassis inventory financed through a floor plan financing agreement as discussed in Note 9. The Company takes title to truck chassis upon receipt of the inventory through its floor plan agreement and performs upfitting service installations to the truck chassis inventory during the installation period. The floor plan obligation is then assumed by the dealer customer upon delivery. At December 31, 2020 and 2019, the Company had $8,146 and $6,539 of chassis inventory and related floor plan financing obligation, respectively. The Company recognizes revenue associated with upfitting and service installations net of the truck chassis.

The Company receives, on consignment, truck chassis on which it performs upfitting service installations under “bailment pool” arrangements with major truck manufacturers. The Company never receives title to the truck chassis. The aggregate value of all bailment pool chassis on hand as of December 31, 2020 and 2019 was $21,725 and $28,645, respectively. The Company is responsible to the manufacturer for interest on chassis held for upfitting. The Company recognizes revenue associated with upfitting and service installations net of the truck chassis.

Leases

As of December 31, 2020, fifteen of the Company’s upfit and distribution centers were subject to a lease agreement.

In February 2016, the FASB issued ASU No. 2016-02 Leases: Amendments to the FASB Accounting Standards Codification. ASU 2016-02 increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 was effective for the Company beginning on January 1, 2019. In July 2018, the FASB issued ASU No. 2018-11 Leases: Targeted Improvements which allowed entities to apply the new lease standard at the adoption date, rather than at the earliest period presented. In transition, lessees and lessors are required to recognize and measure leases using a modified retrospective approach. The Company adopted the standard in the first quarter of fiscal 2019. See Note 7 for additional information the Company’s leases.

Property, plant and equipment

Property, plant and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed using straight-line methods over the estimated useful lives for financial statement purposes and an accelerated method for income tax reporting purposes. The estimated useful lives of the assets are as follows:



	Years
Land improvements and buildings	15	-	40
Leasehold improvements	12
Machinery and equipment	3	-	20
Furniture and fixtures	3	-	12
Mobile equipment and other	3	-	10

Depreciation expense was $8,806, $8,256, and $7,613 for the years ended December 31, 2020, 2019 and 2018, respectively. The estimated useful lives of leasehold improvements is the shorter of the remainder of the lease term and twelve years.

Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to operations when incurred. Repairs and maintenance expenses amounted to $6,089, $6,256 and $6,032 for the years ended December 31, 2020, 2019 and 2018, respectively. When assets are sold or retired, the cost of the asset and the related accumulated depreciation are eliminated from the accounts and any gain or loss is recognized in results of operations.

Impairment of long-lived assets

Long-lived assets are reviewed for potential impairment when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying value of such assets to the undiscounted future cash flows expected to be generated by the assets. If the carrying value of an asset exceeds its estimated undiscounted future cash flows, an impairment provision is recognized to the extent that the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or the fair value of the asset, less costs of disposition. Management of the Company considers such factors as current results, trends and future prospects, current market value, and other economic and regulatory factors in performing these analyses. The Company determined that no long-lived assets were impaired as of December 31, 2019. During the second quarter of 2020, the Company identified a triggering event as there had been a significant decline in the business climate and in results of operations as a result of uncertainty related to the COVID-19 pandemic and chassis availability. Given these indicators, the Company determined that there was a higher degree of uncertainty in achieving its financial projections. Therefore, the Company performed an impairment test for its long-lived assets, other than goodwill, as of June 30, 2020 and subsequently performed its annual impairment testing as of December 31, 2020, both of which indicated no impairment.

Goodwill and other intangible assets

Goodwill and indefinite-lived intangible assets are tested for impairment annually as of December 31, or sooner if impairment indicators arise. The fair value of indefinite-lived intangible assets is estimated based upon an income and market approach. In reviewing goodwill for impairment, potential impairment is identified by comparing the estimated fair value of the reporting units to its carrying value. The Company has determined it has three reporting units. When the fair value is less than the carrying value of the net assets of the reporting unit, including goodwill, an impairment loss would be recognized. Annual impairment tests conducted by the Company

on December 31, 2019 resulted in no adjustment to the carrying value of goodwill. During the second quarter of 2020, the Company identified a triggering event as there had been a significant decline in the business climate and in results of operations as a result of uncertainty related to the COVID-19 pandemic and chassis availability. Given these indicators, the Company determined that there was a higher degree of uncertainty in achieving its financial projections. Therefore, the Company performed an impairment test as of June 30, 2020 for each of its reporting units, and subsequently performed its annual impairment testing as of December 31, 2020.

The Work Truck Attachments segment consists of one reporting unit: Commercial Snow & Ice. The impairment tests performed as of June 30, 2020 and December 31, 2020 indicated no impairment for the Commercial Snow & Ice reporting unit, which had goodwill of $113,132 at both December 31, 2020 and 2019. The Work Truck Solutions consists of two reporting units; Municipal and Dejana. At June 30, 2020, the Municipal reporting unit’s carrying value exceeded its fair value. As a result, all $47,799 of the Municipal goodwill balance was recorded as an impairment charge during year ended December 31, 2020 and is included in Impairment charges on the Consolidated Statements of Income. At June 30, 2020, the Dejana reporting unit’s carrying value exceeded its fair value. As a result, all $80,073 of the Dejana goodwill balance was recorded as an impairment charge during the year ended December 31, 2020 and is included in Impairment charges on the Consolidated Statements of Income.

Intangible assets with estimable useful lives are amortized over their respective estimated useful lives and are reviewed for potential impairment when events or circumstances indicate that the carrying amount of the asset may not be recoverable. The Company amortizes its distribution network intangibles over periods ranging from 15 to 20 years, trademarks over 7 to 25 years, patents over 7 to 20 years, customer relationships over 15 to 19.5 years and noncompete agreements over 4 to 5 years. There were no indicators of impairment during the years ended December 31, 2020 or 2019. The Company had gross intangible assets and accumulated amortization of $273,755 and $120,964, respectively, for the year ended December 31, 2020, of which $177,765 and $93,429 relate to the Work Truck Attachments segment, and $95,990 and $27,535 relate to the Work Truck Solutions segment, respectively. The Company had gross intangible assets and accumulated amortization of $275,675 and $111,953, respectively for the year ended December 31, 2019, of which $177,785 and $87,964 relate to the Work Truck Attachments segment, and $97,890 and $23,989 relate to the Work Truck Solutions segment, respectively.

Income taxes

Deferred income taxes are accounted for under the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates. Deferred income tax provisions or benefits are based on the change in the deferred tax assets and liabilities from period to period. Deferred income tax assets are reduced by a valuation allowance if it is more likely than not that some portion of the deferred income tax asset will not be realized. Additionally, when applicable, the Company would classify interest and penalties related to uncertain tax positions in income tax expense.

Deferred financing costs

The costs of obtaining financing are capitalized and amortized over the term of the related financing on a basis that approximates the effective interest method. The changes in deferred financing costs are as follows:



Balance at December 31, 2017	$	3,209
Amortization of deferred financing costs		(823)
Balance at December 31, 2018		2,386
Amortization of deferred financing costs		(823)
Balance at December 31, 2019		1,563
Deferred financing costs capitalized on new debt		1,133
Write-off of unamortized deferred financing costs		(197)
Amortization of deferred financing costs		(763)
Balance at December 31, 2020	$	1,736

Fair Value

Fair value is the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

The following table presents financial assets and liabilities measured at fair value on a recurring basis and discloses the fair value of long-term debt:



		Fair Value at December 31, 2020		Fair Value at December 31, 2019
Assets:
Non-qualified benefit plan assets (a)	$	9,041	$	7,270

Total Assets	$	9,041	$	7,270

Liabilities:
Interest rate swaps (b)		13,073		6,736
Long term debt (c)		241,278		247,630
Earnout - Dejana (d)		-		2,000

Total Liabilities	$	254,351	$	256,366

(a)	Included in Non-qualified benefit plan assets is the cash surrender value of insurance policies on various individuals that are associated with the Company. The carrying amounts of these insurance policies approximates their fair value.

(b)	Valuation models are calibrated to initial trade price. Subsequent valuations are based on observable inputs to the valuation model (e.g. interest rates and credit spreads). Model inputs are changed only when corroborated

by market data. A credit risk adjustment is made on each swap using observable market credit spreads. Thus, inputs used to determine fair value of the interest rate swap are Level 2 inputs. Interest rate swaps of $4,075 and $8,998 at December 31, 2020 are included in Accrued expenses and other current liabilities and Other long-term liabilities, respectively. Interest rate swaps of $1,522 and $5,214 at December 31, 2019 are included in Accrued expenses and other current liabilities and Other long-term liabilities, respectively.

(c)

The fair value of the Company’s long-term debt, including current maturities, is estimated using discounted cash flows based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements, which is a Level 2 input for all periods presented. Meanwhile, long-term debt is recorded at carrying amount, net of discount and deferred financing costs, as disclosed on the face of the balance sheet.

(d)

Due to the remote probability of attaining targets related to the obligation for a portion of the potential earnout incurred in conjunction with the acquisition of substantially all of the assets of Dejana Truck & Utility Equipment Company, Inc. and certain entities directly or indirectly owned by the Peter Paul Dejana Family Trust dated 12/31/98 (“Dejana”), the earnout obligation was reduced to $0 during the year ended December 31, 2020, which is the fair value of an obligation for a portion of the potential earnout incurred in conjunction with the acquisition of substantially all of the assets of Dejana Truck & Utility Equipment Company, Inc. and certain entities directly or indirectly owned by Dejana. Included in Other long term liabilities in the amount of $2,000 at December 31, 2019 is the fair value of an obligation for a portion of the potential earnout incurred in conjunction with the acquisition of Dejana. The carrying amount of the earnout approximates its fair value. Fair value is based upon Level 3 inputs of a real options approach where gross sales were simulated in a risk-neutral framework using Geometric Brownian Motion, a well-accepted model of stock price behavior that is used in option pricing models such as the Black-Scholes option pricing model, using key inputs of forecasted future sales and financial performance as well as a risk adjusted expected growth rate adjusted appropriately based on its correlation with the market. See reconciliation of liability included below:


	December 31,

	2020		2019
Beginning Balance	$	2,000	$	2,200
Adjustments to fair value		(2,000)		(200)
Ending balance	$	-	$	2,000

Concentration of credit risk

The Company’s cash is deposited with multiple financial institutions. At times, deposits in these institutions exceed the amount of insurance provided on such deposits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant risk on these balances.

No distributor represented more than 10% of the Company’s net sales or accounts receivable during the years ended December 31, 2020, 2019 and 2018.

Revenue recognition

The Company applies the guidance codified in Accounting Standards Codification 606, Revenue from Contracts with Customers (“Topic 606”) using the modified retrospective method upon the adoption of ASU 2014-09 in 2018. Revenue is recognized when or as the Company satisfies a performance obligation. See Note 3 for a more detailed description of revenue recognition policies.

Cost of sales

Cost of sales includes all costs associated with the manufacture of the Company’s products, including raw materials, purchased parts, freight, plant operating expenses, property insurance and taxes, and plant depreciation. All payroll costs and employee benefits for the hourly workforce, manufacturing management, and engineering costs are included in cost of sales.

Related party transactions

As a result of the Dejana acquisition, the Company had previously engaged in related party leases during 2018 and 2019 with parties that were affiliated with the former owners of Dejana and remained affiliated with Dejana post - acquisition. The related parties continued to own land and buildings where Dejana conducts business. Such leases were entered into at market value. The related party is no longer employed by the Company beginning in April 2019 and therefore was not a related party in 2020. The Company incurred $2,168 of total lease expense to related parties in the years ended December 31, 2018 and 2019.

There were no other related party transactions during 2018, 2019 or 2020.

Warranty cost recognition

The Company accrues for estimated warranty costs as revenue is recognized. All warranties are assurance-type warranties. See Note 11 for further details.

Defined benefit plans

The Company has noncontributory, defined benefit retirement plans and postretirement benefit plans covering certain employees. Management reviews underlying assumptions on an annual basis. During 2019, the Company terminated its defined benefit pension plans, and continues to have defined benefit postretirement benefit plans. Refer to Note 13 for additional information.

Advertising expenses

Advertising expenses include costs for the production of marketing media, literature, website content and displays. The Company participates in trade shows and advertises in the yellow pages and billboards. Advertising expenses amounted to $3,437, $4,895 and $5,213 for the years ended December 31, 2020, 2019 and 2018, respectively. All costs associated with the Company’s advertising programs are expensed as incurred.

Research and development expenses

Research and development expenses include costs to develop new technologies to enhance existing products and to expand the range of product offerings. Research and development expenses amounted to $6,679, $5,693 and $3,194 for the years ended December 31, 2020, 2019 and 2018, respectively.

Shipping and handling costs

Generally, shipping and handling costs are paid directly by the customer to the shipping agent. Those shipping and handling costs billed by the Company are recorded as a component of sales with the corresponding costs included in cost of sales.

Share-based payments

The Company applies the guidance codified in ASC 718, Compensation—Stock Compensation. This standard requires the measurement of the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award at the grant date and recognition of the compensation expense over the period during which an employee is required to provide service in exchange for the award (generally the vesting period).

Accumulated Other Comprehensive loss

Accumulated other comprehensive loss is defined as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner resources and is comprised of net income or loss and “other comprehensive loss”. The Company’s other comprehensive loss is comprised of the adjustments for pension and postretirement benefit liabilities including pension terminations as well as the impact of its interest rate swaps. See Note 20 for the components of accumulated other comprehensive loss.

Segment Reporting

The Company operates through two operating segments for which separate financial information is available, and for which operating results are evaluated regularly by the Company's chief operating decision maker in determining resource allocation and assessing performance. During the first quarter of 2019, the Company reorganized its business segments to reflect a new operating structure as a result of a change in how the Company’s chief operating decision maker allocates resources, makes operating decisions and assesses the performance of the business. The Company’s two current reportable business segments are described below.

Work Truck Attachments. The Work Truck Attachments segment includes our operations that manufacture and sell snow and ice control attachments and other products sold under the FISHER®, WESTERN® and SNOWEX® brands.

Work Truck Solutions. The Work Truck Solutions segment includes manufactured municipal snow and ice control products under the HENDERSON® brand and the up-fit of market leading attachments and storage solutions under the HENDERSON® brand, and the DEJANA® brand and its related sub-brands.

Segment performance is evaluated based on segment net sales and adjusted EBITDA. See Note 17 for financial information regarding these segments. Sales are primarily within the United States and substantially all assets are located within the United States.

Revenue Recognition

12 Months Ended

Dec. 31, 2020

Revenue Recognition

Revenue Recognition

3. Revenue Recognition

On January 1, 2018, the Company adopted Topic 606 applying the modified retrospective method to all contracts that were not completed as of January 1, 2018. The Company recorded a net increase to opening retained earnings of $377 as of January 1, 2018 due to the cumulative impact of adopting Topic 606.

The adoption of Topic 606 did not have a significant impact on the Work Truck Attachments segment. In the Work Truck Solutions segment, the standard changed the timing of revenue for truck upfits of customer-owned chassis from a point in time to over time. This change in timing of revenue recognition decreased revenue by $542, decreased revenue by $251, and increased revenue by $299 in the years ended December 31, 2020, 2019 and 2018, respectively.

Revenue Streams

The following is a description of principal activities from which the Company generates revenue. Revenues are recognized when control of the promised goods or services are transferred to the customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company generates all of its revenue from contracts with customers. Additionally, contract amounts represent the full amount of the transaction price as agreed upon with the customer at the time of order, resulting in a single performance obligation in all cases. In the case of a single order containing multiple upfits, the transaction price may represent multiple performance obligations.

Work Truck Attachments

The Company recognizes revenue upon shipment of equipment to the customer. Within the Work Truck Attachments segment, the Company offers a variety of discounts and sales incentives to its distributors. The estimated liability for sales discounts and allowances is calculated using the expected value method and recorded at the time of sale as a reduction of net sales. The liability is estimated based on the costs of the program, the planned duration of the program and historical experience.

The Work Truck Attachments segment has two revenue streams, as identified below.

Independent Dealer Sales – Revenues from sales to independent dealers are recognized when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon shipment. In these instances, each product is considered a separate performance obligation, and revenue is recognized upon shipment of the goods. Any shipping and handling activities performed by the Company after the transfer of control to the customer (e.g., when control transfers upon shipment) are considered fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized.

Parts & Accessory Sales – The Company’s equipment is used in harsh conditions and parts frequently wear out. These parts drive recurring revenues through parts and accessory sales. The process for recording parts and accessory sales is consistent with the independent dealer sales noted above.

Work Truck Solutions

The Work Truck Solutions segment primarily participates in the truck and vehicle upfitting industry in the United States. Customers are billed separately for the truck chassis by the chassis manufacturer. The Company only records sales for the amount of the upfit, excluding the truck chassis. Generally, the Company obtains the truck chassis from the truck chassis manufacturer through either its floor plan agreement with a financial institution or bailment pool agreement with the truck chassis manufacturer. Additionally, in some instances the Company upfits chassis which are owned by the end customer. For truck chassis acquired through the floor plan agreement, the Company holds title to the vehicle from the time the chassis is received by the Company until the completion of the up-fit. Under the bailment pool agreement, the Company does not take title to the truck chassis, but rather only holds the truck chassis on consignment. The Company pays interest on both of these arrangements. The Company records revenue in the same manner net of the value of the truck chassis in both the Company’s floor plan and bailment pool agreements. The Company does not set the price for the truck chassis, is not responsible for the billing of the chassis and does not have inventory risk in either the bailment pool or floor plan agreements. The Work Truck

Solutions segment also has manufacturing operations of municipal snow and ice control equipment, where revenue is recognized upon shipment of equipment to the customer.

Revenues from the sales of the Work Truck Solutions products are recognized net of the truck chassis with the selling price to the customer recorded as sales and the manufacturing and up-fit cost of the product recorded as cost of sales. In these cases, the Company acts as an agent as it does not have inventory or pricing control over the truck chassis. Within the Work Truck Solutions segment, the Company also sells certain third-party products for which it acts as an agent. These sales do not meet the criteria for gross sales recognition, and thus are recognized on a net basis at the time of sale. Under net sales recognition, the cost paid to the third-party service provider is recorded as a reduction to sales, resulting in net sales being equal to the gross profit on the transaction.

The Work Truck Solutions segment has four revenue streams, as identified below.

State and Local Bids – The Company records revenue of separately sold snow and ice equipment upon shipment and fully upfit vehicles upon delivery. The state and local bid process does not obligate the entity to buy any products from the Company, but merely allows the entity to purchase products in the future typically for a fixed period of time. The entity commits to actually purchasing products from the Company when it issues purchase orders off of a previously awarded bid, which lists out actual quantities of equipment being ordered and the delivery terms. On upfit transactions, the Company is providing a significant service by assembling and integrating the individual products onto the customer’s truck. Each individual product and installation activity is highly interdependent and highly interrelated, and therefore the Company considers the manufacture and upfit of a truck a single performance obligation. Any shipping and handling activities performed by the Company after the transfer of control to the Customer (e.g., when control transfers upon shipment) are considered fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized.

Fleet Upfit Sales – The Company enters into contracts with certain fleet customers. Fleet agreements create enforceable rights without the issuance of a purchase order. Typically these agreements outline the terms of sale, payment terms, standard pricing, and the rights of the customer and seller. Fleet sales are performed on both customer owned vehicles as well as non-customer owned vehicles. For non-customer owned vehicles, revenue is recognized at a point in time upon delivery of the truck to the customer. For customer-owned vehicles, per Topic 606, revenue is recognized over time based on a cost input method. The Company accumulates costs incurred on partially completed customer-owned upfits based on estimated margin and completion. This change to over time recognition for customer owned vehicles decreased revenue by $542, decreased revenue by $251 and increased revenue by $299 for the years ended December 31, 2020, 2019 and 2018, respectively.

Dealer Upfit Sales – The Company upfits work trucks for independent dealer customers. Dealer upfit revenue is recorded upon delivery. The customer does not own the vehicles during the upfit process, and as such revenue is recorded at a point in time upon delivery to the customer.

Over the Counter / Parts & Accessory Sales – Work Truck Solutions part and accessory sales are recorded as revenue upon shipment. Additionally, customers can purchase parts at any of the Company’s showrooms. In these instances, each product is considered a separate performance obligation, and revenue is recognized upon shipment of the goods or customer pick up.

Disaggregation of Revenue

The following table provides information about disaggregated revenue by customer type and timing of revenue recognition, and includes a reconciliation of the disaggregated revenue with reportable segments.

Revenue by customer type was as follows:


Year Ended December 31, 2020	Work Truck Attachments	Work Truck Solutions	Total Revenue
Independent dealer	$ 252,838	$ 114,192	$ 367,030
Government	-	62,762	62,762
Fleet	-	42,590	42,590
Other	-	7,772	7,772
Total revenue	$ 252,838	$ 227,316	$ 480,154


Year Ended December 31, 2019	Work Truck Attachments	Work Truck Solutions	Total Revenue
Independent dealer	$ 293,630	$ 127,484	$ 421,114
Government	-	72,810	72,810
Fleet	-	66,306	66,306
Other	-	11,480	11,480
Total revenue	$ 293,630	$ 278,080	$ 571,710


Year Ended December 31, 2018	Work Truck Attachments	Work Truck Solutions	Total Revenue
Independent dealer	$ 275,244	$ 134,140	$ 409,384
Government	-	52,582	52,582
Fleet	-	58,500	58,500
Other	-	3,601	3,601
Total revenue	$ 275,244	$ 248,823	$ 524,067

Revenue by timing of revenue recognition was as follows:


Year Ended December 31, 2020	Work Truck Attachments	Work Truck Solutions	Total Revenue
Point in time	$ 252,838	$ 149,675	$ 402,513
Over time	-	77,641	77,641
Total revenue	$ 252,838	$ 227,316	$ 480,154


Year Ended December 31, 2019	Work Truck Attachments	Work Truck Solutions	Total Revenue
Point in time	$ 293,630	$ 172,269	$ 465,899
Over time	-	105,811	105,811
Total revenue	$ 293,630	$ 278,080	$ 571,710

Year Ended December 31, 2018	Work Truck Attachments	Work Truck Solutions	Total Revenue
Point in time	$ 275,244	$ 153,873	$ 429,117
Over time	-	94,950	94,950
Total revenue	$ 275,244	$ 248,823	$ 524,067

Contract Balances

The following table shows the changes in the Company’s contract liabilities during the years ended December 31, 2020 and 2019:


Year Ended December 31, 2020		Balance at Beginning of Period		Additions		Deductions		Balance at End of Period
Contract liabilities	$	2,187	$	14,931	$	(14,372)	$	2,746


Year Ended December 31, 2019		Balance at Beginning of Period		Additions		Deductions		Balance at End of Period
Contract liabilities	$	2,006	$	16,082	$	(15,901)	$	2,187

The Company receives payments from customers based upon contractual billing schedules. Contract assets include amounts related to our contractual right to consideration for completed performance obligations not yet invoiced. There were no contract assets as of December 31, 2020 or 2019. Contract liabilities include payments received in advance of performance under the contract, variable freight allowances which are refunded to the customer, and rebates paid to distributors under the Company’s municipal rebate program, and are realized with the associated revenue recognized under the contract.

The Company recognized all of the amount that was included in contract liabilities at the beginning of the period as revenue in the years ended December 31, 2020 and 2019.

Practical Expedients and Exemptions

As allowed under Topic 606, the Company adopted the following practical expedients and exemptions:

●

The Company generally expenses sales commissions when incurred because the amortization period would have been less than one year. The Company records these costs within selling, general and administrative expenses.

●

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed.

●

The Company does not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer.

●

The Company excludes from the transaction price all sales taxes that are assessed by a governmental authority.

●

The Company does not adjust the promised amount of consideration for the effects of a significant financing component, as it expects at contract inception that the period between the transfer to a promised good or service to a customer and the customer’s payment for the good or service will be one year or less.

●

The Company accounts for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations.

Acquisitions

12 Months Ended

Dec. 31, 2020

Acquisitions

Acquisition

4. Acquisitions

On July 15, 2016, the Company acquired Dejana. The Dejana purchase agreement includes contingent consideration in the form of an earnout capped at $26,000. Under the earnout agreement, the former owners of Dejana are entitled to receive payments contingent upon the revenue growth and financial performance of the acquired business for the years 2016, 2017 and 2018. The preliminary estimated fair value of the earnout consideration was $10,200 which was further adjusted at December 31, 2016 to $10,373 as a result of the 2016 performance exceeding the 2016 fair value established at the opening balance sheet by $173. Based on the year ended December 31, 2016 results, the new possible range of outcomes was reduced from $26,000 to a maximum earnout of $21,487. The Company made a payment to the former owners of Dejana of $5,487 in the year ended December 31, 2017. The purchase agreement was amended on September 20, 2017 to extend the earnout measurement periods for an additional two years, namely the fiscal years ended December 31, 2019 and December 31, 2020, with the potential for the former owners of Dejana to earn up to 50% of the remaining unearned earnout payments based on the original earnout targets and measurement periods. During the third quarter of 2017, there was a fair value adjustment to reduce the earnout by ($1,186), which was further reduced during the fourth quarter by ($600), for a total fair value adjustment to the earnout for the year of ($1,786). During the fourth quarter of 2018, there was a fair value adjustment to reduce the earnout by ($900), which is included as a reduction to selling, general and administrative expense in the Consolidated Statements of Income (Loss) for the year ended December 31, 2018. During the fourth quarter of 2019, there was a fair value adjustment to reduce the earnout by ($200), which is included as a reduction to selling, general and administrative expense in the Consolidated Statements of Income (Loss) for the year ended December 31, 2019. During the second quarter of 2020, there was a fair value adjustment to reduce the earnout by ($2,000), which is included as a reduction to selling, general and administrative expense in the Consolidated Statements of Income (Loss) for the year ended December 31, 2020 and which reduced the fair value of the earnout consideration to $0.

Inventories

12 Months Ended

Dec. 31, 2020

Inventories

Inventories

5. Inventories

Inventories consist of the following:



	December 31,
	2020		2019

Finished goods	$	39,496	$	42,125
Work-in-process		8,253		6,906
Raw material and supplies	31,733		28,911
	$	79,482	$	77,942

The inventories in the table above do not include truck chassis inventory financed through a floor plan financing agreement as discussed in Note 9. The Company takes title to truck chassis upon receipt of the inventory through its floor plan agreement and performs upfitting service installations to the truck chassis inventory during the installation period. The floor plan obligation is then assumed by the dealer customer upon delivery. At December 31, 2020 and 2019, the Company had $8,146 and $6,539 of chassis inventory and related floor plan financing obligation, respectively. The Company recognizes revenue associated with upfitting and service installations net of

the truck chassis.

Unlike the floorplan agreement, the Company does not record inventory related to truck chassis acquired through the bailment pool agreement as these truck chassis are held on consignment. Like the revenue recognized on floorplan arrangement, revenue recognized for upfitting services on chassis acquired through the bailment agreement, are also recognized net of the truck chassis.

Property, plant and equipment

12 Months Ended

Dec. 31, 2020

Property, plant and equipment

Property, plant and equipment

6. Property, plant and equipment

Property, plant and equipment are summarized as follows:



	December 31,
	2020		2019

Land	$	2,378	$	2,378
Land improvements	4,830		4,541
Leasehold improvements		4,087		4,087
Buildings	29,580		28,715
Machinery and equipment	61,154		55,238
Furniture and fixtures	19,782		17,918
Mobile equipment and other	5,200		5,285
Construction-in-process	11,751		6,555
Total property, plant and equipment	138,762		124,717
Less accumulated depreciation	(74,442)		(66,273)
Net property, plant and equipment	$	64,320	$	58,444

Leases

12 Months Ended

Dec. 31, 2020

Leases

Leases

7. Leases

The Company has operating leases for manufacturing and upfit facilities, land and parking lots, warehousing space and certain equipment. The leases have remaining lease terms of less than one year to 16 years, some of which include options to extend the leases for up to 10 years. Such renewal options were not included in the determination of the lease term unless deemed reasonably certain of exercise. The discount rate used in measuring the lease liabilities is based on the Company’s interest rate on its secured Term Loan Credit Agreement. Certain of the Company’s leases contain escalating rental payments based on an index. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As allowed under ASC 842, the Company has adopted the following practical expedients:

●

Short-term lease practical expedient

o

Allows the Company not to apply the recognition requirements in ASC 842 to short-term leases for all asset classes. Short term leases are leases that, at commencement date, have a term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

●

Separating lease components practical expedient

o

Allows the Company not to separate lease components form nonlease components for all asset classes and instead account for each separate lease and the nonlease components associated with that lease component as a single lease component.

Lease Expense

The components of lease expense, which are included in Cost of sales and Selling, general and administrative expenses on the Consolidated Statements of Income (Loss), were as follows:


	Year Ended	Year Ended
	December 31, 2020	December 31, 2019
Operating lease expense	$ 5,343	$ 4,857
Short term lease cost	$ 397	$ 380
Total lease cost	$ 5,740	$ 5,237

Cash Flow

Supplemental cash flow information related to leases is as follows:


	Year Ended	Year Ended
	December 31, 2020	December 31, 2019

Cash paid for amounts included in the measurement of operating lease liabilities	$ 5,268	$ 4,679
Non-cash lease expense - right-of-use assets	$ 4,182	$ 3,672
Right-of-use assets obtained in exchange for operating lease obligations	$ 3,866	$ 5,325

Balance Sheet

Supplemental balance sheet information related to leases is as follows:


	December 31, 2020		December 31, 2019
Operating Leases
Operating lease right-of-use assets	$ 21,441		$ 22,557

Other current liabilities	4,326		3,822
Operating lease liabilities	17,434		18,981
Total operating lease liabilities	$ 21,760		$ 22,803

Weighted Average Remaining Lease Term
Operating leases	67	months	78	months

Weighted Average Discount Rate
Operating leases	5.16%		5.32%

Lease Maturities

Maturities of leases were as follows:


Year ending December 31,		Operating Leases
2021		$ 5,322
2022		4,941
2023		4,383
2024		3,742
2025		3,016
Thereafter		3,562
Total Lease Payments		24,966
Less: imputed interest		(3,206)
Total		$ 21,760

Other Intangible Assets

12 Months Ended

Dec. 31, 2020

Other Intangible Assets

Other Intangible Assets

8. Other Intangible Assets

The following is a summary of the Company’s other intangible assets:



		Gross	Less		Net
		Carrying	Accumulated		Carrying
		Amount	Amortization		Amount
December 31, 2020
Indefinite-lived intangibles:
Trademark and tradenames	$	77,600	$	-	$	77,600
Amortizable intangibles:
Dealer network		80,000		67,000		13,000
Customer relationships		80,920		27,196		53,724
Patents		21,136		14,484		6,652
Noncompete agreements		8,640		8,477		163
Trademarks		5,459		3,807		1,652
Amortizable intangibles, net		196,155		120,964		75,191
Total	$		$	120,964	$	152,791

		Gross	Less		Net
		Carrying	Accumulated		Carrying
		Amount	Amortization		Amount
December 31, 2019
Indefinite-lived intangibles:
Trademark and tradenames	$	77,600	$	-	$	77,600
Amortizable intangibles:
Dealer network		80,000		63,000		17,000
Customer relationships		80,920		21,914		59,006
Patents		21,136		13,229		7,907
Noncompete agreements		8,640		8,177		463
Trademarks		5,459		3,713		1,746
Backlog		1,900		1,900		-
License		20		20		-
Amortizable intangibles, net		198,075		111,953		86,122
Total	$	275,675	$	111,953	$	163,722

Amortization expense for intangible assets was $10,931, $10,956 and $11,472 for the years ended December 31, 2020, 2019 and 2018, respectively. Estimated amortization expense for the next five years is as follows:



2021	$	10,670
2022		10,520
2023		10,520
2024		7,520
2025		6,075

The weighted average remaining life for intangible assets is 9.0 years at December 31, 2020.

Long-Term Debt

12 Months Ended

Dec. 31, 2020

Long-Term Debt

Long-Term Debt

9. Long-Term Debt

Long-term debt is summarized below:



	December 31,
	2020		2019

Term Loan, net of debt discount of $4,234 and $781 at December 31, 2020 and December 31, 2019, respectively	$	240,078	$	245,787
Less current maturities		1,666		22,143
Long term debt before deferred financing costs		238,412		223,644
Deferred financing costs, net		1,736		1,563
Long term debt, net	$	236,676	$	222,081


The scheduled maturities on long term debt at December 31, 2020, are as follows:
2021	$	1,666
2022		1,666
2023		1,666
2024		1,666
2025		1,666
Thereafter		231,748
	$	240,078

On June 8, 2020, the Company amended and restated its senior credit facilities. Following the changes, the Company’s senior credit facilities consist of a $275,000 term loan facility (the “Term Loan Credit Agreement”) and a $100,000 revolving credit facility (the “Revolving Credit Agreement”) with a group of banks, of which $10,000 will be available in the form of letters of credit and $10,000 will be available for the issuance of short-term swingline loans. The Term Loan Credit Agreement also allows the Company to request the establishment of one or more additional term loan commitments in an aggregate amount not in excess of $100,000 subject to specified terms and conditions, which amount may be further increased so long as the First Lien Debt Ratio (as defined in the Term Loan Credit Agreement) is not greater than 3.25 to 1.00. The Revolving Credit Agreement also allows the Company, as a borrower, to request the establishment of one or more additional revolving commitments in an aggregate amount not in excess of $50,000, subject to specified terms and conditions. The Company applied the proceeds of the Term Loan Credit Agreement to refinance its existing senior secured term loan facility and for the payment of transaction consideration and expenses in connection with the Revolving Credit Agreement and the Term Loan Credit Agreement.

Following the June 8, 2020 changes to senior credit facilities described above, the new term loan under the Term Loan Credit Agreement generally bears interest at (at the Company’s election) either (i) 2.75% per annum plus the greatest of (which if the following would be less than 2.00%, such rate shall be deemed to be 2.00%) (a) the Prime Rate (as defined in the Term Loan Credit Agreement) in effect on such day, (b) the NYFRB Rate (as defined in the Term Loan Credit Agreement) plus 0.50% and (c) 1.00% plus the greater of (1) the London Interbank Offered Rate (“LIBOR”) for a one month interest period multiplied by the Statutory Reserve Rate (as defined in the Term Loan Credit Agreement) and (2) 1.00% or (ii) 3.75% per annum plus the greater of (a) the LIBOR for the applicable interest period multiplied by the Statutory Reserve Rate and (b) 1.00%. If the LIBOR for the applicable interest period is less than 1.00%, such rate shall be deemed to be 1.00% for purposes of calculating the foregoing interest rates in the Term Loan Credit Agreement. The final maturity date of the Term Loan Credit Agreement is June 8, 2026. The principal amount of the term loan will be repaid in quarterly installments in amounts equal to 0.25% of the principal amount of the Term Loan Credit Agreement, with the balance payable on the maturity date. The actual interest rate on the Term Loan Credit Agreement for the years ended December 31, 2020 and December 31, 2019 was 4.75% and 4.71%, respectively.

The Company is required to pay a fee for unused amounts under the Revolving Credit Agreement in an amount ranging from 0.375% to 0.50% of the unused portion of the facility, depending on the utilization of the facility. The Revolving Credit Agreement provides that the Company has the option to select whether borrowings will bear interest at either (i) a margin ranging from 1.75% to 2.25% per annum, depending on the utilization of the facility, plus the LIBOR for the applicable interest period multiplied by the Statutory Reserve Rate (as defined in the Revolving Credit Agreement) or (ii) a margin ranging from 0.75% to 1.25% per annum, depending on the utilization of the facility, plus the greatest of (which if the following would be less than 2.00%, such rate shall be deemed to be 2.00%) (a) the Prime Rate (as defined in the Revolving Credit Agreement) in effect on such day, (b) the NYFRB Rate (as defined in the Revolving Loan Credit Agreement) plus 0.50% and (c) the LIBOR for a one month interest period multiplied by the Statutory Reserve Rate plus 1.00%. If the LIBOR for the applicable interest period is less than 1.00%, such rate shall be deemed to be 1.00% for purposes of calculating the foregoing interest rates in the Revolving Credit Agreement. The final maturity date of the Revolving Credit Agreement is June 8, 2023.

The Term Loan Credit Agreement was issued at a $4,125 discount which is being amortized over the term of the term loan. Additionally, deferred financing costs of $1,133 are being amortized over the term of the term loan.

The Company’s amendment to its term loan facility resulted in a significant modification to a portion of the Company’s debt under ASC 470-50. The Company recorded debt expense of $3,542 related to third party fees that were expensed as incurred as the debt was deemed to be modified under ASC 470-50, and such costs are included as debt modification expense in the Consolidated Statements of Income (Loss) for the year ended December 31, 2020.

At December 31, 2020, the Company had outstanding borrowings under the term loan of $240,078, no outstanding borrowings on the revolving credit facility and remaining borrowing availability of $99,050.

The Company’s senior credit facilities include certain negative and operating covenants, including restrictions on its ability to pay dividends, and other customary covenants, representations and warranties and events of default. The senior credit facilities entered into and recorded by the Company’s subsidiaries significantly restrict its subsidiaries from paying dividends and otherwise transferring assets to the Company. The terms of the Company’s revolving credit facility specifically restrict subsidiaries from paying dividends if a minimum availability under the revolving credit facility is not maintained, and both senior credit facilities restrict subsidiaries from paying dividends above certain levels or at all if an event of default has occurred. These restrictions would affect the Company indirectly since the Company relies principally on distributions from its subsidiaries to have funds available for the payment of dividends. In addition, the Company’s revolving credit facility includes a requirement that if certain minimum availability under the revolving credit facility is not maintained, that the Company comply with a monthly minimum fixed charge coverage ratio test of 1.0: 1.0. Compliance with the fixed

charge coverage ratio test is subject to certain cure rights under the Company’s revolving credit facility. The credit facilities are collateralized by substantially all assets of the Company.

In accordance with the senior credit facilities, the Company is required to make additional principal prepayments over the above scheduled payments under certain conditions. This includes, in the case of the term loan facility, 100% of the net cash proceeds of certain asset sales, certain insurance or condemnation events, certain debt issuances, and, within 150 days of the end of the fiscal year, 50% of excess cash flow, as defined, including a deduction for certain distributions (which percentage is reduced to 0% upon the achievement of certain leverage ratio thresholds), for any fiscal year. Excess cash flow is defined in the senior credit facilities as consolidated adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) plus a working capital adjustment less the sum of repayments of debt and capital expenditures subject to certain adjustments, interest and taxes paid in cash, management fees and certain restricted payments (including dividends or distributions). Working capital adjustment is defined in the senior credit facilities as the change in working capital, defined as current assets excluding cash and cash equivalents less current liabilities excluding current portion of long term debt. As of December 31, 2020 and 2019, the Company was not required to make an excess cash flow payment. The Company made a voluntary payment of $20,000 on its debt on January 30, 2020. The Company made a voluntary payment of $30,000 on its debt on December 31, 2020. The Company made a voluntary payment of $30,000 on its debt on February 13, 2019. The Company made a voluntary payment of of $18,721 on its debt on January 31, 2018.

On June 13, 2019, the Company entered into an interest rate swap agreement to reduce its exposure to interest rate volatility. The interest rate swap has a notional amount of $175,000 effective for the period May 31, 2019 through May 31, 2024. The Company may have counterparty credit risk resulting from the interest rate swap, which it monitors on an on-going basis. The risk lies with one global financial institution. Under the interest rate swap agreement, the Company will either receive or make payments on a monthly basis based on the differential between 2.495% and LIBOR (with a LIBOR floor of 1.0%). The interest rate swap was previously accounted for as a cash flow hedge. During the first quarter of 2020, the swap was determined to be ineffective. As a result, the swap was dedesignated on March 19, 2020, and the remaining losses currently included in Accumulated other comprehensive loss on the Consolidated Balance Sheets will be amortized into interest expense on a straight line basis through the life of the swap. The amount amortized from Accumulated other comprehensive loss into earnings during the year ended December 31, 2020 was $2,243. The amount expected to be amortized from Accumulated other comprehensive loss into earnings in the next twelve months is $2,991. A mark-to-market adjustment of $611 was recorded as Interest expense in the Consolidated Statements of Income for the year ended December 31, 2020 related to the swap.

The interest rate swap’s negative fair value at December 31, 2020 was $13,073, of which $4,075 and $8,998 are included in Accrued expenses and other current liabilities and Other long-term liabilities on the Consolidated Balance Sheet, respectively. The interest rate swaps’ negative fair value at December 31, 2019 was $6,736, of which $1,522 and $5,214 are included in Accrued expenses and other current liabilities and Other long-term liabilities on the Consolidated Balance Sheets, respectively.

The Company receives on consignment, truck chassis on which it performs upfitting service installations under “bailment pool” arrangements with major truck manufacturers. The Company never receives title to the truck chassis. The aggregate value of all bailment pool chassis on hand as of December 31, 2020 and 2019 was $21,725 and $28,645, respectively. The Company is responsible to the manufacturer for interest on chassis held for upfitting. Interest rates vary depending on the number of days in the bailment pool. As of December 31, 2020, rates were based on prime (3.25% at December 31, 2020) plus a margin ranging from 0% to 8%. During 2020, the Company incurred $269 in interest on the bailment pool arrangement. During 2019, the Company incurred $89 in interest on the bailment pool arrangement.

The Company has a floor plan line of credit for up to $20,000 with a financial institution. The current terms of the line of credit are contained in a credit agreement dated July 15, 2016 and expired on July 31, 2017,

which the Company renewed through December 31, 2021. Under the floor plan agreement the Company receives truck chassis and title on upfitting service installations. Upon upfit completion, the title transfers from the Company to the dealer customer. The note bears interest at an adjusted LIBOR rate, plus an applicable rate of 1.75%. The obligation under the floor plan agreement as of December 31, 2020 and 2019 is $8,146 and $6,539, respectively. During 2020, the Company incurred $224 in interest on the floor plan arrangements. During 2019, the Company incurred $382 in interest on the floor plan arrangements.

Accrued Expenses and Other Current Liabilities

12 Months Ended

Dec. 31, 2020

Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities

10. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities are summarized as follows:



	December 31,
	2020		2019

Payroll and related costs	$	10,240	$	10,382
Employee benefits	7,642		6,097
Accrued warranty	3,392		3,941
Interest rate swaps	4,075		1,522
Other	5,482		4,554
	$	30,831	$	26,496

Warranty Liability

12 Months Ended

Dec. 31, 2020

Warranty Liability

Warranty Liability

11. Warranty Liability

The Company accrues for estimated warranty costs as sales are recognized and periodically assesses the adequacy of its recorded warranty liability and adjusts the amount as necessary. The Company’s warranties generally provide, with respect to its snow and ice control equipment, that all material and workmanship will be free from defect for a period of one to two years after the date of purchase by the end-user, and with respect to its parts and accessories purchased separately, that such parts and accessories will be free from defect for a period of one year after the date of purchase by the end-user. Certain snowplows only provide for a one year warranty. The Company determines the amount of the estimated warranty costs (and its corresponding warranty reserve) using the expected value method, and is based on the Company’s prior five years of warranty history utilizing a formula driven by historical warranty expense and applying management’s judgment. The Company adjusts its historical warranty costs to take into account unique factors such as the introduction of new products into the marketplace that do not provide a historical warranty record to assess. All of the Company’s warranties are assurance-type warranties. The warranty reserve is $5,812 at December 31, 2020 of which $2,420 is included in Other long term liabilities and $3,392 is included in Accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheet. At December 31, 2019, the warranty reserve is $6,541 of which $2,600 is included in Other long term liabilities and $3,941 is included in Accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheet.

The following is a rollforward of the Company’s warranty liability:



	December 31,
	2020		2019		2018

Balance at the beginning of the period	$	6,541	$	6,174	$	5,677
Warranty provision	3,202		3,953		4,076
Claims paid/settlements	(3,931)		(3,586)		(3,579)
Balance at the end of the period	$	5,812	$	6,541	$	6,174

Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes

Income Taxes

12. Income Taxes

The provision for income tax expense (benefit) consists of the following:



	Year ended December 31
	2020		2019		2018
Current:
Federal	$	5,509	$	12,492	$	3,953
State		1,621		3,067		1,736
		7,130		15,559		5,689
Deferred:
Federal		(17,135)		(1,442)		5,001
State		(2,271)		(666)		1,164
		(19,406)		(2,108)		6,165
	$	(12,276)	$	13,451	$	11,854

A reconciliation of income tax expense computed at the federal statutory rate to the provision for income taxes for the years ended December 31, 2020, 2019 and 2018 is as follows:



	2020		2019		2018
Federal income tax expense at statutory rate	$	(20,752)	$	13,150	$	11,709
State taxes, net of federal benefit		(2,820)		2,239		2,349
Valuation allowance		1,762		139		-
Change in uncertain tax positions, net		679		(601)		(1,292)
Research and development credit		(536)		(404)		(226)
State rate change		157		(426)		287
Federal deferred rate change		-		-		(836)
Goodwill impairment		10,038		-		-
Other		(804)		(646)		(137)
	$	(12,276)	$	13,451	$	11,854

Significant components of the Company’s deferred tax liabilities and assets are as follows:



	December 31,
	2020		2019
Deferred tax assets:
Allowance for doubtful accounts	$	754	$	382
Inventory reserves		1,529		1,388
Warranty liability		1,465		1,643
Deferred compensation		1,437		1,380
Earnout liabilities		354		406
Pension and retiree health benefit obligations		1,738		1,682
Interest rate swap		3,373		1,733
Accrued vacation		1,241		833
Medical claims reserve		84