UNITED STATES
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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 001-34728

DOUGLAS DYNAMICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

13-4275891

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

7777 North 73rd Street

Milwaukee, Wisconsin 53223

(Address of principal executive offices) (Zip code)

(414) 354-2310

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share

PLOW

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Number of shares of registrant’s common shares outstanding as of May 3, 2021 was 22,955,472.

Table of Contents

DOUGLAS DYNAMICS, INC.

Table of Contents

PART I. FINANCIAL INFORMATION

3

Item 1. Financial Statements

3

Unaudited Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

3

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020

4

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

5

Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2021 and 2020

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk

36

Item 4. Controls and Procedures

37

PART II. OTHER INFORMATION

37

Item 1. Legal Proceedings

37

Item 1A. Risk Factors

38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 3. Defaults Upon Senior Securities

38

Item 4. Mine Safety Disclosures

38

Item 5. Other Information

38

Item 6. Exhibits

39

Signatures

40

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Douglas Dynamics, Inc.

Condensed Consolidated Balance Sheets

(In thousands except share data)

March 31,

December 31,

2021

2020

(unaudited)

(unaudited)

Assets

  

  

Current assets:

Cash and cash equivalents

$

35,524

$

41,030

Accounts receivable, net

45,149

83,195

Inventories

99,873

79,482

Inventories - truck chassis floor plan

12,112

8,146

Prepaid and other current assets

5,209

5,334

Total current assets

197,867

217,187

Property, plant, and equipment, net

64,402

64,320

Goodwill

113,134

113,134

Other intangible assets, net

150,086

152,791

Operating lease - right of use asset

20,404

21,441

Non-qualified benefit plan assets

9,376

9,041

Other long-term assets

1,333

1,288

Total assets

$

556,602

$

579,202

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

19,844

$

16,284

Accrued expenses and other current liabilities

27,363

30,831

Floor plan obligations

12,029

7,885

Operating lease liability - current

4,359

4,326

Income taxes payable

4,588

5,214

Current portion of long-term debt

1,459

1,666

Total current liabilities

69,642

66,206

Retiree benefits and deferred compensation

16,850

15,804

Deferred income taxes

27,005

26,681

Long-term debt, less current portion

216,588

236,676

Operating lease liability - noncurrent

16,380

17,434

Other long-term liabilities

13,510

16,197

Stockholders’ equity:

Common Stock, par value $0.01, 200,000,000 shares authorized, 22,955,472 and 22,857,457 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

230

229

Additional paid-in capital

159,722

157,758

Retained earnings

41,664

47,712

Accumulated other comprehensive loss, net of tax

(4,989)

(5,495)

Total stockholders’ equity

196,627

200,204

Total liabilities and stockholders’ equity

$

556,602

$

579,202

See the accompanying notes to condensed consolidated financial statements.

3

Table of Contents

Douglas Dynamics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except share and per share data)

Three Months Ended

March 31,

March 31,

2021

2020

(unaudited)

Net sales

  

$

103,342

  

$

68,190

Cost of sales

77,090

56,500

Gross profit

26,252

11,690

Selling, general, and administrative expense

19,899

17,149

Intangibles amortization

2,705

2,738

Income (loss) from operations

3,648

(8,197)

Interest expense, net

(2,975)

(5,040)

Other expense, net

(8)

(111)

Income (loss) before taxes

665

(13,348)

Income tax benefit

(77)

(3,262)

Net income (loss)

$

742

$

(10,086)

Weighted average number of common shares outstanding:

Basic

22,881,416

22,813,256

Diluted

22,901,979

22,813,256

Earnings (loss) per common share:

Basic

$

0.03

$

(0.44)

Diluted

$

0.03

$

(0.44)

Cash dividends declared and paid per share

$

0.29

$

0.28

Comprehensive income (loss)

$

1,248

$

(14,380)

See the accompanying notes to condensed consolidated financial statements.

4

Table of Contents

Douglas Dynamics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

Three Months Ended

March 31,

March 31,

2021

2020

(unaudited)

Operating activities

Net income (loss)

  

$

742

  

$

(10,086)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

5,013

4,894

Amortization of deferred financing costs and debt discount

392

303

Stock-based compensation

1,965

1,368

Adjustments on derivatives not classified as hedges

(1,454)

1,413

Provision for losses on accounts receivable

179

204

Deferred income taxes

324

(1,250)

Non-cash lease expense

1,036

1,015

Earnout liability

-

(17)

Changes in operating assets and liabilities:

Accounts receivable

37,867

39,014

Inventories

(20,213)

(34,428)

Prepaid assets, refundable income taxes and other assets

(254)

(2,119)

Accounts payable

3,347

1,161

Accrued expenses and other current liabilities

(4,094)

(7,334)

Benefit obligations and other long-term liabilities

(701)

(3,218)

Net cash provided by (used in) operating activities

24,149

(9,080)

Investing activities

Capital expenditures

(2,177)

(2,304)

Net cash used in investing activities

(2,177)

(2,304)

Financing activities

Shares withheld on restricted stock vesting paid for employees’ taxes

-

(72)

Dividends paid

(6,790)

(6,487)

Net revolver borrowings

-

30,000

Repayment of long-term debt

(20,688)

(20,581)

Net cash provided by (used in) financing activities

(27,478)

2,860

Change in cash and cash equivalents

(5,506)

(8,524)

Cash and cash equivalents at beginning of period

41,030

35,665

Cash and cash equivalents at end of period

$

35,524

$

27,141

Non-cash operating and financing activities

Truck chassis inventory acquired through floorplan obligations

$

16,225

$

6,215

See the accompanying notes to condensed consolidated financial statements.

5

Table of Contents

Douglas Dynamics, Inc.

Condensed Consolidated Statements of Shareholders’ Equity

(In thousands)

Accumulated

Additional

Other

Common Stock

Paid-in

Retained

Comprehensive

Shares

Dollars

Capital

Earnings

Loss

Total

Three Months Ended March 31, 2021

Balance at December 31, 2020

22,857,457

$

229

$

157,758

$

47,712

$

(5,495)

$

200,204

Net income

742

742

Dividends paid

(6,790)

(6,790)

Adjustment for pension and postretirement benefit liability, net of tax of $20

(58)

(58)

Adjustment for interest rate swap, net of tax of ($194)

564

564

Stock based compensation

98,015

1

1,964

1,965

Balance at March 31, 2021

22,955,472

$

230

$

159,722

$

41,664

$

(4,989)

$

196,627

Three Months Ended March 31, 2020

Balance at December 31, 2019

22,795,412

$

228

$

155,001

$

160,748

$

(2,814)

$

313,163

Net loss

(10,086)

(10,086)

Dividends paid

(6,487)

(6,487)

Impact due to adoption of ASC 2016-13 (credit losses), net of tax of $193

(557)

(557)

Adjustment for pension and postretirement benefit liability, net of tax of $20

(57)

(57)

Adjustment for interest rate swap, net of tax of $1,489

(4,237)

(4,237)

Shares withheld on restricted stock vesting

(72)

(72)

Stock based compensation

62,045

1

1,367

1,368

Balance at March 31, 2020

22,857,457

$

229

$

156,296

$

143,618

$

(7,108)

$

293,035

See the accompanying notes to condensed consolidated financial statements.

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Douglas Dynamics, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands except share and per share data)

1.Basis of presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for fiscal year-end financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and related footnotes included in our 2020 Form 10-K (Commission File No. 001-34728) filed with the Securities and Exchange Commission on February 23, 2021.

The Company conducts business in two segments: Work Truck Attachments and Work Truck Solutions. Under this reporting structure, the Company’s two reportable business segments are as follows: 

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

 

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.

See Note 15 to the Unaudited Condensed Consolidated Financial Statements for financial information regarding these segments.

Interim Condensed Consolidated Financial Information

The accompanying Condensed Consolidated Balance Sheet as of March 31, 2021, the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and the Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2021 and 2020, and the Condensed Cash Flows for the three months ended March 31, 2021 and 2020 have been prepared by the Company and have not been audited.

The Company’s Work Truck Attachments segment is seasonal and, consequently its results of operations and financial condition vary from quarter-to-quarter.  Because of this seasonality, the results of operations of the Work Truck Attachments segment for any quarter may not be indicative of results of operations that may be achieved for a subsequent quarter or the full year, and may not be similar to results of operations experienced in prior years. The Company attempts to manage the seasonal impact of snowfall on its revenues in part through its pre-season sales program. This pre-season sales program encourages the Company’s distributors to re-stock their inventory of Work Truck Attachments products during the second and third quarters in anticipation of the peak fourth quarter retail sales period by offering favorable pre-season pricing and payment deferral until the fourth quarter. Thus, the Company’s Work Truck Attachments segment tends to generate its greatest volume of sales during the second and third quarters. By contrast, its revenue and operating results tend to be lowest during the first quarter, as management believes the end-users of Work Truck Attachments products prefer to wait until the beginning of a snow season to purchase new equipment and as the Company’s distributors sell off Work Truck Attachments inventory and wait for the pre-season sales incentive period to re-stock inventory. Fourth quarter sales vary from year-to-year as they are primarily driven by the level, timing and location of snowfall during the quarter. This is because most of the Company’s Work Truck Attachments fourth quarter sales and shipments consist of re-orders by distributors seeking to restock inventory to meet immediate customer needs caused by snowfall during the winter months. In addition, due to the factors noted above, Work Truck Attachments working capital needs are highest in the second and third quarters as its accounts receivable rise from pre-season sales. These working capital needs decline in the fourth quarter as the Company receives payments for its pre-season shipments.  

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As a result of the COVID-19 pandemic, including the market volatility and other economic implications associated with the pandemic and the economic and regulatory measures enacted to contain its spread, the Company’s results of operations were significantly impacted in the three months ended March 31, 2020. The Company preventatively and voluntarily closed its facilities on March 18, 2020.  The Company returned to full production during the second quarter of 2020. The results of operations of the Company for any quarter during the pandemic may not be indicative of results of operations that may be achieved for a subsequent quarter or the full year, and may not be similar to results of operations experienced in prior years. In addition, results in any given period in 2021 may be different than 2020 as a result of the depressed conditions in 2020 stemming from the pandemic.

During the three months ended March 31, 2020, the Company benefited from credits related to the passage of the CARES Act. Under the CARES Act, the Company qualified for an Employee Retention Credit for wages paid to employees who were not working due to the plant shutdown. The Company recorded a total CARES Act benefit of $1,152 for the three months ended March 31, 2020 to Cost of sales and Selling, general and administrative expense on the Consolidated Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

2.Revenue Recognition

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

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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. The Company books an adjustment to account for revenue over time related to customer owned vehicles, which increased revenue by $428 and decreased revenue by $106 for the three months ended March 31, 2021 and 2020, 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.

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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:

Three Months Ended March 31, 2021

Work Truck Attachments

Work Truck Solutions

Total Revenue

Independent dealer

$ 41,981

$ 33,648

$ 75,629

Government

-

12,450

12,450

Fleet

-

11,345

11,345

Other

-

3,918

3,918

Total revenue

$ 41,981

$ 61,361

$ 103,342

Three Months Ended March 31, 2020

Work Truck Attachments

Work Truck Solutions

Total Revenue

Independent dealer

$ 19,120

$ 28,052

$ 47,172

Government

-

10,490

10,490

Fleet

-

9,229

9,229

Other

-

1,299

1,299

Total revenue

$ 19,120

$ 49,070

$ 68,190

Revenue by timing of revenue recognition was as follows:

Three Months Ended March 31, 2021

Work Truck Attachments

Work Truck Solutions

Total Revenue

Point in time

$ 41,981

$ 40,710

$ 82,691

Over time

-

20,651

20,651

Total revenue

$ 41,981

$ 61,361

$ 103,342

Three Months Ended March 31, 2020

Work Truck Attachments

Work Truck Solutions

Total Revenue

Point in time

$ 19,120

$ 29,714

$ 48,834

Over time

-

19,356

19,356

Total revenue

$ 19,120

$ 49,070

$ 68,190

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Contract Balances

The following table shows the changes in the Company’s contract liabilities during the three months ended March 31, 2021 and 2020, respectively:

Three Months Ended March 31, 2021

Balance at Beginning of Period

Additions

Deductions

Balance at End of Period

Contract liabilities

$

2,746

$

3,165

$

(2,170)

$

3,741

Three Months Ended March 31, 2020

Balance at Beginning of Period

Additions

Deductions

Balance at End of Period

Contract liabilities

$

2,187

$

1,637

$

(1,789)

$

2,035

The Company receives payments from customers based upon contractual billing schedules. Contract assets include amounts related to the contractual right to consideration for completed performance obligations. There were no contract assets as of March 31, 2021 or 2020. 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 our municipal rebate program, and are realized with the associated revenue recognized under the contract.

The Company recognized revenue of $415 and $467 during the three months ended March 31, 2021 and 2020, respectively, which was included in contract liabilities at the beginning of each period.

3.         Credit Losses

Effective January 1, 2020, the Company adopted new accounting guidance that significantly changed 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. 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 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. As of March 31, 2021, the Company had an allowance for credit losses on its trade accounts receivable of $1,582 and $1,464 at its Work Truck Attachments and Work Truck Solutions segments, respectively. 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.

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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 three months ended March 31, 2021 and 2020:

Balance at

Additions

Changes to

Balance at

December 31,

charged to

Writeoffs

reserve, net

March 31,

2020

earnings

2021

Three Months Ended March 31, 2021

Work Truck Attachments

$

1,480

$

100

$

-

$

2

$

1,582

Work Truck Solutions

1,449

79

(25)

(39)

1,464

Total

$

2,929

$

179

$

(25)

$

(37)

$

3,046

Balance at

Adoption of

Additions

Changes to

Balance at

December 31,

ASU 2016-13

charged to

Writeoffs

reserve, net

March 31,

2019

earnings

2020

Three Months Ended March 31, 2020

Work Truck Attachments

$

600

$

400

$

100

$

-

$

51

$

1,151

Work Truck Solutions

887

350

104

-

(57)

1,284

Total

$

1,487

$

750

$

204

$

-

$

(6)

$

2,435

4.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).

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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

Fair Value at

March 31,

December 31,

2021

2020

Assets:

Non-qualified benefit plan assets (a)

  

$

9,376

  

$

9,041

Total Assets

$

9,376

$

9,041

Liabilities:

Interest rate swaps (b)

$

10,871

$

13,073

Long-term debt (c)

217,936

241,278

Total Liabilities

$

228,807

$

254,351

(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 amount of these insurance policies approximates their fair value and is considered Level 2 inputs.

(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 $4,074 and $6,797 at March 31, 2021 are included in Accrued expenses and other current liabilities and Other long-term liabilities, respectively.  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.

(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 debt issuance costs, as disclosed on the face of the balance sheet.

5.Inventories

Inventories consist of the following:

March 31,

December 31,

2021

2020

Finished goods

  

$

61,379

  

$

39,496

Work-in-process

7,156

8,253

Raw material and supplies

31,338

31,733

$

99,873

$

79,482

The inventories in the table above do not include truck chassis inventory financed through a floor plan financing agreement, which are recorded separately on the balance sheet. The Company takes title to truck chassis upon receipt of the inventory through its floor plan agreement and performs up-fitting 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 March 31, 2021 and December 31, 2020, the Company had $12,112 and $8,146, respectively, of chassis inventory and $12,029 and $7,885 of related floor plan financing obligation, respectively. The Company recognizes revenue associated with up-fitting and service installations net of the truck chassis.

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6.

Property, plant and equipment

Property, plant and equipment are summarized as follows:

March 31,

December 31,

2021

2020

Land

$

2,378

$

2,378

Land improvements

4,830

4,830

Leasehold improvements

4,087

4,087

Buildings

29,584

29,580

Machinery and equipment

61,459

61,154

Furniture and fixtures

20,144

19,782

Mobile equipment and other

5,208

5,200

Construction-in-process

12,863

11,751

Total property, plant and equipment

140,553

138,762

Less accumulated depreciation

(76,151)

(74,442)

Net property, plant and equipment

$

64,402

$

64,320

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 15 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.

Lease Expense

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

Three Months Ended

Three Months Ended

March 31, 2021

March 31, 2020

Operating lease expense

$ 1,371

$ 1,311

Short term lease cost

$ 115

$ 39

Total lease cost

$ 1,486

$ 1,350

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Cash Flow

Supplemental cash flow information related to leases is as follows:

Three Months Ended

Three Months Ended

March 31, 2021

March 31, 2020

Cash paid for amounts included in the measurement of operating lease liabilities

$ 1,356

$ 1,303

Non-cash lease expense - right-of-use assets

$ 1,036

$ 1,015

Right-of-use assets obtained in exchange for operating lease obligations

$ 65

$ 321

Balance Sheet

Supplemental balance sheet information related to leases is as follows:  

March 31, 2021

December 31, 2020

Operating Leases

Operating lease right-of-use assets

$ 20,404

$ 21,441

Other current liabilities

4,359

4,326

Operating lease liabilities

16,380

17,434

Total operating lease liabilities

$ 20,739

$ 21,760

Weighted Average Remaining Lease Term

Operating leases

64

months

67

months

Weighted Average Discount Rate

Operating leases

5.16%

5.16%

Lease Maturities

Maturities of leases were as follows:

Year ending December 31,

Operating Leases

2021 (excluding the three months ended March 31, 2021)

$ 3,981

2022

4,954

2023

4,406

2024

3,745

2025

3,016

Thereafter

3,562

Total Lease Payments

23,664

Less: imputed interest

(2,925)

Total

$ 20,739

l

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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

March 31, 2021

Indefinite-lived intangibles:

Trademark and tradenames

$

77,600

$

-

$

77,600

Amortizable intangibles:

Dealer network

80,000

68,000

12,000

Customer relationships

80,920

28,481

52,439

Patents

21,136

14,798

6,338

Noncompete agreements

8,640

8,559

81

Trademarks

5,459

3,831

1,628

Amortizable intangibles, net

196,155

123,669

72,486

Total

$

273,755

$

123,669

$

150,086

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