Exhibit 99.1

 

For further information contact:

Douglas Dynamics, Inc.

Bob McCormick

414-362-3868

investorrelations@douglasdynamics.com

 

DOUGLAS DYNAMICS ANNOUNCES RECORD 2014

THIRD QUARTER RESULTS

Record Third Quarter Financial Results Driven by

Strong Order Patterns and Operational Efficiencies;

 Company Increases Full Year 2014 Outlook

 

Highlights:

 

·                  Quarterly Net Sales increased 52% from Q3 FY’13 to a third quarter record of $78.8 million

·                  Record pre-season order period (Q2 & Q3 combined) as net sales increased 56% from the corresponding prior year period

·                  Record earnings per diluted share of $0.47 in third quarter, an increase of $0.45 per diluted share over the corresponding prior year period

·                  Adjusted EBITDA increased 118% from Q3 FY’13 to a third quarter record of $22.2 million

·                  Declared $0.2175 per share cash dividend paid on September 30, 2014

·                  The Company raises guidance for full year 2014 earnings

 

Monday November 3rd, 2014 — Milwaukee, Wisconsin — Douglas Dynamics, Inc. (NYSE: PLOW), North America’s premier manufacturer of vehicle attachments and equipment, today announced financial results for the third quarter ended September 30, 2014.

 

James L. Janik, Chairman, President, and Chief Executive Officer of the Company commented, So far, 2014 has exceeded our internal expectations with strong financial performance reflecting a favorable market environment, strength across our portfolio, and successful execution of our strategy. During the quarter, we achieved record profitability, which is a testament to our relentless drive to improve efficiency and productivity through our manufacturing operations. We are focused on refining every one of our business processes, which will allow us to increase cash flow and invest in future growth opportunities to drive long-term shareholder value.”

 

Third Quarter Results

 

In 2014, net sales were $78.8 million in the third quarter, compared to third quarter 2013 net sales of $52.0 million, an increase of 52%. This increase reflects stronger preseason shipments of equipment and service parts compared to the prior year.

 

- MORE -

 



 

Net income was $10.8 million, or $0.47 per diluted share based on weighted average shares of 22.2 million shares, in the third quarter of 2014 compared to net income of $0.6 million, or $0.02 per diluted share based on weighted average shares of 22.1 million shares, in the third quarter of 2013. Third quarter 2013 net income reflected the negative effects of $4.4 million of pre-tax non-cash purchase accounting adjustments related to the acquisition of the business of TrynEx, Inc. completed in 2013. These adjustments were primarily reflected in an increase in selling, general and administrative expenses due to the $3.8 million in earn-out compensation expenses recorded in conjunction with the acquisition.

 

The effective tax rate for the third quarter of 2014 was 35.0% and the estimated effective tax rate for full year 2014 is expected to be approximately 35.0%.  The effective tax rate for the three months ended September 30, 2014 was higher than the corresponding period in 2013 due to changes in apportionment among taxing jurisdictions triggered last year by the TrynEx acquisition.

 

The Company reported Adjusted EBITDA of $22.2 million in the third quarter of 2014 compared to Adjusted EBITDA of $10.2 million in the third quarter of 2013.

 

Balance Sheet and Liquidity

 

During the first nine months of 2014, the Company recorded net cash used in operating activities of $18.1 million compared to net cash used in operating activities of $26.7 million in the same period last year. The decrease in cash used by operating activities was primarily due to a $21.6 million increase in net income adjusted for reconciling items driven by the favorable operating results partially offset by unfavorable changes in working capital of $13.0 million.

 

Inventory was $36.4 million at the end of the third quarter of 2014, an increase of $0.4 million compared to the end of the third quarter of 2013.

 

Accounts receivable at the end of the third quarter of 2014 were $96.6 million, an increase of $25.3 million compared to third quarter 2013 reflecting higher demand.

 

Dividend

 

As previously reported on September 10, 2014, Douglas Dynamics declared a quarterly cash dividend of $0.2175 per share on the Company’s common stock, which was paid on September 30, 2014 to stockholders of record as of the close of business on September 22, 2014.

 

Outlook

 

Based on results from the first nine months of 2014 and current market visibility, the Company now expects net sales for fiscal 2014 to range from $265 million to $295 million and adjusted EBITDA to be in the range of $70 million to $82 million.  Earnings per share are expected to range from $1.40 per share to $1.75 per share. It is important to note that the Company’s outlook assumes that the economy will remain stable and that the Company’s core markets will experience average snowfall levels.

 

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Mr. Janik explained, “A strong pre-season order period combined with early and significant re-order activity in August and September that exceeded our expectations led to record quarterly third quarter results. Positive market indicators including strength in light truck sales, coupled with the sustained and significant levels of snowfall experienced last winter season, has caused the pendulum to swing back in our favor, signaling the release of pent-up demand and allowing us to increase our outlook for the year. Assuming we see an average amount of snowfall before the end of the year, we expect to produce record results in 2014.”

 

Webcast Information

 

The Company will host an investor conference call on Tuesday, November 4, 2014 at 10:00 a.m. Central Time. The conference call will be available via the Investor Relations section of the Company’s website at www.douglasdynamics.com.  To listen to the live call, please go to the website at least fifteen minutes early to register, download and install any necessary audio software.  For those who cannot listen to the live broadcast, an Internet replay will be available shortly after the call.

 

About Douglas Dynamics

 

Home to the most trusted brands in the industry, Douglas Dynamics is North America’s premier manufacturer of vehicle attachments and equipment. For more than 65 years, the Company has been innovating products that not only enable people to perform their jobs more efficiently and effectively, but also enable businesses to increase profitability. Our commitment to continuous improvement enables us to consistently produce the highest quality products and drive shareholder value. The Douglas Dynamics portfolio includes snow and ice management attachments sold under the BLIZZARD®, FISHER®, SnowEx® and WESTERN® brands, turf care equipment under the TurfEx® brand, and industrial maintenance equipment under the SweepEx® brand. Additional information is available at www.douglasdynamics.com

 

Use of Non-GAAP Financial Measures

 

This press release contains financial information calculated other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).  These non-GAAP measures include:

 

·                  Adjusted net income;

·                  Adjusted earnings per diluted share; and

·                  Adjusted EBITDA.

 

These non-GAAP disclosures should not be construed as an alternative to the reported results determined in accordance with GAAP.

 

Adjusted net income and adjusted earnings per diluted share represent net income and earnings per diluted share, respectively, as determined under GAAP, excluding a loss recognized on impairment of assets held for sale. The Company believes that the presentation of adjusted net income and adjusted earnings per diluted share for the three and nine months ended September 30, 2014 and September 30, 2013 allows investors to make meaningful comparisons of the Company’s operating performance between periods and to view its business from the same perspective as its management.  Because the excluded item is not predictable or consistent, management does not consider it when evaluating the Company’s performance or when making decisions regarding allocation of resources.

 

3



 

Adjusted EBITDA represents net income before interest, taxes, depreciation and amortization, as further adjusted for stock based compensation, non-cash purchase accounting adjustments related to the TrynEx acquisition, certain charges related to certain unrelated legal fees and consulting fees, and impairment on assets held for sale.  The Company uses, and believes its investors benefit from the presentation of, Adjusted EBITDA in evaluating the Company’s operating performance because Adjusted EBITDA provides the Company and its investors with additional tools to compare its operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect the Company’s core operations. In addition, the Company believes that Adjusted EBITDA is useful to investors and other external users of its consolidated financial statements in evaluating the Company’s operating performance as compared to that of other companies, because it allows them to measure a company’s operating performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets and liabilities, capital structure and the method by which assets were acquired. The Company’s management also uses Adjusted EBITDA for planning purposes, including the preparation of its annual operating budget and financial projections, and to evaluate the Company’s ability to make certain payments, including dividends, in compliance with its senior credit facilities, which is determined based on a calculation of “Consolidated Adjusted EBITDA” that is substantially similar to Adjusted EBITDA.

 

Consistent with Regulation G under the U.S. federal securities laws, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measures, and this reconciliation is located under the headings “Net Income to Adjusted EBITDA Reconciliation” and “Reconciliation of Net Income to Adjusted Net Income” following the Consolidated Statements of Cash Flows included in this press release.

 

Forward Looking Statements

 

This press release contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation, product demand, the payment of dividends, and availability of financial resources.  These statements are often identified by use of words such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will” and similar expressions and include references to assumptions and relate to our future prospects, developments and business strategies.  Such statements involve known and unknown risks, uncertainties and other factors that could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.  Factors that could cause or contribute to such differences include, but are not limited to, weather conditions, particularly lack of or reduced levels of snowfall and the timing of such snowfall, a significant decline in economic

 

4



 

conditions, our inability to maintain good relationships with our distributors, lack of available or favorable financing options for our end-users or distributors, increases in the price of steel or other materials necessary for the production of our products that cannot be passed on to our distributors, increases in the price of fuel, the inability of our suppliers to meet our volume or quality requirements, inaccuracies in our estimates of future demand for our products, our inability to protect or continue to build our intellectual property portfolio, the effects of laws and regulations and their interpretations on our business and financial condition, our inability to develop new products or improve upon existing products in response to end-user needs, losses due to lawsuits arising out of personal injuries associated with our products, factors that could impact the future declaration and payment of dividends, our inability to compete effectively against competition, our inability to achieve the projected financial performance with the TrynEx assets and unexpected costs or liabilities related to the acquisition of the TrynEx assets, as well as those discussed in the section entitled “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2013. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements.  In addition, the forward-looking statements in this release speak only as of the date hereof and we undertake no obligation, except as required by law, to update or release any revisions to any forward-looking statement, even if new information becomes available in the future.

 

5



 

Financial Statements

 

Douglas Dynamics, Inc.

Consolidated Balance Sheets

(In thousands)

 

 

 

September 30,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(unaudited)

 

(audited)

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

4,289

 

$

19,864

 

Accounts receivable, net

 

96,569

 

42,343

 

Inventories

 

36,418

 

27,977

 

Refundable income taxes paid

 

 

2,648

 

Deferred income taxes

 

4,141

 

4,223

 

Prepaid and other current assets

 

1,539

 

1,317

 

Total current assets

 

142,956

 

98,372

 

 

 

 

 

 

 

Property, plant, and equipment, net

 

25,639

 

24,866

 

Assets held for sale, net

 

 

1,085

 

Goodwill

 

113,132

 

113,132

 

Other intangible assets, net

 

119,074

 

123,422

 

Deferred financing costs, net

 

1,782

 

2,216

 

Other long-term assets

 

1,806

 

1,246

 

Total assets

 

$

404,389

 

$

364,339

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

4,967

 

$

7,709

 

Accrued expenses and other current liabilities

 

20,397

 

14,418

 

Income taxes payable

 

609

 

 

Short-term borrowings

 

33,500

 

13,000

 

Current portion of long-term debt

 

971

 

971

 

Total current liabilities

 

60,444

 

36,098

 

 

 

 

 

 

 

Retiree health benefit obligation

 

4,866

 

4,654

 

Pension obligation

 

6,029

 

7,077

 

Deferred income taxes

 

49,088

 

45,046

 

Deferred compensation

 

588

 

658

 

Long-term debt, less current portion

 

109,295

 

110,023

 

Other long-term liabilities

 

4,428

 

5,462

 

 

 

 

 

 

 

Total shareholders’ equity

 

169,651

 

155,321

 

Total liabilities and shareholders’ equity

 

$

404,389

 

$

364,339

 

 

6



 

Douglas Dynamics, Inc.

Consolidated Statements of Income

(In thousands, except share and per share data)

 

 

 

Three Month Period Ended

 

Nine Month Period Ended

 

 

 

September 30, 2014

 

September 30, 2013

 

September 30, 2014

 

September 30, 2013

 

 

 

(unaudited)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

78,836

 

$

52,026

 

$

203,457

 

$

121,323

 

Cost of sales

 

49,746

 

36,982

 

125,827

 

83,075

 

Gross profit

 

29,090

 

15,044

 

77,630

 

38,248

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative expense

 

9,006

 

10,733

 

25,757

 

22,740

 

Intangibles amortization

 

1,439

 

1,447

 

4,348

 

4,142

 

Loss recognized on assets held for sale

 

 

 

67

 

647

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

18,645

 

2,864

 

47,458

 

10,719

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(2,037

)

(2,130

)

(6,007

)

(6,190

)

Other expense, net

 

(53

)

(40

)

(136

)

(117

)

Income before taxes

 

16,555

 

694

 

41,315

 

4,412

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

5,793

 

91

 

14,385

 

1,304

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

10,762

 

$

603

 

$

26,930

 

$

3,108

 

Less: Net income attributable to participating securities

 

155

 

9

 

397

 

45

 

Net income attributable to common shareholders

 

$

10,607

 

$

594

 

$

26,533

 

$

3,063

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

22,197,609

 

22,053,555

 

22,158,690

 

22,021,226

 

Diluted

 

22,218,052

 

22,080,037

 

22,178,688

 

22,061,713

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic earnings per common share attributable to common shareholders

 

$

0.48

 

$

0.03

 

$

1.20

 

$

0.14

 

Earnings per common share assuming dilution attributable to common shareholders

 

$

0.47

 

$

0.02

 

$

1.19

 

$

0.13

 

Cash dividends declared and paid per share

 

$

0.22

 

$

0.21

 

$

0.65

 

$

0.62

 

 

7



 

Douglas Dynamics, Inc.

Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Nine Month Period Ended

 

 

 

September 30, 2014

 

September 30, 2013

 

 

 

(unaudited)

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Net income

 

$

26,930

 

$

3,108

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

6,885

 

6,400

 

Amortization of deferred financing costs and debt discount

 

569

 

568

 

Loss recognized on assets held for sale

 

67

 

647

 

Stock-based compensation

 

2,143

 

2,024

 

Provision for losses on accounts receivable

 

171

 

163

 

Deferred income taxes

 

4,124

 

3,342

 

Earnout liability

 

810

 

3,814

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

Accounts receivable

 

(54,397

)

(45,403

)

Inventories

 

(8,441

)

(1,542

)

Prepaid and other assets and refundable income taxes paid

 

1,866

 

(423

)

Accounts payable

 

(2,742

)

(2,369

)

Accrued expenses and other current liabilities

 

6,188

 

2,177

 

Deferred compensation

 

(70

)

(156

)

Benefit obligations and other long-term liabilities

 

(2,236

)

928

 

Net cash used in operating activities

 

(18,133

)

(26,722

)

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Capital expenditures

 

(3,310

)

(1,747

)

Proceeds from sale of assets held for sale

 

1,018

 

 

Acquisition of Trynex

 

 

(26,734

)

Net cash used in investing activities

 

(2,292

)

(28,481

)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Shares withheld on restricted stock vesting paid for employees’ taxes

 

(97

)

(160

)

Dividends paid

 

(14,690

)

(13,935

)

Short term borrowings, net

 

20,500

 

50,000

 

Repayment of long-term debt

 

(863

)

(863

)

Net cash provided by financing activities

 

4,850

 

35,042

 

Change in cash and cash equivalents

 

(15,575

)

(20,161

)

Cash and cash equivalents at beginning of year

 

19,864

 

24,136

 

Cash and cash equivalents at end of quarter

 

$

4,289

 

$

3,975

 

 

8



 

Douglas Dynamics, Inc.

Net Income to Adjusted EBITDA reconciliation (unaudited)

(in thousands)

 

 

 

Three month period ended
September 30,

 

Nine month period ended
September 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

10,762

 

$

603

 

$

26,930

 

$

3,108

 

 

 

 

 

 

 

 

 

 

 

Interest expense - net

 

2,037

 

2,130

 

6,007

 

6,190

 

Income tax expense

 

5,793

 

91

 

14,385

 

1,304

 

Depreciation expense

 

872

 

804

 

2,537

 

2,258

 

Amortization

 

1,439

 

1,447

 

4,348

 

4,142

 

EBITDA

 

20,903

 

5,075

 

54,207

 

17,002

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

546

 

565

 

2,143

 

2,024

 

TrynEx purchase accounting (1)

 

537

 

4,369

 

810

 

4,369

 

Other charges (2)

 

232

 

179

 

1,131

 

1,399

 

Adjusted EBITDA

 

$

22,218

 

$

10,188

 

$

58,291

 

$

24,794

 

 


(1) - Reflects $537 and $810 in earnout compensation expense in the three and nine months ended September 30, 2014, respectively.  Reflects $3,814 and $555 in earn out compensation and inventory that was written up for purchase accounting and sold in both the three and nine months ended September 30, 2013.

 

(2) - Reflects expenses of $232 and $179 for one time, unrelated legal and consulting fees for the three months ended September 30, 2014 and September 30, 2013, respectively; expenses of $1,131 and $752 for one time, unrelated legal and consulting fees for the nine months ended September 30, 2014 and September 30, 2013.  Includes write down of asset held for sale of $647 for the nine months ended September 30, 2013.

 

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Douglas Dynamics, Inc.

Reconciliation of Net Income to Adjusted Net Income

$ Millions, except share data

 

 

 

Three month period ended
September 30,

 

Nine month period ended
September 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Net Income (GAAP)

 

$

10.8

 

$

0.6

 

$

26.9

 

$

3.1

 

Addback expenses, net of tax at 38.8% for 2013:

 

 

 

 

 

 

 

 

 

- Loss recognized on impairment of assets held for sale

 

 

 

 

0.4

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income (non-GAAP)

 

$

10.8

 

$

0.6

 

$

26.9

 

$

3.5

 

 

 

 

 

 

 

 

 

 

 

Weighted average basic common shares outstanding

 

22,197,609

 

22,053,555

 

22,158,690

 

22,021,226

 

Weighted average common shares outstanding assuming dilution

 

22,218,052

 

22,080,037

 

22,178,688

 

22,061,713

 

 

 

 

 

 

 

 

 

 

 

Adjusted earnings per common share - basic

 

$

0.48

 

$

0.03

 

$

1.20

 

$

0.16

 

Adjusted earnings per common share - dilutive

 

$

0.47

 

$

0.02

 

$

1.19

 

$

0.15

 

 

10