0001287213 DOUGLAS DYNAMICS, INC false --12-31 Q1 2024 0.01 0.01 200,000,000 200,000,000 23,094,047 23,094,047 22,983,965 22,983,965 14 133 19 540 2 2 1 247 274 2.00 4.00 1 2 1 1 5 0 10 2 false false false false 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. The Company had outstanding loans of $546 and $750 against these Non-qualified benefit plan assets as of March 31, 2024 and December 31, 2023, respectively, included in Other long-term liabilities on the Condensed Consolidated Balance Sheets, respectively. 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 $3,058 and $1,660 at March 31, 2024 are included in Prepaid and other current assets and Other long-term assets, respectively. Interest rate swaps of $3,174 and $859 at December 31, 2023 are included in Prepaid and other current assets and Other long-term assets, respectively. The fair value of the Company’s long-term debt, including current maturities, is based on rates for instruments with comparable maturities and credit quality (Level 2 inputs), and approximates its carrying value. 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. Reflects unrelated legal, severance, restructuring, and consulting fees for the periods presented. Reflects impairment charges taken on certain internally developed software in the three months ended March 31, 2024. 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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, 2024

 ​

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.)

11270 W Park Place Ste 300

Milwaukee, Wisconsin 53224

(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 April 30, 2024 was 23,094,047.

 

 

 

 

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, 2024 and December 31, 2023

3

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023

4

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

5

Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2024 and 2023

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

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

28

Item 3. Quantitative and Qualitative Disclosures About Market Risk

39

Item 4. Controls and Procedures

40

PART II. OTHER INFORMATION

40

Item 1. Legal Proceedings

40

Item 1A. Risk Factors

41

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

41

Item 3. Defaults Upon Senior Securities

41

Item 4. Mine Safety Disclosures

41

Item 5. Other Information

41

Item 6. Exhibits

42

Signatures

 43

 ​

 

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Douglas Dynamics, Inc.

Condensed Consolidated Balance Sheets

(In thousands except share data) ​

 ​

  

March 31,

  

December 31,

 
  

2024

  

2023

 
  

(unaudited)

  

(unaudited)

 

Assets

        

Current assets:

        

Cash and cash equivalents

 $1,974  $24,156 

Accounts receivable, net

  58,580   83,760 

Inventories

  174,768   140,390 

Inventories - truck chassis floor plan

  3,132   2,217 

Refundable income taxes paid

  6,220   4,817 

Prepaid and other current assets

  6,544   6,898 

Total current assets

  251,218   262,238 

Property, plant, and equipment, net

  64,180   67,340 

Goodwill

  113,134   113,134 

Other intangible assets, net

  118,440   121,070 

Operating lease - right of use asset

  16,687   18,008 

Non-qualified benefit plan assets

  9,976   9,195 

Other long-term assets

  3,441   2,433 

Total assets

 $577,076  $593,418 

Liabilities and stockholders’ equity

        

Current liabilities:

        

Accounts payable

 $24,125  $31,374 

Accrued expenses and other current liabilities

  23,580   25,817 

Floor plan obligations

  3,132   2,217 

Operating lease liability - current

  5,309   5,347 

Short term borrowings

  55,000   47,000 

Current portion of long-term debt

  10,981   6,762 

Total current liabilities

  122,127   118,517 

Retiree benefits and deferred compensation

  14,722   13,922 

Deferred income taxes

  27,999   27,903 

Long-term debt, less current portion

  177,141   181,491 

Operating lease liability - noncurrent

  12,596   13,887 

Other long-term liabilities

  5,333   6,133 

Stockholders’ equity:

        

Common Stock, par value $0.01, 200,000,000 shares authorized, 23,094,047 and 22,983,965 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

  231   230 

Additional paid-in capital

  165,587   165,233 

Retained earnings

  44,644   59,746 

Accumulated other comprehensive income, net of tax

  6,696   6,356 

Total stockholders’ equity

  217,158   231,565 

Total liabilities and stockholders’ equity

 $577,076  $593,418 

 ​ ​

See the accompanying notes to condensed consolidated financial statements.

 

 

3

 ​

 

Douglas Dynamics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

 

   

Three Months Ended

 
   

March 31,

   

March 31,

 
   

2024

   

2023

 
   

(unaudited)

 
                 

Net sales

  $ 95,655     $ 82,545  

Cost of sales

    76,735       71,270  

Gross profit

    18,920       11,275  

Selling, general, and administrative expense

    21,488       22,442  

Impairment charges

    1,224        

Intangibles amortization

    2,630       2,630  

Loss from operations

    (6,422 )     (13,797 )

Interest expense, net

    (3,524 )     (2,864 )

Other income, net

    3       35  

Loss before taxes

    (9,943 )     (16,626 )

Income tax benefit

    (1,591 )     (3,516 )

Net loss

  $ (8,352 )   $ (13,110 )

Weighted average number of common shares outstanding:

               

Basic

    23,009,369       22,906,845  

Diluted

    23,009,369       22,906,845  

Loss per common share:

               

Basic

  $ (0.37 )   $ (0.58 )

Diluted

  $ (0.37 )   $ (0.58 )

Cash dividends declared and paid per share

  $ 0.30     $ 0.30  

Comprehensive loss

  $ (8,012 )   $ (14,699 )

 

See the accompanying notes to condensed consolidated financial statements.

 ​

4

 

 

Douglas Dynamics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands) ​

 ​

   

Three Months Ended

 
   

March 31,

   

March 31,

 
   

2024

   

2023

 
   

(unaudited)

 
                 

Operating activities

               

Net loss

  $ (8,352 )   $ (13,110 )

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

               

Depreciation and amortization

    5,345       5,357  

Gain on disposal of fixed asset

    (6 )     (60 )

Amortization of deferred financing costs and debt discount

    147       145  

Stock-based compensation

    355       957  

Adjustments on derivatives not classified as hedges

    (172 )     (172 )

Provision for losses on accounts receivable

    179       175  

Deferred income taxes

    96       (1,125 )

Impairment charges

    1,224       -  

Non-cash lease expense

    1,364       1,018  

Changes in operating assets and liabilities:

               

Accounts receivable

    25,001       38,367  

Inventories

    (34,378 )     (48,082 )

Prepaid assets, refundable income taxes and other assets

    (3,250 )     (3,376 )

Accounts payable

    (6,695 )     (24,891 )

Accrued expenses and other current liabilities

    (2,238 )     (11,882 )

Benefit obligations, long-term liabilities, and other

    (241 )     (237 )

Net cash used in operating activities

    (21,621 )     (56,916 )

Investing activities

               

Capital expenditures

    (1,328 )     (2,748 )

Net cash used in investing activities

    (1,328 )     (2,748 )

Financing activities

               

Payments on life insurance policy loans

    (204 )     -  

Payments of financing costs

    (279 )     (334 )

Dividends paid

    (6,750 )     (6,960 )

Net revolver borrowings

    8,000       52,000  

Repayment of long-term debt

    -       (2,812 )

Net cash provided by financing activities

    767       41,894  

Change in cash and cash equivalents

    (22,182 )     (17,770 )

Cash and cash equivalents at beginning of period

    24,156       20,670  

Cash and cash equivalents at end of period

  $ 1,974     $ 2,900  
                 

Non-cash operating and financing activities

               

Truck chassis inventory acquired through floorplan obligations

  $ 3,211     $ 1,042  

 ​ ​

See the accompanying notes to condensed consolidated financial statements.

 ​

5

 

 

Douglas Dynamics, Inc.

Condensed Consolidated Statements of Shareholders Equity

(In thousands except share data)

 

  

Common Stock

  

Additional Paid-in

  

Retained

  

Accumulated Other Comprehensive

     
  

Shares

  

Dollars

  

Capital

  

Earnings

  

Income

  

Total

 

Three Months Ended March 31, 2024

                        

Balance at December 31, 2023

  22,983,965  $230  $165,233  $59,746  $6,356  $231,565 

Net loss

           (8,352)     (8,352)

Dividends paid

           (6,750)     (6,750)

Adjustment for postretirement benefit liability, net of tax of $14

              (40)  (40)

Adjustment for interest rate swap, net of tax of ($133)

              380   380 

Stock based compensation

  110,082   1   354         355 

Balance at March 31, 2024

  23,094,047  $231  $165,587  $44,644  $6,696  $217,158 
                         

Three Months Ended March 31, 2023

                        

Balance at December 31, 2022

  22,886,793  $229  $164,281  $63,464  $9,128  $237,102 

Net loss

           (13,110)     (13,110)

Dividends paid

           (6,960)     (6,960)

Adjustment for pension and postretirement benefit liability, net of tax of $19

              (53)  (53)

Adjustment for interest rate swap, net of tax of $540

              (1,536)  (1,536)

Stock based compensation

  69,411   1   956         957 

Balance at March 31, 2023

  22,956,204  $230  $165,237  $43,394  $7,539  $216,400 

 ​

See the accompanying notes to condensed consolidated financial statements.

 ​

6

 

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 2023 Form 10-K (Commission File No. 001-34728) filed with the Securities and Exchange Commission on February 27, 2024.

 ​

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, as well as our vertically integrated products.  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, 2024, the Condensed Consolidated Statements of Operations and Comprehensive Loss and the Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2024 and 2023, and the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023, 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.  

 ​

7

 ​
 

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 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.

 

8

 

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 $1,024 and increased revenue by $291 for the three months ended March 31, 2024 and 2023, 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.

 ​

9

 

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, 2024

 

Work Truck Attachments

  

Work Truck Solutions

  

Total Revenue

 

Independent dealer

 $23,840  $33,281  $57,121 

Government

  -   21,691   21,691 

Fleet

  -   14,009   14,009 

Other

  -   2,834   2,834 

Total revenue

 $23,840  $71,815  $95,655 

 

Three Months Ended March 31, 2023

 

Work Truck Attachments

  

Work Truck Solutions

  

Total Revenue

 

Independent dealer

 $19,246  $30,512  $49,758 

Government

  -   17,590   17,590 

Fleet

  -   12,868   12,868 

Other

  -   2,329   2,329 

Total revenue

 $19,246  $63,299  $82,545 

 

Revenue by timing of revenue recognition was as follows:

 

Three Months Ended March 31, 2024

 

Work Truck Attachments

  

Work Truck Solutions

  

Total Revenue

 

Point in time

 $23,840  $46,342  $70,182 

Over time

  -   25,473   25,473 

Total revenue

 $23,840  $71,815  $95,655 

 

Three Months Ended March 31, 2023

 

Work Truck Attachments

  

Work Truck Solutions

  

Total Revenue

 

Point in time

 $19,246  $40,720  $59,966 

Over time

  -   22,579   22,579 

Total revenue

 $19,246  $63,299  $82,545 

 ​

10

 

Contract Balances

 ​

The following table shows the changes in the Company’s contract liabilities during the three months ended March 31, 2024 and 2023, respectively:

 ​

Three Months Ended March 31, 2024

 

Balance at Beginning of Period

  

Additions

  

Deductions

  

Balance at End of Period

 

Contract liabilities

 $4,009  $4,823  $(2,776) $6,056 

 

Three Months Ended March 31, 2023

 

Balance at Beginning of Period

  

Additions

  

Deductions

  

Balance at End of Period

 

Contract liabilities

 $4,531  $3,374  $(5,061) $2,844 

 

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, 2024 or 2023. 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 $959 and $1,735 during the three months ended March 31, 2024 and 2023, respectively, which was included in contract liabilities at the beginning of each period.

 ​

 

3.

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. As of March 31, 2024, the Company had an allowance for credit losses on its trade accounts receivable of $1,503 and $390 at its Work Truck Attachments and Work Truck Solutions segments, respectively. As of December 31, 2023, the Company had an allowance for credit losses on its trade accounts receivable of $1,400 and $246 at its Work Truck Attachments and Work Truck Solutions segments, respectively.

 ​

11

 

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, 2024 and 2023:

 ​

 Balance at December 31, 2023  Additions (reductions) charged to earnings  

Writeoffs

  Changes to reserve, net  Balance at March 31, 2024 

Three Months Ended March 31, 2024

 

  

  

  

  

 

Work Truck Attachments

 $1,400  $104  $-  $(1) $1,503 

Work Truck Solutions

  246   75   -   69   390 

Total

 $1,646  $179  $-  $68  $1,893 

 ​

  Balance at December 31, 2022  Additions (reductions) charged to earnings  

Writeoffs

  Changes to reserve, net  Balance at March 31, 2023 

Three Months Ended March 31, 2023

                    

Work Truck Attachments

 $1,000  $100  $-  $(2) $1,098 

Work Truck Solutions

  366   75   -   (9)  432 

Total

 $1,366  $175  $-  $(11) $1,530 

 ​

 

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).

 ​

12

 

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,

 
  

2024

  

2023

 

Assets:

        

Non-qualified benefit plan assets (a)

 $9,976  $9,195 

Interest rate swaps (b)

  4,718   4,033 
         

Total Assets

 $14,694  $13,228 
         

Liabilities:

        

Long-term debt (c)

 $189,441  $189,413 

Total Liabilities

 $189,441  $189,413 

  ​


(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. The Company had outstanding loans of $546 and $750 against these Non-qualified benefit plan assets as of March 31, 2024 and December 31, 2023, respectively, included in Other long-term liabilities on the Condensed Consolidated Balance Sheets, respectively.

 ​

(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 $3,058 and $1,660 at March 31, 2024 are included in Prepaid and other current assets and Other long-term assets, respectively.  Interest rate swaps of $3,174 and $859 at December 31, 2023 are included in Prepaid and other current assets and Other long-term assets, respectively.

 ​

(c)  The fair value of the Company’s long-term debt, including current maturities, is based on rates for instruments with comparable maturities and credit quality (Level 2 inputs), and approximates its carrying value. 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.

 ​

13

 ​
 

5.

Inventories

 ​

Inventories consist of the following: ​

 ​

  

March 31,

  

December 31,

 
  

2024

  

2023

 
         

Finished goods

 $108,337  $79,509 

Work-in-process

  14,692   14,384 

Raw material and supplies

  51,739   46,497 
  $174,768  $140,390 

 ​ ​

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 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 March 31, 2024 and December 31, 2023, the Company had $3,132 and $2,217, respectively, of chassis inventory and $3,132 and $2,217 of related floor plan financing obligation, respectively. The Company recognizes revenue associated with upfitting and service installations net of the truck chassis.

 ​

14

 ​
 

6.

Property, plant and equipment

 ​

Property, plant and equipment are summarized as follows: ​

 ​

   

March 31,

   

December 31,

 
   

2024

   

2023

 
                 

Land

  $ 3,969     $ 3,969  

Land improvements

    5,610       5,589  

Leasehold improvements

    6,582       6,582  

Buildings

    36,732       36,719  

Machinery and equipment

    79,370       79,065  

Furniture and fixtures

    26,597       25,920  

Mobile equipment and other

    5,183       5,287  

Construction-in-process

    3,597       5,125  

Total property, plant and equipment

    167,640       168,256  

Less accumulated depreciation

    (103,460 )     (100,916 )

Property, plant and equipment, net

  $ 64,180     $ 67,340  

 

 

15

 

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 12 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.

 ​ ​

16

 

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 Loss, were as follows:

 

  

Three Months Ended March 31, 2024

  

Three Months Ended March 31, 2023

 

Operating lease expense

 $1,596  $1,394 

Short term lease cost

 $93  $178 

Total lease cost

 $1,689  $1,572 

 ​

Cash Flow

 ​

Supplemental cash flow information related to leases is as follows:

 ​

  Three Months Ended March 31, 2024  Three Months Ended March 31, 2023 
         

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

 $1,639  $1,437 

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

 $1,364  $1,197 

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

 $43  $179 

 ​ ​

Balance Sheet

 ​

Supplemental balance sheet information related to leases is as follows:  

 ​

  

March 31, 2024

  

December 31, 2023

 

Operating Leases

        

Operating lease right-of-use assets

 $16,687  $18,008 
         

Other current liabilities

  5,309   5,347 

Operating lease liabilities

  12,596   13,887 

Total operating lease liabilities

 $17,905  $19,234 
         

Weighted Average Remaining Lease Term

        

Operating leases (in months)

  51   53 
         

Weighted Average Discount Rate

        

Operating leases

  5.37%  5.36%

 ​

17

Lease Maturities

 ​

Maturities of leases were as follows:

 ​

Year ending December 31,

 

Operating Leases

 

2024 (excluding the three months ended March 31, 2024)

 $4,620 

2025

  5,762 

2026

  4,078 

2027

  2,299 

2028

  1,265 

Thereafter

  1,849 

Total Lease Payments

  19,873 

Less: imputed interest

  (1,968)

Total

 $17,905 

 

 

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, 2024

            

Indefinite-lived intangibles:

            

Trademark and tradenames

 $77,600  $-  $77,600 

Amortizable intangibles:

            

Dealer network

  80,000   80,000   - 

Customer relationships

  80,920   44,000   36,920 

Patents

  21,136   18,563   2,573 

Noncompete agreements

  8,640   8,640   - 

Trademarks

  5,459   4,112   1,347 

Amortizable intangibles, net

  196,155   155,315   40,840 

Total

 $273,755  $155,315  $118,440 

 

  

Gross

  

Less

  

Net

 
  

Carrying

  

Accumulated

  

Carrying

 
  

Amount

  

Amortization

  

Amount

 

December 31, 2023

            

Indefinite-lived intangibles:

            

Trademark and tradenames

 $77,600  $-  $77,600 

Amortizable intangibles:

            

Dealer network

  80,000   79,000   1,000 

Customer relationships

  80,920   42,707   38,213 

Patents

  21,136   18,249   2,887 

Noncompete agreements

  8,640   8,640   - 

Trademarks

  5,459   4,089   1,370 

Amortizable intangibles, net

  196,155   152,685   43,470 

Total

 $273,755  $152,685  $121,070 

 ​

18

 

Amortization expense for intangible assets was $2,630 and $2,630 for the three months ended March 31, 2024 and 2023, respectively. Estimated amortization expense for the remainder of 2024 and each of the succeeding five years is as follows:

 ​

2024

 $4,890 

2025

  6,075 

2026

  5,450 

2027

  5,450 

2028

  5,450 

2029

  5,300 

 

 

9.

Long-Term Debt

 ​

Long-term debt is summarized below:

 ​

  

March 31,

  

December 31,

 
  

2024

  

2023

 
         

Term Loan, net of debt discount of $247 and $274 at March 31, 2024 and December 31, 2023, respectively

 $189,441  $189,413 

Less current maturities

  10,981   6,762 

Long-term debt before deferred financing costs

  178,460   182,651 

Deferred financing costs, net

  1,319   1,160 

Long-term debt, net

 $177,141  $181,491 

 ​

On  January 29, 2024, the Company entered into Amendment No. 3 to the Credit Agreement, which modifies the minimum required Leverage Ratio (as defined in the Credit Agreement) of the Company, which is measured as of the last day of each Reference Period (as defined in the Credit Agreement), from 3.50 to 1.00 for each Reference Period to (i) 3.50 to 1.00 for each Reference Period ending on or prior to  September 30, 2023, (ii) 4.25 to 1.00 for the Reference Period ending on  December 31, 2023, (iii) 4.00 to 1.00 for each Reference Period ending on  March 31, 2024 and  June 30, 2024, and (iv) 3.50 to 1.00 for each Reference Period ending on  September 30, 2024 and thereafter. Deferred financing costs of $279 relating to entry into Amendment No. 3 are being amortized over the term of the loan. On January 5, 2023, the Company entered into that certain Amendment No. 1 to Credit Agreement and Revolving Credit Commitment Increase Supplement (“Amendment No. 1”) by and among the Company, the Borrowers, the financial institutions listed in Amendment No. 1 as lenders, and JPMorgan Chase Bank, N.A., as administrative agent, which amended the Credit Agreement, dated as of  June 9, 2021 (as amended by Amendment No. 1, the “Credit Agreement”), and pursuant to which, among other things, (i) the Revolving Loan Borrowers exercised a portion of the Revolving Commitment Increase Option (as defined below) and increased the revolving commitment under the Credit Agreement by $50,000 for a total of $150,000 in the aggregate and (ii) the London Interbank Offered Rate pricing option under the Credit Agreement was replaced with a Term SOFR Rate pricing option. Deferred financing costs of $334 relating to entry into Amendment No. 1 are being amortized over the term of the loan. On July 11, 2023, the Company entered into Amendment No. 2 to the Credit Agreement, which allows the Company to take out loans of up to $1,000 against its corporate-owned life insurance policies as included in Non-qualified benefit plan assets on the Condensed Consolidated Balance Sheets. Pursuant to Amendment No. 2, the Company had outstanding loans of $546 and $750 against its corporate-owned life insurance policies as of March 31, 2024 and December 31, 2023, respectively, included in Other long-term liabilities on the Condensed Consolidated Balance Sheets.  

 

The Company is required to pay a fee for unused amounts under the senior secured revolving facility in an amount ranging from 0.150% to 0.300% of the average daily unused portion of the senior secured revolving credit facility, depending on Douglas Dynamics, L.L.C.'s ("DDI LLC") Leverage Ratio (as defined in the Credit Agreement). The Credit Agreement provides that the senior secured term loan facility will bear interest at (i) the Term SOFR Rate for the applicable interest period plus (ii) a margin ranging from 1.375% to 2.00%, depending on the DDI LLC’s Leverage Ratio. The Credit Agreement provides that the Revolving Loan Borrowers have the option to select whether the senior secured revolving credit facility borrowings will bear interest at either (i)(a) the Term SOFR Rate for the applicable interest period plus (b) 0.10% plus (c) a margin ranging from 1.375% to 2.00%, depending on DDI LLC’s Leverage Ratio, or (ii) a margin ranging from 0.375% to 1.00% per annum, depending on DDI LLC’s Leverage Ratio, plus the greatest of (which if the following would be less than 1.00%, such rate shall be deemed to be 1.00%) (a) the Prime Rate (as defined in the Credit Agreement) in effect on such day, (b) the NYFRB Rate (as defined in the Credit Agreement) plus 0.50% and (c) the Term SOFR Rate for a one month interest plus 0.10% (the “Adjusted Term SOFR Rate”). If the Adjusted Term SOFR Rate for the applicable interest period is less than zero, such rate shall be deemed to be zero for purposes of calculating the foregoing interest rates in the Credit Agreement.

 

Following Amendment No. 1, the Credit Agreement provides for a senior secured term loan in the amount of $225,000 and a senior secured revolving credit facility in the amount of $150,000, of which $10,000 will be available in the form of letters of credit and $15,000 will be available for the issuance of short-term swingline loans. The Credit Agreement also allows the Company to request increases to the revolving commitments and/or incremental term loans in an aggregate amount not in excess of $175,000 (the "Revolving Commitment Increase Option"), subject to specified terms and conditions. The final maturity date of the Credit Agreement is June 9, 2026. 

 

19

 ​

At March 31, 2024, the Company had outstanding borrowings under its term loan of $189,441, $55,000 in outstanding borrowings on its revolving credit facility, and remaining borrowing availability of $94,450. At December 31, 2023, the Company had outstanding borrowings under its term loan of $189,413, $47,000 in outstanding borrowings on its revolving credit facility, and remaining borrowing availability of $102,450. During the year ended December 31, 2023 the Company made a voluntary pre-payment of $10,000 of debt amortization principal payments under the Company's Credit Agreement. 

 

The Credit Agreement includes customary representations, warranties and negative and affirmative covenants, as well as customary events of default and certain cross default provisions that could result in acceleration of the Credit Agreement. In addition, as a result of the modifications to the minimum required Leverage Ratio under Amendment No. 3 to the Credit Agreement as discussed above, the Credit Agreement requires the Company to have a Leverage Ratio of (i) 3.50 to 1.00 for each Reference Period ending on or prior to  September 30, 2023, (ii) 4.25 to 1.00 for the Reference Period ending on  December 31, 2023, (iii) 4.00 to 1.00 for each Reference Period ending on  March 31, 2024 and  June 30, 2024, and (iv) 3.50 to 1.00 for each Reference Period ending on  September 30, 2024 and thereafter, and to have a Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of not less than 3.00 to 1.00 as of the last day of any fiscal quarter commencing with the fiscal quarter ending June 30, 2021. As of  March 31, 2024, the Company was in compliance with the respective covenants under the Credit Agreement.

  ​

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 2.424% and SOFR. 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 included in Accumulated other comprehensive income (loss) on the Condensed Consolidated Balance Sheets would be amortized into interest expense on a straight-line basis through the life of the swap. The amount amortized from Accumulated other comprehensive income (loss) into earnings during the three months ended March 31, 2024 and 2023 was ($291) and ($291), respectively. A mark-to-market adjustment of $119 and $119 was recorded as Interest expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended  March 31, 2024 and 2023, respectively, related to the swap. 

 ​

On June 9, 2021, in conjunction with entering into the Credit Agreement described above, the Company re-designated its swap. As a result, the swap will be recorded at fair value with changes recorded in Accumulated other comprehensive income (loss). The amortization from Accumulated other comprehensive income (loss) into earnings from the previous dedesignation has been adjusted as of June 9, 2021 to include the de-recognition of previously recognized mark-to-market gains and the amortization of the off-market component as of the re-designation date, and will continue to be recognized through the life of the swap. The amount expected to be amortized from Accumulated other comprehensive income (loss) into earnings in the next twelve months is $115.

 

On May 19, 2022, the Company entered into an interest rate swap agreement to further reduce its exposure to interest rate volatility. The interest rate swap has a notional amount of $125,000 effective for the period May 31, 2024 through June 9, 2026. 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 two global financial institutions. Under the interest rate swap agreement, the Company will either receive or make payments on a monthly basis based on the differential between 2.718% and SOFR. The interest rate swap is accounted for as a cash flow hedge.

 ​

20

 

The interest rate swaps' positive fair value at March 31, 2024 was $4,718, of which $3,058 and $1,660 are included in Prepaid and other current assets and Other long-term assets on the Condensed Consolidated Balance Sheet, respectively.  The interest rate swaps' positive fair value at  December 31, 2023 was $4,033, of which $3,174 and $859 are included in Prepaid and other current assets and Other long-term assets on the Condensed Consolidated Balance Sheet, respectively. 

 

 

10.

Accrued Expenses and Other Current Liabilities

 ​

Accrued expenses and other current liabilities are summarized as follows:

 ​

   

March 31,

   

December 31,

 
   

2024

   

2023

 
                 

Payroll and related costs

  $ 5,228     $ 5,772  

Employee benefits

    8,320       7,937  

Accrued warranty

    3,980       4,068  

Other

    6,052       8,040  
    $ 23,580     $ 25,817  

 

 

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 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.  All of the Company’s warranties are assurance-type warranties. Certain snowplows only provide for a one year warranty.  The Company determines the amount of the estimated warranty costs (and its corresponding warranty reserve) 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. The warranty reserve was $6,223 at March 31, 2024, of which $2,243 is included in Other long-term liabilities and $3,980 is included in Accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheet. The warranty reserve was $6,957 at December 31, 2023, of which $2,889 is included in Other long-term liabilities and $4,068 is included in Accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheet. 

 

21

 ​

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

 

  

Three Months Ended

 
  

March 31,

  

March 31,

 
  

2024

  

2023

 
         

Balance at the beginning of the period

 $6,957  $7,876 

Warranty provision

  669   464 

Claims paid/settlements

  (1,403)  (1,523)

Balance at the end of the period

 $6,223  $6,817 

 ​

 

12.

Loss per Share

 ​

Basic loss per share of common stock is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share of common stock is computed by dividing net loss by the weighted average number of common shares, using the two-class method. As the Company may grant RSUs that both participate in dividend equivalents and do not participate in dividend equivalents, the Company has calculated earnings per share pursuant to the two-class method, which is an earnings allocation formula that determines earnings per share for common stock and participating securities according to dividends declared and participation rights in undistributed losses. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. Diluted net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common stock and dilutive common stock outstanding during the period.  Potential common shares in the diluted net loss per share computation are excluded to the extent that they would be anti-dilutive. Weighted average of potentially dilutive non-participating RSU's were 0 in each of the three months ended   March 31, 2024 and 2023.

 

  

Three Months Ended

 
  

March 31,

  

March 31,

 
  

2024

  

2023

 

Basic loss per common share

        

Net loss

 $(8,352) $(13,110)

Less income allocated to participating securities

  -   - 

Net loss allocated to common shareholders

 $(8,352) $(13,110)

Weighted average common shares outstanding

  23,009,369   22,906,845 
  $(0.37) $(0.58)
         

Loss per common share assuming dilution

        

Net loss

 $(8,352) $(13,110)

Less income allocated to participating securities

  -   - 

Net loss allocated to common shareholders

 $(8,352) $(13,110)

Weighted average common shares outstanding

  23,009,369   22,906,845 

Incremental shares applicable to non-participating RSUs

  -   - 

Weighted average common shares assuming dilution

  23,009,369   22,906,845 
  $(0.37) $(0.58)

 ​

22

 
 

13.

Employee Stock Plans

 ​

2010 Stock Incentive Plan and 2024 Stock Incentive Plan 

 ​

In May 2010, the Company’s Board of Directors and stockholders adopted the 2010 Stock Incentive Plan (the “2010 Plan”). The material terms of the performance goals under the 2010 Plan, as amended and restated, were approved by stockholders at the Company’s 2014 annual meeting of stockholders and the plan’s term was extended further by the stockholders at the Company’s 2020 annual meeting of stockholders.  The 2010 Plan provides for the issuance of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock awards and restricted stock units (“RSUs”), any of which may be performance-based, and for incentive bonuses, which may be paid in cash or stock or a combination of both, to eligible employees, officers, non-employee directors and other service providers to the Company and its subsidiaries.  A maximum of 2,130,000 shares of common stock may be issued pursuant to all awards under the 2010 Plan.

 

In February 2024, the Company’s Board of Directors adopted the 2024 Stock Incentive Plan (the “2024 Plan”), which was subsequently approved by stockholders in April 2024.  The 2024 Plan provides for the issuance of nonqualified stock options, stock appreciation rights, restricted stock awards and restricted stock units (“RSUs”), any of which may be performance-based, and for incentive bonuses, which may be paid in cash or stock or a combination of both, to eligible employees, officers, non-employee directors and other service providers to the Company and its subsidiaries.  A maximum of 1,227,660 shares of common stock may be issued pursuant to all awards under the 2024 Plan. At the time that the stockholders approved the 2024 Plan, it replaced the 2010 Plan, and no further awards may be issued under the 2010 Plan. Awards that remain outstanding under the 2010 Plan will remain outstanding under the 2010 Plan in accordance with their terms. 

 ​

Equity awards issued to management include a retirement provision under which members of management who either (1) are age 65 or older or (2) have at least ten years of service and are at least age 55 will continue to vest in unvested equity awards upon retirement. The retirement provision also stipulates that the employee remain employed by the Company for six months after the first day of the fiscal year of the grant.  As the retirement provision does not qualify as a substantive service condition, the Company incurred $314 and $1,020 in the three months ended March 31, 2024 and 2023, respectively, in additional expense for employees who meet the thresholds of the retirement provision. In 2013, the Company’s Nominating and Governance Committee of its Board of Directors approved a retirement provision for the RSUs issued to non-employee directors that accelerates the vesting of such awards upon retirement.  Such awards are fully expensed immediately upon grant in accordance with ASC 718, as the retirement provision eliminates substantive service conditions associated with the awards.

 ​

Performance Share Unit Awards

 ​

The Company has granted performance share units as performance-based awards under the 2010 Plan that are subject to performance conditions over a three year performance period beginning in the year of the grant and, beginning with the 2024 grant, includes three 1-year measurement periods, as well as a vesting component based on a Total Shareholder Return ("TSR") modifier tied to the Company's relative total shareholder return in comparison to the total shareholder return of the S&P Small Cap 600 Industrials market index. The total number of shares issued pursuant to performance share units may be increased, decreased, or unchanged based on this TSR modifier.  Upon meeting the prescribed performance conditions, employees will be issued shares which vest immediately at the end of the performance period. In accordance with ASC 718, such awards are being expensed over the vesting period from the date of grant through the requisite service period, based upon the most probable outcome. For the 2024 grants, a Monte Carlo simulation has been used to account for the TSR market condition in the grant date fair value of the award, which was $26.60.

 

The Company recognized ($1,069) and ($417) of compensation expense related to the awards in the three months ended March 31, 2024 and 2023, respectively. The unrecognized compensation expense calculated under the fair value method for shares that were, as of  March 31, 2024, expected to be earned through the requisite service period was approximately $924 and is expected to be recognized through 2027.

 ​

Restricted Stock Unit Awards

 ​

RSUs are granted to both non-employee directors and management.  RSUs do not carry voting rights. While all non-employee director RSUs participate in dividend equivalents, there are two potential classes of management RSUs: one that participates in dividend equivalents, and a second that does not participate in dividend equivalents.  Each RSU represents the right to receive one share of the Company’s common stock and is subject to time-based vesting restrictions. Participants are not required to pay any consideration to the Company at either the time of grant of a RSU or upon vesting.

 ​

23

 

A summary of RSU activity for the three months ended March 31, 2024 is as follows: 

 ​

          

Weighted

 
      

Weighted

  

Average

 
      

Average

  

Remaining

 
      

Grant Date

  

Contractual

 
  

Shares

  

Fair value

  

Term (in years)

 
             

Unvested at December 31, 2023

  183,223  $36.54   1.72 

Granted

  191,317  $28.82   1.28 

Vested

  (134,934) $38.54   - 

Cancelled and forfeited

  (2,435) $33.91   - 
             

Unvested at March 31, 2024

  237,171  $29.20   1.75 
             

Expected to vest in the future at March 31, 2024

  231,638  $29.20   1.75 

 ​

The Company recognized $1,424 and $1,374 of compensation expense related to the RSU awards in the three months ended  March 31, 2024 and 2023, respectively.  The unrecognized compensation expense calculated under the fair value method for shares that were, as of March 31, 2024, expected to be earned through the requisite service period was approximately $4,998 and is expected to be recognized through 2027.

 ​

For grants to non-employee directors, vesting occurs as of the grant date. Vested director RSUs are ‘‘settled’’ by the delivery to the participant or a designated brokerage firm of one share of common stock per vested RSU as soon as reasonably practicable following a termination of service of the participant that constitutes a separation from service, or as soon as reasonably practicable upon grant if such election is made by the non-employee director, and in all events no later than the end of the calendar year in which such termination of service occurs or, if later, two and one-half months after such termination of service. Vested management RSUs are “settled” by the delivery to the participant or a designated brokerage firm of one share of common stock per vested RSU as soon as reasonably practicable following vesting.

 ​

 

14.

Commitments and Contingencies

 ​

In the ordinary course of business, the Company is engaged in various litigation including product liability and intellectual property disputes.  However, the Company does not believe that any pending litigation will have a material adverse effect on its consolidated financial position.  In addition, the Company is not currently a party to any environmental-related claims or legal matters.

 ​

 

15.

Segments

 ​

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, as well as our vertically integrated products.  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.

 ​

Separate financial information is available for the two reportable segments. In addition, segment results include an allocation of all corporate costs to Work Truck Attachments and Work Truck Solutions.

 ​

24

 

Segment performance is evaluated based on segment net sales and Adjusted EBITDA. Segment results include an allocation of all corporate costs. No single customer’s revenues amounted to 10% or more of the Company’s total revenue. Sales are primarily within the United States and substantially all assets are located within the United States.

 ​

All intersegment sales are eliminated in consolidation. Sales between Work Truck Attachments and Work Truck Solutions reflect the Company’s intercompany pricing policy. The following table shows summarized financial information concerning the Company’s reportable segments:

 

  

Three Months Ended

  

Three Months Ended

 
  

March 31,

  

March 31,

 
  

2024

  

2023

 

Net sales

        

Work Truck Attachments

 $23,840  $19,246 

Work Truck Solutions

  71,815   63,299 
  $95,655  $82,545 

Adjusted EBITDA

        

Work Truck Attachments

 $(4,468) $(10,231)

Work Truck Solutions

  6,002   2,857 
  $1,534  $(7,374)

Depreciation and amortization expense

        

Work Truck Attachments

 $3,347  $3,338 

Work Truck Solutions

  1,998   2,019 
  $5,345  $5,357 

Assets

        

Work Truck Attachments

 $374,045  $387,909 

Work Truck Solutions

  203,031   197,379 
  $577,076  $585,288 

Capital Expenditures

        

Work Truck Attachments

 $675  $932 

Work Truck Solutions

  99   536 
  $774  $1,468 

 ​

Adjusted EBITDA

        

Work Truck Attachments

 $(4,468) $(10,231)

Work Truck Solutions

  6,002   2,857 

Total Adjusted EBITDA

 $1,534  $(7,374)

Less items to reconcile Adjusted EBITDA to Loss before taxes:

        

Interest expense - net

  3,524   2,864 

Depreciation expense

  2,715   2,727 

Amortization

  2,630   2,630 

Stock based compensation

  355   957 

Impairment charges (1)

  1,224   - 

Other charges (2)

  1,029   74 

Loss before taxes

 $(9,943) $(16,626)

 

 (1)Reflects impairment charges taken on certain internally developed software in the three months ended March 31, 2024. 
 

(2)

Reflects unrelated legal, severance, restructuring, and consulting fees for the periods presented.

 ​

25

 
 

16.

Income Taxes

 ​

The Company’s effective tax rate was 16.0% and 21.1% for the three months ended March 31, 2024 and 2023, respectively. The effective tax rate for the three months ended  March 31, 2024 was lower than the prior year period due to discrete tax expense of $391 in the three months ended  March 31, 2024 versus discrete tax expense of $148 in the three months ended  March 31, 2023 related to excess tax from stock compensation.

 ​

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  The largest item affecting deferred taxes is the difference between book and tax amortization of goodwill and other intangibles amortization.

 ​

 

17.

Restructuring and Impairment

 

In  January 2024, the Company implemented the 2024 Cost Savings Program, primarily in the form of restructuring charges for salaried headcount reductions in both the Work Truck Attachments segment and corporate functions. For the three months ended March 31, 2024, $857 in pre-tax restructuring charges were recorded related to workforce reduction costs and other related expenses, and are included in Cost of sales and Selling, general, and administrative expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss. Such costs have been substantially all paid as of March 31, 2024. 

 

In conjunction with the 2024 Cost Savings Program, impairment charges of $1,224 were recorded in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 related to certain internally developed software at our Work Truck Attachments segment representing the full capitalized value of the software. In addition, management evaluated its assets outside of the internally developed software described above and determined that there were no indicators of impairment.

 

 

18.

Recent Accounting Pronouncements

 

In  November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires that entities disclose significant segment expenses and enhances disclosure around segment reporting. The standard is effective for annual periods beginning after  December 15, 2023. The Company will adopt this standard in fiscal 2024. The Company has identified and is in the process of implementing changes to processes and controls to meet the standard’s updated reporting and disclosure requirements.

 

In  December 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures," which enhances disclosure around income taxes. The standard is effective for annual periods beginning after  December 15, 2024. The Company is in the process of evaluating the standard’s updated disclosure requirements.  

 

 

19.

Changes in Accumulated Other Comprehensive Income (Loss) by Component

 ​

Changes to accumulated other comprehensive income (loss) by component for the three months ended March 31, 2024 are as follows:

 

  

Unrealized

         
  

Net Gain (Loss)

  

Retiree

     
  

on Interest

  

Health

     
  

Rate

  

Benefit

     
  

Swap

  

Obligation

  

Total

 

Balance at December 31, 2023

 $3,331  $3,025  $6,356 

Other comprehensive gain before reclassifications

  1,335      1,335 

Amounts reclassified from accumulated other comprehensive income (loss): (1)

  (955)  (40)  (995)

Balance at March 31, 2024

 $3,711  $2,985  $6,696 
             

(1) Amounts reclassified from accumulated other comprehensive income (loss):

            

Amortization of Other Postretirement Benefit items:

            

Actuarial gains

 $(54)        

Tax expense

  14         

Reclassification net of tax

 $(40)        
             

Realized gains on interest rate swaps reclassified to interest expense

 $(1,290)        

Tax expense

  335         

Reclassification net of tax

 $(955)        

 ​

26

 

Changes to accumulated other comprehensive income (loss) by component for the three months ended March 31, 2023, are as follows:​

 ​

  

Unrealized

         
  

Net Gain (Loss)

  

Retiree

     
  

on Interest

  

Health

     
  

Rate

  

Benefit

     
  

Swap

  

Obligation

  

Total

 

Balance at December 31, 2022

 $6,115  $3,013  $9,128 

Other comprehensive loss before reclassifications

  (871)     (871)

Amounts reclassified from accumulated other comprehensive income (loss): (1)

  (665)  (53)  (718)

Balance at March 31, 2023

 $4,579  $2,960  $7,539 
             

(1) Amounts reclassified from accumulated other comprehensive income (loss):

            

Amortization of Other Postretirement Benefit items:

            

Actuarial gains

 $(72)        

Tax expense

  19         

Reclassification net of tax

 $(53)        
             

Realized gains on interest rate swaps reclassified to interest expense

 $(899)        

Tax expense

  234         

Reclassification net of tax

 $(665)        

 ​

27

 
 

 

 ​Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

 ​

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes which are included in Item 1 of this Quarterly Report on Form 10-Q, as well as the information contained in our Form 10-K (Commission File No. 001-34728) filed with the Securities and Exchange Commission. Amounts presented are in thousands, unless otherwise stated.

 ​

In this Quarterly Report on Form 10-Q, unless the context indicates otherwise: Douglas Dynamics, the Company, we, our, or us refer to Douglas Dynamics, Inc.

 ​

Forward-Looking Statements

 ​

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).  These statements include information relating to future events, product demand, the payment of dividends, future financial performance, strategies, expectations, competitive environment, regulation 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: (i) weather conditions, particularly lack of or reduced levels of snowfall and the timing of such snowfall, including as a result of global climate change; (ii) our ability to manage general economic, business and geopolitical conditions, including the impacts of natural disasters, labor strikes, global political instability, adverse developments affecting the banking and financial services industries, pandemics and outbreaks of contagious diseases and other adverse public health developments; (iii) our inability to maintain good relationships with the original equipment manufacturers (OEM) with whom we currently do significant business; (iv) the inability of our suppliers and OEM partners to meet our volume or quality requirements; (v) increases in the price of steel or other materials, including as a result of tariffs or inflationary conditions, necessary for the production of our products that cannot be passed on to our distributors; (vi) increases in the price of fuel or freight,  (vii) the effects of laws and regulations and their interpretations on our business and financial condition, including policy or regulatory changes related to climate change; (viii) a significant decline in economic conditions; (ix) our inability to maintain good relationships with our distributors; (x) lack of available or favorable financing options for our end-users, distributors or customers; (xi) inaccuracies in our estimates of future demand for our products; (xii) our inability to protect or continue to build our intellectual property portfolio; (xiii) our inability to develop new products or improve upon existing products in response to end-user needs; (xiv) losses due to lawsuits arising out of personal injuries associated with our products; (xv) factors that could impact the future declaration and payment of dividends or our ability to execute repurchases under our stock repurchase program; (xvi) our inability to compete effectively against competition, as well as those discussed in the sections entitled Risk Factors in Part II, Item 1A of this Quarterly Report on Form 10-Q, if any, or in our most recent Annual Report on Form 10-K.  Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements.  In addition, the forward-looking statements in this Quarterly Report on Form 10-Q 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.

 ​

28

 

Results of Operations

 ​

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, as well as our vertically integrated products.  This segment consists of our operations that manufacture and sell snow and ice control products. As described under “Seasonality and Year-To-Year Variability,” the Work Truck Attachments Segment is seasonal and, as a result, its results of operations can vary from quarter-to-quarter and from year-to-year.

 

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.

 ​

In addition, segment results include an allocation of all corporate costs to Work Truck Attachments and Work Truck Solutions.

 ​

Macroeconomic Environment

 

 ​As a result of recent market volatility, supply chain disruptions, labor strikes, labor shortages, inflationary pressures (including around materials, freight, labor and benefits) and other economic trends, our results of operations were impacted in each of the three months ended March 31, 2024 and 2023, and may be significantly impacted in future quarters. See below for further discussion of the impact to our financial statements. We may have challenges in short-term liquidity that could impact our ability to fund working capital needs. We have taken various steps to preserve liquidity. In January 2024, we implemented the 2024 Cost Savings Program, which is primarily in the form of restructuring charges for salaried headcount reductions and impacted both the Work Truck Attachments segment and corporate functions. We are also reducing discretionary spending where possible and deferring payments where appropriate within existing contractual terms, while remaining committed to long term growth projects.  In addition, as discussed in Note 9 to the Unaudited Condensed Consolidated Financial Statements, in January 2023, we expanded the borrowing capacity of our revolving credit facility, and in January 2024, we amended our Credit Agreement to increase the minimum required leverage ratio from December 31, 2023 through June 30, 2024. In consideration of these recent macroeconomic trends, we expect that cash on hand and cash we generate from operations, as well as available credit under our senior credit facilities, will provide adequate funds for the foreseeable future. 

 

Overview

 ​

The following table sets forth, for the three months ended March 31, 2024 and 2023, the consolidated statements of operations of the Company and its subsidiaries.  All intercompany balances and transactions have been eliminated in consolidation.  In the table below and throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” consolidated statements of operations data for the three months ended March 31, 2024 and 2023 have been derived from our unaudited consolidated financial statements. The information contained in the table below should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q.

 

29

 

   

Three Months Ended

 
   

March 31,

   

March 31,

 
   

2024

   

2023

 
   

(unaudited)

 
                 

Net sales

  $ 95,655     $ 82,545  

Cost of sales

    76,735       71,270  

Gross profit

    18,920       11,275  

Selling, general, and administrative expense

    21,488       22,442  

Impairment charges

    1,224       -  

Intangibles amortization

    2,630       2,630  

Loss from operations

    (6,422 )     (13,797 )

Interest expense, net

    (3,524 )     (2,864 )

Other income, net

    3       35  

Loss before taxes

    (9,943 )     (16,626 )

Income tax benefit

    (1,591 )     (3,516 )

Net loss

  $ (8,352 )   $ (13,110 )

 ​

The following table sets forth for the three months ended March 31, 2024 and 2023 the percentage of certain items in our Condensed Consolidated Statements of Operations and Comprehensive Loss, relative to net sales: ​

 

   

Three Months Ended

 
   

March 31,

   

March 31,

 
   

2024

   

2023

 
   

(unaudited)

 

Net sales

    100.0 %     100.0 %

Cost of sales

    80.2 %     86.3 %

Gross profit

    19.8 %     13.7 %

Selling, general, and administrative expense

    22.5 %     27.2 %

Impairment charges

    1.3 %     - %

Intangibles amortization

    2.7 %     3.2 %

Loss from operations

    (6.7 )%     (16.7 )%

Interest expense, net

    (3.7 )%     (3.5 )%

Other income, net

    - %     - %

Loss before taxes

    (10.4 )%     (20.2 )%

Income tax benefit

    (1.7 )%     (4.3 )%

Net loss

    (8.7 )%     (15.9 )%

 ​

Net Sales

 ​

Net sales were $95.7 million for the three months ended March 31, 2024 compared to $82.5 million in the three months ended March 31, 2023, an increase of $13.2 million, or 16.0%. The increase in sales for the three months ended March 31, 2024 compared to the same period in 2023 is a result of higher volumes and pricing at our Work Truck Solutions segment and higher parts and accessories volumes and pricing at our Work Truck Attachments segment. See below for a discussion of net sales for each of our segments.

 

30

 

   

Three Months Ended

   

Three Months Ended

 
   

March 31,

   

March 31,

 
   

2024

   

2023

 

Net sales

               

Work Truck Attachments

  $ 23,840     $ 19,246  

Work Truck Solutions

    71,815       63,299  
    $ 95,655     $ 82,545  

 

Net sales at our Work Truck Attachments segment were $23.8 million for the three months ended March 31, 2024 compared to $19.2 million in the three months ended March 31, 2023, an increase of $4.6 million. The increase in sales in the three months ended March 31, 2024 was due to price increases, as well as higher parts and accessories sales when compared to the same period in the prior year, as several major cities on the I-95 corridor on the East Coast saw their first measurable snowfall in over 700 days during the first quarter of 2024. 

Net sales at our Work Truck Solutions segment were $71.8 million for the three months ended March 31, 2024 compared to $63.3 million in the three months ended March 31, 2023, an increase of $8.5 million. The increase in sales for the three months ended March 31, 2024 compared to the same period in 2023 was a result of higher volumes on improved chassis availability, price increase realization, as well as higher sales of Company-purchased chassis, which are typically sold at cost.

 ​

Cost of Sales

 ​

Cost of sales was $76.7 million for the three months ended March 31, 2024 compared to $71.3 million for the three months ended March 31, 2023, an increase of $5.4 million or 7.6%. The increase in cost of sales for the three months ended March 31, 2024 compared to the same period in the prior year was driven by the higher volumes, as well as lower outsourcing costs. Cost of sales as a percentage of sales were 80.2% for the three months ended March 31, 2024, compared to 86.3% for the three months ended March 31, 2023.  The decrease in cost of sales as a percentage of sales for the three months ended March 31, 2024 was due to the higher volumes and product mix. 

 ​

Gross Profit

 ​

Gross profit was $18.9 million for the three months ended March 31, 2024 compared to $11.3 million for the three months ended March 31, 2023, an increase of $7.6 million, or 67.3%. The change in gross profit is attributable to the changes in sales as discussed above under “—Net Sales.”  As a percentage of net sales, gross profit increased from 13.7% for the three months ended March 31, 2023 to 19.8% for the corresponding period in 2024. The reasons for the change in gross profit as a percentage of net sales are the same as those relating to the changes in cost of sales as a percentage of sales discussed above under “—Cost of Sales.”

 

31

 

Selling, General and Administrative Expense

 ​

Selling, general and administrative expenses, including intangibles amortization, were $24.1 million for the three months ended March 31, 2024 compared to $25.1 million for the three months ended March 31, 2023, a decrease of $1.0 million, or 4.0%. The decrease in the three months ended March 31, 2024 is related to lower stock-based compensation of $0.6 million and lower wages, benefits and employee costs of $0.5 million resulting from actions under the 2024 Cost Savings Plan, as well as a decrease in advertising costs of $0.6 million related to curtailed discretionary spending, somewhat offset by an increase in severance costs of $0.9 million related to salaried headcount reductions at our Work Truck Attachments segment and our corporate function as part of our 2024 Cost Savings Program. 

 

Impairment Charges

 

Impairment charges were $1.2 million in the three months ended March 31, 2024 compared to $0.0 million in the same period in the prior year. The impairment charges in 2024 relate to certain internally developed software at our Work Truck Attachments segment and represent the full capitalized value of the software. 

 

Interest Expense

 ​

Interest expense was $3.5 million for the three months ended March 31, 2024, an increase compared to the $2.9 million incurred in the same period in the prior year. The increase in interest expense for the three months ended March 31, 2024 was due to higher interest on our revolver of $0.4 million due to having higher revolver borrowings during the quarter compared to the prior year. In addition, the increase in the three months ended March 31, 2024 was due to higher interest on our floor plan agreement of $0.4 million, see Note 5 to the Unaudited Condensed Consolidated Financial Statements for additional information regarding the floor plan agreement. 

 

Income Taxes

 ​

The Company’s effective tax rate was 16.0% and 21.1% for the three months ended March 31, 2024 and March 31, 2023, respectively. The effective tax rate for the three months ended March 31, 2024 was lower than the prior year period due to discrete tax expense of $0.4 million in the three months ended March 31, 2024 versus discrete tax expense of $0.1 million in the three months ended March 31, 2023 related to excess tax from stock compensation.

 ​

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  The largest item affecting deferred taxes is the difference between book and tax amortization of goodwill and other intangibles amortization.

 ​

Net Loss

 ​

Net loss for the three months ended March 31, 2024 was ($8.4) million, compared to ($13.1) million for the corresponding period in 2023, a decrease in net loss of $4.7 million. The change in net loss for the three months ended March 31, 2024 was driven by the factors described above under “— Net Sales,” “— Cost of Sales,” “— Selling, General and Administrative Expense,” “— Impairment Charges,” and “— Income Taxes.”  As a percentage of net sales, net loss was (8.7%) for the three months ended March 31, 2024 compared to (15.9%) for the three months ended March 31, 2023.

 ​

Discussion of Critical Accounting Policies and Estimates

 ​

There have been no material changes to our critical accounting policies and estimates previously disclosed in our Form 10-K (Commission File No. 001-34728) filed with the Securities and Exchange Commission, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Critical Accounting Policies and Estimates.”

 ​

Liquidity and Capital Resources

 ​

Our principal sources of cash have been, and we expect will continue to be, cash from operations and borrowings under our senior credit facilities.

 ​