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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 September 30, 2021

OR

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

For the transition period from to .

Commission file number: 001-34728

DOUGLAS DYNAMICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

13-4275891

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

7777 North 73rd Street

Milwaukee, Wisconsin 53223

(Address of principal executive offices) (Zip code)

(414) 354-2310

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share

PLOW

New York Stock Exchange

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

Number of shares of registrant’s common shares outstanding as of November 2, 2021 was 22,980,951.

Table of Contents

DOUGLAS DYNAMICS, INC.

Table of Contents

PART I. FINANCIAL INFORMATION

3

Item 1. Financial Statements

3

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

3

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2021 and 2020

4

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020

5

Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2021 and 2020

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

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

29

Item 3. Quantitative and Qualitative Disclosures About Market Risk

43

Item 4. Controls and Procedures

44

PART II. OTHER INFORMATION

44

Item 1. Legal Proceedings

44

Item 1A. Risk Factors

45

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

45

Item 3. Defaults Upon Senior Securities

45

Item 4. Mine Safety Disclosures

45

Item 5. Other Information

45

Item 6. Exhibits

46

Signatures

47

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Douglas Dynamics, Inc.

Condensed Consolidated Balance Sheets

(In thousands except share data)

September 30,

December 31,

2021

2020

(unaudited)

(unaudited)

Assets

  

  

Current assets:

Cash and cash equivalents

$

7,340

$

41,030

Accounts receivable, net

124,135

83,195

Inventories

100,134

79,482

Inventories - truck chassis floor plan

7,916

8,146

Refundable income taxes paid

2,552

-

Prepaid and other current assets

5,552

5,334

Total current assets

247,629

217,187

Property, plant, and equipment, net

64,612

64,320

Goodwill

113,134

113,134

Other intangible assets, net

144,739

152,791

Operating lease - right of use asset

19,080

21,441

Non-qualified benefit plan assets

9,837

9,041

Other long-term assets

1,203

1,288

Total assets

$

600,234

$

579,202

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

16,861

$

16,284

Accrued expenses and other current liabilities

32,652

30,831

Floor plan obligations

7,916

7,885

Operating lease liability - current

4,623

4,326

Income taxes payable

-

5,214

Short term borrowings

37,000

-

Current portion of long-term debt

11,137

1,666

Total current liabilities

110,189

66,206

Retiree benefits and deferred compensation

17,245

15,804

Deferred income taxes

27,553

26,681

Long-term debt, less current portion

208,747

236,676

Operating lease liability - noncurrent

14,840

17,434

Other long-term liabilities

11,431

16,197

Stockholders’ equity:

Common Stock, par value $0.01, 200,000,000 shares authorized, 22,980,951 and 22,857,457 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

230

229

Additional paid-in capital

163,782

157,758

Retained earnings

49,707

47,712

Accumulated other comprehensive loss, net of tax

(3,490)

(5,495)

Total stockholders’ equity

210,229

200,204

Total liabilities and stockholders’ equity

$

600,234

$

579,202

See the accompanying notes to condensed consolidated financial statements.

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Douglas Dynamics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except share and per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

September 30,

September 30,

2021

2020

2021

2020

(unaudited)

(unaudited)

Net sales

  

$

127,636

  

$

133,761

$

388,508

  

$

321,994

Cost of sales

97,001

97,033

282,823

241,501

Gross profit

30,635

36,728

105,685

80,493

Selling, general, and administrative expense

17,607

16,428

59,488

47,435

Impairment charges

-

-

-

127,872

Intangibles amortization

2,642

2,737

8,052

8,214

Income (loss) from operations

10,386

17,563

38,145

(103,028)

Interest expense, net

(2,167)

(5,007)

(9,514)

(15,709)

Debt modification expense

-

(237)

-

(3,429)

Loss on extinguishment of debt

-

-

(4,936)

-

Other income (expense), net

15

145

123

(33)

Income (loss) before taxes

8,234

12,464

23,818

(122,199)

Income tax expense (benefit)

1,204

3,234

1,943

(17,484)

Net income (loss)

$

7,030

$

9,230

$

21,875

$

(104,715)

Weighted average number of common shares outstanding:

Basic

22,980,951

22,857,457

22,945,617

22,842,777

Diluted

22,992,793

22,878,002

22,960,334

22,842,777

Earnings (loss) per common share:

Basic

$

0.30

$

0.40

$

0.94

$

(4.60)

Diluted

$

0.30

$

0.39

$

0.92

$

(4.60)

Cash dividends declared and paid per share

$

0.29

$

0.28

$

0.86

$

0.84

Comprehensive income (loss)

$

7,611

$

9,719

$

23,880

$

(108,038)

See the accompanying notes to condensed consolidated financial statements.

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Douglas Dynamics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

Nine Months Ended

September 30,

September 30,

2021

2020

(unaudited)

Operating activities

Net income (loss)

  

$

21,875

  

$

(104,715)

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

Depreciation and amortization

15,235

14,704

Gain on sales of fixed asset

(165)

-

Amortization of deferred financing costs and debt discount

770

914

Debt modification expense

-

267

Loss on extinguishment of debt

4,936

-

Stock-based compensation

6,025

2,768

Adjustments on derivatives not classified as hedges

(1,020)

3,133

Provision for losses on accounts receivable

519

778

Deferred income taxes

872

(18,556)

Impairment charges

-

127,872

Non-cash lease expense

2,360

3,095

Earnout liability

-

(2,017)

Changes in operating assets and liabilities:

Accounts receivable

(41,459)

(36,656)

Inventories

(20,391)

(16,057)

Prepaid assets, refundable income taxes and other assets

(3,545)

(3,542)

Accounts payable

538

3,205

Accrued expenses and other current liabilities

(3,433)

(962)

Benefit obligations and other long-term liabilities

(2,598)

(1,313)

Net cash used in operating activities

(19,481)

(27,082)

Investing activities

Capital expenditures

(7,271)

(9,465)

Net cash used in investing activities

(7,271)

(9,465)

Financing activities

Shares withheld on restricted stock vesting paid for employees’ taxes

-

(72)

Payments of financing costs

(1,371)

(992)

Dividends paid

(19,880)

(19,411)

Net revolver borrowings

37,000

12,000

Borrowings on long-term debt

224,438

270,875

Repayment of long-term debt

(247,125)

(247,233)

Net cash provided by (used in) financing activities

(6,938)

15,167

Change in cash and cash equivalents

(33,690)

(21,380)

Cash and cash equivalents at beginning of period

41,030

35,665

Cash and cash equivalents at end of period

$

7,340

$

14,285

Non-cash operating and financing activities

Truck chassis inventory acquired through floorplan obligations

$

28,012

$

27,691

See the accompanying notes to condensed consolidated financial statements.

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Douglas Dynamics, Inc.

Condensed Consolidated Statements of Shareholders’ Equity

(In thousands)

Accumulated

Additional

Other

Common Stock

Paid-in

Retained

Comprehensive

Shares

Dollars

Capital

Earnings

Loss

Total

Three Months Ended September 30, 2021

Balance at June 30, 2021

22,980,951

$

230

$

163,777

$

49,303

$

(4,071)

$

209,239

Net income

7,030

7,030

Dividends paid

(6,626)

(6,626)

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

(58)

(58)

Adjustment for interest rate swap, net of tax of ($221)

639

639

Stock based compensation

5

5

Balance at September 30, 2021

22,980,951

$

230

$

163,782

$

49,707

$

(3,490)

$

210,229

Nine Months Ended September 30, 2021

Balance at December 31, 2020

22,857,457

$

229

$

157,758

$

47,712

$

(5,495)

$

200,204

Net income

21,875

21,875

Dividends paid

(19,880)

(19,880)

Adjustment for pension and postretirement benefit liability, net of tax of $60

(174)

(174)

Adjustment for interest rate swap, net of tax of ($755)

2,179

2,179

Stock based compensation

123,494

1

6,024

6,025

Balance at September 30, 2021

22,980,951

$

230

$

163,782

$

49,707

$

(3,490)

$

210,229

Three Months Ended September 30, 2020

Balance at June 30, 2020

22,857,457

$

229

$

157,497

$

33,320

$

(6,626)

$

184,420

Net income

9,230

9,230

Dividends paid

(6,485)

(6,485)

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

(57)

(57)

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

546

546

Stock based compensation

199

199

Balance at September 30, 2020

22,857,457

$

229

$

157,696

$

36,065

$

(6,137)

$

187,853

Nine Months Ended September 30, 2020

Balance at December 31, 2019

22,795,412

$

228

$

155,001

$

160,748

$

(2,814)

$

313,163

Net loss

(104,715)

(104,715)

Dividends paid

(19,411)

(19,411)

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

(557)

(557)

Adjustment for pension and postretirement benefit liability, net of tax of $60

(171)

(171)

Adjustment for interest rate swap, net of tax of $1,101

(3,152)

(3,152)

Shares withheld on restricted stock vesting

(72)

(72)

Stock based compensation

62,045

1

2,767

2,768

Balance at September 30, 2020

22,857,457

$

229

$

157,696

$

36,065

$

(6,137)

$

187,853

See the accompanying notes to condensed consolidated financial statements.

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Douglas Dynamics, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands except share and per share data)

1.Basis of presentation

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

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

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

 

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

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

Interim Condensed Consolidated Financial Information

The accompanying Condensed Consolidated Balance Sheet as of September 30, 2021, the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and the Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2021 and 2020, and the Condensed Cash Flows for the nine months ended September 30, 2021 and 2020 have been prepared by the Company and have not been audited.

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

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As a result of the COVID-19 pandemic, including the market volatility and other economic implications associated with the pandemic and the economic and regulatory measures enacted to contain its spread, the Company’s results of operations were significantly impacted in the nine months ended September 30, 2020. The Company preventatively and voluntarily closed its facilities on March 18, 2020.  The Company returned to full production during the second quarter of 2020. The results of operations of the Company for any quarter during the pandemic may not be indicative of results of operations that may be achieved for a subsequent quarter or the full year, and may not be similar to results of operations experienced in prior years. In addition, results in any given period in 2021 may be different than 2020 as a result of the depressed conditions in 2020 stemming from the pandemic.

During the nine months ended September 30, 2020, the Company benefited from credits related to the passage of the CARES Act. Under the CARES Act, the Company qualified for an Employee Retention Credit for wages paid to employees who were not working due to the plant shutdown. The Company recorded a total CARES Act benefit of $1,152 for the nine months ended September 30, 2020 to Cost of sales and Selling, general and administrative expense on the Consolidated Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Goodwill

The Company performs an annual impairment test for goodwill and more frequently if an event or circumstances indicate that an impairment loss has been incurred. Conditions that would trigger an impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset. The amount of goodwill impairment is determined by the amount the carrying value of the reporting unit exceeds its fair value.  The Company has determined it has three reporting units, and all significant decisions are made on a company-wide basis by the chief operating decision maker. The fair value of the reporting unit is estimated by using an income and market approach. The estimated fair value is compared with the aggregate carrying value. If the fair value is greater than the carrying amount, there is no impairment. If the carrying amount is greater than the fair value, an impairment loss is recognized equal to the difference. During the quarter ended June 30, 2020, the Company identified a triggering event as there had been a significant decline in the business climate and in results of operations as a result of uncertainty related to the COVID-19 pandemic and chassis availability. Given these indicators, the Company determined that there was a higher degree of uncertainty in achieving its financial projections. Therefore, the Company performed an impairment test as of June 30, 2020 for each of its reporting units. There were no triggering events identified during the quarter ended September 30, 2021.

The Work Truck Attachments segment consists of one reporting unit: Commercial. The impairment test performed as of June 30, 2020 indicated no impairment for the Commercial reporting unit. The Work Truck Solutions consists of two reporting units; Municipal and Dejana. At June 30, 2020, the Municipal reporting unit’s carrying value exceeded its fair value. As a result, $47,799 of the Municipal goodwill balance was recorded as an impairment charge during the three months ended June 30, 2020 and is included in Impairment charges on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). At June 30, 2020, the Dejana reporting unit’s carrying value exceeded its fair value. As a result, $80,073 of the Dejana goodwill balance was recorded as an impairment charge during the three months ended June 30, 2020 and is included in Impairment charges on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

2.Revenue Recognition

Revenue Streams

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

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performance obligation in all cases. In the case of a single order containing multiple upfits, the transaction price may represent multiple performance obligations.

Work Truck Attachments

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

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

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

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

Work Truck Solutions

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

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

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

State and Local Bids – The Company records revenue of separately sold snow and ice equipment upon shipment and fully upfit vehicles upon delivery.  The state and local bid process does not obligate the entity to buy any products from the Company, but merely allows the entity to purchase products in the future typically for a fixed period of time. The entity commits to actually purchasing products from the Company when it issues purchase orders off of a previously awarded bid, which lists out actual quantities of equipment being ordered and the delivery

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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 decreased revenue by $92 and decreased revenue by $216 for the three months ended September 30, 2021 and 2020, respectively. The adjustment increased revenue by $168 and decreased revenue by $406 for the nine months ended September 30, 2021 and 2020, respectively.

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

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

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Disaggregation of Revenue

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

Revenue by customer type was as follows:

Three Months Ended September 30, 2021

Work Truck Attachments

Work Truck Solutions

Total Revenue

Independent dealer

$ 81,373

$ 25,425

$ 106,798

Government

-

10,942

10,942

Fleet

-

8,539

8,539

Other

-

1,357

1,357

Total revenue

$ 81,373

$ 46,263

$ 127,636

Three Months Ended September 30, 2020

Work Truck Attachments

Work Truck Solutions

Total Revenue

Independent dealer

$ 76,903

$ 24,768

$ 101,671

Government

-

19,058

19,058

Fleet

-

11,277

11,277

Other

-

1,755

1,755

Total revenue

$ 76,903

$ 56,858

$ 133,761

Nine Months Ended September 30, 2021

Work Truck Attachments

Work Truck Solutions

Total Revenue

Independent dealer

$ 227,992

$ 91,457

$ 319,449

Government

-

32,858

32,858

Fleet

-

29,179

29,179

Other

-

7,022

7,022

Total revenue

$ 227,992

$ 160,516

$ 388,508

Nine Months Ended September 30, 2020

Work Truck Attachments

Work Truck Solutions

Total Revenue

Independent dealer

$ 169,853

$ 78,646

$ 248,499

Government

-

41,248

41,248

Fleet

-

27,639

27,639

Other

-

4,608

4,608

Total revenue

$ 169,853

$ 152,141

$ 321,994

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Revenue by timing of revenue recognition was as follows:

Three Months Ended September 30, 2021

Work Truck Attachments

Work Truck Solutions

Total Revenue

Point in time

$ 81,373

$ 29,201

$ 110,574

Over time

-

17,062

17,062

Total revenue

$ 81,373

$ 46,263

$ 127,636

Three Months Ended September 30, 2020

Work Truck Attachments

Work Truck Solutions

Total Revenue

Point in time

$ 76,903

$ 38,564

$ 115,467

Over time

-

18,294

18,294

Total revenue

$ 76,903

$ 56,858

$ 133,761

Nine Months Ended September 30, 2021

Work Truck Attachments

Work Truck Solutions

Total Revenue

Point in time

$ 227,992

$ 102,601

$ 330,593

Over time

-

57,915

57,915

Total revenue

$ 227,992

$ 160,516

$ 388,508

Nine Months Ended September 30, 2020

Work Truck Attachments

Work Truck Solutions

Total Revenue

Point in time

$ 169,853

$ 98,659

$ 268,512

Over time

-

53,482

53,482

Total revenue

$ 169,853

$ 152,141

$ 321,994

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Contract Balances

The following table shows the changes in the Company’s contract liabilities during the three and nine months ended September 30, 2021 and 2020, respectively:

Three Months Ended September 30, 2021

Balance at Beginning of Period

Additions

Deductions

Balance at End of Period

Contract liabilities

$

6,603

$

4,660

$

(7,767)

$

3,496

Three Months Ended September 30, 2020

Balance at Beginning of Period

Additions

Deductions

Balance at End of Period

Contract liabilities

$

6,316

$

3,500

$

(5,620)

$

4,196

Nine Months Ended September 30, 2021

Balance at Beginning of Period

Additions

Deductions

Balance at End of Period

Contract liabilities

$

2,746

$

15,389

$

(14,639)

$

3,496

Nine Months Ended September 30, 2020

Balance at Beginning of Period

Additions

Deductions

Balance at End of Period

Contract liabilities

$

2,187

$

12,006

$

(9,997)

$

4,196

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 September 30, 2021 or 2020. Contract liabilities include payments received in advance of performance under the contract, variable freight allowances which are refunded to the customer, and rebates paid to distributors under our municipal rebate program, and are realized with the associated revenue recognized under the contract.

The Company recognized revenue of $601 and $773 during the three months ended September 30, 2021 and 2020, respectively, which was included in contract liabilities at the beginning of each period. The Company recognized revenue of $2,746 and $2,187 during the nine months ended September 30, 2021 and 2020, respectively, which was included in contract liabilities at the beginning of each period.

3.         Credit Losses

Effective January 1, 2020, the Company adopted new accounting guidance that significantly changed the impairment model for estimating credit losses on financial assets to a current expected credit losses (“CECL”) model that requires entities to estimate the lifetime expected credit losses on such assets, leading to earlier recognition of such losses. Effective January 1, 2020, the adoption of CECL accounting, through a modified-retrospective approach, caused an increase to the allowance for credit losses of approximately $400 and $350 for the Work Truck Attachments and Work Truck Solutions segments, respectively.

The majority of the Company’s accounts receivable are due from distributors of truck equipment and dealers of completed upfit trucks. Credit is extended based on an evaluation of a customer’s financial condition. A

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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 September 30, 2021, the Company had an allowance for credit losses on its trade accounts receivable of $1,783 and $1,674 at its Work Truck Attachments and Work Truck Solutions segments, respectively. As of December 31, 2020, the Company had an allowance for credit losses on its trade accounts receivable of $1,480 and $1,449 at its Work Truck Attachments and Work Truck Solutions segments, respectively.

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 nine months ended September 30, 2021 and 2020:

Balance at

Additions

Changes to

Balance at

December 31,

charged to

Writeoffs

reserve, net

September 30,

2020

earnings

2021

Nine Months Ended September 30, 2021

Work Truck Attachments

$

1,480

$

300

$

-

$

3

$

1,783

Work Truck Solutions

1,449

219

(10)

16

1,674

Total

$

2,929

$

519

$

(10)

$

19

$

3,457

Balance at