1.Basis of presentation

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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 2019 Form 10-K (Commission File No. 001-34728) filed with the Securities and Exchange Commission on February 25, 2020.

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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: 

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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.

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See Note 16 to the Unaudited Condensed Consolidated Financial Statements for financial information regarding these segments.

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Interim Condensed Consolidated Financial Information

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The accompanying condensed consolidated balance sheet as of March 31, 2020, the condensed consolidated statements of operations and comprehensive loss and the condensed consolidated statements of shareholders’ equity for the three months ended March 31, 2020 and 2019, and the condensed cash flows for the three months ended March 31, 2020 and 2019 have been prepared by the Company and have not been audited.

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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 crisis, including the market volatility and other economic implications associated with the crisis and the economic and regulatory measures enacted to contain its spread, the Company’s results of operations have been impacted in the three months ended March 31, 2020, and may be significantly impacted in future quarters. In addition, the Company’s working capital and liquidity needs may become more unpredictable as a result of changes in order patterns among customers due to the crisis.  Based on the COVID-19 crisis, the results of operations of the Company for any quarter during the crisis 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.

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The Company preventatively and voluntarily closed its facilities on March 18, 2020.  Since that time, the Company has started to slowly ramp up production at various facilities as appropriate. The Company has taken all of the necessary safety steps and precautions for employees who have returned to work. As of the date of this filing, the Company is not yet up to full production levels. The Company will continue to monitor the situation and provide updates as appropriate.

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During the three months ended March 31, 2020, the Company benefited from credits related to the passage of the CARES Act on March 27, 2020 in response to the COVID-19 crisis. Under the CARES Act, the Company qualified for an Employee Retention Credit for wages paid to employees who were not working due to a plant shutdown related to the COVID-19 crisis. As a result of the CARES Act, the Company recorded a total benefit of $1,152 to Cost of sales and Selling, general and administrative expense on the Consolidated Condensed Consolidated Statements of Operations and Comprehensive Loss.

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Recently Adopted Accounting Pronouncements

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In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses,” which modifies the measurement of expected credit losses for financial instruments held at the reporting date. The standard is effective for annual periods beginning after December 15, 2019. The Company adopted this standard in the first quarter of fiscal 2020. Upon adoption, the Company recognized the cumulative effect of adopting this guidance as an adjustment to the opening balance of retained earnings of $557, net of tax. The Company has identified and implemented changes to processes and controls to meet the standard’s updated reporting and disclosure requirements. See Note 3 for additional information.

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