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Douglas Dynamics Announces Second Quarter 2010 Results

Management believes that the presentation of Adjusted net income and Adjusted earnings per diluted share provides useful information to investors by facilitating comparisons to Douglas' historical performance.

Consistent with Regulation G under the U.S. federal securities laws, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measure, and the reconciliations are located under the headings "Net Income to Adjusted Net Income Reconciliation" (appearing in the body of this press release) and "Net Income to Adjusted EBITDA Reconciliation" (appearing after the Consolidated Statements of Cash Flows, included in this press release).

Forward Looking Statements

This press release contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements include information relating to future events, 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, weather conditions, particularly lack of or reduced levels of snowfall, a significant decline in economic conditions, our inability to maintain good relationships with our distributors,  lack of available or favorable financing options for our end-users or distributors, increases in the price of steel or other materials necessary for the production of our products that cannot be passed on to our distributors, the inability of our suppliers to meet our volume or quality requirements, our inability to compete effectively against competition, and other factors identified in our Exchange Act filings.  You should not place undue reliance on these forward-looking statements. In addition, the forward-looking statements in this release speak only as of the date hereof and we undertake no obligation, except as required by law, to update or release any revisions to any forward-looking statement, even if new information becomes available in the future.

Financial Statements

Douglas Dynamics, Inc.
Consolidated Balance Sheets
( In thousands)
 
  June 30, 2010 (unaudited) December 31, 2009 (audited)
     
Assets    
Current assets:    
Cash and cash equivalents $ 9,981 $ 69,073
Accounts receivable, net  58,645  32,172
Inventories  25,624  26,697
Deferred income taxes  3,729  3,729
Prepaid income taxes  7,627  --
Prepaid management fees-related party  --  417
Prepaid and other current assets  964  1,446
Total current assets  106,570  133,534
     
Property, plant, and equipment, net  24,951  26,661
Goodwill  107,222  107,222
Other intangible assets, net  129,870  132,950
Deferred financing costs, net  1,214  3,311
Other long-term assets  942  941
Total assets $ 370,769 $ 404,619
     
Liabilities, redeemable stock and stockholders' equity    
Current liabilities:    
Accounts payable $ 6,437 $ 5,170
Accrued expenses and other current liabilities  11,794  12,598
Accrued interest  24  5,367
Income taxes payable  --  1,202
Short-term borrowings  20,000  --
Current portion of long-term debt  1,250  850
Total current liabilities  39,504  25,187
     
Retiree health benefit obligation  7,661  7,848
Pension obligation  8,775  8,957
Deferred income taxes  21,209  18,913
Deferred compensation  1,607  1,482
Long-term debt, less current portion  120,888  231,813
Other long-term liabilities   2,110  2,195
     
Redeemable preferred stock  --  2
Total stockholders' equity  169,014  108,222
Total liabilities, redeemable stock and stockholders' equity $ 370,769 $ 404,619
 
 
Douglas Dynamics, Inc.
Consolidated Statements of Operations
(In thousands, except share data)
         
  Three Month Period Ended Six Month Period Ended
     
  June 30, 2010 June 30, 2009 June 30, 2010 June 30, 2009
     
  (unaudited) (unaudited)
         
         
Net sales $ 66,243 $ 59,637 $ 80,890 $ 74,810
Cost of sales  41,182  40,122  53,849  52,282
Gross profit  25,061  19,515  27,041  22,528
         
Selling, general, and administrative expense  7,900  4,995  13,708  10,527
Intangibles amortization  1,540  1,540  3,080  3,080
Management fees-related party  5,966  330  6,313  655
         
Income from operations  9,655  12,650  3,940  8,266
         
Interest expense, net (2,989) (3,942) (6,704) (7,954)
Loss on extinguishment of debt (7,967)   (7,967)  
Other income (expense), net (1) (24)  5 (83)
Income (loss) before taxes (1,302)  8,684 (10,726)  229
         
Income tax expense (benefit) (1,377)  3,019 (5,082) (974)
         
Net income (loss) $ 75 $ 5,665 $ (5,644) $ 1,203
         
Weighted average number of common shares outstanding:        
Basic  18,236,818  14,421,736  16,339,816  14,425,674
Diluted  18,520,117  14,747,041  16,339,816  14,750,979
         
Earnings (loss) per share:        
Basic  $ 0.00  $ 0.39  $ (0.35)  $ 0.08
Diluted  $ 0.00  $ 0.38  $ (0.35)  $ 0.08
 
 
Douglas Dynamics, Inc.
Consolidated Statements of Cash Flows
(In thousands)
     
  Six Month Period Ended
   
  June 30, 2010 June 30, 2009
   
  (unaudited)
     
Operating activities    
Net loss $ (5,643) $ 1,203
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:    
Depreciation and amortization  6,644  5,666
Amortization of deferred financing costs  611  568
Loss on Extinguishment of Debt 7,967  --
Stock-based compensation  1,821  732
Provision for losses on accounts receivable  316  98
Deferred income taxes  2,216  1,003
Changes in operating assets and liabilities:    
Accounts receivable (26,789) (25,291)
Inventories  1,073 (1,208)
Prepaid and other assets and prepaid income taxes (6,729) (1,794)
Accounts payable  1,267 (236)
Accrued expenses and other current liabilities (7,350) (2,540)
Deferred compensation  125  124
Benefit obligations and other long-term liabilities (237)  284
Net cash used in operating activities (24,708) (21,391)
     
Investing activities    
Capital expenditures (1,854) (4,006)
Net cash used in investing activities (1,854) (4,006)
     
Financing activities    
Stock repurchases (2) (1,010)
Call premium on senior notes (3,876)  --
Change in shareholders notes receivable   540  --
Payments of deferred financing costs (2,605)  --
Revolver borrowings  20,000  5,000
Proceeds of IPO, net  63,938  --
Borrowings on long-term debt  40,000  --
Repayment of long-term debt (150,525) (426)
Net cash provided by (used in) financing activities (32,530)  3,565
Change in cash and cash equivalents (59,092) (21,832)
Cash and cash equivalents at beginning of period  69,073  53,552
Cash and cash equivalents at end of period $ 9,981 $ 31,720
 
 
Douglas Dynamics, Inc.
Net Income to Adjusted EBITDA reconciliation (unaudited)
     
  Three month period ended June 30,
  2010 2009
     
Net Income  $ 75  $ 5,665
     
Interest Expense - Net  3,102  3,942
Income Taxes  (1,377)  3,019
Depreciation Expense  1,546  1,293
Amortization  1,540  1,540
EBITDA  4,886  15,459
     
Management Fees  5,966  330
Stock Based Compensation (1)  1,748  -- 
Loss on Extinguishment of Debt  7,855  -- 
Liquidity Bonus Payment  1,003  -- 
Other non-recurring charges (2)  199  93
Adjusted EBITDA  $ 21,657  $ 15,882
     
(1) Reflects the stock-based compensation expense associated with the repurchase of stock options from certain of our executives.
(2) Reflects severance and one-time, non-recurring expenses for costs related to the closure of our Johnson City facility of $389 and $25 for the three months ended June 30, 2010 and 2009, respectively, $477 and $68 of unrelated legal fees for the three months ended June 30, 2010 and 2009, respectively, and $667 and $0 gain on other post employment benefit plan curtailment related to the Johnson City plant closure for the three months ended June 30, 2010 and 2009, respectively. 
CONTACT:  Douglas Dynamics, Inc.
          Bob McCormick
          414-362-3868
          investorrelations@douglasdynamics.com

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