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Douglas Dynamics Announces Third Quarter 2010 Results

We use, and we believe our investors benefit from the presentation of Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with additional tools to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations . In addition, we believe that Adjusted EBITDA is useful to investors and other external users of our consolidated financial statements in evaluating our operating performance as compared to that of other companies, because it allows them to measure a company's operating performance without regard to items such as interest expense, taxes, depreciation and depletion, and amortization and accretion, which can vary substantially from company to company depending upon accounting methods and book value of assets and liabilities, capital structure and the method by which assets were acquired. Our management also uses Adjusted EBITDA for planning purposes, including the preparation of our annual operating budget and financial projections. Management also uses Adjusted EBITDA to evaluate our ability to make certain payments, including dividends, in compliance with our senior credit facilities, which is determined based on a calculation of "Consolidated Adjusted EBITDA" that is substantially similar to Adjusted EBITDA. 

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 this reconciliation is located under the headings "Reconciliation of Net Income to Adjusted Net Income" and "Net Income to Adjusted EBITDA Reconciliation" following the Consolidated Statements of Cash Flows, included in this press release.

Forward Looking Statements

This press release contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation 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 protect or continue to build our intellectual property portfolio, our inability to develop new products or improve on existing products in response to end-user needs, losses due to lawsuits arising out of personal injury associated with our products, and our inability to compete effectively against competition, as well as those discussed in the section entitled "Risk Factors," in our quarterly report on Form 10-Q for the quarter ended June 30, 2010.  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)
  September 30, December 31,
  2010 2009
  (unaudited) (audited)
Current assets:    
Cash and cash equivalents $ 8,721 $ 69,073
Accounts receivable, net  82,397  32,172
Inventories  24,475  26,697
Deferred income taxes  3,729  3,729
Prepaid income taxes  6,596  --
Prepaid management fees-related party  --  417
Prepaid and other current assets  1,336  1,446
Total current assets  127,254  133,534
Property, plant, and equipment, net  22,183  26,661
Assets Held for Sale  1,854  --
Goodwill  107,222  107,222
Other intangible assets, net  128,328  132,950
Deferred financing costs, net  1,084  3,311
Other long-term assets  941  941
Total assets $ 388,866 $ 404,619
Liabilities, redeemable stock and stockholders' equity    
Current liabilities:    
Accounts payable $ 6,545 $ 5,170
Accrued expenses and other current liabilities  12,097  12,598
Accrued interest  30  5,367
Income taxes payable  --  1,202
Short-term borrowings  37,000  --
Current portion of long-term debt  1,250  850
Total current liabilities  56,922  25,187
Retiree health benefit obligation  7,801  7,848
Pension obligation  8,926  8,957
Deferred income taxes  22,367  18,913
Deferred compensation  1,669  1,482
Long-term debt, less current portion  120,575  231,813
Other long-term liabilities   2,110  2,195
Redeemable preferred stock  --  2
Total stockholders' equity  168,496  108,224
Total liabilities, redeemable stock and stockholders' equity $ 388,866 $ 404,619
Douglas Dynamics, Inc.
Consolidated Statements of Operations
(In thousands, except share data)
  Three Month Period Ended Nine Month Period Ended
  September 30, 2010 September 30, 2009 September 30, 2010 September 30, 2009
  (unaudited) (unaudited)
Net sales $ 47,448 $ 50,396 $ 128,338 $ 125,206
Cost of sales  32,221  35,241  86,070  87,523
Gross profit  15,227  15,155  42,268  37,683
Selling, general, and administrative expense  6,819  4,916  20,527  15,443
Intangibles amortization  1,541  1,541  4,621  4,621
Management fees-related party  57  411  6,370  1,066
Income from operations  6,810  8,287  10,750  16,553
Interest expense, net (2,334) (3,802) (9,038) (11,756)
Loss on extinguishment of debt  --  -- (7,967)  --
Other expense, net (12) (22) (7) (105)
Income (loss) before taxes  4,464  4,463 (6,262)  4,692
Income tax expense (benefit)  2,279  1,725 (2,803)  751
Net income (loss) $ 2,185 $ 2,738 $ (3,459) $ 3,941
Weighted average number of common shares outstanding:        
Basic  21,158,573  14,421,736  17,963,720  14,424,347
Diluted  21,546,767  14,747,041  17,963,720  14,749,652
Earnings (loss) per share:        
Basic  $ 0.10  $ 0.19  $ (0.19)  $ 0.27
Diluted  $ 0.10  $ 0.19  $ (0.19)  $ 0.27
Cash dividends per share  $ 0.18  $ --   $ 0.18  $ -- 
Douglas Dynamics, Inc.
Consolidated Statements of Cash Flows
(In thousands)
  Nine Month Period Ended
  September 30, 2010 September 30, 2009
Operating activities    
Net income (loss) $ (3,459) $ 3,941
 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:  
Depreciation and amortization  9,448  8,498
Amortization of deferred financing costs  741  853
Loss on extinguishment of debt 7,967  --
Stock-based compensation  3,158  738
Provision for losses on accounts receivable  281  116
Deferred income taxes  3,374  133
Changes in operating assets and liabilities:    
Accounts receivable (50,446) (53,901)
Inventories  2,222  1,949
Prepaid and other assets and prepaid income taxes (6,069) (245)
Accounts payable  1,375 (43)
Accrued expenses and other current liabilities (7,268) (2,742)
Deferred compensation  187  187
Benefit obligations and other long-term liabilities  54  633
Net cash used in operating activities (38,435) (39,883)
Investing activities    
Capital expenditures (2,414) (4,821)
Proceeds from sale of equipment  212  --
Net cash used in investing activities (2,202) (4,821)
Financing activities    
Stock repurchases (2) (1,000)
Dividends paid (3,867)  --
Payment of call premium and post payoff interest on senior notes redemption (3,876)  --
Collection of stockholders' notes receivable   535  --
Payments of financing costs (2,605)  --
Revolver borrowings  37,000  10,000
Proceeds of IPO, net  63,938  --
Borrowings on long-term debt  40,000  --
Repayment of long-term debt (150,838) (638)
Net cash provided by (used in) financing activities (19,715)  8,362
Change in cash and cash equivalents (60,352) (36,342)
Cash and cash equivalents at beginning of period  69,073  53,552
Cash and cash equivalents at end of period $ 8,721 $ 17,210
The accompanying notes are an integral part of these statements.    
Douglas Dynamics, Inc.
Reconciliation of Net Income to Adjusted Net Income
$ Millions
  Three Months Ended Nine Months Ended
  September 30, 2010 September 30, 2010
Net Income(Loss) - (GAAP) $2.2 ($3.5)
Addback non-recurring expenses, net of tax at 43.0%, incurred at the time of the IPO:    
 - Buyout of the Management Services Agreement $0.0 $3.3
 - Loss on extinguishment of debt $0.0 $4.6
 - Liquidity bonus payment $0.0 $0.6
- Non-recurring Stock based compensation expense $0.7 $1.7
Adjusted Net Income - (non-GAAP) $2.9 $6.7
Adjusted EPS - Basic $0.14 $0.37
Adjusted EPS - Diluted $0.13 $0.37
Douglas Dynamics, Inc.
Net Income to Adjusted EBITDA reconciliation (unaudited)
  Three month period ended September 30, Nine months ended September 30,
  2010 2009 2010 2009
Net Income (Loss)  $ 2,185  $ 2,738  $ (3,459)  $ 3,941
Interest Expense - Net  2,334  3,802  9,038  11,756
Income Taxes  2,279  1,725  (2,803)  751
Depreciation Expense  1,262  1,291  4,827  3,877
Amortization  1,541  1,541  4,621  4,621
EBITDA  9,601  11,097  12,224  24,946
Management Fees  57  411  6,370  1,066
Stock Based Compensation   1,337  6  3,158  738
Loss on Extinguishment of Debt  --   --   7,967  -- 
Liquidity Bonus Payment  --   --   1,003  -- 
Other non-recurring charges (1)  565  1,138  1,383  1,286
Adjusted EBITDA  $ 11,560  $ 12,652  $ 32,105  $ 28,036
(1) Reflects severance and one-time, non-recurring expenses for costs related to the closure of our Johnson City facility of ($1) and $872 for the three months and $828 and $897 for the nine months ended September 30, 2010 and 2009, respectively, $566 and $266 of unrelated legal fees for the three months and $1,222 and $389 for the  nine months ended September 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 nine months ended September 30, 2010 and 2009, respectively.
CONTACT: Douglas Dynamics, Inc.
         Bob McCormick

Douglas Dynamics, Inc. Logo

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