Douglas Dynamics, Inc. (NYSE: PLOW), North America’s premier
manufacturer and upfitter of work truck attachments and
equipment, today announced preliminary results for the quarter and
full year ended December 31, 2023.
Preliminary Consolidated Fourth Quarter
and Full Year 2023 Results
$ in millions(except EPS) |
Preliminary Q4 2023 |
|
Q4 2022 |
Preliminary Full Year 2023 |
Full Year2022 |
Net Sales |
$134 |
|
$159.8 |
$568 |
$616.1 |
Net Income |
$7 |
|
$11.5 |
$24 |
$38.6 |
Diluted EPS |
$0.29 |
|
$0.49 |
$0.98 |
$1.63 |
|
|
|
|
|
|
Adjusted EBITDA |
$15 |
|
$22.9 |
$68 |
$86.8 |
Adjusted Net Income |
$4 |
|
$12.3 |
$24 |
$43.5 |
Adjusted Diluted EPS |
$0.19 |
|
$0.52 |
$1.01 |
$1.84 |
|
Work Truck Attachments
The Attachments segment continues to navigate
the highly unusual weather trends which began in the fourth quarter
of 2022 and continued through the fourth quarter of 2023. Following
record low snowfall on the east coast during the 2022-23 snow
season, demand was already negatively impacted entering the fourth
quarter 2023 equipment retail season. The situation was compounded
by fourth quarter 2023 snowfall totals that were nearly 70% below
the ten-year average, resulting in the lowest fourth quarter order
activity on record, which was more than 60% below the ten-year
average. For 2023, initial results indicate Attachments Net Sales
will be more than 20% lower than the previous year, with adjusted
EBITDA approximately one-third lower than 2022 results.
“The lack of snowfall was the reason our 2023
results came in well below our expectations,” explained Bob
McCormick, President and CEO. “Douglas has been in the weather
business for over 75 years, and we’ve seen our share of low
snowfall environments, but the past 15 months have been one for the
record books. Until earlier this month, there was a record
approximate 700-day gap between measurable snowfalls in important
east coast markets such as New York, Philadelphia, Baltimore, and
Washington D.C.”
McCormick continued, “More than two-thirds of a
season’s snowfall typically occurs in the first quarter and I’m
glad to say snowfall in the first quarter of 2024 is off to a
positive start. We’ve seen a succession of storms across the
snowbelt in January, including in core east coast markets.”
“Due to the unprecedented nature of the weather
patterns we’ve experienced, the equipment replacement cycle has
lengthened, likely taking us more than one snow season to return to
an average demand environment. Therefore, we made the prudent
decision to align our cost structure and effectively manage through
this highly unusual period.”
Work Truck Solutions
The Solutions segment completed a strong finish
to 2023, producing double digit EBITDA margins in the fourth
quarter of 2023. On a full year basis, initial results indicate Net
Sales growth above 15% and adjusted EBITDA growth of approximately
100% when compared to 2022 results, which is a testament to the
progress made on margin improvement and baseline profit
initiatives.
“I’m pleased to say that Solutions delivered
year over year margin improvement each quarter this year, as
planned. We enter 2024 with optimism based on our strong fourth
quarter performance, ongoing positive demand and continued elevated
backlog,” noted McCormick.
2024 Cost Savings Program
The recently implemented 2024 Cost Savings
Program, which is primarily in the form of salaried headcount
reductions, impacted both the Work Truck Attachments segment and
corporate functions. The structural changes are anticipated to
yield annual pre-tax savings of $8 million to $10
million, with approximately 75% of the anticipated annualized
savings expected to be realized in 2024. The implementation of
these initiatives is expected to lead to approximately $2 million
in pre-tax restructuring charges related to workforce reduction
costs and other related expenses. We expect to incur these charges
primarily in the first quarter of 2024, and Adjusted EBITDA will be
adjusted for any items affecting comparability.
McCormick explained, “While our business model
is designed to adapt quickly to temporary weather driven
challenges, the historic low snowfall trends seen in the past few
years has led us to look beyond our typical cost cutting measures.
While we expect to unlock significant savings from the initiatives,
we remain equally confident in protecting and growing our
competitive advantages, which leaves us well positioned to drive
growth over the medium- to long-term.”
Initial 2024 Outlook
Sarah Lauber, Executive Vice President and CFO
stated, “Our initial outlook for 2024 indicates the midpoint of our
adjusted earnings per share guidance will be seventy to eighty
percent higher than our 2023 results. The projected improvement
includes continued baseline profit improvements in all of our
businesses, our recently implemented 2024 Cost Savings Program, and
projected higher volumes in Attachments.”
“As a direct result of the extremely poor fourth
quarter 2023 snowfall following the well below average 2022-23 snow
season, we are now seeing a lengthened equipment replacement cycle.
Under this scenario, we expect approximately half of the weather
driven volume decline experienced this year will be recovered in
2024.”
Lauber concluded, “While weather hasn’t been in
our favor recently, 2024 is off to a better start than last year.
In Attachments, we have made the tough decisions to align our fixed
cost structure to more recent weather driven demand. Solutions
exited 2023 with higher margins, strong demand and continued
elevated backlog, which provides momentum as we enter the new year.
Finally, it is worth reiterating that the dividend has been, and
will remain, our top capital allocation priority.”
A more detailed 2024 financial outlook will be
provided in conjunction with the complete fourth quarter and full
year 2023 results, which will be issued on Monday, February 26,
2024.
With respect to the Company’s preliminary 2024
guidance, the Company is not able to provide a reconciliation of
the non-GAAP financial measures to GAAP because it does not provide
specific guidance for the various extraordinary, nonrecurring, or
unusual charges and other certain items. These items have not yet
occurred, are out of the Company’s control and/or cannot be
reasonably predicted. As a result, reconciliation of the non-GAAP
guidance measures to GAAP is not available without unreasonable
effort and the Company is unable to address the probable
significance of the unavailable information.
Amended Credit Facility
On January 29, 2024, the Company amended its
credit facility to provide greater financial flexibility by
increasing the leverage ratio covenant from 3.5X to 4.25X at
December 31, 2023 and 4.0X at March 31, 2024 and June 30, 2024,
returning back to 3.5X at September 30, 2024. The Company’s
preliminary leverage ratio at December 31, 2023 was slightly below
3.5X.
Fourth Quarter and Full Year 2023
Earnings Release and Conference Call Information
The Company plans to issue a complete fourth
quarter and full year 2023 earnings release after market close on
Monday, February 26, 2024. A conference call to discuss the results
will follow on Tuesday, February 27, 2024, at 10:00 a.m. Eastern
Time (9:00 a.m. Central Time). The call will also be available via
the Investor Relations section of the Company’s website at
www.douglasdynamics.com. For those who cannot listen to the live
broadcast, replays will be available for one week following the
call.
The fiscal fourth quarter 2023 and full year
2023 selected financial results and disclosures in this press
release are preliminary and reflect management's current views.
These results are subject to change.
About Douglas Dynamics
Home to the most trusted brands in the industry,
Douglas Dynamics is North America’s premier manufacturer and
up-fitter of commercial work truck attachments and equipment. For
more than 75 years, the Company has been innovating products that
not only enable people to perform their jobs more efficiently and
effectively, but also enable businesses to increase profitability.
Through its proprietary Douglas Dynamics Management System (DDMS),
the Company is committed to continuous improvement aimed at
consistently producing the highest quality products, at
industry-leading levels of service and delivery that ultimately
drive shareholder value. The Douglas Dynamics portfolio of products
and services is separated into two segments: First, the Work Truck
Attachments segment, which includes commercial snow and ice control
equipment sold under the FISHER®, SNOWEX® and WESTERN® brands.
Second, the Work Truck Solutions segment, which includes the up-fit
of market leading attachments and storage solutions under the
HENDERSON® brand, and the DEJANA® brand and its related
sub-brands.
Use of Non-GAAP Financial
Measures
This press release contains financial
information calculated other than in accordance
with U.S. Generally Accepted Accounting Principles
(“GAAP”). The non-GAAP measures used in this press release
are Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per
Share, The Company believes that these non-GAAP measures are useful
to investors and other external users of its consolidated financial
statements in evaluating the Company’s operating performance as
compared to that of other companies. Reconciliations of these
non-GAAP measures to the nearest comparable GAAP measures can be
found at the end of this press release.
Adjusted EBITDA represents net income before
interest, taxes, depreciation, and amortization, as further
adjusted for certain charges consisting of unrelated legal and
consulting fees, stock-based compensation, severance, restructuring
charges, and incremental costs incurred in 2022 related to the
COVID-19 pandemic. Such COVID-19 related costs include increased
expenses directly related to the pandemic, and do not include
either production related overhead inefficiencies or lost or
deferred sales. We believe these costs are out of the ordinary,
unrelated to our business and not representative of our results.
The Company uses Adjusted EBITDA in evaluating the Company’s
operating performance because it provides the Company and its
investors with additional tools to compare its operating
performance on a consistent basis by removing the impact of certain
items that management believes do not directly reflect the
Company’s core operations. The Company’s management also uses
Adjusted EBITDA for planning purposes, including the preparation of
its annual operating budget and financial projections, and to
evaluate the Company’s ability to make certain payments, including
dividends, in compliance with its senior credit facilities, which
is determined based on a calculation of “Consolidated Adjusted
EBITDA” that is substantially similar to Adjusted EBITDA.
Adjusted Net Income and Adjusted Earnings Per
Share (calculated on a diluted basis) represents net income and
earnings per share (as defined by GAAP), excluding the impact of
stock based compensation, severance, restructuring charges, certain
charges related to unrelated legal fees and consulting fees,
incremental costs incurred in 2022 related to the COVID-19
pandemic, and adjustments on derivatives not classified as hedges,
net of their income tax impact. Such COVID-19 related costs include
increased expenses directly related to the pandemic, and do not
include either production related overhead inefficiencies or lost
or deferred sales. We believe these costs are out of the ordinary,
unrelated to our business and not representative of our results.
Adjustments on derivatives not classified as hedges are non-cash
and are related to overall financial market conditions; therefore,
management believes such costs are unrelated to our business and
are not representative of our results. Management believes
that Adjusted Net Income and Adjusted Earnings Per Share are useful
in assessing the Company’s financial performance by eliminating
expenses and income that are not reflective of the underlying
business performance.
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, product demand, the payment of dividends, 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 and
the timing of such snowfall, expected annualized savings to be
achieved by the 2024 Cost Savings Program, our ability to manage
general economic, business and geopolitical conditions, including
the impacts of natural disasters, labor strikes, global political
instability, pandemics and outbreaks of contagious diseases and
other adverse public health developments, such as the COVID-19
pandemic, our inability to maintain good relationships with our
distributors, our inability to maintain good relationships with the
original equipment manufacturers with whom we currently do
significant business, lack of available or favorable financing
options for our end-users, distributors or customers, increases in
the price of steel or other materials, including as a result of
tariffs, necessary for the production of our products that cannot
be passed on to our distributors, increases in the price of fuel or
freight, a significant decline in economic conditions, the
inability of our suppliers and original equipment manufacturer
partners to meet our volume or quality requirements, inaccuracies
in our estimates of future demand for our products, our inability
to protect or continue to build our intellectual property
portfolio, the effects of laws and regulations and their
interpretations on our business and financial condition, our
inability to develop new products or improve upon existing products
in response to end-user needs, losses due to lawsuits arising out
of personal injuries associated with our products, factors that
could impact the future declaration and payment of dividends, our
inability to compete effectively against competition, as well as
those discussed in the section entitled “Risk Factors” in our
annual report on Form 10-K for the year ended December 31,
2022. 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.
Douglas
Dynamics, Inc. |
|
Net Income
to Adjusted EBITDA reconciliation (unaudited) |
|
(In
thousands) |
|
|
|
Three month period ended December 31, |
|
Twelve month period ended December 31, |
|
|
|
|
2023 |
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
7,077 |
|
|
$ |
11,512 |
|
$ |
23,723 |
|
$ |
38,609 |
|
|
|
|
|
|
|
|
|
|
|
Interest expense - net |
|
|
4,468 |
|
|
|
3,401 |
|
|
15,675 |
|
|
11,253 |
|
Income tax expense |
|
|
1,118 |
|
|
|
1,509 |
|
|
5,511 |
|
|
8,752 |
|
Depreciation expense |
|
|
2,852 |
|
|
|
2,682 |
|
|
11,142 |
|
|
10,418 |
|
Intangibles amortization |
|
|
2,630 |
|
|
|
2,630 |
|
|
10,520 |
|
|
10,520 |
|
EBITDA |
|
|
18,145 |
|
|
|
21,734 |
|
|
66,571 |
|
|
79,552 |
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
(3,283 |
) |
|
|
1,167 |
|
|
953 |
|
|
6,730 |
|
Other charges (1) |
|
|
60 |
|
|
|
10 |
|
|
598 |
|
|
498 |
|
Adjusted EBITDA |
|
$ |
14,922 |
|
|
$ |
22,911 |
|
$ |
68,122 |
|
$ |
86,780 |
|
|
|
|
|
|
|
|
|
|
|
(1) Reflects unrelated
legal, severance, restructuring, and consulting fees, and, in 2022,
incremental costs incurred related to the COVID-19 pandemic for the
periods presented. |
|
|
|
|
|
|
|
|
|
|
|
Douglas
Dynamics, Inc. |
Reconciliation of Net Income to Adjusted Net Income
(unaudited) |
(In
thousands, except share and per share data) |
|
Three month period ended December 31, |
|
Twelve month period ended December 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
Net
income |
$ |
7,077 |
|
|
$ |
11,512 |
|
|
$ |
23,723 |
|
|
$ |
38,609 |
|
Adjustments: |
|
|
|
|
|
|
|
Stock based compensation |
|
(3,283 |
) |
|
|
1,167 |
|
|
|
953 |
|
|
|
6,730 |
|
Adjustments on derivative not classified as hedge (1) |
|
(172 |
) |
|
|
(172 |
) |
|
|
(688 |
) |
|
|
(688 |
) |
Other charges (2) |
|
60 |
|
|
|
10 |
|
|
|
598 |
|
|
|
498 |
|
Tax effect
on adjustments |
|
849 |
|
|
|
(251 |
) |
|
|
(216 |
) |
|
|
(1,635 |
) |
Adjusted net income |
$ |
4,531 |
|
|
$ |
12,266 |
|
|
$ |
24,370 |
|
|
$ |
43,514 |
|
|
|
|
|
|
|
|
|
Weighted
average basic common shares outstanding |
|
22,983,965 |
|
|
|
22,886,793 |
|
|
|
22,962,591 |
|
|
|
22,915,543 |
|
Weighted
average common shares outstanding assuming dilution |
|
22,983,965 |
|
|
|
22,886,793 |
|
|
|
22,962,591 |
|
|
|
22,916,824 |
|
|
|
|
|
|
|
|
|
Adjusted
earnings per common share - dilutive |
$ |
0.19 |
|
|
$ |
0.52 |
|
|
$ |
1.01 |
|
|
$ |
1.84 |
|
|
|
|
|
|
|
|
|
GAAP
diluted earnings (loss) per share |
$ |
0.29 |
|
|
$ |
0.49 |
|
|
$ |
0.98 |
|
|
$ |
1.63 |
|
Adjustments
net of income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
(0.09 |
) |
|
|
0.04 |
|
|
|
0.03 |
|
|
|
0.21 |
|
Adjustments on derivative not classified as hedge (1) |
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
Other charges (2) |
|
- |
|
|
|
- |
|
|
|
0.02 |
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
Adjusted diluted earnings per share |
$ |
0.19 |
|
|
$ |
0.52 |
|
|
$ |
1.01 |
|
|
$ |
1.84 |
|
|
|
|
|
|
|
|
|
(1) Reflects non-cash
mark-to-market and amortization adjustments on an interest rate
swap not classified as a hedge for the periods presented. |
(2) Reflects unrelated
legal, severance, restructuring, and consulting fees, and, in 2022,
incremental costs incurred related to the COVID-19 pandemic for the
periods presented. |
|
|
|
|
|
|
|
|
CONTACT Nathan ElwellVice
President of Investor RelationsDouglas Dynamics,
Inc.847-530-0249investorrelations@douglasdynamics.com
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