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(NYSE: PLOW)(NYSE: PLOW)
R.W. BAIRD INDUSTRIAL CONFERENCER.W. BAIRD INDUSTRIAL CONFERENCEINVESTOR PRESENTATIONINVESTOR PRESENTATION
November 9, 2010November 9, 2010
11
Forward Looking StatementsForward Looking StatementsSomeSome ofof thethe informationinformation presentedpresented hereinherein containscontains forwardforward--lookinglooking statementsstatements thatthat involveinvolve aa numbernumberofof risksrisks andand uncertaintiesuncertainties.. ForwardForward--lookinglooking statementsstatements areare identifiedidentified byby termsterms andand phrasesphrases suchsuch asas“anticipate,”“anticipate,” “believe,”“believe,” “intend,”“intend,” “estimate,”“estimate,” “expect,”“expect,” “continue,”“continue,” “should,”“should,” “could,”“could,” “may,”“may,” “plan,”“plan,”“project,”“project,” “predict,”“predict,” “will”“will” andand similarsimilar expressionsexpressions andand includeinclude referencesreferences toto assumptionsassumptions andand relaterelate totothethe Company’sCompany’s futurefuture prospects,prospects, developmentsdevelopments andand businessbusiness strategiesstrategies.. FactorsFactors thatthat couldcould causecauseactualactual resultsresults toto differdiffer materiallymaterially fromfrom thosethose expressedexpressed oror impliedimplied hereinherein include,include, butbut areare notnot limitedlimited toto::weatherweather conditions,conditions, particularlyparticularly levelslevels ofof snowfallsnowfall;; economiceconomic conditionsconditions;; ourour relationshipsrelationships withwith ourourdistributorsdistributors;; thethe priceprice oror availabilityavailability ofof steelsteel oror otherother necessarynecessary suppliessupplies;; challengeschallenges toto ourour intellectualintellectualpropertyproperty portfolioportfolio;; shiftingshifting endend--useruser needsneeds;; andand competitivecompetitive pressurespressures..
ActualActual results,results, performanceperformance oror achievementsachievements maymay differdiffer materiallymaterially fromfrom thethe resultsresults expressedexpressed ororimpliedimplied hereinherein andand thethe CompanyCompany doesdoes notnot undertakeundertake toto updateupdate thethe materialsmaterials inin thisthis presentationpresentation totoreflectreflect futurefuture eventsevents oror circumstancescircumstances..
ThisThis informationinformation isis confidential,confidential, andand shouldshould notnot bebe photocopied,photocopied, distributeddistributed oror discloseddisclosed toto anyoneanyone andandyouryour acceptanceacceptance oror receiptreceipt ofof thisthis documentdocument isis deemeddeemed toto bebe anan agreementagreement toto thesethese termsterms..
22
Introduction to Douglas DynamicsIntroduction to Douglas Dynamics
Market leader in snowplowsMarket leader in snowplows
Exceptional consumer Exceptional consumer loyalty and brand equityloyalty and brand equity
Extensive, experienced, and Extensive, experienced, and stable distributor networkstable distributor network
Leading Market PositionLeading Market Position
Mission critical products for Mission critical products for nonnon--discretionary servicesdiscretionary services
Replacement driven Replacement driven business business
Consistent price increasesConsistent price increases
High barriers to entryHigh barriers to entry
Consistent annual snowfall Consistent annual snowfall over multiover multi--year periodsyear periods
Expanding plowExpanding plow--able areaable area
Attractive Industry DynamicsAttractive Industry Dynamics
Built to generate Built to generate substantial profitability in substantial profitability in all snowfall conditionsall snowfall conditions
Compelling free cash flow Compelling free cash flow profileprofile
Flexible, lean enterprise Flexible, lean enterprise platformplatform
Global sourcing Global sourcing capabilitiescapabilities
Strong Financial ProfileStrong Financial Profile
33
Market Leader Market Leader Unparalleled scale, geographic scope and channel penetrationUnparalleled scale, geographic scope and channel penetration
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08
Units
8-Year Rolling Average Douglas Equipment Unit Sales
Estimated Market ShareEstimated Market Share (1)(1)
Douglas Douglas DynamicsDynamics50% 50% -- 60%60%
Other Other Competitors Competitors (3)(3)
40% 40% -- 50%50%
Source: Management estimates. Source: Management estimates. (1) Estimated 2009 market share represents North America only.(1) Estimated 2009 market share represents North America only.(2) Long(2) Long--term growth chart pro forma for Blizzard acquisition in 2002term growth chart pro forma for Blizzard acquisition in 2002--2005.2005.(3) Includes Meyer Products, Northern Star Industries (Boss), Sno(3) Includes Meyer Products, Northern Star Industries (Boss), Sno--Way, Curtis, Buyers and Hiniker, among others.Way, Curtis, Buyers and Hiniker, among others.
Market Leadership Drives Consistent GrowthMarket Leadership Drives Consistent Growth (2)(2)
Leading Brands Leading Brands
44
Rigorously screen prospective distributorsRigorously screen prospective distributors
Actively monitor existing distributors Actively monitor existing distributors
–– Performance Performance
–– Quality of serviceQuality of service
–– Credit profile Credit profile
2000 Current
Most Extensive Distributor Network Most Extensive Distributor Network Industry's largest, most influential and best capitalized distributors Industry's largest, most influential and best capitalized distributors
Distributor Network OptimizationDistributor Network Optimization
>10 Distributors>10 Distributors
55--10 Distributors10 Distributors
<5 Distributors<5 Distributors
0 Distributors0 Distributors
Note: Map excludes distributors in China (1), Finland (2), South Korea (1), Scotland (1), Northern Ireland (1), and AustraliaNote: Map excludes distributors in China (1), Finland (2), South Korea (1), Scotland (1), Northern Ireland (1), and Australia (1(1).).
Diverse Distributor FootprintDiverse Distributor Footprint(Figures represent number of direct distributors)
455455
721721
55
Snow and Ice Control: A Primer Snow and Ice Control: A Primer TypicalTypicalVehicle:Vehicle:
TypicalTypicalPlow:Plow:
ExtremeExtremedutyduty
LightLightdutyduty
TypicalTypicalPlower:Plower:
Contractor / Contractor / ProfessionalProfessional
PersonalPersonal
MunicipalMunicipal
BusinessBusiness
Western MVP PlusWestern MVP Plus
Fisher HomesteaderFisher Homesteader
Ford FFord F--350350
Dodge RamDodge Ram
Fisher MCFisher MC Ford FFord F--550550
Blizzard HDBlizzard HD Ford FFord F--250250
Mission critical products Mission critical products
–– Snowfall inhibits travel and commerceSnowfall inhibits travel and commerce
–– 33--4 month snow seasons create finite 4 month snow seasons create finite window for plowable opportunitieswindow for plowable opportunities
–– Plowers develop brand loyalty in Plowers develop brand loyalty in response to performance over timeresponse to performance over time
–– Professional plowers can potentially Professional plowers can potentially pay for a plow in one stormpay for a plow in one storm
Highly engineered productsHighly engineered products
–– Hydraulics and electrical partsHydraulics and electrical parts
–– Integration with vehicleIntegration with vehicle
–– Requires maximum reliability in Requires maximum reliability in severe work environmentssevere work environments
Defining CharacteristicsDefining Characteristics
66
Installed base of over 500,000 units Installed base of over 500,000 units
Replacement cycle of 7Replacement cycle of 7--8 years for actively 8 years for actively used snowplowsused snowplows
Exceptional consumer loyalty and brand Exceptional consumer loyalty and brand equity equity
Highly visible and recurring revenue Highly visible and recurring revenue stream over replacement cyclestream over replacement cycle
Exceptional Consumer Loyalty and Brand EquityExceptional Consumer Loyalty and Brand EquitySuperior innovation, productivity and reliability drive…Superior innovation, productivity and reliability drive…
(1) Based on survey of commercial snowplow end(1) Based on survey of commercial snowplow end--users. Price is one of many potential factors that survey participants could citeusers. Price is one of many potential factors that survey participants could cite as the primary driver of their purchase decision.as the primary driver of their purchase decision.
…recurring sales…recurring sales…premium pricing and……premium pricing and…
PricePrice<10%<10%
Other Other ~90%~90%
Primary Decision FactorsPrimary Decision Factors (1)(1)
77
Attractive Financial ProfileAttractive Financial ProfileDouglas business model is built to generate strong free cash flowDouglas business model is built to generate strong free cash flow
Highly Profitable Highly Profitable Business ModelBusiness Model
Predictable and Predictable and Manageable Cash CycleManageable Cash Cycle
Strong base business Strong base business marginsmargins
Track record of revenue and Track record of revenue and variable gross profit per variable gross profit per unit growth unit growth
High variable cost structure High variable cost structure maximizes profit in all maximizes profit in all snowfall conditionssnowfall conditions
Preseason order program Preseason order program provides early visibility to provides early visibility to current year performancecurrent year performance
Predictable working capital Predictable working capital requirements requirements
Low leverage and interest Low leverage and interest expense expense
Favorable cash tax Favorable cash tax structure structure
88
Focus on industryFocus on industry--leading shipping leading shipping performance performance
One piece flow replaces batch One piece flow replaces batch manufacturing manufacturing
Continuous improvementContinuous improvement
–– Waste elimination Waste elimination
–– Floor space consolidationFloor space consolidation
Most Operationally Efficient ManufacturerMost Operationally Efficient ManufacturerFlexible, lean enterprise platform is highly responsive to demand changesFlexible, lean enterprise platform is highly responsive to demand changes
(1) Based on 2009 financial results.(1) Based on 2009 financial results.(2) Components of fixed costs include: manufacturing, engineering, insurance, taxes, and depreciation.(2) Components of fixed costs include: manufacturing, engineering, insurance, taxes, and depreciation.(3) Components of variable costs include: materials, labor, and variable overhead.(3) Components of variable costs include: materials, labor, and variable overhead.(4) Based on data from 2005 to 2009.(4) Based on data from 2005 to 2009.
Lean HighlightsLean Highlights
Perfect ship improved from 71% to 98% Perfect ship improved from 71% to 98% (4)(4)
FactoryFactory--wide productivity improved 35% wide productivity improved 35% (4)(4)
Internal scrap rates reduced 19% Internal scrap rates reduced 19% (4)(4)
Plant rationalization (Project 322)Plant rationalization (Project 322)
–– Reduction from 3 to 2 plants Reduction from 3 to 2 plants
VariableVariable (3) (3)
83%83%
Fixed Fixed (2)(2)
17%17%
NonNon--union workforce augmented by union workforce augmented by flexible layer of temporary workersflexible layer of temporary workers
–– 10% to 15% of total workforce10% to 15% of total workforce
Low costs due to vertical integrationLow costs due to vertical integration
Incentivized employee base is rewarded Incentivized employee base is rewarded for performancefor performance
Highly Variable Cost StructureHighly Variable Cost Structure
Fixed vs. Variable COGS Fixed vs. Variable COGS (1)(1)
99
5%
64%
26%
8%
30%
5%
29% 33%
Q1 Q2 Q3 Q4
Orders Shipments
Successfully Managing Seasonality Successfully Managing Seasonality Douglas has evolved to manage the variability in its businessDouglas has evolved to manage the variability in its business
PrePre--Season Order Program Provides Strong Visibility Season Order Program Provides Strong Visibility
Note: Based on averages from 1998Note: Based on averages from 1998--2009.2009.
(% of units)
Predictable Working Capital Needs Predictable Working Capital Needs
Returns to averageReturns to averagelevels bylevels by
NovemberNovember
Peaks in Peaks in September atSeptember at$83 million $83 million (1)(1)
Average Average Working Working Capital:Capital:
$54 million $54 million (1)(1)
Inventory starts building Inventory starts building during Q2 in anticipation of during Q2 in anticipation of
shipping orders in Q3/Q4shipping orders in Q3/Q4
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Illus
trat
ive
Mon
thly
W
orki
ng C
apita
l
(1) Based on average monthly working capital from 2007(1) Based on average monthly working capital from 2007--2009. Excludes accrued interest, income taxes payable, deferred tax asset2009. Excludes accrued interest, income taxes payable, deferred tax assets and prepaid management fees.s and prepaid management fees.
1010
2002 2003 2004 2005 2006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009
Track Record of Improving Base Business Profitability Track Record of Improving Base Business Profitability Continuous improvement in revenue and variable gross profit per unitContinuous improvement in revenue and variable gross profit per unit
(Bars represent average revenue per unit of equipment)(Bars represent average revenue per unit of equipment)
Revenue Per UnitRevenue Per Unit(Bars represent average variable gross profit per unit of equipment)(Bars represent average variable gross profit per unit of equipment)
Variable Gross Profit Per Unit Variable Gross Profit Per Unit (2)(2)
Blizzard acquired in Blizzard acquired in November 2005 November 2005 (3)(3)
(1) Includes steel surcharges.(1) Includes steel surcharges.(2) Excludes fixed overhead.(2) Excludes fixed overhead.(3) The acquisition temporarily reduced variable gross profit per unit because Blizzard had a lower variable gross profit per(3) The acquisition temporarily reduced variable gross profit per unit because Blizzard had a lower variable gross profit per ununit than Western and Fisher.it than Western and Fisher.
1111
$12$14
$16
$11
$29
$14$19
$9
$27
$18
$0
$5
$10
$15
$20
$25
$30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Economic Recovery Provides Upside OpportunityEconomic Recovery Provides Upside OpportunityDeferral of new equipment purchases has created pentDeferral of new equipment purchases has created pent--up demand up demand
(24%)
(10%)(16%)
2%
16%11%
(30%)
19%
(11%)
14%
(26%)
19%
(14%)(7%)
9%
(9%)
13%
33%24%
(14%)
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Snowfall vs. 10-Year Average Snowfall Unit Sales vs. 10-Year Average Unit Sales
Equipment Unit Sales and Snowfall vs. 10Equipment Unit Sales and Snowfall vs. 10--Year Averages Year Averages (1)(1)
Parts and Accessories SalesParts and Accessories Sales($ in millions)
(1) Unit sales data pro forma for Blizzard units. Snowfall season begins on October 1 of the prior year through March 31 of c(1) Unit sales data pro forma for Blizzard units. Snowfall season begins on October 1 of the prior year through March 31 of currurrent year. ent year.
1212
($ in millions, except Equipment Variable Gross Profit Per Unit)($ in millions, except Equipment Variable Gross Profit Per Unit)
2009 Equipment Variable Gross Profit Per Unit2009 Equipment Variable Gross Profit Per Unit
2009 Fixed Overhead2009 Fixed Overhead
Normalized EBITDA Normalized EBITDA
Normalized EBITDA CalculationNormalized EBITDA Calculation
9.59.5
$1,431$1,431
(14.1)(14.1)
~ $52~ $52
53,03553,035
Normalized P&A Variable Gross Profit Normalized P&A Variable Gross Profit
(23.6)(23.6)2009 SG&A Expense 2009 SG&A Expense (1)(1)
Normalized EBITDA = Earnings PowerNormalized EBITDA = Earnings PowerHistorical average volumes at current margins and pro forma cost savingsHistorical average volumes at current margins and pro forma cost savings
Historical Average Unit VolumeHistorical Average Unit Volume
4.04.0Pro Forma 322 Cost SavingsPro Forma 322 Cost Savings (2)(2)
(1) Excludes amortization expense and management fees of approximately $6.2 million and $1.4 million, respectively. Includes (1) Excludes amortization expense and management fees of approximately $6.2 million and $1.4 million, respectively. Includes $3.$3.5 million estimate for incremental public company costs.5 million estimate for incremental public company costs.
(2) Based on annualized Project 322 cost savings.(2) Based on annualized Project 322 cost savings.
Normalized Equipment Variable Gross ProfitNormalized Equipment Variable Gross Profit $75.9$75.9
1313
High Free Cash Flow ConversionHigh Free Cash Flow ConversionStrong free cash flow allows dividends and reinvestment for growthStrong free cash flow allows dividends and reinvestment for growth
($ in millions)($ in millions)
High EBITDA marginsHigh EBITDA margins
Low pro forma leverageLow pro forma leverage
Low capex requirements Low capex requirements
Favorable tax structure Favorable tax structure ($18 million of annual tax($18 million of annual tax--deductible amortization)deductible amortization)
Predictable working capital needsPredictable working capital needs
Normalized Free Cash Flow Normalized Free Cash Flow
Normalized Free Cash FlowNormalized Free Cash Flow
$51.7$51.7
(9.3)(9.3)
(8.7)(8.7)
(3.5)(3.5)
(0.5)(0.5)
~$30~$30
EBITDAEBITDA
PF Net Cash Interest PF Net Cash Interest
Capex Capex (1)(1)
Cash TaxesCash Taxes (2)(2)
Working Capital IncreaseWorking Capital Increase
(1) Based on the historical capex budget. (1) Based on the historical capex budget. (2) Assumes 40% tax rate.(2) Assumes 40% tax rate.
Base DividendBase Dividend ~$17~$17
1414
$17.0$17.0 $17.0
Low Volume Normalized High Volume
$73.9
$35.3
$52.7
Low Volume Normalized High Volume
70,314
40,538
53,035
Low Volume Normalized High Volume
High Free Cash Flow Conversion (cont’d)High Free Cash Flow Conversion (cont’d)Robust cash flows through all snowfall environmentsRobust cash flows through all snowfall environments
(1) Based on historical range of unit sales over the past ten years (pro forma for Blizzard).(1) Based on historical range of unit sales over the past ten years (pro forma for Blizzard).(2) Base dividend. (2) Base dividend.
1010--Year Unit VolumeYear Unit Volume (1)(1) EBITDA EBITDA PF Free Cash Flow PF Free Cash Flow ($ in millions)($ in millions) ($ in millions)($ in millions)
$21.8
$30.7
$43.3
(2) (2) (2)
1515
Recently Announced 10% Increase in Quarterly Dividend Recently Announced 10% Increase in Quarterly Dividend Effective withEffective with Q4 dividend paymentQ4 dividend payment
Quarterly Dividend Rate Increased from $0.1825 to $0.20 per Share of Common Stock Quarterly Dividend Rate Increased from $0.1825 to $0.20 per Share of Common Stock (1) (1)
(1) Subject to the approval of the Company’s Board of Directors and in accordance with the restrictions on the Company’s cred(1) Subject to the approval of the Company’s Board of Directors and in accordance with the restrictions on the Company’s credit it facilities facilities
Well Positioned to Fund Dividend PaymentsWell Positioned to Fund Dividend Payments$8.7 million Cash on Hand*
$23.0 million Unused Capacity on Revolver*
$31.7 million Total Liquidity** As of Q3 2010* As of Q3 2010
1616
Attractive Total Return to ShareholdersAttractive Total Return to ShareholdersStrong cash flow and stable longStrong cash flow and stable long--term growth drive above average returnsterm growth drive above average returns
Dividend YieldDividend Yield Capital AppreciationCapital Appreciation
Base DividendBase Dividend Special DividendsSpecial Dividends Organic GrowthOrganic Growth Organic GrowthOrganic Growth
5%+ Annual Yield5%+ Annual Yield (1)(1) Industry GrowthIndustry Growth
Market Share GainsMarket Share Gains
Margin ImprovementMargin Improvement
Total ReturnTotal Return
(1) Based on current stock price.(1) Based on current stock price.
Reinvestment GrowthReinvestment Growth
Debt ReductionDebt Reduction
Small Accretive Acquisitions Small Accretive Acquisitions
International ExpansionInternational Expansion
1717
An Undisputed MarketAn Undisputed Market--Leading PositionLeading Position
Industry’s Industry’s Broadest and Most Broadest and Most Innovative Product Innovative Product
PortfolioPortfolio
Extensive Extensive Distributor Distributor
NetworkNetwork
Most Operationally Most Operationally Efficient Efficient
ManufacturerManufacturer
High Free Cash High Free Cash Flow ConversionFlow Conversion
Experienced Experienced Management TeamManagement Team Market LeaderMarket Leader
Highly Defensible Highly Defensible Market PositionMarket Position
Exceptional Exceptional Consumer Loyalty Consumer Loyalty and Brand Equityand Brand Equity
AppendixAppendix
19191919
Evolution of an Industry Leader Over 50+ Years Evolution of an Industry Leader Over 50+ Years
19521952 19771977 19841984
19911991
19991999
2004200419481948
Douglas Seaman founds Douglas Seaman founds Western Welding and Western Welding and
ManufacturingManufacturing
Dean Fisher Dean Fisher founds Fisher founds Fisher EngineeringEngineering
Dean Fisher sells Dean Fisher sells Fisher to DDIFisher to DDI
Armco acquires DDIArmco acquires DDI
AK Steel Corporation AK Steel Corporation merges with Armcomerges with Armco
Douglas Dynamics Douglas Dynamics incorporatesincorporates
Major MilestonesMajor Milestones
Douglas acquires Douglas acquires BlizzardBlizzard
20052005
Aurora and Ares Aurora and Ares purchase Douglas purchase Douglas
from AK Steelfrom AK Steel
20102010
IPOIPO
2020
Industry’s Broadest Product PortfolioIndustry’s Broadest Product PortfolioFull range of snowplows, sand and salt spreaders and parts and accessoriesFull range of snowplows, sand and salt spreaders and parts and accessories
SnowplowsSnowplows
Sand and Salt SpreadersSand and Salt Spreaders
SD SeriesSD Series Pro & PolyPro & Poly
MVP PLUS ™ VMVP PLUS ™ V--PlowPlow
Low ProfileLow Profile Tornado™ PolyTornado™ Poly
Homesteader™Homesteader™ HD SeriesHD Series
XBLADE™XBLADE™
PROPRO--CASTER™CASTER™ Model 2500™Model 2500™
PRO PLUSPRO PLUS® POWER PLOW POWER PLOW ®
2121
2010: Financial Results YTD2010: Financial Results YTD
($ in millions)
Year to Date2010 Y-o-Y %
∆
Income Statement Results:Revenue $128. 3 2.5%
% YoY Growth
Gross Profit $42.3 12.2%% Margin
Adjusted EBITDA $32.1 14.5%
% Margin 25.0%
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