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TEAM MEMBERS : BHARATH CHANDRASHEKHAR, ROBERT EBERHAD, PURVI MITTAL, SHALINI R SIVARAJAH

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DOUGLAS DYNAMICS INC. TEAM MEMBERS : BHARATH CHANDRASHEKHAR, ROBERT EBERHAD, PURVI MITTAL, SHALINI R SIVARAJAH Presented: April 22, 2014. AGENDA. Introduction Company Overview Macroeconomic Overview Market Prospects Financial and Ratio Analysis Financial Projections Valuation Tools

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DOUGLAS DYNAMICS INC.

TEAM MEMBERS: BHARATH CHANDRASHEKHAR, ROBERT EBERHAD, PURVI MITTAL, SHALINI R SIVARAJAH

Presented: April 22, 2014

agenda
AGENDA
  • Introduction
  • Company Overview
  • Macroeconomic Overview
  • Market Prospects
  • Financial and Ratio Analysis
  • Financial Projections
  • Valuation Tools
  • Recommendation
company overview
COMPANY OVERVIEW
  • North American leader in the design, manufacture and sale of snow and ice control equipment for light trucks
  • Founded in 1977, but traces history back to 1948 founding of Fisher Engineering
  • Headquartered in Milwaukee
  • Previously owned by steel companies and private equity; went public in May 2010
  • Acquired TrynEx International in 2013 to expand product line and geographic reach
distribution network
DISTRIBUTION NETWORK
  • Worldwide distribution network of over 2,100 points of sale
  • Focus on “snow belt regions in North America
  • 80% of distributors are east of the Mississippi River

Source: Company 10-K and 2013 Investor Presentation

consumer loyalty
CONSUMER LOYALTY
  • Installed base of over 500,000 units
  • Actively used snowplows are replaced every 7-9 years
  • Different brands based on needs of user

Sources: Company 10-K and 2013 Investor Presentation

employees and lean manufacturing
EMPLOYEES AND LEAN MANUFACTURING
  • Non-union workforce with an average tenure of 9.3 years
  • Temporary workers allow for low fixed cost model to respond to consumer demand
  • Intense focus on lean manufacturing leads to high operational efficiency

Source: 2013 Investor Presentation

key industry drivers
KEY INDUSTRY DRIVERS
  • Annual average rainfall (precipitation)
  • Value of Construction
  • World price of Steel
  • Trade-Weighted Index

Source: Ibisworld

industry outlook
INDUSTRY OUTLOOK
  • Pent-up demand and innovative plowing systems will be key growth drivers for the industry
  • Profit margins are expected to remain elevated due to use of lean manufacturing techniques
  • Manufacturers aim to mitigate rising steel prices by passing them down to consumers higher sale prices
  • Companies taking cost-cutting measures to increase profitability
  • Increase in construction leads to increase in total area that need snow clearing

Source: Ibisworld

market prospects
MARKET PROSPECTS

Source: Yahoo.Finance

comparables
COMPARABLES

Source: CapitalIQ

comparables valuation
COMPARABLES VALUATION

Source: Yahoo.Finance

recommendation watchlist
RECOMMENDATION: WATCHLIST*
  • DCF VALUATION=>10.73
  • COMPARABLE VALUATION=>12.51
  • CURRENT SHARE PRICE=>16.70
  • Good Business Story but Poor Capital Management
  • Reconsideration should be based on a more sustainable dividend policy
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