Acquisition boosts Douglas Dynamics, despite lack of snow

Reliance on solutions segment cut into margins

snow plow
Douglas Dynamics makes vehicle attachments such as plows.

The acquisition of Dejana Truck & Utility Equipment Co. helped Milwaukee-based Douglas Dynamics Inc. post record revenue, but limited snow and a shift in sales mix cut into the company’s profit.

snow plow
Douglas Dynamics makes vehicle attachments such as plows.

Douglas Dynamics closed on the Dejana acquisition in July and created a new work truck solutions segment as a result. That segment produced $65 million in revenue and a gross profit of $14.1 million for the year.

Overall, the maker and up-fitter of work truck attachments increased revenue by 4 percent to $416.3 million in 2016, but net income dropped by 11.7 percent to $38.5 million and earnings fell from $1.94 to $1.70 per diluted share.

The company attributed the decline to a higher cost of sales for the solutions segment compared to the work truck attachments segment. Cost of goods sold was up 5.5 percent for the year to $282.3 million while selling, general and administrative expenses were up 12.7 percent to $54.3 million.

“Overall, it was a very positive year for our company and our results for the fourth quarter were in line with our expectations, especially given this was the second winter in a row to start off with very little snowfall across our core markets before December,” said James Janik, Douglas Dynamics chairman, president and chief executive officer. “While we have diversified, and expanded our portfolio of products and services, snowfall is still an important factor for our business. There is no question that the lower than average snowfall over the past two winters negatively impacted our business in 2016.”

Revenue was up 9.5 percent in the fourth quarter to $130.1 million. Net income, however, was down 33 percent to $10 million and earnings declined from 66 to 44 cents per diluted share.

The company forecasted its 2017 revenue would be between $470 million and $530 million with earnings coming in at $1.20 to $1.80 per share.

“While non-snowfall indicators remain generally encouraging, our outlook reflects two consecutive winters of below average snowfall in most of our core markets, which will impact the 2017 pre-season order period for our commercial snow and ice products,” Janik said. “In addition, while we generally expect the Work Truck Solutions segment to grow at a mid to high single digit rate over the long-term, we have seen some softness in the first two months of the year and have created our outlook with that in mind. We expect 2017 will be an important year of execution as we continue to integrate the Work Truck Solutions team and capitalize on the considerable market opportunity.”

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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