DOUGLAS DYNAMICS INC

Previous wording

This Quarterly Report on Form 10-Q contains certain“forward-looking statements”* within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the*“Exchange Act”). These statements include information relating to future events, product demand, the payment of dividends, 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: (i) weather conditions, particularly lack of or reduced levels of snowfall and the timing of such snowfall, including as a result of global climate change; (ii) our ability to manage general economic, business and geopolitical conditions, including the impacts of natural disasters, labor strikes, global political instability, adverse developments affecting the banking and financial services industries, pandemics and outbreaks of contagious diseases and other adverse public health developments; (iii) our inability to maintain good relationships with the original equipment manufacturers (“OEM”) with whom we currently do significant business; (iv) the inability of our suppliers and OEM partners to meet our volume or quality requirements; (v) increases in the price of steel or other materials, including as a result of tariffs or inflationary conditions, necessary for the production of our products that cannot be passed on to our distributors; (vi) increases in the price of fuel or freight, (vii) the effects of laws and regulations and their interpretations on our business and financial condition, including policy or regulatory changes related to climate change; (viii) a significant decline in economic conditions; (ix) our inability to maintain good relationships with our distributors; (x) lack of available or favorable financing options for our end-users, distributors or customers; (xi) inaccuracies in our estimates of future demand for our products; (xii) our inability to protect or continue to build our intellectual property portfolio; (xiii) our inability to develop new products or improve upon existing products in response to end-user needs; (xiv) losses due to lawsuits arising out of personal injuries associated with our products; (xv) factors that could impact the future declaration and payment of dividends or our ability to execute…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Quarterly Report on Form 10-Q contains certain“forward-looking statements”* within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the*“Exchange Act”). These statements include information relating to future events, product demand, the payment of dividends, 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: (i) weather conditions, particularly lack of or reduced levels of snowfall and the timing of such snowfall, including as a result of global climate change; (ii) our ability to manage general economic, business and geopolitical conditions, including the impacts of natural disasters, labor strikes, global political instability, adverse developments affecting the banking and financial services industries, pandemics and outbreaks of contagious diseases and other adverse public health developments; (iii) our inability to maintain good relationships with the original equipment manufacturers (“OEM”) with whom we currently do significant business; (iv) the inability of our suppliers and OEM partners to meet our volume or quality requirements; (v) increases in the price of steel or other materials, including as a result of tariffs or inflationary conditions, necessary for the production of our products that cannot be passed on to our distributors; (vi) increases in the price of fuel or freight, (vii) the effects of laws and regulations and their interpretations on our business and financial condition, including policy or regulatory changes related to climate change; (viii) a significant decline in economic conditions; (ix) our inability to maintain good relationships with our distributors; (x) lack of available or favorable financing options for our end-users, distributors or customers; (xi) inaccuracies in our estimates of future demand for our products; (xii) our inability to protect or continue to build our intellectual property portfolio; (xiii) our inability to develop new products or improve upon existing products in response to end-user needs; (xiv) losses due to lawsuits arising out of personal injuries associated with our products; (xv) factors that could impact the future declaration and payment of dividends or our ability to execute…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

​As a result of recent market volatility, supply chain disruptions, labor strikes, labor shortages, inflationary pressures (including around materials, freight, labor and benefits) and other economic trends, our results of operations were impacted in each of the three months ended March 31, 2024 and 2023, and may be significantly impacted in future quarters. See below for further discussion of the impact to our financial statements. We may have challenges in short-term liquidity that could impact our ability to fund working capital needs. We have taken various steps to preserve liquidity. In January 2024, we implemented the 2024 Cost Savings Program, which is primarily in the form of restructuring charges for salaried headcount reductions and impacted both the Work Truck Attachments segment and corporate functions. We are also reducing discretionary spending where possible and deferring payments where appropriate within existing contractual terms, while remaining committed to long term growth projects. In addition, as discussed in Note 9 to the Unaudited Condensed Consolidated Financial Statements, in January 2023, we expanded the borrowing capacity of our revolving credit facility, and in January 2024, we amended our Credit Agreement to increase the minimum required leverage ratio from December 31, 2023 through June 30, 2024. In consideration of these recent macroeconomic trends, we expect that cash on hand and cash we generate from operations, as well as available credit under our senior credit facilities, will provide adequate funds for the foreseeable future.

Current wording

​As a result of recent market volatility, supply chain disruptions, labor strikes, labor shortages, inflationary pressures (including around materials, freight, labor and benefits) and other economic trends, our results of operations were impacted in each of the six months ended June 30, 2024 and 2023, and may be significantly impacted in future quarters. See below for further discussion of the impact to our financial statements. We may have challenges in short-term liquidity that could impact our ability to fund working capital needs. We have taken various steps to preserve liquidity. In January 2024, we implemented the 2024 Cost Savings Program, which is primarily in the form of restructuring charges for salaried headcount reductions and impacted both the Work Truck Attachments segment and corporate functions. We are also reducing discretionary spending where possible and deferring payments where appropriate within existing contractual terms, while remaining committed to long term growth projects. In addition, as discussed in Note 9 to the Unaudited Condensed Consolidated Financial Statements, in January 2023, we expanded the borrowing capacity of our revolving credit facility, and in January 2024, we amended our Credit Agreement to increase the minimum required leverage ratio from December 31, 2023 through June 30, 2024. In consideration of these recent macroeconomic trends, we expect that cash on hand and cash we generate from operations, as well as available credit under our senior credit facilities, will provide adequate funds for the foreseeable future.

Previous wording

The following table sets forth, for the three months ended March 31, 2024 and 2023, the consolidated statements of operations of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the table below and throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” consolidated statements of operations data for the three months ended March 31, 2024 and 2023 have been derived from our unaudited consolidated financial statements. The information contained in the table below should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

The following table sets forth, for the three and six months ended June 30, 2024 and 2023, the consolidated statements of operations of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the table below and throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” consolidated statements of operations data for the three and six months ended June 30, 2024 and 2023 have been derived from our unaudited consolidated financial statements. The information contained in the table below should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

The following table sets forth for the three months ended March 31, 2024 and 2023 the percentage of certain items in our Condensed Consolidated Statements of Operations and Comprehensive Loss, relative to net sales: ​

Current wording

The following table sets forth for the three and six months ended June 30, 2024 and 2023 the percentage of certain items in our Condensed Consolidated Statements of Operations and Comprehensive Income, relative to net sales: ​

Previous wording

Net sales were $95.7 million for the three months ended March 31, 2024 compared to $82.5 million in the three months ended March 31, 2023, an increase of $13.2 million, or 16.0%. The increase in sales for the three months ended March 31, 2024 compared to the same period in 2023 is a result of higher volumes and pricing at our Work Truck Solutions segment and higher parts and accessories volumes and pricing at our Work Truck Attachments segment. See below for a discussion of net sales for each of our segments.

Current wording

Net sales were $199.9 million for the three months ended June 30, 2024 compared to $207.3 million in the three months ended June 30, 2023, a decrease of $7.4 million, or 3.6%. Net sales were $295.6 million for the six months ended June 30, 2024 compared to $289.8 million in the six months ended June 30, 2023, an increase of $5.8 million or 2.0%. The decrease in sales for the three months ended June 30, 2024 compared to the same period in 2023 is a result of low snowfall in our core markets leading to lower volumes in 2024. The increase in sales for the six months ended June 30, 2024 was related to higher volumes and pricing at our Work Truck Solutions segment, somewhat offset by lower volumes at our Work Truck Attachments segment related to low snowfall. See below for a discussion of net sales for each of our segments.

Previous wording

Net sales at our Work Truck Solutions segment were $71.8 million for the three months ended March 31, 2024 compared to $63.3 million in the three months ended March 31, 2023, an increase of $8.5 million. The increase in sales for the three months ended March 31, 2024 compared to the same period in 2023 was a result of higher volumes on improved chassis availability, price increase realization, as well as higher sales of Company-purchased chassis, which are typically sold at cost.

Current wording

​Net sales at our Work Truck Solutions segment were $81.8 million for the three months ended June 30, 2024 compared to $66.0 million in the three months ended June 30, 2023, an increase of $15.8 million. Net sales at our Work Truck Solutions segment were $153.6 million for the six months ended June 30, 2024 compared to $129.3 million in the six months ended June 30, 2023, an increase of $24.3 million. The increase in sales for the three and six months ended June 30, 2024 compared to the same periods in 2023 was a result of higher volumes on improved throughput, price increase realization, as well as higher sales of Company-purchased chassis, which are typically sold at cost.

Previous wording

Cost of sales was $76.7 million for the three months ended March 31, 2024 compared to $71.3 million for the three months ended March 31, 2023, an increase of $5.4 million or 7.6%. The increase in cost of sales for the three months ended March 31, 2024 compared to the same period in the prior year was driven by the higher volumes, as well as lower outsourcing costs. Cost of sales as a percentage of sales were 80.2% for the three months ended March 31, 2024, compared to 86.3% for the three months ended March 31, 2023. The decrease in cost of sales as a percentage of sales for the three months ended March 31, 2024 was due to the higher volumes and product mix.

Current wording

Cost of sales was $138.6 million for the three months ended June 30, 2024 compared to $145.9 million for the three months ended June 30, 2023, a decrease of $7.3 million or 5.0%. Cost of sales was $215.3 million for the six months ended June 30, 2024 compared to $217.2 million for the six months ended June 30, 2023, a decrease of $1.9 million or 0.9%. The decrease in cost of sales for the three and six months ended June 30, 2024 compared to the same period in the prior year was driven by the lower volumes. Cost of sales as a percentage of sales were 69.3% and 72.9% for the three and six months ended June 30, 2024, compared to 70.4% and 74.9% for the three and six months ended June 30, 2023. The decrease in cost of sales as a percentage of sales for the three and six months ended June 30, 2024 was due to lower spending in conjunction with our 2024 Cost Savings Plan.

Previous wording

Gross profit was $18.9 million for the three months ended March 31, 2024 compared to $11.3 million for the three months ended March 31, 2023, an increase of $7.6 million, or 67.3%. The change in gross profit is attributable to the changes in sales as discussed above under “—Net Sales.” As a percentage of net sales, gross profit increased from 13.7% for the three months ended March 31, 2023 to 19.8% for the corresponding period in 2024. The reasons for the change in gross profit as a percentage of net sales are the same as those relating to the changes in cost of sales as a percentage of sales discussed above under “—Cost of Sales.”

Current wording

Gross profit was $61.3 million for the three months ended June 30, 2024 compared to $61.4 million for the three months ended June 30, 2023, a decrease of $0.1 million, or 0.2%. Gross profit was $80.2 million for the six months ended June 30, 2024 compared to $72.6 million for the six months ended June 30, 2023, an increase of $7.6 million, or 10.5%. The change in gross profit is attributable to the changes in sales as discussed above under “—Net Sales.” As a percentage of net sales, gross profit increased from 29.6% for the three months ended June 30, 2023 to 30.7% for the corresponding period in 2024. As a percentage of net sales, gross profit increased from 25.1% for the six months ended June 30, 2023 to 27.1% for the corresponding period in 2024. The reasons for the change in gross profit as a percentage of net sales are the same as those relating to the changes in cost of sales as a percentage of sales discussed above under “—Cost of Sales.”

Previous wording

Selling, general and administrative expenses, including intangibles amortization, were $24.1 million for the three months ended March 31, 2024 compared to $25.1 million for the three months ended March 31, 2023, a decrease of $1.0 million, or 4.0%. The decrease in the three months ended March 31, 2024 is related to lower stock-based compensation of $0.6 million and lower wages, benefits and employee costs of $0.5 million resulting from actions under the 2024 Cost Savings Plan, as well as a decrease in advertising costs of $0.6 million related to curtailed discretionary spending, somewhat offset by an increase in severance costs of $0.9 million related to salaried headcount reductions at our Work Truck Attachments segment and our corporate function as part of our 2024 Cost Savings Program.

Current wording

Selling, general and administrative expenses, including intangibles amortization, were $25.0 million for the three months ended June 30, 2024 compared to $26.8 million for the three months ended June 30, 2023, a decrease of $1.8 million, or 6.7%. Selling, general and administrative expenses, including intangibles amortization, were $49.1 million for the six months ended June 30, 2024 compared to $51.9 million for the six months ended June 30, 2023, a decrease of $2.8 million, or 5.4%. The decrease in the three months ended June 30, 2024 is related to lower intangibles amortization of $1.0 million related to an asset becoming fully amortized when compared to the prior year, as well as lower stock-based compensation of $0.8 million and incentive-based compensation of $0.4 million, somewhat offset by an increase in employee benefits costs of $0.6 million. The decrease in the six months ended June 30, 2024 is related to lower intangibles amortization of $1.0 million related to an asset becoming fully amortized when compared to the prior year, lower stock-based compensation of $1.4 million and incentive-based compensation of $0.9 million, as well as a decrease in advertising costs of $0.7 million and travel costs of $0.2 million related to curtailed discretionary spending, somewhat offset by an increase in employee benefits costs of $0.6 million and severance costs of $0.9 million related to salaried headcount reductions at our Work Truck Attachments segment and our corporate function as part of our 2024 Cost Savings Program.

Previous wording

Impairment charges were $1.2 million in the three months ended March 31, 2024 compared to $0.0 million in the same period in the prior year. The impairment charges in 2024 relate to certain internally developed software at our Work Truck Attachments segment and represent the full capitalized value of the software.

Current wording

Impairment charges were $1.2 million in the six months ended June 30, 2024 compared to $0.0 million in the same period in the prior year. The impairment charges in 2024 relate to certain internally developed software at our Work Truck Attachments segment and represent the full capitalized value of the software.

Previous wording

Interest expense was $3.5 million for the three months ended March 31, 2024, an increase compared to the $2.9 million incurred in the same period in the prior year. The increase in interest expense for the three months ended March 31, 2024 was due to higher interest on our revolver of $0.4 million due to having higher revolver borrowings during the quarter compared to the prior year. In addition, the increase in the three months ended March 31, 2024 was due to higher interest on our floor plan agreement of $0.4 million, see Note 5 to the Unaudited Condensed Consolidated Financial Statements for additional information regarding the floor plan agreement.

Current wording

Interest expense was $4.1 million for the three months ended June 30, 2024, an increase compared to the $3.7 million incurred in the same period in the prior year. The increase in interest expense for the three months ended June 30, 2024 was due to higher interest on our floor plan agreement of $0.3 million, see Note 5 to the Unaudited Condensed Consolidated Financial Statements for additional information regarding the floor plan agreement. Interest expense was $7.6 million for the six months ended June 30, 2024, an increase compared to the $6.6 million incurred in the same period in the prior year. The increase in interest expense for the six months ended June 30, 2024 was due to higher interest on our revolver of $0.4 million due to having higher revolver borrowings during the quarter compared to the prior year, as well as higher interest on our floor plan agreement of $0.7 million.

Previous wording

The Company’s effective tax rate was 16.0% and 21.1% for the three months ended March 31, 2024 and March 31, 2023, respectively. The effective tax rate for the three months ended March 31, 2024 was lower than the prior year period due to discrete tax expense of $0.4 million in the three months ended March 31, 2024 versus discrete tax expense of $0.1 million in the three months ended March 31, 2023 related to excess tax from stock compensation.

Current wording

The Company’s effective tax rate was 24.2% and 22.0% for the three months ended June 30, 2024 and 2023, respectively. The Company’s effective tax rate was 27.9% and 23.1% for the six months ended June 30, 2024 and 2023, respectively. The effective tax rate for the three and six months ended June 30, 2024 was higher than the prior year periods due to the establishment of reserves for uncertain tax positions of $0.9 million, compared to the release of reserves for uncertain tax positions of $0.1 million in the three and six months ended June 30, 2023. The effective tax rate for the six months ended June 30, 2024 was also impacted by discrete tax expense of $0.4 million compared to expense of $0.1 million in the six months ended June 30, 2023 related to excess tax from stock compensation.

Previous wording

Net loss for the three months ended March 31, 2024 was ($8.4) million, compared to ($13.1) million for the corresponding period in 2023, a decrease in net loss of $4.7 million. The change in net loss for the three months ended March 31, 2024 was driven by the factors described above under “— Net Sales,” “— Cost of Sales,” “— Selling, General and Administrative Expense,” “— Impairment Charges,” and “— Income Taxes.” As a percentage of net sales, net loss was (8.7%) for the three months ended March 31, 2024 compared to (15.9%) for the three months ended March 31, 2023.

Current wording

Net income for the three months ended June 30, 2024 was $24.3 million, compared to $24.0 million for the corresponding period in 2023, an increase of $0.3 million. Net income for the six months ended June 30, 2024 was $16.0 million, compared to $10.9 million for the corresponding period in 2023, an increase of $5.1 million. The change in net income for the three and six months ended June 30, 2024 was driven by the factors described above under “— Net Sales,” “— Cost of Sales,” “— Selling, General and Administrative Expense,” “— Impairment Charges,” and “— Income Taxes.” As a percentage of net sales, net income was 12.2% for the three months ended June 30, 2024 compared to 11.5% for the three months ended June 30, 2023. As a percentage of net sales, net income was 5.4% for the six months ended June 30, 2024 compared to 3.7% for the six months ended June 30, 2023.

Previous wording

As of March 31, 2024, we had $96.5 million of total liquidity, comprised of $2.0 million in cash and cash equivalents and $94.5 million of borrowing availability under our revolving credit facility, compared with total liquidity as of December 31, 2023 of approximately $126.7 million, comprised of approximately $24.2 million in cash and cash equivalents and borrowing availability of approximately $102.5 million under our revolving credit facility. The change in our total liquidity from December 31, 2023 is primarily due to the seasonality of our business. We have taken various steps to preserve liquidity. In January 2024, we implemented the 2024 Cost Savings Program, which is primarily in the form of restructuring charges for salaried headcount reductions and impacted both the Work Truck Attachments segment and corporate functions. We are also reducing discretionary spending where possible and deferring payments where appropriate within existing contractual terms, while remaining committed to long term growth projects. We expect that cash on hand and cash we generate from operations, as well as available credit under our senior credit facilities, will provide adequate funds for the primary uses of cash we describe above for the foreseeable future. From time to time, we may seek additional funding through the issuance of debt or equity securities to provide additional liquidity to fund acquisitions aligned with our strategic priorities and for other general corporate purposes.

Current wording

As of June 30, 2024, we had $90.7 million of total liquidity, comprised of $4.2 million in cash and cash equivalents and $86.5 million of borrowing availability under our revolving credit facility, compared with total liquidity as of December 31, 2023 of approximately $126.7 million, comprised of approximately $24.2 million in cash and cash equivalents and borrowing availability of approximately $102.5 million under our revolving credit facility. The change in our total liquidity from December 31, 2023 is primarily due to the seasonality of our business. We have taken various steps to preserve liquidity. In January 2024, we implemented the 2024 Cost Savings Program, which is primarily in the form of restructuring charges for salaried headcount reductions and impacted both the Work Truck Attachments segment and corporate functions. We are also continuing to reduce discretionary spending where possible and deferring payments where appropriate within existing contractual terms, while remaining committed to long term growth projects. We expect that cash on hand and cash we generate from operations, as well as available credit under our senior credit facilities, will provide adequate funds for the primary uses of cash we describe above for the foreseeable future. From time to time, we may seek additional funding through the issuance of debt or equity securities to provide additional liquidity to fund acquisitions aligned with our strategic priorities and for other general corporate purposes.

Previous wording

We had cash and cash equivalents of $2.0 million at March 31, 2024 compared to cash and cash equivalents of $24.2 million and $2.9 million at December 31, 2023 and March 31, 2023, respectively. The table below sets forth a summary of the significant sources and uses of cash for the periods presented.

Current wording

We had cash and cash equivalents of $4.2 million at June 30, 2024 compared to cash and cash equivalents of $24.2 million and $3.4 million at December 31, 2023 and June 30, 2023, respectively. The table below sets forth a summary of the significant sources and uses of cash for the periods presented.

Previous wording

Net cash used in operating activities decreased $35.3 million from the three months ended March 31, 2023 to the three months ended March 31, 2024. The decrease in cash used in operating activities was due to a $7.0 million decrease in net loss adjusted for reconciling items, and favorable changes in working capital of $28.3 million. The largest favorable changes in working capital were a decrease in cash used in accounts payable related to the timing of supplier payments, as well as a decrease in cash used for inventory related to a larger increase in inventory in the prior year from pulling forward purchases in anticipation of inflationary price increases and supply chain disruptions, and higher material costs due to inflation.

Current wording

Net cash used in operating activities decreased $47.1 million from the six months ended June 30, 2023 to the six months ended June 30, 2024. The decrease in cash used in operating activities was due to a $7.1 million increase in net income adjusted for reconciling items, and favorable changes in working capital of $40.1 million. The largest favorable changes in working capital were a decrease in cash used in accounts payable related to the timing of supplier payments, as well as a decrease in cash used for inventory related to a larger increase in inventory in the prior year from pulling forward purchases in anticipation of inflationary price increases and supply chain disruptions, and higher material costs due to inflation.

Previous wording

Net cash used in investing activities decreased $1.4 million for the three months ended March 31, 2024 compared to the corresponding period in 2023 due to a lower level of capital expenditures.

Current wording

Net cash used in investing activities decreased $2.5 million for the six months ended June 30, 2024 compared to the corresponding period in 2023 due to a lower level of capital expenditures.

Previous wording

Net cash provided by financing activities decreased $41.1 million for the three months ended March 31, 2024 as compared to the corresponding period in 2023. The decrease in cash provided was related to having $55.0 million in revolver borrowings outstanding at March 31, 2024 and $47.0 million in revolver borrowings outstanding at December 31, 2023, compared to $52.0 million in revolver borrowings outstanding at March 31, 2023 and no revolver borrowings outstanding at December 31, 2022. See Note 9 to the Unaudited Condensed Consolidated Financial Statements for additional information. Somewhat offsetting the decrease in cash provided is a $2.8 million increase in cash provided related to a prior year scheduled repayment of long-term debt, while no payment was required in the three months ended March 31, 2024 related to a voluntary pre-payment of debt amortization principal payments in 2023; see Note 9 to the Unaudited Condensed Consolidated Financial Statements for additional information.

Current wording

Net cash provided by financing activities decreased $52.3 million for the six months ended June 30, 2024 as compared to the corresponding period in 2023. The decrease in cash provided was related to having $63.0 million in revolver borrowings outstanding at June 30, 2024 and $47.0 million in revolver borrowings outstanding at December 31, 2023, compared to $74.0 million in revolver borrowings outstanding at June 30, 2023 and no revolver borrowings outstanding at December 31, 2022. See Note 9 to the Unaudited Condensed Consolidated Financial Statements for additional information. Somewhat offsetting the decrease in cash provided is a $5.6 million increase in cash provided related to prior year scheduled repayments of long-term debt, while no payments were required in the six months ended June 30, 2024 related to a voluntary pre-payment of debt amortization principal payments in 2023; see Note 9 to the Unaudited Condensed Consolidated Financial Statements for additional information.

Previous wording

Free cash flow for the three months ended March 31, 2024 was ($22.9) million compared to ($59.7) million in the corresponding period in 2023, an increase of $36.8 million. The increase in free cash flow for the three months ended March 31, 2024 is primarily a result of lower cash used in operating activities of $35.3 million as discussed above under “Liquidity and Capital Resources.”

Current wording

Free cash flow for the three months ended June 30, 2024 was $1.1 million compared to ($11.9) million in the corresponding period in 2023, an increase of $13.0 million. Free cash flow for the six months ended June 30, 2024 was ($21.9) million compared to ($71.5) million in the corresponding period in 2023, an increase of $49.6 million. The increase in free cash flow for the six months ended June 30, 2024 is primarily a result of lower cash used in operating activities of $47.1 million as discussed above under “Liquidity and Capital Resources.”

Previous wording

Free cash flow is a non-GAAP financial measure which we define as net cash provided by (used in) operating activities less capital expenditures. Free cash flow should be evaluated in addition to, and not considered a substitute for, other financial measures such as net income (loss) and cash flow provided by (used in) operations. We believe that free cash flow represents our ability to generate additional cash flow from our business operations.

Current wording

Free cash flow is a non-GAAP financial measure which we define as net cash provided by (used in) operating activities less net cash provided by (used in) investing activities. Free cash flow should be evaluated in addition to, and not considered a substitute for, other financial measures such as net income and cash flow provided by (used in) operations. We believe that free cash flow represents our ability to generate additional cash flow from our business operations.

Previous wording

Adjusted EBITDA represents net loss before interest, taxes, depreciation and amortization, as further adjusted for certain charges consisting of unrelated legal and consulting fees, severance, restructuring charges, impairment charges, and stock-based compensation. 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 amortization, 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.

Current wording

Adjusted EBITDA represents net income before interest, taxes, depreciation and amortization, as further adjusted for certain charges consisting of unrelated legal and consulting fees, severance, restructuring charges, write downs of property, plant and equipment, impairment charges, and stock-based compensation. 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 amortization, 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.

Previous wording

Adjusted EBITDA has limitations as an analytical tool. As a result, you should not consider it in isolation, or as a substitute for net income (loss), operating income, cash flow provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Some of these limitations are:

Current wording

Adjusted EBITDA has limitations as an analytical tool. As a result, you should not consider it in isolation, or as a substitute for net income, operating income, cash flow provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Some of these limitations are:

Previous wording

The following table presents a reconciliation of net loss, the most comparable GAAP financial measure, to Adjusted EBITDA as well as the resulting calculation of Adjusted EBITDA for the three months ended March 31, 2024 and 2023:

Current wording

The following table presents a reconciliation of net income, the most comparable GAAP financial measure, to Adjusted EBITDA as well as the resulting calculation of Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023:

Previous wording

The following table presents Adjusted EBITDA by segment for the three months ended March 31, 2024 and 2023.

Current wording

The following table presents Adjusted EBITDA by segment for the three and six months ended June 30, 2024 and 2023.

Previous wording

Adjusted EBITDA at our Work Truck Solutions segment was $6.0 million for the three months ended March 31, 2024 compared to $2.9 million in the three months ended March 31, 2023, an increase of $3.1 million. The change in the three months ended March 31, 2024 was due to improved volumes and price increase realization, as well as improved efficiencies.

Current wording

Adjusted EBITDA at our Work Truck Solutions segment was $7.9 million for the three months ended June 30, 2024 compared to $1.0 million in the three months ended June 30, 2023, an increase of $6.9 million. Adjusted EBITDA at our Work Truck Solutions segment was $13.9 million for the six months ended June 30, 2024 compared to $3.8 million in the six months ended June 30, 2023, an increase of $10.1 million. The change in the three and six months ended June 30, 2024 was due to improved volumes and price increase realization, as well as improved efficiencies.

Previous wording

Adjusted Net Loss and Adjusted Loss Per Share (calculated on a diluted basis) represents net loss and loss per share (as defined by GAAP), excluding the impact of stock-based compensation, severance, restructuring charges, impairment charges, certain charges related to unrelated legal fees and consulting fees, and adjustments on derivatives not classified as hedges, net of their income tax impact. 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 Loss and Adjusted Loss 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. We believe that the presentation of adjusted net loss for the periods presented allows investors to make meaningful comparisons of our operating performance between periods and to view our business from the same perspective as our management. Because the excluded items are not predictable or consistent, management does not consider them when evaluating our performance or when making decisions regarding allocation of resources.

Current wording

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, write downs of property, plant and equipment, impairment charges, certain charges related to unrelated legal fees and consulting fees, and adjustments on derivatives not classified as hedges, net of their income tax impact. 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. We believe that the presentation of adjusted net income for the periods presented allows investors to make meaningful comparisons of our operating performance between periods and to view our business from the same perspective as our management. Because the excluded items are not predictable or consistent, management does not consider them when evaluating our performance or when making decisions regarding allocation of resources.

Previous wording

The following table presents a reconciliation of net loss, the most comparable GAAP financial measure, to Adjusted net loss as well as a reconciliation of diluted loss per share, the most comparable GAAP financial measure, to Adjusted diluted loss per share for the three months ended March 31, 2024 and 2023:

Current wording

The following table presents a reconciliation of net income, the most comparable GAAP financial measure, to Adjusted net income as well as a reconciliation of diluted earnings per share, the most comparable GAAP financial measure, to Adjusted diluted earnings per share for the three and six months ended June 30, 2024 and 2023:

Previous wording

Inflation in materials and labor had a material impact on our profitability in the three months ended March 31, 2024 and 2023 and, although we are starting to see such inflationary pressures ease, we expect ongoing inflationary pressures may also impact our profitability in the remainder of 2024. While we anticipate being able to cover this inflation by raising prices, there may be a timing difference of when we incur the increased costs and when we realize the higher prices in our backlog. In 2023 and in previous years, including in 2019, as a result of inflationary pressures due to tariffs, we experienced significant increases in steel costs, but were able to mitigate the effects of these increases through both temporary and permanent steel surcharges; we expect, but cannot be certain, that we will be able to do the same going forward.

Current wording

Inflation in materials and labor had a material impact on our profitability in the three and six months ended June 30, 2024 and 2023 and, although we are starting to see such inflationary pressures ease, we expect ongoing inflationary pressures may also impact our profitability in the remainder of 2024. While we anticipate being able to cover this inflation by raising prices, there may be a timing difference of when we incur the increased costs and when we realize the higher prices in our backlog. In 2023 and in previous years, including in 2019, as a result of inflationary pressures due to tariffs, we experienced significant increases in steel costs, but were able to mitigate the effects of these increases through both temporary and permanent steel surcharges; we expect, but cannot be certain, that we will be able to do the same going forward.