10-K

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Table of Contents
Index to Consolidated Financial Statements

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
ý	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2011
or
o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition period from                        to

Commission File No. 001-34728

DOUGLAS DYNAMICS, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	134275891 (I.R.S. Employer Identification No.)
7777 N 73rd Street
Milwaukee, Wisconsin (Address of principal executive offices)	53223 (Zip Code)

Registrant's telephone number, including area code (414) 354-2310

         Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $.01 Par Value	New York Stock Exchange

         Securities registered pursuant to Section 12(g) of the Act: NONE

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý.

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý.

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o.

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o.

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer ý Non-accelerated filer o
(Do not check if a
smaller reporting company) Smaller reporting company o

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý.

         At June 30, 2011, the aggregate market value of the voting stock of the Registrant held by stockholders who were not affiliates of the Registrant was approximately $291 million (based upon the closing price of Registrant's Common Stock on the New York Stock Exchange on such date). At March 13, 2012, the Registrant had outstanding an aggregate of 22,130,996 shares of its Common Stock.

Documents Incorporated by Reference:

         Portions of the Proxy Statement for the Registrant's Annual Meeting of Shareholders to be held on May 2, 2012 are incorporated into Parts II and III.

Table of Contents

PART I		3
Item 1.	Business	3
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	19
Item 3.	Legal Proceedings	19
Item 4.	Mine Safety Disclosures	19
PART II		20
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
	We did not make any purchases of equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 during 2011	22
Item 6.	Selected Consolidated Financial Data	22
Item 7.	Management Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 8.	Financial Statements and Supplementary Data	43
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosures	43
Item 9A.	Controls and Procedures	43
Item 9B.	Other Information	44
PART III		45
Item 10.	Directors, Executive Officers and Corporate Governance	45
Item 11.	Executive Compensation	45
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	45
Item 13.	Certain Relationships and Related Transactions, and Director Independence	45
Item 14.	Principal Accounting Fees and Services	45
PART IV		46
Item 15.	Exhibits and Financial Statement Schedules	46
Signatures		47
Exhibit Index		48
Index to Consolidated Financial Statements		F-1

PART I

Forward Looking Statements

        This Annual Report on Form 10-K contains "forward-looking statements" made within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "should," "could," "may," "plan," "project," "predict," "will" and similar expressions are intended to identify forward-looking statements. In addition, statements covering our future sales or financial performance and our plans, performance and other objectives, expectations or intentions are forward-looking statements, such as statements regarding our liquidity, debt, planned capital expenditures, and adequacy of capital resources and reserves. Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:

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Weather conditions, particularly lack of or reduced levels of snowfall;

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A significant decline in economic conditions;

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Our inability to maintain good relationships with our distributors;

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Lack of available or favorable financing options for our end-users or distributors;

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Increases in the price of steel or other materials necessary for the production of our products that cannot be passed on to our distributors;

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The inability of our suppliers to meet our volume or quality requirements;

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Inaccuracies in our estimates of future demand for our products;

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Our inability to protect or continue to build our intellectual property portfolio;

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Our inability to develop new products or improve upon existing products in response to end-user needs;

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Our inability to compete effectively against competition;

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The effects of laws and regulations and their interpretations on our business and financial conditions;

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Losses due to lawsuits arising out of personal injuries associated with our products; and

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Factors that could impact dividend payments;

        We undertake no obligation to revise the forward-looking statements included in this Annual Report on Form 10-K to reflect any future events or circumstances. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors in addition to those listed above that could cause or contribute to such differences are discussed in Item 1A, "Risk Factors" of the Annual Report on Form 10-K.

Item 1.    Business

Overview

        Douglas Dynamics, Inc. (the "Company," "we," "us," "our") is the North American leader in the design, manufacture and sale of snow and ice control equipment for light trucks, which consists of snowplows, sand and salt spreaders, and related parts and accessories. We sell our products under the WESTERN®, FISHER® and BLIZZARD® brands which are among the most established and recognized in the industry. We believe that in 2011 our share of the light truck snow and ice control equipment market was greater than 50%. We operate as a single segment.

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        We offer the broadest and most complete product line of snowplows and sand and salt spreaders for light trucks in the U.S. and Canadian markets. We also provide a full range of related parts and accessories, which generates an ancillary revenue stream throughout the lifecycle of our snow and ice control equipment. For the year ended December 31, 2011, 85% of our net sales were generated from sales of snow and ice control equipment, and 15% of our net sales were generated from sales of parts and accessories.

        We sell our products through a distributor network primarily to professional snowplowers who are contracted to remove snow and ice from commercial, municipal and residential areas. Over the last 50 years, we have engendered exceptional customer loyalty for our products because of our ability to satisfy the stringent demands of our customers for a high degree of quality, reliability and service. As a result, we believe our installed base is the largest in the industry with over 500,000 snowplows and sand and salt spreaders in service. Because sales of snowplows and sand and salt spreaders are primarily driven by the need of our core end-user base to replace worn existing equipment, we believe our substantial installed base provides us with a high degree of predictable sales over any extended period of time.

        We believe we have the industry's most extensive North American distributor network, which primarily consists of over 720 truck equipment distributors who purchase directly from us and are located throughout the snow belt regions in North America (primarily the Midwest, East and Northeast regions of the United States as well as all provinces of Canada). We have longstanding relationships with many of our distributors, with an average tenure of approximately 15 years. We continually seek to grow and optimize our network by opportunistically adding high-quality, well-capitalized distributors in select geographic areas and by cross-selling our industry-leading brands within our distribution network. Beginning in 2005, we began to extend our reach to international markets, establishing distribution relationships in Northern Europe and Asia, where we believe meaningful growth opportunities exist.

        We believe we are the industry's most operationally efficient manufacturer due to our vertical integration, highly variable cost structure and intense focus on lean manufacturing. We continually seek to use lean principles to reduce costs and increase the efficiency of our manufacturing operations. We currently manufacture our products in two facilities that we own in Milwaukee, Wisconsin and Rockland, Maine. Furthermore, our manufacturing efficiency allows us to deliver desired products quickly to our customers during times of sudden and unpredictable snowfall events when our customers need our products immediately.

        On May 10, 2010, we completed our initial public offering ("IPO"). In connection with our IPO, we listed our common stock on the New York Stock Exchange ("NYSE") under the stock symbol "PLOW." On May 20, 2011 and December 6, 2011, certain of our stockholders, including affiliates of Aurora Capital Group and Ares Management, completed registered secondary offerings of 5,750,000 and 1,966,479 shares, respectively, of our common stock. We did not receive any proceeds from the sale of common stock by the selling stockholders in the offerings.

Our Industry

        The light truck snow and ice control equipment industry in North America consists predominantly of domestic participants that manufacture their products in North America. The annual demand for snow and ice control equipment is driven primarily by the replacement cycle of the existing installed base, which is predominantly a function of the average life of a snowplow or spreader and is driven by usage and maintenance practices of the end-user. We believe actively-used snowplows are typically replaced, on average, every 7 to 8 years.

        The primary factor influencing the replacement cycle for snow and ice control equipment is the level, timing and location of snowfall. Sales of snow and ice control equipment in any given year and region are most heavily influenced by local snowfall levels in the prior snow season. Heavy snowfall

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during a given winter causes equipment usage to increase, resulting in greater wear and tear and shortened life cycles, thereby creating a need for replacement equipment and additional parts and accessories.

        While snowfall levels vary within a given year and from year-to-year, snowfall, and the corresponding replacement cycle of snow and ice control equipment, is relatively consistent over multi-year periods. The following chart depicts aggregate annual and eight-year (based on the typical life of our snowplows) rolling average of the aggregate snowfall levels in 66 cities in 26 snow belt states across the Northeast, East, Midwest and Western United States where we monitor snowfall levels from 1980 to 2011. As the chart indicates, since 1982 aggregate snowfall levels in any given rolling eight-year period have been fairly consistent, ranging from 2,742 to 3,419 inches.

Snowfall in Snowbelt States (inches)
(for October 1 through March 31)

Note: The 8-year rolling average snowfall is not presented prior to 1982 for purposes of the calculation due to lack of snowfall data prior to 1975. Snowfall data in this chart is not adjusted for snowfall outside of the 66 cities in the 26 states reflected.

Source: National Oceanic and Atmospheric Administration's National Weather Service.

        The demand for snow and ice control equipment can also be influenced by general economic conditions in the United States, as well as local economic conditions in the snow-belt regions in North America. In stronger economic conditions, our end-users may choose to replace or upgrade existing equipment before its useful life has ended, while in weak economic conditions, our end-users may seek to extend the useful life of equipment, thereby increasing the sales of parts and accessories. However, since snow and ice control management is a non-discretionary service necessary to ensure public safety and continued personal and commercial mobility in populated areas that receive snowfall, end-users cannot extend the useful life of snow and ice control equipment indefinitely and must replace equipment that has become too worn, unsafe or unreliable, regardless of economic conditions. While our parts and accessories yield slightly higher gross margins than our snow and ice control equipment, they yield significantly lower revenue than equipment sales, which adversely affects our results of operations. However, since snow and ice control management is a non-discretionary service necessary to ensure public safety and continued personal and commercial mobility in populated areas that receive snowfall, end-users cannot extend the useful life of snow and ice control equipment indefinitely and

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must replace equipment that has become too worn, unsafe or unreliable, regardless of economic conditions.

        Sales of parts and accessories for 2010 and 2011, respectively, were approximately 21.9% and 51.2% higher than average annual parts and accessories sales over the preceding ten years, which management believes is largely a result of the deferral of new equipment purchases due to the recent economic downturn. Although sales of snow and ice control units increased in 2011 as compared to 2010, management believes that absent the recent economic downturn, equipment sales in 2010 and 2011 would have been considerably higher due to the high levels of snowfall during these years, as equipment unit sales in 2010 and 2011 remained below the ten-year average, while snowfall levels for snow seasons ending March 31, 2010 and 2011 were considerably above the ten-year average. Management believes this deferral of new equipment purchases could result in an elevated multi-year replacement cycle as the economy recovers.

        Long-term growth in the overall snow and ice control equipment market also results from geographic expansion of developed areas in the snow belt regions of North America, as well as consumer demand for technological enhancements in snow and ice control equipment and related parts and accessories that improves efficiency and reliability. Continued construction in the snow belt regions in North America increases the aggregate area requiring snow and ice removal, thereby growing the market for snow and ice control equipment. In addition, the development and sale of more reliable, more efficient and more sophisticated products have contributed to an approximate 2% to 4% average unit price increase in each of the past five years.

Our Competitive Strengths

        We compete solely with other North American manufacturers who do not benefit from our extensive distributor network, manufacturing efficiencies and depth and breadth of products. As the market leader in snow and ice control equipment for light trucks, we enjoy a set of competitive advantages versus smaller equipment providers, which allows us to generate robust cash flows in all snowfall environments and to support continued investment in our products, distribution capabilities and brand regardless of annual volume fluctuations. We believe these advantages are rooted in the following competitive strengths and reinforces our industry leadership over time.

        Exceptional Customer Loyalty and Brand Equity.    Our brands enjoy exceptional customer loyalty and brand equity in the snow and ice control equipment industry with both end-users and distributors, which have been developed through over 50 years of superior innovation, productivity, reliability and support, consistently delivered season after season. We believe past brand experience, rather than price, is the key factor impacting snowplow purchasing decisions.

        Broadest and Most Innovative Product Offering.    We provide the industry's broadest product offering with a full range of snowplows, sand and salt spreaders and related parts and accessories. We believe we maintain the industry's largest and most advanced in-house new product development program, historically introducing several new and redesigned products each year. Our broad product offering and commitment to new product development is essential to maintaining and growing our leading market share position as well as continuing to increase the profitability of our business.

        Extensive North American Distributor Network.    With over 720 direct distributors, we benefit from having the most extensive North American direct distributor network in the industry, providing a significant competitive advantage over our peers. Our distributors function not only as sales and support agents (providing access to parts and service), but also as industry partners providing real-time end-user information, such as retail inventory levels, changing consumer preferences or desired functionality enhancements, which we use as the basis for our product development efforts.

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        Leader in Operational Efficiency.    We believe we are a leader in operational efficiency in our industry, resulting from our application of lean manufacturing principles and a highly variable cost structure. By utilizing lean principles, we are able to adjust production levels easily to meet fluctuating demand, while controlling costs in slower periods. This operational efficiency is supplemented by our highly variable cost structure, driven in part by our access to a sizable temporary workforce (comprising approximately 10-15% of our total workforce), which we can quickly adjust, as needed. These manufacturing efficiencies enable us to respond rapidly to urgent customer demand during times of sudden and unpredictable snowfalls, allowing us to provide exceptional service to our existing customer base and capture new customers from competitors that we believe cannot service their customers' needs with the same speed and reliability.

        Strong Cash Flow Generation.    We are able to generate significant cash flow as a result of relatively consistent high profitability, low capital spending requirements and predictable timing of our working capital requirements. Our cash flow results will also benefit substantially from approximately $18 million of annual tax-deductible intangible and goodwill expense over the next eight years, which has the impact of reducing our corporate taxes owed by approximately $6.7 million on an annual basis during this period, in the event we have sufficient taxable income to utilize such benefit. Our significant cash flow has allowed us to reinvest in our business, pay down long term debt, and pay substantial dividends on a pro rata basis to our stockholders.

        Experienced Management Team.    We believe our business benefits from an exceptional management team that is responsible for establishing our leadership in the snow and ice control equipment industry for light trucks. Our senior management team, consisting of four officers, has an average of approximately 20 years of weather-related industry experience and an average of over eleven years with our company. James Janik, our President and Chief Executive Officer, has been with us for over 19 years and in his current role since 2000, and through his strategic vision, we have been able to expand our distributor network and grow our market leading position.

Our Business Strategy

        Our business strategy is to capitalize on our competitive strengths to maximize cash flow to pay dividends, reduce indebtedness and reinvest in our business to create stockholder value. The building blocks of our strategy are:

        Continuous Product Innovation.    We believe new product innovation is critical to maintaining and growing our market-leading position in the snow and ice control equipment industry. We will continue to focus on developing innovative solutions to increase productivity, ease of use, reliability, durability and serviceability of our products and on incorporating lean manufacturing concepts into our product development process, which has allowed us to reduce the overall cost of development and, more importantly, to reduce our time-to-market by nearly one-half.

        Distributor Network Optimization.    We will continually seek opportunities to continue to expand our extensive distribution network by adding high-quality, well-capitalized distributors in select geographic areas and by cross-selling our industry-leading brands within our distribution network to ensure we maximize our ability to generate revenue while protecting our industry leading reputation, customer loyalty and brands. We will also focus on optimizing this network by providing in-depth training, valuable distributor support and attractive promotional and incentive opportunities. As a result of these efforts, we believe a majority of our distributors choose to sell our products exclusively. We believe this sizable high quality network is unique in the industry, providing us with valuable insight into purchasing trends and customer preferences, and would be very difficult to replicate.

        Aggressive Asset Management and Profit Focus.    We will continue to aggressively manage our assets in order to maximize our cash flow generation despite seasonal and annual variability in snowfall levels.

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We believe our ability is unique in our industry and enables us to achieve attractive margins in all snowfall environments. Key elements of our asset management and profit focus strategies include:

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employment of a highly variable cost structure, which allows us to quickly adjust costs in response to real-time changes in demand;

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use of enterprise-wide lean principles, which allow us to easily adjust production levels up or down to meet demand;

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implementation of a pre-season order program, which incentivizes distributors to place orders prior to the retail selling season and thereby enables us to more efficiently utilize our assets; and

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development of a vertically integrated business model, which we believe provides us cost advantages over our competition.

        Additionally, although modest, our capital expenditure requirements and operating expenses can be temporarily reduced in response to anticipated or actual lower sales in a particular year to maximize cash flow.

        Flexible, Lean Enterprise Platform.    We will continue to utilize lean principles to maximize the flexibility, efficiency and productivity of our manufacturing operations while reducing the associated costs, enabling us to increase distributor and end-user satisfaction. For example, in an environment where shorter lead times and near-perfect order fulfillment are important to our distributors, we believe our lean processes have helped us to improve our shipping performance and build a reputation for providing industry leading shipping performance.

Our Growth Opportunities

        Increase Our Industry Leading Market Share.    We plan to leverage our industry leading position, distribution network and new product innovation capabilities to capture market share in the North American snow and ice control equipment market, focusing our primary efforts on increasing penetration in those North American markets where we believe our overall market share is less than 50%. We also plan to continue growing our presence in the snow and ice control equipment market outside of North America, particularly in Asia and Europe, which we believe could provide significant growth opportunities in the future.

        Opportunistically Seek New Products and New Markets.    We will consider external growth opportunities within the snow and ice control industry and other equipment or component markets. We plan to continue to evaluate acquisition opportunities within our industry that can help us expand our distribution reach, enhance our technology and as a consequence improve the breadth and depth of our product lines. We also consider diversification opportunities in adjacent markets that complement our business model and could offer us the ability to leverage our core competencies to create stockholder value.

Employees

        As of December 31, 2011, we employed approximately 525 employees on a full-time basis. None of our employees are represented by a union and we are not party to any collective bargaining agreements.

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Sales Programs

        We offer a number of sales programs to our distributors to finance the purchase of our products. One such program is our pre-season sales program, which not only benefits our distributors, but also benefits us by helping us to manage the seasonality of our business. During the second and third quarters, we offer our distributors the option of either (1) a purchase price discount, with the percentage discount being highest the earlier in the season that the distributor purchases and pays for our products, or (2) deferring payment until the fourth quarter. Under either option product shipment occurs during the pre-season sales period. On average, approximately 60% to 65% of our annual shipments occur during the pre-season sales period. Distributors who purchase our products during the first or fourth quarter, on the other hand, must deliver payment to us within 30 days of shipment. Our backlog as of December 31, 2011 and 2010 was $0.8 million and $0.7 million, respectively. We expect that all backlog as of December 31, 2011 will be shipped in 2012.

        We are also party to an accounts receivable securitization facility pursuant to which certain distributors may elect to finance their purchases from us through a third party financing company. Distributors who purchase our products through this financing arrangement are offered the same pre-season sales incentives as distributors who purchase directly from us, the terms of which are described above. In the years ended December 31, 2011, 2010 and 2009, 1.3%, 1.0% and 1.9%, respectively of our net sales were financed by our distributors through a third party financing company. Pursuant to the terms of this facility, we maintain the risk of collectability of the receivable under this facility. If the third party financing company is unable to collect from the distributor the amounts due in respect of the product financing, we are obligated to repurchase the outstanding receivable balance plus any legal fees incurred by the financing company. Historically, repurchases of inventory and uncollectible amounts related to receivables sold under this program have been less than $100 thousand on average for the years ended December 31, 2009, 2010 and 2011.

        In 2011, we also unveiled an end-user financing program. We have partnered with a third party financing company which has agreed to extend credit to our-end users for purchases of our products, subject to credit approval. Once approval is obtained, our end-users can then place an order directly for our products with our distributors. This program is designed to facilitate our end-users' access to credit.

Intellectual Property

        We maintain patents relating to snowplow mounts, assemblies, hydraulics, electronics and lighting systems as well as sand and salt spreader assemblies and our patent applications relate to each of the foregoing except for hydraulics and sand and salt spreader assemblies. When granted, each patent has a 17 year duration. The duration of the patents we currently possess range between one year and 17 years of remaining life. Our patent applications date from 2001 to 2011.

        We rely on a combination of patents, trade secrets and trademarks to protect certain of the proprietary aspects of our business and technology. We hold approximately 20 U.S. registered trademarks (including the trademarks WESTERN®, FISHER® and BLIZZARD®), 5 Canadian registered trademarks, 25 U.S. issued patents, 15 Canadian patents and two Chinese patents.

Other Information

        We were formed as a Delaware corporation in 2004. We maintain a website with the address www.douglasdynamics.com. We are not including the information contained on our website as part of, or incorporating it by reference into, this report. We make available free of charge (other than an investor's own Internet access charges) through our website our Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports, as

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soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission ("SEC").

Item 1A.    Risk Factors

The Company operates in an environment that involves numerous known and unknown risks and uncertainties. Our business, prospects, financial condition and operating results could be materially adversely affected by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The risk described below highlight some of the factors that have affected, and in the future could affect our operations.

Our results of operations depend primarily on the level, timing and location of snowfall. As a result, a decline in snowfall levels in multiple regions for an extended time could cause our results of operations to decline and adversely affect our ability to pay dividends.

        As a manufacturer of snow and ice control equipment for light trucks, and related parts and accessories, our sales depend primarily on the level, timing and location of snowfall in the regions in which we offer our products. A low level or lack of snowfall in any given year in any of the snow-belt regions in North America (primarily the Midwest, East and Northeast regions of the United States as well as all provinces of Canada) will likely cause sales of our products to decline in such year as well as the subsequent year, which in turn may adversely affect our results of operations and ability to pay dividends. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Seasonality and Year-to-Year Variability." A sustained period of reduced snowfall events in one or more of the geographic regions in which we offer our products could cause our results of operations to decline and adversely affect our ability to pay dividends.

The year-to-year variability of our business can cause our results of operations and financial condition to be materially different from year-to-year; whereas the seasonality of our business can cause our results of operations and financial condition to be materially different from quarter-to-quarter.

        Because our business depends on the level, timing and location of snowfall, our results of operations vary from year-to-year. Additionally, because the annual snow season typically only runs from October 1 through March 31, our distributors typically purchase our products during the second and third quarters. As a result, we operate in a seasonal business. We not only experience seasonality in our sales, but also experience seasonality in our working capital needs. Consequently, our results of operations and financial condition can vary from year-to-year, as well as from quarter-to-quarter, which could affect our ability to pay dividends. If we are unable to effectively manage the seasonality and year-to-year variability of our business, our results of operations, financial condition and ability to pay dividends may suffer.

If economic conditions in the United States continue to remain weak or deteriorate further, our results of operations, financial condition and ability to pay dividends may be adversely affected.

        Historically, demand for snow and ice control equipment for light trucks has been influenced by general economic conditions in the United States, as well as local economic conditions in the snow-belt regions in North America. During the last few years, economic conditions throughout the United States have been extremely weak, although they began to improve in 2011, they may not become strong in the foreseeable future. Weakened economic conditions may cause our end-users to delay purchases of replacement snow and ice control equipment and instead repair their existing equipment, leading to a decrease in our sales of new equipment. Weakened economic conditions may also cause our end-users to delay their purchases of new light trucks. Because our end-users tend to purchase new snow and ice control equipment concurrent with their purchase of new light trucks, their delay in purchasing new light trucks can also result in the deferral of their purchases of new snow and ice control equipment.

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The deferral of new equipment purchases during periods of weak economic conditions may negatively affect our results of operations, financial condition and ability to pay dividends.

        Weakened economic conditions may also cause our end-users to consider price more carefully in selecting new snow and ice control equipment. Historically, considerations of quality and service have outweighed considerations of price, but in a weak economy, price may become a more important factor. Any refocus away from quality in favor of cheaper equipment could cause end-users to shift away from our products to less expensive competitor products, or to shift away from our more profitable products to our less profitable products, which in turn would adversely affect our results of operations and our ability to pay dividends.

Our failure to maintain good relationships with our distributors, the loss or consolidation of our distributor base or the actions or inactions of our distributors could have an adverse effect on our results of operations and our ability to pay dividends.

        We depend on a network of truck equipment distributors to sell, install and service our products. Nearly all of these sales and service relationships are at will, so almost all of our distributors could discontinue the sale and service of our products at any time, and those distributors that primarily sell our products may choose to sell competing products at any time. Further, difficult economic or other circumstances could cause any of our distributors to discontinue their businesses. Moreover, if our distributor base were to consolidate or if any of our distributors were to discontinue their business, competition for the business of fewer distributors would intensify. If we do not maintain good relationships with our distributors, or if we do not provide product offerings and pricing that meet the needs of our distributors, we could lose a substantial amount of our distributor base. A loss of a substantial portion of our distributor base could cause our sales to decline significantly, which would have an adverse effect on our results of operations and ability to pay dividends.

        In addition, our distributors may not provide timely or adequate service to our end-users. If this occurs, our brand identity and reputation may be damaged, which would have an adverse effect on our results of operations and ability to pay dividends.

Lack of available financing options for our end-users or distributors may adversely affect our sales volumes.

        Our end-user base is highly concentrated among professional snowplowers, who comprise over 50% of our end-users, many of whom are individual landscapers who remove snow during the winter and landscape during the rest of the year, rather than large, well-capitalized corporations. These end-users often depend upon credit to purchase our products. If credit is unavailable on favorable terms or at all, our end-users may not be able to purchase our products from our distributors, which would in turn reduce sales and adversely affect our results of operations and ability to pay dividends.

        In addition, because our distributors, like our end-users, rely on credit to purchase our products, if our distributors are not able to obtain credit, or access credit on favorable terms, we may experience delays in payment or nonpayment for delivered products. Further, if our distributors are unable to obtain credit or access credit on favorable terms, they could experience financial difficulties or bankruptcy and cease purchases of our products altogether. Thus, if financing is unavailable on favorable terms or at all, our results of operations and ability to pay dividends would be adversely affected.

The price of steel, a commodity necessary to manufacture our products, is highly variable. If the price of steel increases, our gross margins could decline.

        Steel is a significant raw material used to manufacture our products. During 2011, 2010 and 2009, our steel purchases were approximately 15%, 13% and 18% of our revenue, respectively. The steel industry is highly cyclical in nature, and steel prices have been volatile in recent years and may remain

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volatile in the future. Steel prices are influenced by numerous factors beyond our control, including general economic conditions domestically and internationally, the availability of raw materials, competition, labor costs, freight and transportation costs, production costs, import duties and other trade restrictions. Steel prices are volatile and may increase as a result of increased demand from the automobile and consumer durable sectors. If the price of steel increases, our variable costs may increase. We may not be able to mitigate these increased costs through the implementation of permanent price increases or temporary invoice surcharges, especially if economic conditions remain weak and our distributors and end-users become more price sensitive. If we are unable to successfully mitigate such cost increases in the future, our gross margins could decline.

If petroleum prices increase, our results of operations could be adversely affected.

        Petroleum prices have fluctuated significantly in recent years. Prices and availability of petroleum products are subject to political, economic and market factors that are outside of our control. Political events in petroleum-producing regions as well as hurricanes and other weather-related events may cause the price of fuel to increase. If the price of fuel increases, the demand for our products may decline, which would adversely affect our financial condition and results of operations.

We depend on outside suppliers who may be unable to meet our volume and quality requirements, and we may be unable to obtain alternative sources.

        We purchase certain components essential to our snowplows and sand and salt spreaders from outside suppliers, including off-shore sources. Most of our key supply arrangements can be discontinued at any time. A supplier may encounter delays in the production and delivery of such products and components or may supply us with products and components that do not meet our quality, quantity or cost requirements. Additionally, a supplier may be forced to discontinue operations. Any discontinuation or interruption in the availability of quality products and components from one or more of our suppliers may result in increased production costs, delays in the delivery of our products and lost end-user sales, which could have an adverse effect on our business and financial condition.

        We have continued to increase the number of our off-shore suppliers. Our increased reliance on off-shore sourcing may cause our business to be more susceptible to the impact of natural disasters, war and other factors that may disrupt the transportation systems or shipping lines used by our suppliers, a weakening of the dollar over an extended period of time and other uncontrollable factors such as changes in foreign regulation or economic conditions. In addition, reliance on off-shore suppliers may make it more difficult for us to respond to sudden changes in demand because of the longer lead time to obtain components from off-shore sources. We may be unable to mitigate this risk by stocking sufficient materials to satisfy any sudden or prolonged surges in demand for our products. If we cannot satisfy demand for our products in a timely manner, our sales could suffer as distributors can cancel purchase orders without penalty until shipment.

We do not sell our products under long-term purchase contracts, and sales of our products are significantly impacted by factors outside of our control; therefore, our ability to estimate demand is limited.

        We do not enter into long-term purchase contracts with our distributors and the purchase orders we receive may be cancelled without penalty until shipment. Therefore, our ability to accurately predict future demand for our products is limited. Nonetheless, we attempt to estimate demand for our products for purposes of planning our annual production levels and our long-term product development and new product introductions. We base our estimates of demand on our own market assessment, snowfall figures, quarterly field inventory surveys and regular communications with our distributors. Because wide fluctuations in the level, timing and location of snowfall, economic conditions and other factors may occur, each of which is out of our control, our estimates of demand may not be accurate. Underestimating demand could result in procuring an insufficient amount of materials necessary for the

12

production of our products, which may result in increased production costs, delays in product delivery, missed sale opportunities and a decrease in customer satisfaction. Overestimating demand could result in the procurement of excessive supplies, which could result in increased inventory and associated carrying costs.

If we are unable to enforce, maintain or continue to build our intellectual property portfolio, or if others invalidate our intellectual property rights, our competitive position may be harmed.

        Our patents relate to snowplow mounts, assemblies, hydraulics, electronics and lighting systems as well as sand and salt spreader assemblies and our patent applications relate to each of the foregoing except for hydraulics and sand and salt spreader assemblies. When granted, each patent has a 17 year duration. The duration of the patents we currently possess range between one year and 17 years of remaining life. Our patent applications date from 2001 through 2011.

        We rely on a combination of patents, trade secrets and trademarks to protect certain of the proprietary aspects of our business and technology. We hold approximately 20 U.S. registered trademarks (including the trademarks WESTERN®, FISHER® and BLIZZARD®), 5 Canadian registered trademarks, 25 U.S. issued patents, 15 Canadian patents and two Chinese patents. Although we work diligently to protect our intellectual property rights, monitoring the unauthorized use of our intellectual property is difficult, and the steps we have taken may not prevent unauthorized use by others. In addition, in the event a third party challenges the validity of our intellectual property rights, a court may determine that our intellectual property rights may not be valid or enforceable. An adverse determination with respect to our intellectual property rights may harm our business prospects and reputation. Third parties may design around our patents or may independently develop technology similar to our trade secrets. The failure to adequately build, maintain and enforce our intellectual property portfolio could impair the strength of our technology and our brands, and harm our competitive position. Although we have no reason to believe that our intellectual property rights are vulnerable, previously undiscovered intellectual property could be used to invalidate our rights.

If we are unable to develop new products or improve upon our existing products on a timely basis, it could have an adverse effect on our business and financial condition.

        We believe that our future success depends, in part, on our ability to develop on a timely basis new technologically advanced products or improve upon our existing products in innovative ways that meet or exceed our competitors' product offerings. Continuous product innovation ensures that our consumers have access to the latest products and features when they consider buying snow and ice control equipment. Maintaining our market position will require us to continue to invest in research and development and sales and marketing. Product development requires significant financial, technological and other resources. We may be unsuccessful in making the technological advances necessary to develop new products or improve our existing products to maintain our market position. Industry standards, end-user expectations or other products may emerge that could render one or more of our products less desirable or obsolete. If any of these events occur, it could cause decreases in sales, a failure to realize premium pricing and an adverse effect on our business and financial condition.

We face competition from other companies in our industry, and if we are unable to compete effectively with these companies, it could have an adverse effect on our sales and profitability. Price competition among our distributors could negatively affect our market share.

        We primarily compete with regional manufacturers of snow and ice control equipment for light trucks. While we are the most geographically diverse company in our industry, we may face increasing competition in the markets in which we operate. In saturated markets, price competition may lead to a decrease in our market share or a compression of our margins, both of which would affect our

13

profitability. Moreover, current or future competitors may grow their market share and develop superior service and may have or may develop greater financial resources, lower costs, superior technology or more favorable operating conditions than we maintain. As a result, competitive pressures we face may cause price reductions for our products, which would affect our profitability or result in decreased sales and operating income. Additionally, saturation of the markets in which we compete or channel conflicts among our brands and shifts in consumer preferences may increase these competitive pressures or may result in increased competition among our distributors and affect our sales and profitability. In addition, price competition among the distributors that sell our products could lead to significant margin erosion among our distributors, which could in turn result in compressed margins or loss of market share for us. Management believes that, after ourselves, the next largest competitors in the market for snow and ice control equipment for light trucks are Northern Star Industries, Inc. (the manufacturer of the Boss brand of snow and ice control equipment) and Meyer Products LLC, respectively, and accordingly represent our primary competitors for market share.

We are subject to complex laws and regulations, including environmental and safety regulations that can adversely affect the cost, manner or feasibility of doing business.

        Our operations are subject to certain federal, state and local laws and regulations relating to, among other things, the generation, storage, handling, emission, transportation, disposal and discharge of hazardous and non-hazardous substances and materials into the environment, the manufacturing of motor vehicle accessories and employee health and safety. We cannot be certain that existing and future laws and regulations and their interpretations will not harm our business or financial condition. We currently make and may be required to make large and unanticipated capital expenditures to comply with environmental and other regulations, such as:

•

Applicable motor vehicle safety standards established by the National Highway Traffic Safety Administration;

•

Reclamation and remediation and other environmental protection; and

•

Standards for workplace safety established by the Occupational Safety and Health Administration.

        While we monitor our compliance with applicable laws and regulations and attempt to budget for anticipated costs associated with compliance, we cannot predict the future cost of such compliance. In 2011, the amount expended for such compliance was insignificant, but we could incur material expenses in the future in the event of future legislation changes or unforeseen events, such as a workplace accident or environmental discharge, or if we otherwise discover we are in non-compliance with an applicable regulation. In addition, under these laws and regulations, we could be liable for:

•

Product liability claims;

•

Personal injuries;

•

Investigation and remediation of environmental contamination and other governmental sanctions such as fines and penalties; and

•

Other environmental damages.

        Our operations could be significantly delayed or curtailed and our costs of operations could significantly increase as a result of regulatory requirements, restrictions or claims. We are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.

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Financial market conditions have had a negative impact on the return on plan assets for our pension plans, which may require additional funding and negatively impact our cash flows.

        Our pension expense and required contributions to our pension plan are directly affected by the value of plan assets, the projected rate of return on plan assets, the actual rate of return on plan assets and the actuarial assumptions we use to measure the defined benefit pension plan obligations. Due to the recent significant financial market downturn, the funded status of our pension plans has declined. As of December 31, 2011, our pension plans were underfunded by approximately $14.2 million. In 2011, contributions to our defined benefit pension plans were approximately $1.9 million. If plan assets continue to perform below expectations, future pension expense and funding obligations will increase, which would have a negative impact on our cash flows. Moreover, under the Pension Protection Act of 2006, it is possible that continued losses of asset values may necessitate accelerated funding of our pension plans in the future to meet minimum federal government requirements.

The statements regarding our industry, market positions and market share in this filing are based on our management's estimates and assumptions. While we believe such statements are reasonable, such statements have not been independently verified.

        Information contained in this Annual Report on Form 10-K concerning the snow and ice control equipment industry for light trucks, our general expectations concerning this industry and our market positions and other market share data regarding the industry are based on estimates our management prepared using end-user surveys, anecdotal data from our distributors and distributors that carry our competitors' products, our results of operations and management's past experience, and on assumptions made, based on our management's knowledge of this industry, all of which we believe to be reasonable. These estimates and assumptions are inherently subject to uncertainties, especially given the year-to-year variability of snowfall and the difficulty of obtaining precise information about our competitors, and may prove to be inaccurate. In addition, we have not independently verified the information from any third-party source and thus cannot guarantee its accuracy or completeness, although management also believes such information to be reasonable. Our actual operating results may vary significantly if our estimates and outlook concerning the industry, snowfall patterns, our market positions or our market shares turn out to be incorrect.

We are subject to product liability claims, product quality issues, and other litigation from time to time that could adversely affect our operating results or financial condition.

        The manufacture, sale and usage of our products expose us to a risk of product liability claims. If our products are defective or used incorrectly by our end-users, injury may result, giving rise to product liability claims against us. If a product liability claim or series of claims is brought against us for uninsured liabilities or in excess of our insurance coverage, and it is ultimately determined that we are liable, our business and financial condition could suffer. Any losses that we may suffer from any liability claims, and the effect that any product liability litigation may have upon the reputation and marketability of our products, may divert management's attention from other matters and may have a negative impact on our business and operating results. Additionally, we could experience a material design or manufacturing failure in our products, a quality system failure or other safety issues, or heightened regulatory scrutiny that could warrant a recall of some of our products. A recall of some of our products could also result in increased product liability claims. Any of these issues could also result in loss of market share, reduced sales, and higher warranty expense.

We are heavily dependent on our Chief Executive Officer and management team.

        Our continued success depends on the retention, recruitment and continued contributions of key management, finance, sale and marketing personnel, some of whom could be difficult to replace. Our success is largely dependent upon our senior management team, led by our Chief Executive Officer and

15

other key managers. The loss of any one or more of such persons could have an adverse effect on our business and financial condition.

Our indebtedness could adversely affect our operations, including our ability to perform our obligations and pay dividends.

        As of December 31, 2011, we had approximately $123 million of senior secured indebtedness and $70 million of borrowing availability under our revolving credit facility. We may also be able to incur substantial indebtedness in the future, including senior indebtedness, which may or may not be secured.

        Our indebtedness could have important consequences, including the following:

•

We could have difficulty satisfying our debt obligations, and if we fail to comply with these requirements, an event of default could result;

•

We may be required to dedicate a substantial portion of our cash flow from operations to required payments on indebtedness, thereby reducing the cash flow available to pay dividends or fund working capital, capital expenditures and other general corporate activities;

•

Covenants relating to our indebtedness may restrict our ability to make distributions to our stockholders;

•

Covenants relating to our indebtedness may limit our ability to obtain additional financing for working capital, capital expenditures and other general corporate activities, which may limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

•

We may be more vulnerable to general adverse economic and industry conditions;

•

We may be placed at a competitive disadvantage compared to our competitors with less debt; and

•

We may have difficulty repaying or refinancing our obligations under our senior credit facilities on their respective maturity dates.

        If any of these consequences occur, our financial condition, results of operations and ability to pay dividends could be adversely affected. This, in turn, could negatively affect the market price of our common stock, and we may need to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot assure you that any refinancing would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds that may be realized from those sales, or that additional financing could be obtained on acceptable terms, if at all.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly and could impose adverse consequences.

        Certain of our borrowings, including our term loan and any revolving borrowings under our senior credit facilities, are at variable rates of interest and expose us to interest rate risk. In addition, the interest rate on any revolving borrowings is subject to an increase in the interest rate if the average daily availability under our revolving credit facility falls below a certain threshold. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows would correspondingly decrease.

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Our senior credit facilities impose restrictions on us, which may also prevent us from capitalizing on business opportunities and taking certain corporate actions. One of these facilities also includes minimum availability requirements, which if unsatisfied, could result in liquidity events that may jeopardize our business.

        Our senior credit facilities contain, and future debt instruments to which we may become subject may contain, covenants that limit our ability to engage in activities that could otherwise benefit our company. Under the credit facilities as modified in April 2011, these covenants include restrictions on our ability to:

•

incur, assume or permit to exist additional indebtedness or contingent obligations;

•

incur liens and engage in sale and leaseback transactions;

•

make loans and investments in excess of agreed upon amounts;

•

declare dividends, make payments or redeem or repurchase capital stock in excess of agreed upon amounts and subject to certain other limitations;

•

engage in mergers, acquisitions and other business combinations;

•

prepay, redeem or purchase certain indebtedness or amend or alter the terms of our indebtedness;

•

sell assets;

•

make further negative pledges;

•

create restrictions on distributions by subsidiaries;

•

change our fiscal year;

•

engage in activities other than, among other things, incurring the debt under our new senior credit facilities and the activities related thereto, holding our ownership interest in DDI LLC, making restricted payments, including dividends, permitted by our new senior credit facilities and conducting activities related to our status as a public company;

•

amend or waive rights under certain agreements;

•

transact with affiliates or our stockholders; and

•

alter the business that we conduct.

        Our amended revolving credit facility also includes limitations on capital expenditures and requires that if we fail to maintain the greater of $8,750,000 and 12.5% of the revolving commitments in borrowing availability, we must comply with a fixed charge coverage ratio test. In addition, if a liquidity event occurs because our borrowing availability is less than the greater of $10,500,000 and 15% of the aggregate revolving commitments (or an event of default occurs and is continuing), subject to certain limited cure rights, all proceeds of our accounts receivable and other collateral will be applied to reduce obligations under our amended revolving credit facility, jeopardizing our ability to meet other obligations. Our ability to comply with the covenants contained in our senior credit facilities or in the agreements governing our future indebtedness, and our ability to avoid liquidity events, may be affected by events, or our future performance, which are subject to factors beyond our control, including prevailing economic, financial, industry and weather conditions, such as the level, timing and location of snowfall and general economic conditions in the snowbelt regions of North America. A failure to comply with these covenants could result in a default under our senior credit facilities, which could prevent us from paying dividends, borrowing additional amounts and using proceeds of our inventory and accounts receivable, and also permit the lenders to accelerate the payment of such debt. If any of our debt is accelerated or if a liquidity event (or event of default) occurs that results in collateral proceeds being applied to reduce such debt, we may not have sufficient funds available to repay such

17

debt and our other obligations, in which case, our business could be halted and such lenders could proceed against any collateral securing that debt. Further, if the lenders accelerate the payment of the indebtedness under our senior credit facilities, our assets may not be sufficient to repay in full the indebtedness under our senior credit facilities and our other indebtedness, if any. We cannot assure you that these covenants will not adversely affect our ability to finance our future operations or capital needs to pursue available business opportunities or react to changes in our business and the industry in which we operate.

Provisions of Delaware law and our charter documents could delay or prevent an acquisition of us, even if the acquisition would be beneficial to you.

        Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. These provisions include:

•

the absence of cumulative voting in the election of our directors, which means that the holders of a majority of our common stock may elect all of the directors standing for election;

•

the ability of our Board of Directors to issue preferred stock with voting rights or with rights senior to those of our common stock without any further vote or action by the holders of our common stock;

•

the division of our Board of Directors into three separate classes serving staggered three-year terms;

•

the ability of our stockholders to remove our directors is limited to cause and only by the vote of at least 66²/3% of the outstanding shares of our common stock;

•

the prohibition on our stockholders from acting by written consent and calling special meetings;

•

the requirement that our stockholders provide advance notice when nominating our directors or proposing business to be considered by the stockholders at an annual meeting of stockholders; and

•

the requirement that our stockholders must obtain a 66²/3% vote to amend or repeal certain provisions of our certificate of incorporation.

        We are also subject to Section 203 of the Delaware General Corporation Law, which, subject to certain exceptions, prohibits us from engaging in any business combination with any interested stockholder, as defined in that section, for a period of three years following the date on which that stockholder became an interested stockholder. This provision, together with the provisions discussed above, could also make it more difficult for you and our other stockholders to elect directors and take other corporate actions, and could limit the price that investors might be willing to pay in the future for shares of our common stock.

Our dividend policy may limit our ability to pursue growth opportunities.

        If we continue to pay dividends at the level contemplated by our dividend policy, as in effect on the date of this filing, or if we increase the level of our dividend payments in the future, we may not retain a sufficient amount of cash to finance growth opportunities, meet any large unanticipated liquidity requirements or fund our operations in the event of a significant business downturn. In addition, because a significant portion of cash available will be distributed to holders of our common stock under our dividend policy, our ability to pursue any material expansion of our business, including through acquisitions, increased capital spending or other increases of our expenditures, will depend more than it otherwise would on our ability to obtain third party financing. We cannot assure you that such financing will be available to us at all, or at an acceptable cost. If we are unable to take timely

18

advantage of growth opportunities, our future financial condition and competitive position may be harmed, which in turn may adversely affect the market price of our common stock.

Item 1B.    Unresolved Staff Comments

        Not applicable.

Item 2.    Properties

        We are headquartered in Milwaukee, WI and currently have manufacturing facilities in Milwaukee, WI, and Rockland, ME. We closed our Johnson City, TN facility in August 2010, and are currently holding it for sale. Additionally, we operate a sourcing office in China. We operate as a single segment.

Item 3.    Legal Proceedings

        In the ordinary course of business, we are engaged in various litigation primarily including product liability and intellectual property disputes. However, management does not believe that any current litigation is material to our operations or financial position. In addition, we are not currently party to any environmental-related claims or legal matters.

Item 4.    Mine Safety Disclosures

        Not applicable.

Executive Officers of the Registrant

        Our executive officers as of December 31, 2011 were as follows:

Name	Age		Position
James Janik		55		President and Chief Executive Officer; Director
Robert McCormick		51		Executive Vice President, Chief Financial Officer and Secretary
Mark Adamson		53		Vice President, Sales and Marketing
Keith Hagelin		51		Vice President, Operations

James Janik has been serving as our President and Chief Executive Officer since 2000 and as a director since 2004. Mr. Janik was General Manager of our Western Products division from 1994 to 2000 and Vice President of Marketing and Sales from 1998 to 2000. Prior to joining us, Mr. Janik was the Vice President of Marketing and Sales of Sunlite Plastics Inc., a custom extruder of thermoplastic materials, for two years. During the 11 prior years, Mr. Janik held a number of key marketing, sales and production management positions for John Deere Company.

Robert McCormick has been serving as our Executive Vice President, Chief Financial Officer since September 2004 and as our Secretary since May 2005. Mr. McCormick served as our Assistant Secretary from September 2004 to May 2005 and as our Treasurer from September 2004 through December 2010. Prior to joining us, Mr. McCormick served as President and Chief Executive Officer of Xymox Technology Inc. from 2001 to 2004. Prior to that, Mr. McCormick served in various capacities in the Newell Rubbermaid Corporation, including President from 2000 to 2001 and Vice President Group Controller from 1997 to 2000. While Mr. McCormick served as President, he was responsible for Newell's Mirro / Wearever Cookware, and as Vice President Group Controller, he was responsible for worldwide strategic and financial responsibilities for 12 company divisions with sales of over two billion dollars.

19

Mark Adamson has been serving as our Vice President, Sales and Marketing since 2007. Prior to joining us, Mr. Adamson held numerous senior level management positions with industry leaders in the grounds care industry, including John Deere Company from 1980 to 2002 and Gehl Corporation from 2002 to 2007. From 2003 to 2005, he was the Manager, Regional Sales & Distribution of Gehl Company, directing the sales and marketing activities of certain sales field managers in the northeastern United States responsible for Gehl product sales and rental., and from 2005 to 2007, he was the Director, Training and Customer Support, where he directed the aftermarket and training activities of five departments and thirty-two individuals responsible for Gehl and Mustang products worldwide. From 1980 to 2002, Mr. Adamson held several senior level management positions with John Deere Company.

Keith Hagelin has been serving as our Vice President, Operations since 2009, having previously spent twelve years in progressive roles with us, including Plant Manager and General Manager—Rockland and most recently Vice President of Manufacturing from 2007 to 2009. Prior to joining Douglas, Mr. Hagelin spent 13 years at Raytheon Corporation in various manufacturing, production and new product development roles.

        Executive officers are elected by, and serve at the discretion of, the Board of Directors. There are no family relationships between any of our directors or executive officers.

PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

        The Company's common stock is listed, and principally traded, on the NYSE. The Company's symbol for its common stock is "PLOW." The following table sets forth the range of high and low per share sales prices of the Company's common stock and per share dividends for the periods indicated. As the company was not listed until it listed its common stock in the second quarter 2010 in connection with the IPO, no market price data is available for the first quarter of 2010.

	2011						2010
	Price Range						Price Range
	High		Low		Dividends		High		Low		Dividends
Fourth Quarter	$	15.57	$	12.50	$	0.21	$	16.84	$	11.97	$	0.20
Third Quarter		16.27		11.38		0.20		13.00		10.20		0.18
Second Quarter		16.68		14.10		0.20		12.54		10.93		—
First Quarter		16.96		13.48		0.57		—		—		—

        At March 13, 2012, there were 24 record holders of our Common Stock.

        In accordance with the Company's dividend policy, dividends are declared and paid quarterly at the discretion of the board of directors. Additionally, special dividends may be declared and paid at the discretion of the board of directors. The first quarterly dividend to common shareholders subsequent to IPO was made in the third quarter of 2010 for $0.1825 per share paid on September 30, 2010. Additionally, the Company paid a $0.20 per share quarterly dividend on December 31, 2010. In the first quarter of 2011, the Company both declared and paid a special dividend of $0.37 in addition to a stated dividend of $0.20. In both the second and third quarters of 2011, the Company both declared and paid a stated dividend of $0.20 per share. In the fourth quarter of 2011, the Company increased its annual stated dividend from $0.80 to $0.82 and both declared and paid a dividend of $0.205 per share.

        The Company's senior credit facilities include certain negative and operating covenants, including restrictions on its ability to pay dividends, and other customary covenants, representations and warranties and events of default. The senior credit facilities entered into and recorded by the

20

Company's subsidiaries significantly restrict its subsidiaries from paying dividends and otherwise transferring assets to Douglas Dynamics, Inc. The terms of the Company's revolving credit facility specifically restrict the Company from paying dividends if a minimum availability under the revolving credit facility, the greater of $10.5 million and 15% of the aggregate revolving commitments at the time of determination, is not maintained. Additionally, both senior credit facilities restrict the Company from paying dividends above certain levels not to exceed $5.25 million in any fiscal quarter of 2011 calculated without regard to a one-time special dividend not to exceed $8.0 million, $5.5 million in any fiscal quarter of 2012, $5.75 million in any fiscal quarter of 2013, $6.0 million in any fiscal quarter of 2014, $6.25 million in any fiscal quarter of 2015 and $6.5 million in any fiscal quarter of 2016 and thereafter or at all if an event of default has occurred. These restrictions would affect the Company indirectly since the Company relies principally on distributions from its subsidiaries to have funds available for the payment of dividends.

Securities Authorized for Issuance under Equity Compensation Plans

        The following table sets forth information with respect to compensation plans under which equity securities of the Company are authorized for issuance as of December 31, 2011.

Equity Compensation Plan Information

PLAN CATEGORY	Number of securities to be issued upon the exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders:(1)
2010 Stock Incentive Plan		20,612	$	—		1,779,602
2004 Stock Incentive Plan		37,240	$	4.21		—
Equity compensation plans not approved by security holders		—		—		—
Total		57,852	$	2.71		1,779,602

(1)

Includes the Company's 2010 Stock Incentive Plan and 2004 Stock Incentive Plan, both of which were approved by our stockholders prior to our IPO.

        The following information in this Item 5 of this Annual Report on Form 10-K is not deemed to be "soliciting material" or to be "filed" with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate it by reference into such a filing.

        The graph set forth below compares the cumulative total stockholder return on our common stock between May 5, 2010 (the date of our initial public offering, or IPO) and December 31, 2011, with the cumulative total return of The Dow Jones Industrial Average and Russell 2000 Index. This graph assumes the investment of $100 on May 5, 2010 in our common stock at our IPO offering price of

21

$11.25 per share, the Dow Jones Industrial Average and Russell 2000 Index, and assumes the reinvestment of dividends.

        We did not sell any equity securities during 2011, in offerings that were not registered under the Securities Act of 1933.

        We did not make any purchases of equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 during 2011.

Item 6.    Selected Consolidated Financial Data

        The following table sets forth our selected historical consolidated financial data for the periods and at the dates indicated. The selected historical consolidated financial data as of December 31, 2010 and 2011 and for the three years in the periods ended December 31, 2011 are derived from our audited consolidated financial statements.

        The selected historical consolidated financial data as of December 2007, 2008 and 2009 and for the years ended December 31, 2007 and 2008 is derived from our historical financial statements not included in this Annual Report on Form 10-K.

        The selected consolidated financial data presented below should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this document.

	As of December 31,
	2007		2008		2009		2010		2011
	(in thousands)
Selected Balance Sheet Data
Cash and cash equivalents	$	35,519	$	53,552	$	69,073	$	20,149	$	39,432
Total current assets		91,491		115,414		133,534		88,972		103,462
Total assets		375,649		391,264		404,619		348,043		359,017
Total current liabilities		19,013		23,858		25,187		15,976		32,611
Total debt		234,363		233,513		232,663		121,154		122,937
Total liabilities		283,705		293,203		296,395		178,550		195,628
Total redeemable stock and shareholders' equity		91,944		98,061		108,224		169,493		163,389

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	For the year ended December 31,
	2007			2008		2009		2010		2011
	(in thousands, except per share data)
Consolidated Statement of Operations Data
Total sales	$	140,065		$	180,108	$	174,342	$	176,795	$	208,798
Gross profit		42,816			62,197		57,078		60,301		71,817
Income from operations		20,636			35,636		29,439		21,408		40,181
Income tax expense (benefit)		(749	)		6,793		3,986		872		11,332
Net income (loss)		(1,057	)		11,471		9,843		1,662		19,040
Net income (loss) per basic share, as adjusted(1)	$	(0.07	)	$	0.79	$	0.68	$	0.09	$	0.87
Net income (loss) per diluted share, as adjusted(1)	$	(0.07	)	$	0.77	$	0.67	$	0.09	$	0.85

	For the year ended December 31,
	2007		2008		2009		2010		2011
	(in thousands)
Other Data
Adjusted EBITDA	$	32,745	$	47,742	$	45,180	$	47,345	$	52,461
Capital expenditures(2)	$	1,049	$	3,160	$	8,200	$	3,009	$	2,373

(1)

Represents net income (loss) per share after giving effect to a 23.75-for-one stock split of our common stock that occurred in conjunction with the initial public offering.

(2)

Capital expenditures for the year ended December 31, 2009 include $5 million related to the investments in our Milwaukee, Wisconsin and Rockland, Maine manufacturing facilities to support the closure of our Johnson City, Tennessee manufacturing facility.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2009, 2010 and 2011 should be read together with our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategies for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in, or implied by, the forward-looking statements contained in this Annual Report on Form 10-K.

Results of Operations

Overview

        In assessing our results of operations in a given period, one of the primary factors we consider is the level of snowfall experienced within the prior snow season. We typically compare the snowfall level in a given period both to the snowfall level in the prior season and to those snowfall levels we consider to be average. References to "average snowfall" levels below refer to the aggregate average inches of snowfall recorded in 66 cities in 26 snow-belt states in the United States during the annual snow season, from October 1 through March 31, from 1980 to 2011. During this period, snowfall averaged 3,038 inches, with the low in such period being 2,094 inches and the high being 4,502 inches.

23

        During the six-month snow seasons ending March 31, 2009, 2010 and 2011, we experienced above average snowfall (approximately 20%, 18% and 37% above average during the six months ending March 31, 2009, 2010 and 2011 snow seasons, respectively). Despite above average snowfalls during these periods, we believe that the economic downturn resulted in lower sales of snowplows and sand and salt spreaders, but increased sales of our parts and accessories as a percentage of total net sales during the years ended December 31, 2009, 2010 and 2011 as compared to prior periods. We experienced lower equipment and higher parts and accessories sales as weakened economic conditions tend to cause our end-users to delay purchase of replacement snow and ice control equipment and instead repair their existing equipment.

        Sales of parts and accessories for 2011 and 2010 were $31.0 million and $25.0 million, respectively, or approximately 51.2% and 21.9% higher than average annual parts and accessories sales over the preceding ten years (from 2002 to 2007, sales of parts and accessories ranged from approximately $9 million to $19 million per year, with an average of approximately $15 million). Management believes the increased sales of parts and accessories are largely a result of the deferral of new equipment purchases due to the severe economic downturn that began in 2008 from which conservative re-ordering has continued subsequently, as many end-users chose to extend the life of their existing equipment beyond the typical replacement cycle. In 2011, unit sales increased 12.8% which was the first significant increase since 2008, which management believes is a direct result of higher than normal snowfall in the six month snow season ending March 31, 2011. Management believes that absent the recent economic downturn, equipment sales in 2011, 2010 and 2009 would have been considerably higher due to the high levels of snowfall during the year. Although equipment unit sales increased significantly in 2011, they were only 1% above the immediately preceding ten-year average despite snowfall levels in snow season ending March 31, 2011 that were approximately 26% above the immediately preceding ten-year average (excluding units sold by Blizzard Corporation prior to its acquisition by us in November 2005). Equipment unit sales in 2010 remained 12% below the immediately preceding ten-year average, despite the fact that snowfall levels in snow season ending March 31, 2010 were approximately 13% above the immediately preceding ten-year average (excluding units sold by Blizzard Corporation prior to its acquisition by us in November 2005). Management believes this deferral of new equipment purchases could result in an elevated multi-year replacement cycle as the economy recovers.

        The following table shows our sales of snow and ice control equipment and related parts and accessories as a percentage of net sales for the periods indicated. During the years ended December 31, 2009, 2010 and 2011, we sold 44,444, 45,054 and 50,801 units of snow and ice control equipment, respectively.

	Year Ended December 31,
	2009			2010			2011
Equipment		85	%		86	%		85	%
Parts and accessories		15	%		14	%		15	%

        The following table sets forth, for the periods presented, the consolidated statements of income 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 income data for the years ended December 31, 2009, 2010 and 2011 have been derived from our audited consolidated financial statements. The information contained in the table below should be read in conjunction with our

24

consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.

	For the year ended December 31,
	2009			2010			2011
	(in thousands)
Net sales	$	174,342		$	176,795		$	208,798
Cost of sales		117,264			116,494			136,981
Gross profit		57,078			60,301			71,817
Selling, general, and administrative expense		20,085			26,509			26,389
Intangibles amortization		6,161			6,001			5,201
Management fees-related party		1,393			6,383			46
Income from operations		29,439			21,408			40,181
Interest expense, net		(15,520	)		(10,943	)		(8,918	)
Loss on extinguishment of debt		—			(7,967	)		(673	)
Other income (expense), net		(90	)		36			(218	)
Income before taxes		13,829			2,534			30,372
Income tax expense		3,986			872			11,332
Net income	$	9,843		$	1,662		$	19,040

        The following table sets forth, for the periods indicated, the percentage of certain items in our consolidated statement of income data, relative to net sales:

	For the year ended December 31,
	2009			2010			2011
	(in thousands)
Net sales		100.0	%		100.0	%		100.0	%
Cost of sales		67.3	%		65.9	%		65.6	%
Gross profit		32.7	%		34.1	%		34.4	%
Selling, general, and administrative expense		11.5	%		15.0	%		12.7	%
Intangibles amortization		3.5	%		3.4	%		2.5	%
Management fees-related party		0.8	%		3.6	%		0.0	%
Income from operations		16.9	%		12.1	%		19.2	%
Interest expense, net		(8.9	)%		(6.2	)%		(4.3	)%
Loss on extinguishment of debt		0.0	%		(4.5	)%		(0.3	)%
Other income (expense), net		(0.1	)%		0.0	%		(0.1	)%
Income before taxes		7.9	%		1.4	%		14.5	%
Income tax expense		2.3	%		0.5	%		5.4	%
Net income		5.6	%		0.9	%		9.1	%

25

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

        Net Sales.    Net sales were $208.8 million for the year ended December 31, 2011 compared to $176.8 million in 2010, an increase of $32.0 million, or 18.1%. This increase was primarily driven by increases of $26.0 million in sales of snow and ice control equipment and $6.0 million in parts and accessories sales. The increase in sales of snow and ice control equipment for the year ended December 31, 2011 was attributable to (1) an increase in sales volume of snow and ice control equipment of $19.4 million, or 12.8%, as compared to the prior year and (2) price increases that we implemented in the third quarter of 2010 and that extended throughout the remainder of 2010 and 2011. Additionally, we implemented a temporary one percent surcharge in both the second and third quarters of 2011 due to inflationary costs due to increases in costs of commodities, while no such surcharges existed in 2010 and we increased prices by three percent effective in the fourth quarter of 2011. The increase in sales volume was largely a result of the above average snow season ending March 31, 2011. Net sales of parts and accessories increased in the year ended December 31, 2011 from the year ended December 31, 2010 by 24.0%, from $25.0 million to $31.0 million. Net sales of parts and accessories remained comparatively high in 2011, exceeding the preceding ten-year average by approximately 51.2%. As discussed above, the comparatively strong sales of parts and accessories was due in large part to above average snowfall resulting in increased equipment usage and subsequent repair. Additionally, equipment sales were only slightly higher (1% above the immediately preceding ten-year average), as many end-users continue to repair their existing snow and ice control equipment instead of purchasing new equipment.

        Cost of Sales.    Cost of sales was $137.0 million for the year ended December 31, 2011 compared to $116.5 million in 2010, an increase of $20.5 million, or 17.6%. This increase was driven primarily by increased volume as cost of sales as a percentage of total sales did not fluctuate significantly. Cost of sales as a percentage of net sales decreased slightly from 65.9% for the year ended December 31, 2010 to 65.6% for the year ended December 31, 2011. Negative inflationary commodity experience throughout the year was more than offset by lower costs per unit resulting from increases in volume of equipment units and parts and accessories. As a percentage of cost of sales, fixed and variable costs were approximately 15% and 85%, respectively, for the year ended December 31, 2011 versus approximately 19% and 81%, respectively for the year ended December 31, 2010.

        Gross Profit.    Gross profit was $71.8 million for the year ended December 31, 2011 compared to $60.3 million in 2010, an increase of $11.5 million, or 19.1%, due to the increase in net sales volume described above under "—Net Sales" and "—Cost of Sales." As a percentage of net sales, gross profit increased from 34.1% for the year ended December 31, 2010 to 34.4% for the corresponding period in 2011, as a result of the factors discussed above under "—Net Sales" and "—Cost of Sales."

        Selling, General and Administrative Expense.    Selling, general and administrative expenses, including intangible asset amortization and management fees, were $31.6 million for the year ended December 31, 2011 compared to $38.9 million for the year ended December 31, 2010, a decrease of $7.3 million, or 18.7%, driven by non-recurring expenses incurred at the time of the IPO in 2010. The non-recurring charges associated with the IPO totaled $8.5 million, and were comprised of the buyout of the management services agreement at $5.8 million, compensation expense associated with net exercises of stock options totaling $1.7 million and the expense and payment of cash bonuses under the our liquidity bonus plan of $1.0 million. Additionally, in 2010 there was non-recurring compensation expense associated with net exercises of stock options subsequent to the IPO totaling $1.2 million. In addition, the closure costs associated with the Johnson City facility were $0.7 million in the prior year. Amortization expense decreased $0.8 million compared to 2010 due to certain intangible assets becoming fully amortized. Additionally, contributing to the reduction, in 2011, we spent $0.9 million less on legal and consulting fees compared to 2010 in order to defend patents and explore potential acquisitions. Meanwhile, offsetting the decreases, in 2011 we incurred higher incentive based

26

compensation of $2.1 million due to better operating results. Recurring stock based compensation increased $0.8 million compared to 2010 due to a full year as a public company in the current year. We spent $1.3 million in 2011 on offering costs to allow our former principal stockholders to dispose of their remaining holdings in our common stock. Finally, health insurance costs increased $0.6 million in the year ended December 31, 2011 compared to 2010. As a percentage of net sales, selling, general and administrative expenses, including intangibles amortization and management fees, decreased from 22.0% for the year ended December 31, 2010 to 15.2% for the corresponding period in 2011 due to items discussed above.

        Interest Expense.    Interest expense was $8.9 million for the year ended December 31, 2011 compared to $10.9 million in the corresponding period in 2010, a decrease of $2.0 million. This decrease was due to less interest expense as a result of the redemption of our 7³/4% Senior Notes due 2012 ("Senior Notes") with proceeds from the IPO, additional borrowings under our senior credit facilities and cash on hand. Additionally, interest expense was lower for year ending December 31, 2011 compared to 2010 as we incurred a favorable rate as a result of the April 2011 refinancing.

        Loss on Extinguishment of Debt.    Loss on extinguishment of debt totaling $0.7 million for the year ended December 31, 2011 was entirely driven by our entry into a new term loan facility resulting in a significant modification of our debt which resulted in the write off of unamortized capitalized deferred financing costs of $0.3 million and write off of unamortized debt discount of $0.3 million. Loss on extinguishment of debt totaling $8.0 million for the year ended December 31, 2010 was entirely driven by costs associated with the amendment of our senior credit facilities and the redemption of the Senior Notes, including both the call premium on the redemption of our Senior Notes, and the write-off of unamortized deferred financing costs relating to the redemption of our Senior Notes and the amendment of our senior credit facilities.

        Income Taxes.    Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The largest item affecting deferred taxes is the difference between book and tax amortization of goodwill and other intangibles amortization. Our effective combined federal and state tax rate for 2011 was 37.3% compared to 34.4% for 2010. The effective tax rate for the year ended December 31, 2011 is higher than 2010 due to an increase in federal rate from 34.0% in year ending December 31, 2010 compared to 35.0% for the year ending December 31, 2011.

        Net Income.    Net income for the year ended December 31, 2011 was $19.0 million compared to net income of $1.7 million for the corresponding period in 2010, an increase of $17.3 million. This increase was driven by the factors described above, and primarily by the non-recurring charges associated with the IPO incurred in 2010.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

        Net Sales.    Net sales were $176.8 million for the year ended December 31, 2010 compared to $174.3 million in 2009, an increase of $2.5 million, or 1.4%. This increase was primarily driven by a $4.3 million increase in sales of snow and ice control equipment, slightly offset by a $1.9 million decrease in parts and accessories sales. The increase in sales of snow and ice control equipment for the year ended December 31, 2010 was attributable to (1) an increase in sales volume of snow and ice control equipment of $2.1 million, or 1.4%, as compared to the prior year and (2) price increases that we implemented in the second quarter of 2010 and that extended throughout 2010. The 1.4% increase in sales volume was largely a result of strengthening economic conditions towards the end of 2010 which we believed led to lower parts and accessories sales compared to 2009. However, compared to a ten year historical average, parts and accessories sales were still higher than average, while equipment sales were lower than average, as many end-users continue to repair their existing snow and ice control equipment instead of purchasing new equipment. Net sales of parts and accessories declined in the year

27

ended December 31, 2010 from the year ended December 31, 2009 by 7.0%, from $26.9 million to $25.0 million. Notwithstanding this decline, net sales of parts and accessories remained comparatively high in 2010, exceeding the preceding ten-year average by approximately 34.4%. As discussed above, the comparatively strong sales of parts and accessories was due in large part to the continued downturn in general economic conditions and local economic conditions in the snowbelt regions, which we believed led many of our end-users to repair their existing snow and ice control equipment instead of purchasing new equipment.

        Cost of Sales.    Cost of sales was $116.5 million for the year ended December 31, 2010 compared to $117.3 million in 2009, a decrease of $0.8 million, or 0.7%. This decrease was driven primarily by reduced costs due to material cost savings as steel costs were lower in 2010 as compared to 2009. Steel purchases were approximately 15% and 18% of our sales revenue for the years ending December 31, 2010 and 2009, respectively. Lower steel costs were slightly offset by increases in snow and ice control equipment unit volume as discussed above. Costs of sales as a percentage of net sales decreased from 67.3% for the year ended December 31, 2009 to 65.9% for the year ended December 31, 2010 as a result of the material cost savings as discussed above. As a percentage of cost of sales, fixed and variable costs were approximately 19% and 81%, respectively, for the year ended December 31, 2010 versus approximately 17% and 83%, respectively for the year ended December 31, 2009.

        Gross Profit.    Gross profit was $60.3 million for the year ended December 31, 2010 compared to $57.1 million in 2009, an increase of $3.2 million, or 5.6%, due to the increase in net sales described above under "—Net Sales" And the reduction in material costs as described under "—Cost of Sales." As a percentage of net sales, gross profit increased from 32.7% for the year ended December 31, 2009 to 34.1% for the corresponding period in 2010, as a result of the factors discussed above under "—Net Sales" and "—Cost of Sales."

        Selling, General and Administrative Expense.    Selling, general and administrative expenses, including intangible asset amortization and management fees, were $38.9 million for the year ended December 31, 2010 compared to $27.6 million for the year ended December 31, 2009, an increase of $11.3 million, or 40.9%, driven by non-recurring expenses incurred at the time of the IPO. The non-recurring charges associated with the IPO totaled $8.5 million, and were comprised of the buyout of the management services agreement at $5.8 million, compensation expense associated with net exercises of stock options totaling $1.7 million and the expense and payment of cash bonuses under our liquidity bonus plan of $1.0 million. Additionally, there was non-recurring compensation expense associated with net exercises of stock options subsequent to the IPO totaling $1.2 million. We also spent $1.3 million more in 2010 on defending our patents compared to 2009. Finally, the closure costs associated with the Johnson City facility increased $0.4 million compared to the prior year. As a percentage of net sales, selling, general and administrative expenses, including intangibles amortization and management fees, increased from 15.8% for the year ended December 31, 2009 to 22.0% for the corresponding period in 2010 due to the non-recurring charges discussed above.

        Interest Expense.    Interest expense was $10.9 million for the year ended December 31, 2010 compared to $15.5 million in the corresponding period in 2009, a decrease of $4.6 million. This decrease was due to less interest expense as a result of the redemption of our 7³/4% Senior Notes due 2012 ("Senior Notes") with proceeds from the IPO, additional borrowings under our senior credit facilities and cash on hand.

        Loss on Extinguishment of Debt.    Loss on extinguishment of debt totaling $8.0 million for the year ended December 31, 2010 was entirely driven by costs associated with the amendment of our senior credit facilities and the redemption of the Senior Notes, including both the call premium on the redemption of our Senior Notes, and the write-off of unamortized deferred financing costs relating to the redemption of our Senior Notes and the amendment of our senior credit facilities.

28

        Income Taxes.    Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The largest item affecting deferred taxes is the difference between book and tax amortization of goodwill and other intangibles amortization. Our effective combined federal and state tax rate for 2010 was 34.4% compared to 28.8% for 2009. The effective tax rate for the year ended December 31, 2010 is higher than 2009 due to state net operating loss allowances ("NOLs") related to the closure of the Johnson City, Tennessee facility. Additionally, the 2009 effective rate was lower due to the release of a valuation allowance for Wisconsin NOLs in the first quarter of 2009 due to a tax law change in the state of Wisconsin resulting in the ability to utilize the NOLs in future periods.

        Net Income.    Net income for the year ended December 31, 2010 was $1.7 million compared to net income of $9.8 million for the corresponding period in 2009, a decrease of $8.1 million, or 82.7%. This decrease was driven by the factors described above, and primarily by the non-recurring charges associated with the IPO.

Non-GAAP Financial Measures

        This Annual Report on Form 10-K contains financial information calculated other than in accordance with U.S. generally accepted accounting principles ("GAAP").

        These non-GAAP measures include:

•

Free cash flow;

•

Adjusted net income; and

•

Adjusted EBITDA.

        These non-GAAP disclosures should not be construed as an alternative to the reported results determined in accordance with GAAP.

        Free cash flow (as defined below) for the year ended December 31, 2011 was $45.4 million compared to $12.8 million in the corresponding period in 2010, an increase in cash provided of $32.6 million, or 255.2%. The increase in cash provided is primarily a result of $32.0 million less cash used by operating activities, as discussed below under Liquidity and Capital Resources. In addition to the changes in cash used by operating activities, capital expenditures decreased by $0.6 million. In 2010, there were higher capital expenditures to accommodate the increased production demands in Milwaukee and Rockland because of the closure of our Johnson City, TN manufacturing plant in the first half of the year.

        Free cash flow is a non-GAAP financial measure, which we define as net cash provided by 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 and cash flow provided by operations. We believe that free cash flow represents our ability to generate additional cash flow from our business operations.

        The following table reconciles net cash provided by operating activities, a GAAP measure, to free cash flow, a non-GAAP measure.

	For the year ended December 31,
	2011			2010			2009
	(in thousands)
Net cash provided by operating activities	$	47,728		$	15,777		$	25,571
Acquisition of property and equipment		(2,373	)		(3,009	)		(8,200	)
Free cash flow	$	45,355		$	12,768		$	17,371

29

        Adjusted net income represents net income as determined under GAAP, excluding certain expenses incurred at the time of our IPO in 2010 (namely the buyout of our management services agreement, loss on extinguishment of debt, stock based compensation expense associated with the net exercise of stock options and the payment of cash bonuses under our liquidity bonus plan); certain expenses incurred at the time of our secondary offering in 2011; costs incurred to pursue acquisitions and a loss on extinguishment of debt incurred in 2011. We believe that the presentation of adjusted net income for the years ended December 30, 2011 and December 30, 2010 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.

        The following table presents a reconciliation of net income, the most comparable GAAP financial measure, to adjusted net income for the years ending December 31, 2011 and December 31, 2010.

	Years Ended
(in millions)	December 31, 2011		December 31, 2010
Net Income—(GAAP)	$	19.0	$	1.7
Addback non-recurring expenses, net of tax at 37.0% and 38.0%, for 2011 and 2010, respectively:
—Buyout of the management services agreement		—		3.6
—Loss on extinguishment of debt		0.4		4.9
—Liquidity bonus payment		—		0.6
—Non-recurring stock based compensation expense		—		1.9
—Acquisition costs		0.6		—
—Offering costs		0.8		—
Adjusted Net Income—(non-GAAP)	$	20.8	$	12.7

        Adjusted EBITDA represents net income before interest, taxes, depreciation and amortization, as further adjusted for certain non-recurring charges related to the closure of our Johnson City, Tennessee manufacturing facility and certain non-recurring legal and consulting fees, as well as management fees paid by us to affiliates of our principal stockholders, stock based compensation, payment of cash bonuses under our liquidity bonus plan, loss on extinguishment of debt and offering costs. 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.

        Adjusted EBITDA for the year ended December 31, 2011 was $52.5 million compared to $47.3 million in the corresponding period in 2010, an increase of $5.2 million, or 11.0%. As a percentage of net sales, Adjusted EBITDA decreased from 26.8% for the year ended December 31,

30

2010 to 25.1% for the year ended December 31, 2011. Adjusted EBITDA for the year ended December 31, 2010 was $47.3 million compared to Adjusted EBITDA of $45.2 million for the year ended December 31, 2009, an increase of $2.1 million, or 4.6%. As a percentage of net sales, Adjusted EBITDA increased from 25.9% for the year ended December 31, 2009 to 26.8% for the year ended December 31, 2010. In addition to the specific changes resulting from the exceptions, the changes to Adjusted EBITDA for the periods discussed resulted from factors discussed above under "—Results of Operations."

        The following table presents a reconciliation of net income, the most comparable GAAP financial measure, to Adjusted EBITDA, for each of the periods indicated.

	For the year ended December 31,
	2007			2008		2009		2010		2011
	(in thousands)
Net income (loss)	$	(1,057	)	$	11,471	$	9,843	$	1,662	$	19,040
Interest expense—net		19,622			17,299		15,520		10,943		8,918
Income taxes		(749	)		6,793		3,986		872		11,332
Depreciation expense		4,632			4,650		5,797		5,704		2,975
Amortization		6,164			6,160		6,161		6,001		5,201
EBITDA		28,612			46,373		41,307		25,182		47,466
Management fees		1,400			1,369		1,393		6,383		46
Stock based compensation		—			—		732		4,029		1,873
Loss on extinguishment of debt		2733			—		—		7,967		673
Management liquidity bonus		—			—		—		1,003		—
Offering costs		—			—		—		—		1,342
Other non-recurring charges(1)		—			—		1,748		2,781		1,061
Adjusted EBITDA	$	32,745		$	47,742	$	45,180	$	47,345	$	52,461

(1)

Reflects severance and one-time, non-recurring expenses for costs related to the closure of our Johnson City facility of $1,054 and $1,435 for the years ended 2009 and 2010, respectively, $694, $2,013 and $1,061 of unrelated legal and consulting fees for the years ended 2009, 2010 and 2011, respectively, and a $667 gain on other post employment benefit plan curtailment related to the Johnson City plant closure for the year ended 2010.

Discussion of Critical Accounting Policies

        Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. These estimates and assumptions are often based on judgments that we believe to be reasonable under the circumstances at the time made, but all such estimates and assumptions are inherently uncertain and unpredictable. Actual results may differ from those estimates and assumptions, and it is possible that other professionals, applying their own judgment to the same facts and circumstances, could develop and support alternative estimates and assumptions that would result in material changes to our operating results and financial condition. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.

        The most significant accounting estimates inherent in the preparation of our financial statements include estimates used in the determination of liabilities related to pension obligations, recovery of

31

accounts receivable, impairment assessment of goodwill and other indefinite-lived intangible assets, as well as estimates used in the determination of the lower of cost or market value of inventory and liabilities related to taxation and product warranty.

        We believe the following are the critical accounting policies that affect our financial condition and results of operations.

Defined Benefit Pension Obligation

        As discussed in Note 12 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K, the pension benefit obligation and related pension expense or income of our pension plans are calculated in accordance with Accounting Standards Codification ("ASC") 715-30, Defined Benefit Plans-Pension, and are impacted by certain actuarial assumptions, including the discount rate and the expected rate of return on plan assets. Rates are evaluated on an annual basis considering such factors as market interest rates and historical asset performance. Actuarial valuations for 2011 used a discount rate of 4.6% and an expected long-term rate of return on plan assets of 7.25%. Our discount rate reflects the expected future cash flow based upon our funding valuation assumptions and participant data at the beginning of the plan year. The expected future cash flow was discounted by the Principal Financial Group's yield curve for the month preceding the 2011 year end.

        In estimating the expected return on plan assets, we analyze historical and expected returns for multiple asset classes. The overall rate for each asset class was developed by combining a long-term inflation component, the risk-free real rate of return, and the associated risk premium. A weighted average rate was then developed based upon those overall rates and the target asset allocation of the plan. Changes in the discount rate and return on assets can have a significant effect on the funded status of our pension plans, shareholders' equity and related expense. We cannot predict these changes in discount rates or investment returns and, therefore, cannot reasonably estimate whether the impact in subsequent years will be significant. The funded status of our pension plans is the difference between the projected benefit obligation and the fair value of its plan assets. The projected benefit obligation is the actuarial present value of all benefits expected to be earned by our employees' service adjusted for future wage increases. At December 31, 2011, our pension obligation funded status was $14.2 million underfunded.

        Our funding policy for our pension plans is to contribute amounts at least equal to the minimum annual amount required by applicable regulations. We contributed approximately $1.9 million to our pension plans in 2011. See Note 12 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a more detailed description of our pension plans.

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Revenue Recognition and Allowance for Doubtful Accounts

        We recognize revenues upon shipment to the customer, which is when title passes and all of the following conditions are satisfied: (1) persuasive evidence of an arrangement exists; (2) the price is fixed or determinable; (3) collectability is reasonably assured; and (4) the product has been shipped and we have no further obligations. Customers have no right of return privileges. Historically, product returns have not been material and are permitted on an exception basis only.

        We offer a variety of discounts and sales incentives to our distributors. The estimated liability for sales discounts and allowances is recorded at the time of sale as a reduction of net sales. The liability is estimated based on the costs of the program, the planned duration of the program and historical experience.

        We carry our accounts receivable at their face amount less an allowance for doubtful accounts. On a periodic basis, we evaluate our accounts receivable and establish an allowance for doubtful accounts based on a combination of specific distributor circumstances and credit conditions taking into account the history of write-offs and collections. A receivable is considered past due if payment has not been received within the period agreed upon in the invoice. Accounts receivable are written off after all collection efforts have been exhausted. We take a security interest in the inventory as collateral for the receivable but often do not have a priority security interest. See Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information regarding our allowance for doubtful accounts.

Impairment of Long-Lived Assets

        Long-lived assets are reviewed for potential impairment when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying value of such assets to the undiscounted future cash flows expected to be generated by the assets. If the carrying value of an asset exceeds its estimated undiscounted future cash flows, an impairment provision is recognized to the extent that the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or the fair value of the asset, less costs of disposition. Our management considers such factors as current results, trends and future prospects, current market value, and other economic and regulatory factors in performing these analyses. We determined that no long-lived assets were impaired as of December 31, 2011, 2010 and 2009.

Goodwill and Other Intangible Assets

        We perform an annual impairment test for goodwill and trade names and more frequently if an event or circumstances indicate that an impairment loss has been incurred. Conditions that would trigger an impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset. The analysis of potential impairment of goodwill requires a two-step process. The first step is the estimation of fair value of the applicable reporting unit. We have determined we have one reporting unit, and all significant decisions are made on a companywide basis by our chief operating decision maker. The fair value of the reporting unit is estimated by using a market approach. The estimated fair value is compared with our aggregate carrying value. If our fair value is greater than the carrying amount, there is no impairment. If our carrying amount is greater than the fair value, then the second step must be completed to measure the amount of impairment, if any.

        The second step calculates the implied fair value of the goodwill, which is compared to its carrying value. The implied fair value of goodwill is calculated by valuing all of the tangible and intangible assets of the reporting unit at the hypothetical fair value, assuming the reporting unit had been acquired in a business combination. The excess of the fair value of the entire reporting unit over the

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fair value of its identifiable assets and liabilities is the implied fair value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference. Annual impairment tests conducted by us on December 31, 2011, 2010 and 2009 resulted in no adjustment to the carrying value of our indefinite-lived intangibles and goodwill.

        Our goodwill and trade name balances could be impaired in future periods. A number of factors, many of which we have no ability to control, could affect our financial condition, operating results and business prospects and could cause actual results to differ from the estimates and assumptions we employed. These factors include:

•

a prolonged global economic crisis;

•

a significant decrease in the demand for our products;

•

the inability to develop new and enhanced products and services in a timely manner;

•

a significant adverse change in legal factors or in the business climate;

•

an adverse action or assessment by a regulator; and

•

successful efforts by our competitors to gain market share in our markets.

Inventory Valuation

        Inventories are stated at the lower of cost or market. Market is determined on the basis of estimated realizable values. Cost is determined using the first-in, first-out basis. We periodically review our inventory for slow-moving, damaged and discontinued items and provide reserves to reduce such items identified to their recoverable amounts.

Income Taxes

        Our estimate of income taxes payable, deferred income taxes and the effective tax rate is based on an analysis of many factors including interpretations of federal and state income tax laws, the difference between tax and financial reporting bases and liabilities, estimates of amounts currently due or owed in various jurisdictions, and current accounting standards. We review and update our estimates on a quarterly basis as facts and circumstances change and actual results are known.

        We have generated significant deferred tax assets as a result of goodwill and intangible asset book versus tax differences as well as net operating loss carryforwards. In assessing the ability to realize these deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. As a result of this analysis, we have recorded a valuation allowance against certain of these deferred tax assets.

        Accruals for tax contingencies, if any, are provided for in accordance with the requirements of ASC 740—Income Taxes. See Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information regarding our accounting for income taxes.

Warranty Cost Recognition

        We accrue for estimated warranty costs as sales are recognized and periodically assess the adequacy of the recorded warranty liability and adjust the amount as necessary. Our warranties generally provide, with respect to our snow and ice control equipment, that all material and workmanship will be free from defect for a period of two years after the date of purchase by the

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end-user, and with respect to our parts and accessories purchased separately, that such parts and accessories will be free from defect for a period of one year after the date of purchase by the end-user. Certain snowplows only provide for a one year warranty. We determine the amount of the estimated warranty costs (and our corresponding warranty reserve) based on our prior five years of warranty history utilizing a formula driven by historical warranty expense and applying management's judgment. We adjust our historical warranty costs to take into account unique factors such as the introduction of new products into the marketplace that do not provide a historical warranty record to assess.

Liquidity and Capital Resources

        Our principal sources of cash have been and we expect will continue to be cash from operations and borrowings under our senior credit facilities.

        Our primary uses of cash are to provide working capital, meet debt service requirements, finance capital expenditures, pay dividends under our dividend policy and support our growth, including through potential acquisitions, and for other general corporate purposes. For a description of the seasonality of our working capital rates see "—Seasonality and Year-To-Year Variability."

        Our Board of Directors has adopted a dividend policy that reflects an intention to distribute to our stockholders a regular quarterly cash dividend. The declaration and payment of these dividends to holders of our common stock is at the discretion of our Board of Directors and depends upon many factors, including our financial condition and earnings, legal requirements, taxes and other factors our Board of Directors may deem to be relevant. The terms of our indebtedness may also restrict us from paying cash dividends on our common stock under certain circumstances. As a result of this dividend policy, we may not have significant cash available to meet any large unanticipated liquidity requirements. As a result, we may not retain a sufficient amount of cash to fund our operations or to finance unanticipated capital expenditures or growth opportunities, including acquisitions. Our Board of Directors may, however, amend, revoke or suspend our dividend policy at any time and for any reason.

        As of December 31, 2011, we had liquidity comprised of $39 million in cash and cash equivalents and borrowing availability of $70 million under our revolving credit facility. Borrowing availability under our revolving credit facility is governed by a borrowing base, the calculation of which includes cash on hand. Accordingly, use of cash on hand may also result in a reduction in the amount available for borrowing under our revolving credit facility. Furthermore, our revolving credit facility requires us to maintain at least $10.5 million of borrowing availability. We expect that cash on hand, cash generated from operations, as well as available credit under our senior credit facilities will provide adequate funds for the purposes described above for at least the next 12 months.

Cash Flow Analysis

        Set forth below is summary cash flow information for each of the years ended December 31, 2009, 2010 and 2011.

	Year ended December 31,
Cash Flows (in thousands)	2009			2010			2011
Net cash provided by operating activities	$	25,571		$	15,777		$	47,728
Net cash used in investing activities		(8,200	)		(2,783	)		(2,306	)
Net cash used in financing activities		(1,850	)		(61,918	)		(26,139	)
Increase (Decrease) in cash	$	15,521		$	(48,924	)	$	19,283

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Sources and Uses of Cash

        During the three-year periods described above, net cash provided by operating activities was used for funding capital investment, retiring preferred stock and paying related dividends, paying interest on both our senior notes and senior credit facilities, and funding working capital requirements during our pre-season shipping period.

        The following table shows our cash and cash equivalents and inventories at December 31, 2009, 2010 and 2011.

	December 31,
	2009		2010		2011
	(in thousands)
Cash and cash equivalents	$	69,073	$	20,149	$	39,432
Inventories		26,697		23,481		24,005

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

        We had cash and cash equivalents of $39.4 million at December 31, 2011 compared to cash and cash equivalents of $20.1 million at December 31, 2010. The table below sets forth a summary of the significant sources and uses of cash for the periods presented.

	Year ended December 31,
Cash Flows (in thousands)	2010			2011			Change
Net cash provided by operating activities	$	15,777		$	47,728		$	31,951	202.5	%
Net cash used in investing activities		(2,783	)		(2,306	)		477	(17.1	)%
Net cash used in financing activities		(61,918	)		(26,139	)		35,779	(57.8	)%
Increase (Decrease) in cash	$	(48,924	)	$	19,283		$	68,207	(139.4	)%

        Net cash provided by operating activities increased $32.0 million from the year ended December 31, 2010 to the year ended December 31, 2011. The increase in cash provided by operating activities was due to a $9.8 increase in net income adjusted for reconciling items. Additionally, accounts receivable decline of $3.0 million and accounts payable increase of $2.2 million both positively influenced operating cash flows. As we paid off the senior notes in 2010, accrued interest at the end of 2009 declined in 2010 $5.3 million, which increased cash used in operating activities in 2010.

        Net cash used in investing activities decreased $0.5 million for the year ended December 31, 2011, compared to the corresponding period in 2010. This decrease was due to higher capital expenditures in 2010 to accommodate the increased production demands in Milwaukee, WI and Rockland, ME because of the closure of our Johnson City, TN manufacturing plant.

        Net cash used in financing activities decreased $35.8 million for the year ended December 31, 2011 compared to the corresponding period in 2010. The decrease was a result of our repayment of our senior notes in the amount of $150 million in 2010. Offsetting cash used were net proceeds from the IPO of $63.9 million and borrowings under the credit facility of $40 million in 2010. As we refinanced our term loan in 2011 there was a net impact of $2.2 million in cash provided to us as we borrowed $125.0 million less a $1.3 million discount, offset by debt repayments of $121.5 million. We also paid dividends of $25.8 million in the year ended December 31, 2011, compared to dividends paid of $8.2 million in the year ended December 31, 2010. We also received $1.3 million in 2011 for the exercise of stock options, wheras all options exercised in 2010 were accomplished through "net exercises" that resulted in no cash paid for the exercise price of the options.

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Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

        We had cash and cash equivalents of $20.1 million at December 31, 2010 compared to cash and cash equivalents of $69.1 million at December 31, 2009. The table below sets forth a summary of the significant sources and uses of cash for the periods presented.

	Year ended December 31,
Cash Flows (in thousands)	2009			2010			Change
Net cash provided by operating activities	$	25,571		$	15,777		$	(9,794	)	(38.3	)%
Net cash used in investing activities		(8,200	)		(2,783	)		5,417		(66.1	)%
Net cash used in financing activities		(1,850	)		(61,918	)		(60,068	)	3,246.9	%
Increase in cash	$	15,521		$	(48,924	)	$	(64,445	)	(415.2	)%

        Net cash provided by operating activities decreased $9.8 million from the year ended December 31, 2009 to the year ended December 31, 2010. The decrease in cash provided by operating activities was due to an $8.1 decrease in net income, caused in part by an $8.0 million loss on extinguishment of debt that we recorded when we repaid our senior notes. As we paid off these notes, accrued interest declined $5.3 million, which increased cash used in operating activities. Additionally, accounts receivable growth of $4.9 million and accounts payable decline of $2.3 million both negatively impacted operating cash flows. Slightly offsetting these uses of cash were an increase in stock based compensation of $3.3 million and lower inventories of $3.2 million. Lower inventory levels have resulted from the closure of our Johnson City, TN location in August 2010.

        Net cash used in investing activities decreased $5.4 million for the year ended December 31, 2010, compared to the corresponding period in 2009, mainly as a result of higher than normal capital investments in 2009 of approximately $5.0 million in our manufacturing plants in Milwaukee, WI and Rockland, ME to support the closure of our Johnson City, TN manufacturing facility in August 2010.

        Net cash used in financing activities increased $60.1 million for the year ended December 31, 2010 compared to the corresponding period in 2009. The increase was a result of our repayment of our senior notes in the amount of $150.0 million. Offsetting cash used were net proceeds from the IPO of $63.9 million and borrowings under the credit facility of $40.0 million.

Future Obligations and Commitments

Contractual Obligations

        We are subject to certain contractual obligations, including long-term debt and related interest. We have net unrecognized tax benefits of $0.3 million as of December 31, 2011. However, we cannot make a reasonably reliable estimate of the period of potential cash settlement of the underlying liabilities, therefore, we have not included unrecognized tax benefits in calculating the obligations set forth in the following table of significant contractual obligations as of December 31, 2011.

(Dollars in thousands)	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Long-term debt(1)	$	122,937	$	11,071	$	2,142	$	2,142	$	107,582
Interest on long-term debt(2)		44,444		7,399		14,583		13,710		8,752
Total contracted cash obligations(3)	$	167,381	$	18,470	$	16,725	$	15,852	$	116,334

(1)

Long-term debt obligation is presented net of discount of $1.1 million at December 31, 2011.

(2)

Assumes all debt will remain outstanding until maturity. Interest payments were calculated using interest rates in effect as of December 31, 2011.

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(3)

Pension obligations are excluded from this table as we are unable to estimate the timing of payments related to these obligations. The minimum required contribution to our pension plans was $1.9 million in 2011 and is expected to be $2.5 million in 2012.

Senior Credit Facilities

        On April 18, 2011, we amended our senior credit facilities to, among other things, (i) increase the borrowing ability under the revolving credit agreement by $10 million, and (ii) amend certain of the provisions in the senior credit facilities which govern our ability to pay dividends. Consequently, as of April 18, 2011, our senior credit facilities consisted of a $125 million term loan facility and a $70 million revolving credit facility with a group of banks. The previous term loans consisted of an initial term loan of $85 million and a "tack on" of $40 million, and a $60 million revolving credit facility. Prior to the April 2011 changes to our senior credit facilities, the interest on the original $85 million term loan facility was (at our option) either the base rate (which shall be no less than 3%) plus 3.5% or the eurodollar rate (which shall be no less than 2%) plus 4.5%. The interest for the additional $40 million in our term loan facility was an interest rate equal to (at our option) either the base rate (which shall be no less than 3%) plus 4% or the eurodollar rate (which shall be no less than 2%) plus 5%. Under the previous revolving credit facility, the margin for base rate loans was either 0.25% or 0.50% and the margin for eurodollar rate loans was either 1.25% or 1.50%, in each case determined based on our leverage ratio from time to time.

        The agreement for the new term loan (the "Term Loan Credit Agreement") provides for a senior secured term loan facility in the aggregate principal amount of $125 million and generally bears interest at (at our election) either (i) 3.25% per annum plus the greatest of (a) the Prime Rate (as defined in the Term Loan Credit Agreement) in effect on such day, (b) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers plus 0.50% and (c) 1.00% plus the greater of (1) the London Interbank Offered Rate for a one month interest period multiplied by the Statutory Reserve Rate (as defined in the Term Loan Credit Agreement) and (2) 1.50% or (ii) 4.25% per annum plus the greater of (a) the London Interbank Offered Rate for the applicable interest period multiplied by the Statutory Reserve Rate and (b) 1.50%. The revolving credit facility as amended and restated (the "Revolving Credit Agreement") provides that we have the option to select whether borrowings will bear interest at either (i) 2.25% per annum plus the London Interbank Offered Rate for the applicable interest period multiplied by the Statutory Reserve Rate or (ii) 1.25% per annum plus the greatest of (a) the Prime Rate in effect on such day, (b) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers plus 0.50% and (c) the London Interbank Offered Rate for a one month interest period multiplied by the Statutory Reserve Rate plus 1%. The maturity date for our amended and restated revolving credit facility is April 18, 2016, and our new term loan amortizes in nominal amounts quarterly with the balance payable on April 18, 2018.

        The new term loan entered into in the second quarter of 2011 was issued at a $1.25 million discount which is being amortized over the term of the new term loan.

        Our entry into the new term loan facility resulted in a significant modification of our debt which resulted in the write off of unamortized capitalized deferred financing costs of $0.3 million and write off of unamortized debt discount of $0.3 million which in total resulted in a loss on extinguishment of debt of $0.7 million in the Consolidated Statement of Income during the year ended December 31, 2011.

        At December 31, 2011, we had no outstanding borrowings on the revolving credit facility and remaining borrowing availability of $70 million.

        Our senior credit facilities include certain negative and operating covenants, including restrictions on our ability to pay dividends, and other customary covenants, representations and warranties and

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events of default. The senior credit facilities entered into and recorded by our subsidiaries significantly restrict our subsidiaries from paying dividends and otherwise transferring assets to us. The terms of our revolving credit facility specifically restrict subsidiaries from paying dividends if a minimum availability under the revolving credit facility is not maintained, and both senior credit facilities restrict subsidiaries from paying dividends above certain levels or at all if an event of default has occurred. These restrictions would affect us indirectly since we rely principally on distributions from our subsidiaries to have funds available for the payment of dividends. In addition, the our revolving credit facility includes a requirement that, subject to certain exceptions, capital expenditures may not exceed $10 million in any calendar year and, if certain minimum availability under our revolving credit facility is not maintained, that we comply with a monthly minimum fixed charge coverage ratio test of 1.0:1.0. Compliance with the fixed charge coverage ratio test is subject to certain cure rights under the Company's revolving credit facility. At December 31, 2011, we were in compliance with the respective covenants. The credit facilities are collateralized by substantially all assets of our assets.

        In accordance with the senior credit facilities, we are required to make additional principal prepayments over the above scheduled payments under certain conditions. This includes, in the case of the term loan facility, 100% of the net cash proceeds of certain asset sales, certain insurance or condemnation events, certain debt issuances, and, within 150 days of the end of the fiscal year, 50% of excess cash flow, as defined, including a deduction for certain distributions (which percentage is reduced to 25% or 0% upon the achievement of certain leverage ratio thresholds), for any fiscal year. Excess cash flow is defined in the senior credit facilities as consolidated adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) plus a working capital adjustment less the sum of repayments of debt and capital expenditures subject to certain adjustments, interest and taxes paid in cash, management fees and certain restricted payments (including dividends or distributions). Working capital adjustment is defined in the senior credit facilities as the change in working capital, defined as current assets excluding cash and cash equivalents less current liabilities excluding current portion of long term debt. As of December 31, 2011, we were not required to make an excess cash flow payment. However, the company expects to make a voluntary prepayment of $10 million in 2012.

        Each of the senior secured facilities entered into in the second quarter of 2011 includes a hedge provision, which requires us to enter into an interest rate hedge commencing 90 days after the closing date. The hedging provision required the Company to hedge the interest rate on at least 25% of the aggregate outstanding principal amount of the term loans. The purpose of the interest rate swap is to reduce our exposure to interest rate volatility. Effective June 20, 2011, we entered into an interest rate swap agreement with a notional amount of $50 million. The interest rate swap negative fair value at December 31, 2011 of $0.6 million is included in other long-term liabilities on the Consolidated Balance Sheet. We have counterparty credit risk resulting from the interest rate swap, which we monitors on an on-going basis. This risk lies with one global financial institution. Under the interest rate swap agreement, effective as of July 18, 2011, we either receives or makes payments on a monthly basis based on the differential between 6.335% and LIBOR plus 4.25% (with a LIBOR floor of 1.5%). The interest rate swap contract on the term loan expires in December 2014.

Deductibility of Intangible and Goodwill Expense

        We possess a favorable tax structure with approximately $18 million of annual tax-deductible intangible and goodwill expense over the next nine years which may be utilized in the event we have sufficient taxable income to utilize such benefit.

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Impact of Inflation

        We do not believe that inflation risk is material to our business or our financial condition, results of operations or cash flows at this time. Historically, we have experienced normal raw material, labor and fringe benefit inflation. To date we have been able to fully offset this inflation by providing higher value products, which command higher prices. In previous years, we have experienced significant increases in steel costs, but have been able to mitigate the effects of these increases through both temporary and permanent steel surcharges. See "Risk Factors—The price of steel, a commodity necessary to manufacture our products, is highly variable. If the price of steel increases, our gross margins could decline."

Off-Balance Sheet Arrangements

        We are not party to any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

Seasonality and Year-To-Year Variability

        Our business is seasonal and also varies from year-to-year. Consequently, our results of operations and financial condition vary from quarter-to-quarter and from year-to-year as well. In addition, because of this seasonality and variability, our results of operations for any quarter may not be indicative of results of operations that may be achieved for a subsequent quarter or the full year, and may not be similar to results of operations experienced in prior years.

        Sales of our products are significantly impacted by the level, timing and location of snowfall, with sales in any given year and region most heavily influenced by snowfall levels in the prior snow season (which we consider to begin in October and end in March) in that region. This is due to the fact that end-user demand for our products is driven primarily by the condition of their snow and ice control equipment, and in the case of professional snowplowers, by their financial ability to purchase new or replacement snow and ice control equipment, both of which are significantly affected by snowfall levels. Heavy snowfall during a given winter causes usage of our products to increase, resulting in greater wear and tear to our products and a shortening of their life cycles, thereby creating a need for replacement snow and ice control equipment and related parts and accessories. In addition, when there is a heavy snowfall in a given winter, the increased income our professional snowplowers generate from their professional snowplow activities provides them with increased purchasing power to purchase replacement snow and ice control equipment prior to the following winter. To a lesser extent, sales of our products are influenced by the timing of snowfall in a given winter. Because an early snowfall can be viewed as a sign of a heavy upcoming snow season, our end-users may respond to an early snowfall by purchasing replacement snow and ice control equipment during the current season rather that delaying purchases until after the season is over when most purchases are typically made by end-users.

        The following chart illustrates the effects of snowfall levels in the snowbelt states in a given winter on the number of units of snow and ice control equipment we shipped in the following year. Snowfall levels represent the aggregate number of inches of snowfall recorded in each of 66 cities in 26 snowbelt states across the Northeast, East, Midwest and Western United States where we have historically monitored snowfall levels. We have historically monitored snowfall levels in these cities because they represent the key metropolitan areas in the states where snowfall is a regular occurrence and coincide with our historical U.S. market. With respect to the calculation of units shipped, each year in the following chart represents the calendar year period from January 1 to December 31. With respect to the calculation of snowfall, each year in the following chart represents the period beginning on October 1 of the prior year and extending through the following March 31. Thus, for example, the number of units shipped in 2001 represents the total units of snow and ice control equipment we

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shipped from January 1, 2001 to December 31, 2001, whereas the 2001 snowfall level reflects snowfall in the snowbelt states in the period from October 1, 2000 through March 31, 2001. As the chart indicates, heavy snowfall levels in a given winter tend to lead to increased unit shipments of our snow and ice control equipment in the following year, whereas low snowfall levels in a given winter tend to lead to decreased units shipped of our snow and ice control equipment in the following year. Over the past 10 years, our sales of snow and ice control equipment ranged from a low of 40,538 units to a high of 66,043 units, averaging 50,504 units per year (including units sold by Blizzard Corporation prior to its acquisition by us in November 2005).

Equipment Sales Versus Snowfall

Note: This chart is not weighted or adjusted to account for new distributors or increased market size, but does include unit sales attributable to new distributors. Further, snowfall data in this chart is not adjusted for snowfall outside of the 66 cities in the 26 states reflected. Units of equipment sales for years 2002 through 2005 are adjusted to include units sold by Blizzard Corporation prior to its acquisition by us in November 2005.

Source of snowfall data: National Oceanic and Atmospheric Administration's National Weather Service

        Snowfall levels in any given rolling eight-year period have been relatively constant. See "Business—Our Industry."

        We attempt to manage the seasonal impact of snowfall on our revenues in part through our pre-season sales program, which involves actively soliciting and encouraging pre-season distributor orders in the second and third quarters by offering our distributors a combination of pricing, payment and freight incentives during this period. These pre-season sales incentives encourage our distributors to re-stock their inventory during the second and third quarters in anticipation of the peak fourth quarter retail sales period by offering favorable pre-season pricing and payment deferral until the fourth quarter. As a result, we tend to generate our greatest volume of sales (an average of over two-thirds over the last ten years) during the second and third quarters, providing us with manufacturing visibility for the remainder of the year. By contrast, our revenue and operating results tend to be lowest during the first quarter as management believes our end-users prefer to wait until the beginning of a snow season to purchase new equipment and as our distributors sell off inventory and wait for our pre-season sales incentive period to re-stock inventory. Fourth quarter sales vary from

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year-to-year as they are primarily driven by the level, timing and location of snowfall during the quarter. This is because most of our fourth quarter sales and shipments consist of re-orders by distributors seeking to restock inventory to meet immediate customer needs caused by snowfall during the winter months.

        Our revenue and operating results tend to be lowest during the first quarter, during which period we typically experience negative earnings as the snow season draws to a close. Our first quarter revenue has varied from approximately $8.5 million to approximately $23.5 million between 2007 and 2011. During the last five-year period, net loss during the first quarter has varied from a net loss of approximately $0.8 million to a net loss of approximately $6.5 million, with an average net loss of $4.1 million.

        While our monthly working capital has averaged approximately $90 million from 2009 to 2011, because of the seasonality of our sales, we experience seasonality in our working capital needs as well. In the first quarter we require capital as we are generally required to build our inventory in anticipation of our second and third quarter sales seasons. During the second and third quarters, our working capital requirements rise as our accounts receivables increase as a result of the sale and shipment of products ordered through our pre-season sales program and we continue to build inventory. Working capital requirements peak towards the end of the third quarter (reaching an average peak of approximately $73.0 million over the prior three years) and then begin to decline through the fourth quarter through a reduction in accounts receivables (as it is in the fourth quarter that we receive a majority of the payments for previously shipped products).

        We also attempt to manage the impact of seasonality and year-to-year variability on our business costs through the effective management of our assets. See "Business—Our Business Strategy—Aggressive Asset Management and Profit Focus." Our asset management and profit focus strategies include:

•

the employment of a highly variable cost structure facilitated by a core group of workers that we supplement with a temporary workforce as sales volumes dictate, which allows us to adjust costs on an as-needed basis in response to changing demand;

•

our enterprise-wide lean concept, which allows us to adjust production levels up or down to meet demand;

•

the pre-season order program described above, which incentivizes distributors to place orders prior to the retail selling season; and

•

a vertically integrated business model.

        These asset management and profit focus strategies, among other management tools, allow us to adjust fixed overhead and sales, general and administrative expenditures to account for the year-to-year variability of our sales volumes. Management currently estimates that annual fixed overhead expenses generally range from approximately $14.0 million in low sales volume years to approximately $16.0 million in high sales volume years. Further, management currently estimates that annual sales, general and administrative expenses other than amortization generally approximate $20.0 million, but can be reduced to approximately $17.0 million to maximize cash flow in low sales volume years, and can increase to approximately $24.0 million to maintain customer service and responsiveness in high sales volume years.

        Additionally, although modest, our annual capital expenditure requirements, which are normally budgeted at $3.5 million, can be temporarily reduced by up to approximately 40% in response to actual or anticipated decreases in sales volumes. If we are unsuccessful in our asset management initiatives, the seasonality and year-to-year variability effects on our business may be compounded and in turn our results of operations and financial condition may suffer.

42

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk

        We do not use financial instruments for speculative trading purposes, and do not hold any derivative financial instruments that could expose us to significant market risk. Our primary market risk exposures are changes in interest rates and steel price fluctuations.

Interest Rate Risk

        We are exposed to market risk primarily from changes in interest rates. Our borrowings, including our term loan and any revolving borrowings under our senior credit facilities, are at variable rates of interest and expose us to interest rate risk. A portion of our interest rate risk associated with our term loan is mitigated through an interest rate swap as discussed in Note 7 to the Consolidated Financial Statements. In addition, the interest rate on any revolving borrowings is subject to an increase in the interest rate based on our average daily availability under our revolving credit facility.

        As of December 31, 2011, we had outstanding borrowings under our term loan of $122.9 million. A hypothetical interest rate change of 1%, 1.5% and 2% on our term loan would have changed interest incurred for the year ended December 31, 2011 by $0.1 million, $0.2 million and $0.7 million, respectively. We have entered into an interest rate swap, which became effective beginning July 2011 and matures December 2014, to hedge the variability in future cash flows associated with our variable-rate term loans. The swap converts $50.0 million of our term loan to a fixed interest rate of 2.085%. As of December 31, 2011, we had no outstanding borrowings under our revolving credit facility.

Commodity Price Risk

        In the normal course of business, we are exposed to market risk related to our purchase of steel, the primary commodity upon which our manufacturing depends. While steel is typically available from numerous suppliers, the price of steel is a commodity subject to fluctuations that apply across broad spectrums of the steel market. We do not use any derivative or hedging instruments to manage the price risk. If the price of steel increases, our variable costs could also increase. While historically we have successfully mitigated these increased costs through the implementation of either permanent price increases and/or temporary invoice surcharges, in the future we may not be able to successfully mitigate these costs, which could cause our gross margins to decline. If our costs for steel were to increase by $1.00 in a period in which we were not able to pass any of this increase onto our distributors, our gross margins would decline by $1.00 in that period.

Item 8.    Financial Statements and Supplementary Data

        The financial statements are included in this report beginning on page F-3.

Item 9.    Changes In and Disagreements with Accountants on Accounting and Financial Disclosures

None

Item 9A.    Controls and Procedures

Disclosure Controls and Procedures

        Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (the "Evaluation") as of the last day of the period covered by this report.

43

        Based upon the Evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective of the last day of the period covered by this report. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act") as controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

        It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions, regardless of how remote.

Management's Report on Internal Control Over Financial Reporting

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of our published financial statements.

        All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

        Our management with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control—Integrated Framework. Based on its, management believes that, as of December 31, 2011, our internal control over financial reporting was effective based on those criteria.

        Ernst & Young LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and, as part of its audit, has issued an attestation report, included herein, on the effectiveness of our internal control over financial reporting.

Management's Report on Internal Control Over Financial Reporting

        During the last fiscal quarter, of the period covered by this report, there were no changes in our internal controls over financial reporting that have materially affected or are reasonably likely to materially affect such controls.

Item 9B.    Other Information

        None

44

PART III

Item 10.    Directors, Executive Officers and Corporate Governance

        The information included under the captions "Election of Directors," "Board of Directors and Corporate Governance" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's definitive proxy statement, which is expected to be filed pursuant to Regulation 14A within 120 days following the end of the fiscal year covered by this report (the "Proxy Statement"), is hereby incorporated by reference. The information required by Item 10 with respect to our Executive Officers is included in Part I of this Annual Report on Form 10-K.

        We have adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer and principal accounting officer, as well as all of our employees. We have posted a copy of the Code of Business Conduct and Ethics on our website at www.douglasdynamics.com. The Code of Business Conduct and Ethics is also available in print to any stockholder who requests it in writing from the Corporate Secretary at 7777 North 73rd Street, Milwaukee, Wisconsin 53223. We intend to post on our website any amendments to, or waivers (with respect to our principal executive officer, principal financial officer and controller) from, the Code of Business Conduct and Ethics within four business days of any such amendment or waiver. We are not including the information contained on our website as part of, or incorporating it by reference into, this report.

Item 11.    Executive Compensation

        The information required in Item 11 is incorporated by reference to the information in the Proxy Statement under the captions "Corporate Governance—Compensation Committee Interlocks and Insider Participation," "Compensation Discussion and Analysis", "Executive Compensation," "Director Compensation" and "Compensation Committee Report."

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

        The information required in Item 12 is incorporated by reference to the information in the Proxy Statement under the captions "Corporate Governance—Significant Stockholders" and "—Executive Officers and Directors."

Item 13.    Certain Relationships and Related Transactions, and Director Independence

        The information required in Item 13 is incorporated by reference to the information in the Proxy Statement under the caption "Corporate Governance."

Item 14.    Principal Accounting Fees and Services

        The information required in Item 14 is incorporated by reference to the information in the Proxy Statement under the caption "Ratification of Appointment of Independent Registered Public Accounting Firm."

45

PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)

Documents filed as part of this report:

1.

Consolidated Financial Statements:

        See "Index to Consolidated Financial Statements" on page F-1, the Reports of Independent Registered Public Accounting Firm on page F-2 and F-3 and the Consolidated Financial Statements beginning on page F-4, all of which are incorporated herein by reference.

2.

Financial Statement Schedule:

        All schedules have been omitted because the information required in these schedules is included in the Notes to the Consolidated Financial Statements.

3.

Exhibits:

        See "Exhibit Index" of this Form 10-K, which is incorporated herein by reference.

46

Signatures

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 13^th day of March, 2012.

DOUGLAS DYNAMICS, INC.
By:	/s/ JAMES JANIK James L. Janik President and Chief Executive Officer

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 13, 2012.

/s/ JAMES L. JANIK James L. Janik	President and Chief Executive Officer (Principal Executive Officer) and Director
/s/ ROBERT L. MCCORMICK Robert L. McCormick	Executive Vice President and Chief Financial Officer (Principal Financial Officer)
/s/ ROBERT J. YOUNG Robert J. Young	Corporate Controller and Treasurer (Controller)
/s/ KENNETH W. KRUEGER Kenneth W. Krueger	Director
/s/ JAMES L. PACKARD James L. Packard	Director
/s/ JACK O. PEIFFER Jack O. Peiffer	Director
/s/ JAMES D. STALEY James D. Staley	Director
/s/ DONALD W. STURDIVANT Donald W. Sturdivant	Director
/s/ MICHAEL W. WICKHAM Michael W. Wickham	Director

47

Exhibit Index

Exhibit Number			Title
	3.1		Fourth Amended and Restated Certificate of Incorporation of Douglas Dynamics, Inc. [Incorporated by reference to Exhibit 3.3 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	3.2		Second Amended and Restated Bylaws of Douglas Dynamics, Inc. [Incorporated by reference to Exhibit 3.6 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590) ].
	10.1		Amended and Restated Credit and Guaranty Agreement dated as of April 18, 2011 among Douglas Dynamics, L.L.C. Douglas Dynamics Finance Company and Fisher LLC as borrowers, Douglas Dynamics, Inc., as guarantor, the banks and financial institutions listed therein as lenders, J.P.Morgan Securities LLC, as sole bookrunner and sole lead arranger, JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, and Wells Fargo Capital Finance, LLC, as syndication agent [Incorporated by reference to Exhibit 10.1 to Douglas Dynamics, Inc.'s Current Report on Form 8-K filed April 20, 2011 (File No. 001-34728)].
	10.2		Credit and Guaranty Agreement, dated as of April 18, 2011, among Douglas Dynamics, L.L.C., as borrower, Douglas Dynamics, Inc., Douglas Dynamics Finance Company and Fisher, LLC, as guarantors, the banks and financial institutions listed therein, as lenders, J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC, as joint bookrunners and joint lead arrangers, JPMorgan Chase Bank, N.A., as collateral agent and administrative agent, and Credit Suisse Securities (USA) LLC, as syndication agent Incorporated by reference to Exhibit 10.2 to Douglas Dynamics, Inc.'s Current Report on Form 8-K filed April 20, 2011 (File No. 001-34728)].
	10.3	#	Employment Agreement between Robert McCormick and Douglas Dynamics, Inc., dated September 7, 2004, as amended by that certain amendment, dated as of October 1, 2008 [Incorporated by reference to Exhibit 10.5 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.4	#	Form of Amendment No. 2 to Employment Agreement between Robert McCormick and Douglas Dynamics, Inc. [Incorporated by reference to Exhibit 10.6 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.5	#	Employment Agreement between James L. Janik and Douglas Dynamics, Inc., dated March 30, 2004 [Incorporated by reference to Exhibit 10.7 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.6	#	Form of Amendment No. 1 to Employment Agreement between James L. Janik and Douglas Dynamics, Inc. [Incorporated by reference to Exhibit 10.8 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.7	#	Employment Agreement between Mark Adamson and Douglas Dynamics, Inc., dated August 27, 2007 [Incorporated by reference to Exhibit 10.9 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.9	#	Form of Amendment No. 1 to Employment Agreement between Mark Adamson and Douglas Dynamics, Inc. [Incorporated by reference to Exhibit 10.10 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].

48

Exhibit Number			Title
	10.10	#	Douglas Dynamics, Inc. Amended and Restated 2004 Stock Incentive Plan [Incorporated by reference to Exhibit 10.16 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.11	#	Form of Amended and Restated Management Incentive Option Agreement under Douglas Dynamics, Inc. Amended and Restated 2004 Stock Incentive Plan [Incorporated by reference to Exhibit 10.18 to Douglas Dynamics,  Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.12	#	Form of Management Non-Qualified Stock Option Agreement under Douglas Dynamics, Inc. 2004 Stock Incentive Plan [Incorporated by reference to Exhibit 10.19 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.13	#	Form of Amended and Restated Management Non-Qualified Option Agreement under Douglas Dynamics, Inc. Amended and Restated 2004 Stock Incentive Plan [Incorporated by reference to Exhibit 10.20 to Douglas Dynamics,  Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.14	#	Form of Non-Employee Director Non-Qualified Option Agreement under Douglas Dynamics, Inc. 2004 Stock Incentive Plan [Incorporated by reference to Exhibit 10.21 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.15	#	Form of Amended and Restated Non-Employee Director Non-Qualified Option Agreement under Douglas Dynamics, Inc. Amended and Restated 2004 Stock Incentive Plan [Incorporated by reference to Exhibit 10.22 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.16	#	Amended and Restated Management Incentive Option Agreement under Douglas Dynamics, Inc. 2004 Stock Incentive Plan between Douglas Dynamics, Inc. and James L. Janik, dated March 31, 2004 [Incorporated by reference to Exhibit 10.23 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.17	#	Form of Second Amended and Restated Management Incentive Option Agreement under Douglas Dynamics, Inc. Amended and Restated 2004 Stock Incentive Plan between Douglas Dynamics, Inc. and James L. Janik [Incorporated by reference to Exhibit 10.24 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.18	#	Amended and Restated Non-Qualified Option Agreement under Douglas Dynamics, Inc. 2004 Stock Incentive Plan between Douglas Dynamics, Inc. and James L. Janik, dated March 31, 2004 [Incorporated by reference to Exhibit 10.25 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.19	#	Form of Second Amended and Restated Non-Qualified Option Agreement under Douglas Dynamics, Inc. Amended and Restated 2004 Stock Incentive Plan between Douglas Dynamics, Inc. and James L. Janik [Incorporated by reference to Exhibit 10.26 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.20	#	Form of Amended and Restated Deferred Stock Unit Agreement [Incorporated by reference to Exhibit 10.27 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590) ].
	10.21	#	Douglas Dynamics 2011 Annual Incentive Plan [Incorporated by reference to Exhibit 10.1 to Douglas Dynamics, Inc.'s Quarterly Report on Form 10-Q (File No. 001-34728)].

49

Exhibit Number			Title
	10.22	#	Douglas Dynamics, L.L.C. Long Term Incentive Plan 2009 [Incorporated by reference to Exhibit 10.30 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590) ].
	10.23	#	Douglas Dynamics, Inc. 2010 Stock Incentive Plan [Incorporated by reference to Exhibit 10.32 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590) ].
	10.24	#	Form of Restricted Stock Agreement under Douglas Dynamics, Inc. 2010 Stock Incentive Plan [Incorporated by reference to Exhibit 10.33 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.25	#	Alternative Form of Restricted Stock Agreement under Douglas Dynamics, Inc. 2010 Stock Incentive Plan [Incorporated by reference to Exhibit 10.34 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.26	#	Form of Restricted Stock Units Agreement under Douglas Dynamics, Inc. 2010 Stock Incentive Plan [Incorporated by reference to Exhibit 10.35 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.27	#	Form of Nonqualified Stock Option Agreement under Douglas Dynamics, Inc. 2010 Stock Incentive Plan [Incorporated by reference to Exhibit 10.36 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.28	#	Form of Incentive Stock Option Agreement under 2010 Stock Incentive Plan [Incorporated by reference to Exhibit 10.37 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.29	#	Form of Restricted Stock Grant Notice and Standard Terms and Conditions under the Douglas Dynamics, Inc. 2010 Stock Incentive Plan [Incorporated by reference to Exhibit 10.1 to Douglas Dynamics, Inc.'s Current Report on Form 8-K filed December 30, 2010 (File No. 001-34728)].
	10.30	#	Form of Restricted Stock Unit Grant Notice and Standard Terms and Conditions under the Douglas Dynamics, Inc. 2010 Stock Incentive Plan [Incorporated by reference to Exhibit 10.1 to Douglas Dynamics, Inc.'s Current Report on Form 8-K filed December 30, 2010 (File No. 001-34728)].
	10.31	#	Form of Nonemployee Director Restricted Stock Unit Grant Notice and Standard Terms and Conditions under the Douglas Dynamics, Inc. 2010 Stock Incentive Plan [Incorporated by reference to Exhibit 10.1 to Douglas Dynamics, Inc.'s Current Report on Form 8-K filed December 30, 2010 (File No. 001-34728)].
	10.32	#	Form of Second Amended and Restated Joint Management Services Agreement among Douglas Dynamics, Inc., Douglas Dynamics, L.L.C., Aurora Management Partners LLC, and ACOF Management, L.P. [Incorporated by reference to Exhibit 10.42 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590)].
	10.33	#	Form of Director and Officer Indemnification Agreement [Incorporated by reference to Exhibit 10.43 to Douglas Dynamics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-164590) ].
	10.34	#*	Douglas Dynamics Nonqualified Deferred Compensation Plan
	21.1	*	Subsidiaries of Douglas Dynamics, Inc.

50

Exhibit Number			Title
	23.1	*	Consent of Ernst & Young LLP.
	31.1	*	Certification of the Company's Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	*	Certification of the Company's Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	*	Certification of the Company's Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	99.1		Proxy Statement for the 2012 Annual Meeting of Stockholders [To be filed with the Securities and Exchange Commission under Regulation 14A within 120 days after December 31, 2011; except to the extent specifically incorporated by reference, the Proxy Statement for the 2012 Annual Meeting of Stockholders shall not be deemed to be filed with the Securities and Exchange Commission as part of this Annual Report on Form 10-K]
	101.1		XBRL Instance Document
	101.2		XBRL Taxonomy Extension Schema Document
	101.3		XBRL Taxonomy Extension Calculation Linkbase Document
	101.4		XBRL Taxonomy Extension Definition Linkbase Document
	101.5		XBRL Taxonomy Extension Label Linkbase Document
	101.6		XBRL Taxonomy Extension Presentation Linkbase Document

#

A management contract or compensatory plan or arrangement.

*

Filed herewith.

51

Index to Consolidated Financial Statements

	Page
Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets		F-4
Consolidated Statements of Income		F-5
Consolidated Statements of Changes in Shareholders' Equity		F-6
Consolidated Statements of Cash Flows		F-7
Notes to Consolidated Financial Statements		F-8

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Douglas Dynamics, Inc.

        We have audited the accompanying consolidated balance sheets of Douglas Dynamics, Inc. (the Company) as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Douglas Dynamics, Inc. at December 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Douglas Dynamics, Inc.'s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 13, 2012 expressed an unqualified opinion thereon.

Milwaukee, Wisconsin
March 13, 2012 /s/ Ernst & Young LLP

F-2

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Douglas Dynamics, Inc.

        We have audited Douglas Dynamics, Inc.'s (the Company) internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Douglas Dynamics, Inc.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, Douglas Dynamics, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Douglas Dynamics, Inc. as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2011 and our report dated March 13, 2012, expressed an unqualified opinion thereon.

/s/Ernst & Young LLP

Milwaukee, WI
March 13, 2012

F-3

DOUGLAS DYNAMICS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars In Thousands, Except Per Share Data)

	December 31, 2011			December 31, 2010
Assets
Current assets:
Cash and cash equivalents	$	39,432		$	20,149
Accounts receivable, net		34,019			37,040
Inventories		24,005			23,481
Deferred income taxes		4,952			7,142
Prepaid income taxes		—			29
Prepaid and other current assets		1,054			1,131
Total current assets		103,462			88,972
Property, plant, and equipment, net		21,340			21,962
Assets held for sale		1,732			1,779
Goodwill		107,222			107,222
Other intangible assets, net		121,747			126,948
Deferred financing costs, net		3,402			953
Other long-term assets		112			207
Total assets	$	359,017		$	348,043
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	5,040		$	2,847
Accrued expenses and other current liabilities		15,755			11,923
Accrued interest		350			23
Income taxes payable		395			—
Current portion of long-term debt		11,071			1,183
Total current liabilities		32,611			15,976
Retiree health benefit obligation		8,053			7,235
Pension obligation		14,163			10,753
Deferred income taxes		26,957			22,650
Deferred compensation		912			1,067
Long-term debt, less current portion		111,866			119,971
Other long-term liabilities		1,066			898
Shareholders' equity:
Common Stock, par value $0.01, 200,000,000 shares authorized, 22,020,694 and 21,579,655 shares issued and outstanding at December 31, 2011 and December 31, 2010, respectively		220			216
Additional paid-in capital		130,907			127,695
Shareholders' notes receivable		—			(482	)
Retained earnings		39,742			46,495
Accumulated other comprehensive loss, net of tax		(7,480	)		(4,431	)
Total shareholders' equity		163,389			169,493
Total liabilities and shareholders' equity	$	359,017		$	348,043

See accompanying Notes to Consolidated Financial Statements

F-4

DOUGLAS DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Data)

	2011			2010			2009
Net sales	$	208,798		$	176,795		$	174,342
Cost of sales		136,981			116,494			117,264
Gross profit		71,817			60,301			57,078
Selling, general, and administrative expense		26,389			26,509			20,085
Intangibles amortization		5,201			6,001			6,161
Management fees-related party		46			6,383			1,393
Income from operations		40,181			21,408			29,439
Interest expense, net		(8,918	)		(10,943	)		(15,520	)
Loss on extinguishment of debt		(673	)		(7,967	)		—
Other income (expense), net		(218	)		36			(90	)
Income before taxes		30,372			2,534			13,829
Income tax expense		11,332			872			3,986
Net income	$	19,040		$	1,662		$	9,843
Less: Net income attributable to participating securities		233			12			—
Net income attributable to common shareholders	$	18,807		$	1,650		$	9,843
Earnings per share:
Basic earnings per common share attributable to common shareholders	$	0.87		$	0.09		$	0.68
Earnings per common share assuming dilution attributable to common shareholders	$	0.85		$	0.09		$	0.67
Cash dividends declared and paid per share	$	1.18		$	0.38		$	0.00

See accompanying Notes to Consolidated Financial Statements

F-5

DOUGLAS DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Dollars In Thousands)

	Redeemable Securities
	Series A Redeemable Preferred Stock
					Series B Redeemable Preferred						Series C Redeemable Preferred
																	Common Stock														Accumulated Other Comprehensive Loss
																						Additional Paid-in Capital			Shareholders' Notes Receivable			Retained Earnings									Comprehensive Income (Loss)
	Shares		Dollars		Shares			Dollars			Shares			Dollars			Shares			Dollars														Total
Balance at December 31, 2008		—	$	—		1		$	1			1		$	1			14,454,369		$	144	$	60,378		$	(1,116	)	$	43,212		$	(4,559	)	$	98,059
Net income		—		—		—			—			—			—			—			—		—			—			9,843			—			9,843		$	9,843
Adjustment for pension and postretirement benefit liability, net of tax of $365		—		—		—			—			—			—			—			—		—			—			—			622			622			622
Interest on shareholders' notes receivable		—		—		—			—			—			—			—			—		—			(34	)		—			—			(34	)		—
Stock repurchases and retirement		—		—		—			—			—			—			(32,633	)		—		(405	)		137			—			—			(268	)		—
Balance at December 31, 2009		—	$	—		1		$	1			1		$	1			14,421,736		$	144	$	59,973		$	(1,013	)	$	53,055		$	(3,937	)	$	108,222		$	10,465
Net income		—		—		—			—			—			—			—			—		—			—			1,662			—			1,662		$	1,662
Dividends paid		—		—		—			—			—			—			—			—		—			—			(8,222	)		—			(8,222	)		—
Adjustment for pension and postretirement benefit liability, net of tax of $327		—		—		—			—			—			—			—			—		—			—			—			(494	)		(494	)		(494	)
Interest on shareholders' notes receivable		—		—		—			—			—			—			—			—		—			(28	)		—			—			(28	)		—
Issuance and sales of common stock by Company through IPO		—		—		—			—			—			—			6,500,000			65		63,864			—			—			—			63,929			—
Issuance of non-vested common stock in connection with IPO		—		—		—			—			—			—			208,130			2		(2	)		—			—			—			—			—
Shares issued for options exercised in connection with IPO		—		—		—			—			—			—			180,567			2		1,659			—			—			—			1,661			—
Fractional shares repurchased and retired in connection with IPO		—		—		—			—			—			—			(7	)		—		—			—			—			—			—			—
Stock repurchases and retirement		—		—		(1	)		(1	)		(1	)		(1	)										559						—			559			—
Deferred stock units converted		—		—		—			—			—			—			174,229			2		(2	)		—			—			—			—			—
Stock option exercises		—		—		—			—			—			—			95,000			1		1,067			—			—			—			1,068
Stock based compensation		—		—		—			—			—			—			—			—		1,136			—			—			—			1,136			—
Balance at December 31, 2010		—	$	—		—		$	—			—		$	—			21,579,655		$	216	$	127,695		$	(482	)	$	46,495		$	(4,431	)	$	169,493		$	1,168
Net income		—		—		—			—			—			—			—			—		—			—			19,040			—			19,040			19,040
Dividends paid		—		—		—			—			—			—			—			—		—			—			(25,793	)		—			(25,793	)		—
Adjustment for pension and postretirement benefit liability, net of tax of $1,560		—		—		—			—			—			—			—			—		—			—			—			(2,658	)		(2,658	)		(2,658	)
Adjustment for interest rate swap, net of tax of $230		—		—		—			—			—			—			—			—		—			—			—			(391	)		(391	)		(391	)
Interest on shareholders' notes receivable		—		—		—			—			—			—			—			—		—			(7	)		—			—			(7	)		—
Repayment of shareholders' note receivable		—		—		—			—			—			—			—			—		—			489			—			—			489			—
Shares issued for options exercised		—		—		—			—			—			—			319,383			3		1,340			—			—			—			1,343			—
Stock based compensation		—		—		—			—			—			—			121,656			1		1,872			—			—			—			1,873			—
Balance at December 31, 2011		—	$	—		—		$	—			—		$	—			22,020,694		$	220	$	130,907		$	—		$	39,742		$	(7,480	)	$	163,389		$	15,991

See accompanying Notes to Consolidated Financial Statements

F-6

DOUGLAS DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	2011			2010			2009
Operating activities
Net income	$	19,040		$	1,662		$	9,843
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,176			11,705			11,958
Amortization of deferred financing costs and debt discount		832			872			1,209
Loss on extinguishment of debt		673			7,967			—
Stock-based compensation		1,873			4,029			732
Provision for losses on accounts receivable		47			445			133
Deferred income taxes		6,497			641			1,810
Changes in operating assets and liabilities:
Accounts receivable		2,974			(5,313	)		(3,717	)
Inventories		(524	)		3,216			2,105
Prepaid and other assets and prepaid income taxes		201			1,437			(776	)
Accounts payable		2,193			(2,323	)		218
Accrued expenses and other current liabilities		4,554			(7,201	)		1,127
Deferred compensation		(155	)		(415	)		(162	)
Benefit obligations and other long-term liabilities		1,347			(945	)		1,091
Net cash provided by operating activities		47,728			15,777			25,571
Investing activities
Capital expenditures		(2,373	)		(3,009	)		(8,200	)
Proceeds from sale of equipment		67			226			—
Net cash used in investing activities		(2,306	)		(2,783	)		(8,200	)
Financing activities
Stock repurchases		—			(166	)		(1,000	)
Proceeds from exercise of stock options		1,343			—			—
Payment of call premium and post payoff interest on senior notes redemption		—			(3,876	)		—
Collection of shareholders' notes receivable		482			531			—
Payments of financing costs		(3,471	)		(2,605	)		—
Proceeds from initial public offering, net		—			63,929			—
Borrowings on long-term debt		123,750			40,000			—
Dividends paid		(25,793	)		(8,222	)		—
Repayment of long-term debt		(122,450	)		(151,509	)		(850	)
Net cash used in financing activities		(26,139	)		(61,918	)		(1,850	)
Change in cash and cash equivalents		19,283			(48,924	)		15,521
Cash and cash equivalents at beginning of year		20,149			69,073			53,552
Cash and cash equivalents at end of year	$	39,432		$	20,149		$	69,073
Supplemental disclosure of cash flow information
Income taxes paid	$	2,479		$	1,663		$	1,895
Interest paid	$	7,767		$	16,886		$	14,410

See accompanying Notes to Consolidated Financial Statements

F-7

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

1. Description of business and basis of presentation

        Douglas Dynamics, Inc., (the "Company") is the North American leader in the design, manufacture and sale of snow and ice control equipment for light trucks, which is comprised of snowplows and sand and salt spreaders, and related parts and accessories. The Company's snow and ice control products are sold through a network of over 720 truck equipment distributors that purchase directly from the Company and are located throughout the snowbelt regions in North America (primarily the Midwest, East and Northeast regions of the United States as well as all provinces of Canada). The Company sells its products under the WESTERN®, FISHER®, and BLIZZARD® brands. The Company is headquartered in Milwaukee, WI and currently has manufacturing facilities in Milwaukee, WI, and Rockland, ME. The Company closed its Johnson City, TN facility in August 2010. The Company operates as a single segment.

        On May 20, 2011 and December 6, 2011, certain of the stockholders of the Company, including affiliates of Aurora Capital Group and Ares Management, closed registered secondary offerings of 5,750,000 and 1,996,479 shares, respectively, of the Company's common stock. The Company did not receive any proceeds from the sale of its stock by the selling stockholders in the offerings.

2. Summary of Significant Accounting Policies

Principles of consolidation

        The accompanying consolidated financial statements include the accounts of Douglas Dynamics, Inc. and its direct wholly-owned subsidiary, Douglas Dynamics, L.L.C., and its indirect wholly-owned subsidiaries, Douglas Dynamics Finance Company (an inactive subsidiary) and Fisher, LLC (hereinafter collectively referred to as the "Company"). All intercompany balances and transactions have been eliminated in consolidation.

Use of estimates

        The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Accordingly, actual results could differ from those estimates.

Cash and Cash Equivalents

        The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

Accounts receivable and allowance for doubtful accounts

        The Company carries its accounts receivable at their face amount less an allowance for doubtful accounts. The majority of the Company's accounts receivable are due from distributors of truck equipment. Credit is extended based on an evaluation of a customer's financial condition. On a

F-8

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

2. Summary of Significant Accounting Policies (Continued)

periodic basis, the Company evaluates its accounts receivable and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances and credit conditions based on a history of write-offs and collections. A receivable is considered past due if payments have not been received within agreed upon invoice terms. Accounts receivable are written off after all collection efforts have been exhausted. The Company takes a security interest in the inventory as collateral for the receivable but often does not have a priority security interest.

Financing program

        The Company is party to a financing program in which certain distributors may elect to finance their purchases from the Company through a third party financing company. The Company provides the third party financing company recourse against the Company regarding the collectability of the receivable under the program due to the fact that if the third party financing company is unable to collect from the distributor the amounts due in respect of the product financed, the Company would be obligated to repurchase any remaining inventory related to the product financed and reimburse any legal fees incurred by the financing company. During the years ended December 31, 2011, 2010 and 2009, distributors financed purchases of $2,752, $1,696 and $3,269 through this financing program, respectively. At December 31, 2011 there were $55 of uncollectible outstanding receivables related to sales financed under the financing program, all of which is fully reserved for in the allowance for doubtful accounts. There were no outstanding or uncollectible amounts related to sales financed under the financing program for the years ended December 31, 2010. The amount owed by our distributors to the third party financing company under this program at December 31, 2011 and 2010 was $1,714 and $1,267, respectively. The Company was required to repurchase repossessed inventory of $41, $91 and $19 for the years ended December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

        In the past, minimal losses have been incurred under this agreement. However, an adverse change in distributor retail sales could cause this situation to change and thereby require the Company to repurchase repossessed units. Any repossessed units are inspected to ensure they are current, unused product and are restocked and resold.

Interest Rate Swap

        As required by the new debt agreement the Company entered into in the second quarter of 2011, the Company entered into an interest-rate swap agreement to hedge against the potential impact on earnings from increases in market interest rates. Under the interest rate swap agreement, effective as of July 18, 2011 the Company either receives or makes payments on a monthly basis based on the differential between 6.335% and LIBOR plus 4.25% (with a LIBOR floor of 1.5%). See Comprehensive income (loss) for treatment of gains and losses on the interest rate swap agreement.

Inventories

        Inventories are stated at the lower of cost or market. Market is determined based on estimated realizable values. Inventory costs are primarily determined by the first-in, first-out (FIFO) method. The

F-9

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

2. Summary of Significant Accounting Policies (Continued)

Company periodically reviews our inventory for slow moving, damaged and discontinued items and provides reserves to reduce such items identified to their recoverable amounts.

Property, plant and equipment

        Property, plant and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed using straight-line methods over the estimated useful lives for financial statement purposes and an accelerated method for income tax reporting purposes. The estimated useful lives of the assets are as follows:

	Years
Land improvements and buildings		15 - 40
Machinery and equipment		3 - 20
Furniture and fixtures		3 - 12
Mobile equipment and other		3 - 10

        Depreciation expense was $2,975, $5,704, and $5,797 for the years ended December 31, 2011, 2010 and 2009, respectively.

        Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to operations when incurred. Repairs and maintenance expenses amounted to $4,025, $2,909 and $3,079 for the years ended December 31, 2011, 2010 and 2009, respectively. When assets are sold or retired, the cost of the asset and the related accumulated depreciation are eliminated from the accounts and any gain or loss is recognized in the results of operations.

Impairment of long-lived assets

        Long-lived assets are reviewed for potential impairment when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying value of such assets to the undiscounted future cash flows expected to be generated by the assets. If the carrying value of an asset exceeds its estimated undiscounted future cash flows, an impairment provision is recognized to the extent that the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or the fair value of the asset, less costs of disposition. Management of the Company considers such factors as current results, trends and future prospects, current market value, and other economic and regulatory factors in performing these analyses. The Company determined that no long-lived assets were impaired as of December 31, 2011 and 2010.

Goodwill and other intangible assets

        Goodwill and indefinite-lived intangible assets are tested for impairment annually in the fourth quarter, or sooner if impairment indicators arise. The fair value of indefinite-lived intangible assets is estimated based upon a market approach. In reviewing goodwill for impairment, potential impairment is identified by comparing the estimated fair value of the reporting unit to its carrying value. The

F-10

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

2. Summary of Significant Accounting Policies (Continued)

Company has determined it has one reporting unit. When the fair value is less than the carrying value of the net assets of the reporting unit, including goodwill, an impairment loss may be recognized. The Company has determined that goodwill and indefinite lived assets were not impaired as of December 31, 2011 and 2010.

        Intangible assets with estimable useful lives are amortized over their respective estimated useful lives and also reviewed at least annually for impairment or as events or circumstances arise. The Company amortizes its distribution network intangible over periods ranging from 15 to 20 years, trademarks over 7 to 10 years, patents over 7 to 20 years, and noncompete agreements over 5 years. The Company has determined that finite lived intangible assets were not impaired as of December 31, 2011 and 2010.

Income taxes

        Deferred income taxes are accounted for under the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates. Deferred income tax provisions or benefits are based on the change in the deferred tax assets and liabilities from period to period. Deferred income tax assets are reduced by a valuation allowance if it is more likely than not that some portion of the deferred income tax asset will not be realized. Additionally, when applicable, the Company would classify interest and penalties related to uncertain tax positions in income tax expense.

Deferred financing costs

        The costs of obtaining financing are capitalized and amortized over the term of the related financing on a basis that approximates the effective interest method. The changes in deferred financing costs are as follows:

Balance at January 1, 2009	$	4,520
Amortization of deferred financing costs		(1,209	)
Balance at December 31, 2009		3,311
Write-off of unamortized deferred financing costs		(2,045	)
Deferred financing costs capitalized on new debt		559
Amortization of deferred financing costs		(872	)
Balance at December 31, 2010		953
Write-off of unamortized deferred financing costs		(335	)
Deferred financing costs capitalized on new debt		3,471
Amortization of deferred financing costs		(687	)
Balance at December 31, 2011	$	3,402

        For the year ended December 31, 2011, the Company recorded the write-off of deferred financing costs as a loss on extinguishment of debt, in the consolidated statements of operations as a result of an

F-11

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

2. Summary of Significant Accounting Policies (Continued)

amendment to the Company's term loan facility. The amendment of the term loan facility resulted in a significant modification of the debt which resulted in the write off of unamortized capitalized deferred financing costs of $335. See further details in Note 7. For the year ended December 31, 2010 the Company recorded a loss on extinguishment of debt of $7,967 as a result of an amendment to the Company's term loan facility and the repayment of the senior notes as follows. The amendment of the term loan facility resulted in a significant modification of the debt, which resulted in the write off of unamortized deferred financing costs of $995. The Company also incurred expenditures of $2,045 related to financing costs paid to existing lenders. The Company wrote off $1,050 of unamortized deferred financing costs related to the senior notes and paid $3,876 for a redemption call premium and post payoff interest on the senior notes redemption.

Fair Value

        Fair value is the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

        The following table presents financial assets and liabilities measured at fair value on a recurring basis and discloses the fair value of long-term debt:

	Fair Value at 12/31/2011		Fair Value at 12/31/2010
Assets:
Assets(a)	$	—	$	—
Total Assets	$	—	$	—
Liabilities:
Long term debt(b)		122,709		120,397
Other non-current liabilities—Interest rate swap(c)		621		—
Total Liabilities	$	123,330	$	120,397

(a)

The Company does not have any financial assets that are required to be measured at fair value on a recurring basis.

(b)

The fair value of the Company's long-term debt, including current maturities, is estimated using discounted cash flows based on the Company's current incremental borrowing rates for similar types of borrowing arrangements, which is a level 2 input for all periods presented. Meanwhile, long-term debt is recorded at carrying amount, net of discount, as disclosed on the face of the balance sheet.

F-12

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

2. Summary of Significant Accounting Policies (Continued)

(c)

Valuation models are calibrated to initial trade price. Subsequent valuations are based on observable inputs to the valuation model (e.g. interest rates and credit spreads). Model inputs are changed only when corroborated by market data. A credit risk adjustment is made using observable market credit spreads. Thus, inputs used to determine fair value of the interest rate swap are level 2 inputs.

Concentration of credit risk

        The Company's cash is deposited with multiple financial institutions. At times, deposits in these institutions exceed the amount of insurance provided on such deposits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant risk on these balances.

        No distributor represented more than 10% of the Company's net sales or accounts receivable during the years ended December 31, 2011, 2010 and 2009.

Revenue recognition

        The Company recognizes revenues upon shipment to the customer, which is when title passes and all of the following conditions are satisfied: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) the product has been shipped and the Company has no further obligations. Customers have no right of return privileges. Historically, product returns have not been material and are permitted on an exception basis only.

        The Company offers a variety of discounts and sales incentives to our distributors. The estimated liability for sales discounts and allowances is recorded at the time of sale as a reduction of net sales. The liability is estimated based on the costs of the program, the planned duration of the program and historical experience.

Cost of sales

        Cost of sales includes all costs associated with the manufacture of the Company's products, including raw materials, purchased parts, freight, plant operating expenses, property insurance and taxes, and plant depreciation. All payroll costs and employee benefits for the hourly workforce, manufacturing management, and engineering costs are included in cost of sales.

Warranty cost recognition

        The Company accrues for estimated warranty costs as revenue is recognized. See note 9 for further details.

Advertising expenses

        Advertising expenses include costs for the production of marketing media, literature, CD-ROM, and displays. The Company participates in trade shows and advertises in the yellow pages and billboards. Advertising expenses amounted to $2,718, $2,805 and $2,528 for the years ended

F-13

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

2. Summary of Significant Accounting Policies (Continued)

December 31, 2011, 2010 and 2009, respectively. The Company also provides its distributors with pre-approved, cooperative advertising programs, which are recorded as advertising expense in selling, general and administrative expense. All costs associated with the Company's advertising programs are expensed as incurred.

Shipping and handling costs

        Generally, shipping and handling costs are paid directly by the customer to the shipping agent. Those shipping and handling costs billed by the Company are recorded as a component of sales with the corresponding costs included in cost of sales.

Share-based payments

        The Company applies the guidance codified in ASC 718—Compensation—Stock Compensation. This standard requires the measurement of the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award at the grant date and recognition of the compensation expense over the period during which an employee is required to provide service in exchange for the award (generally the vesting period). Because the Company used the minimum-value method to measure compensation cost for employee stock options prior to January 1, 2006 the date on which ASC 718 was adopted, under this previous guidance, it was required to use the prospective method of adoption for this standard. Under the prospective method, the Company continues to account for non-vested awards outstanding at the date of adoption using the same method as prior to adoption for financial statement recognition purposes. All awards granted, modified, or settled after the date of adoption are accounted for using the measurement, recognition, and attribution provisions of ASC 718.

Comprehensive income (loss)

        Comprehensive income (loss) is defined as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner resources and is comprised of net income or loss and "other comprehensive income (loss)". The Company's other comprehensive income (loss) is comprised of the adjustments for pension and postretirement benefit liabilities as well as the impact of our interest rate swap. The interest rate swap contract on $50,000 notional amount of the term loan expires in December 2014. The Company does not expect to record any unrecognized loss into earnings in the next twelve months. Additionally, other comprehensive income (loss) includes the net income (loss) of the Company plus/minus the Company's adjustments for its defined benefit retirement plans based on the measurement date as of the Company's year-end.

F-14

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

2. Summary of Significant Accounting Policies (Continued)

        Components of accumulated other comprehensive loss are as follows:

	December 31,
	2011			2010
Interest rate swap, net of tax	$	(391	)	$	—
Unrecognized pension and postretirement benefit plan liabilities, net of tax		(7,089	)		(4,431	)
	$	(7,480	)	$	(4,431	)

Segment Reporting

        The Company operates in and reports as a single operating segment, which is the manufacture and sale of snow and ice control products. Net sales are generated through the sale of snow and ice control products and accessories to distributors. The chief operating decision maker (the Company's Chief Executive Officer) manages and evaluates its operations as one segment primarily due to similarities in the nature of the products, production processes and methods of distribution. All of the Company's identifiable assets are located in the United States. The Company's sales outside North America are not material, representing less than 1% of net sales.

        The Company's product offerings primarily consist of snow and ice control products and accessories. Equipment and parts and accessories are each a similar class of products based on similar customer usage.

	Year ended December 31,
	2011		2010		2009
Equipment	$	177,806	$	151,808	$	147,478
Parts and accessories		30,992		24,987		26,864
Net Sales	$	208,798	$	176,795	$	174,342

3. Related-Party Transactions

        The Company was party to a Joint Management Services Agreement with Aurora Management Partners, LLC ("AMP") and ACOF Management, LP ("ACOF"), who were affiliates of its principal stockholders at that time. Prior to the Company's initial public offering ("IPO") of its common stock in May 2010, this agreement obligated the Company to pay an annual management fee of $1,250 per annum, to AMP and ACOF, pro rata in accordance with their respective holdings, plus reimbursement of reasonable out-of-pocket expenses, in exchange for consultation and advice in fields such as financial services, accounting, general business management, acquisitions, dispositions and banking.

F-15

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

3. Related-Party Transactions (Continued)

        In connection with the Company's IPO, the Company amended and restated the terms of its Joint Management Services Agreement to, among other things, (i) extend the term of service until the earlier of (A) the fifth anniversary of the consummation of the Company's IPO, (B) such time as AMP and ACOF, together with their affiliates, collectively hold less than 5% of the Company's outstanding common stock and (C) such time as all parties mutually agree in writing, while eliminating all other termination events (other than termination for cause); (ii) eliminate the annual management fee, as well as the provision obligating the Company to pay AMP and ACOF a transaction fee in the event of an acquisition or any sale or disposition of the Company or any of its divisions or any sale of substantially all Company assets or similar transactions in exchange for a one-time fee of $5,800 upon the consummation of the IPO, pro rata in accordance with their respective holdings; and (iii) modify the expense reimbursement provisions to include reimbursement for out-of-pocket expenses incurred in connection with SEC and other legally required filings made by each of AMP and ACOF with respect to the Company's securities and certain other expenses. The one-time management fee was paid on May 10, 2010, and is included in management fees—related party expense for the year ended December 31, 2010.

        On December 6, 2011, the Company completed a secondary offering by certain stockholders. Immediately following the secondary offering, AMP and ACOF were no longer shareholders in the Company.

        The Company recognized management fees and related expense of $46, $6,383 and $1,393 for the years ended December 31, 2011, 2010 and 2009, respectively.

4. Inventories

        Inventories consist of the following:

	December 31,
	2011		2010
Finished goods and work-in-process	$	22,630	$	21,896
Raw material and supplies		1,375		1,585
	$	24,005	$	23,481

F-16

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

5. Property, plant and equipment

        Property, plant and equipment are summarized as follows:

	December 31,
	2011			2010
Land	$	960		$	960
Land improvements		1,768			1,768
Buildings		12,660			12,554
Machinery and equipment		23,253			22,343
Furniture and fixtures		7,255			6,482
Mobile equipment and other		1,216			1,019
Construction-in-process		748			422
Total property, plant and equipment		47,860			45,548
Less accumulated depreciation		(26,520	)		(23,586	)
Net property, plant and equipment	$	21,340		$	21,962

6. Other Intangible Assets

        The following is a summary of the Company's other intangible assets:

	Gross Carrying Amount		Less Accumulated Amortization		Net Carrying Amount
December 31, 2011:
Indefinite-lived intangibles:
Trademark and tradenames	$	60,000	$	—	$	60,000
Amortizable intangibles:
Dealer network		80,000		31,000		49,000
Customer relations		2,000		822		1,178
Patents		15,116		4,735		10,381
Noncompete agreements		5,050		5,050		—
Trademark—Blizzard		3,100		1,912		1,188
License		20		20		—
Amortizable intangibles, net		105,286		43,539		61,747
Total	$	165,286	$	43,539	$	121,747

F-17

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

6. Other Intangible Assets (Continued)

	Gross Carrying Amount		Less Accumulated Amortization		Net Carrying Amount
December 31, 2010:
Indefinite-lived intangibles:
Trademark and tradenames	$	60,000	$	—	$	60,000
Amortizable intangibles:
Dealer network		80,000		27,000		53,000
Customer relations		2,000		689		1,311
Patents		15,116		3,977		11,139
Noncompete agreements		5,050		5,050		—
Trademark—Blizzard		3,100		1,602		1,498
License		20		20		—
Amortizable intangibles, net		105,286		38,338		66,948
Total	$	165,286	$	38,338	$	126,948

        Amortization expense for intangible assets was $5,201, $6,001 and $6,161 for the years ended December 31, 2011, 2010 and 2009, respectively. Estimated amortization expense for the next five years is as follows:

2012	$	5,199
2013		5,193
2014		5,193
2015		5,142
2016		4,883

        The weighted average remaining life for intangible assets is 12.2 years.

7. Long-Term Debt

        Long-term debt is summarized below:

	December 31,
	2011		2010
Term Loan, net of debt discount of $1,125 and $358 at December 31, 2011 and December 31, 2010, respectively:	$	122,937	$	121,154
Total long-term debt		122,937		121,154
Less current maturities		11,071		1,183
	$	111,866	$	119,971

F-18

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

7. Long-Term Debt (Continued)

        The scheduled maturities on long-term debt at December 31, 2011, are as follows:

2012	$	11,071
2013		1,071
2014		1,071
2015		1,071
2016		1,071
Thereafter		107,582
	$	122,937

        On April 18, 2011, the Company amended its senior credit facilities to, among other things, (i) increase the borrowing ability under the revolving credit agreement by $10,000, and (ii) amend certain of the provisions in its senior credit facilities which govern the Company's ability to pay dividends. Consequently, as of April 18, 2011, the Company's senior credit facilities consisted of a $125,000 term loan facility and a $70,000 revolving credit facility with a group of banks. The previous term loans consisted of an initial term loan of $85,000 and a "tack on" of $40,000 and a $60,000 revolving credit facility. Prior to the April 2011 changes to the Company's senior credit facilities, the interest on the original $85,000 term loan facility was (at the Company's option) either the base rate (which shall be no less than 3%) plus 3.5% or the eurodollar rate (which shall be no less than 2%) plus 4.5%. The interest for the additional $40,000 in the Company's term loan facility was an interest rate equal to (at the Company's option) either the base rate (which shall be no less than 3%) plus 4% or the eurodollar rate (which shall be no less than 2%) plus 5%. Under the previous revolving credit facility, the margin for base rate loans was either 0.25% or 0.50% and the margin for eurodollar rate loans was either 1.25% or 1.50%, in each case determined based on the Company's leverage ratio from time to time.

        The agreement for the new term loan (the "Term Loan Credit Agreement") provides for a senior secured term loan facility in the aggregate principal amount of $125,000 and generally bears interest at (at the Company's election) either (i) 3.25% per annum plus the greatest of (a) the Prime Rate (as defined in the Term Loan Credit Agreement) in effect on such day, (b) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers plus 0.50% and (c) 1.00% plus the greater of (1) the London Interbank Offered Rate for a one month interest period multiplied by the Statutory Reserve Rate (as defined in the Term Loan Credit Agreement) and (2) 1.50% or (ii) 4.25% per annum plus the greater of (a) the London Interbank Offered Rate for the applicable interest period multiplied by the Statutory Reserve Rate and (b) 1.50%. The revolving credit facility as amended and restated (the "Revolving Credit Agreement") provides that the Company has the option to select whether borrowings will bear interest at either (i) 2.25% per annum plus the London Interbank Offered Rate for the applicable interest period multiplied by the Statutory Reserve Rate or (ii) 1.25% per annum plus the greatest of (a) the Prime Rate in effect on such day, (b) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers plus 0.50% and (c) the London Interbank Offered Rate for a one month interest period multiplied by the Statutory Reserve Rate plus 1%. The maturity date for the Company's amended and restated revolving

F-19

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

7. Long-Term Debt (Continued)

credit facility is April 18, 2016, and the Company's new term loan amortizes in nominal amounts quarterly with the balance payable on April 18, 2018.

        The new term loan entered into in the second quarter of 2011 was issued at a $1,250 discount which is being amortized over the term of the new term loan.

        The Company's entry into the new term loan facility resulted in a significant modification of the Company's debt which resulted in the write off of unamortized capitalized deferred financing costs of $335 and write off of unamortized debt discount of $338 which in total resulted in a loss on extinguishment of debt of $673 in the Consolidated Statement of Income during the year ended December 31,2011.

        At December 31, 2011, the Company had no outstanding borrowings on the revolving credit facility and remaining borrowing availability of $70,000.

        The Company's senior credit facilities include certain negative and operating covenants, including restrictions on its ability to pay dividends, and other customary covenants, representations and warranties and events of default. The senior credit facilities entered into and recorded by the Company's subsidiaries significantly restrict its subsidiaries from paying dividends and otherwise transferring assets to Douglas Dynamics, Inc. The terms of the Company's revolving credit facility specifically restrict subsidiaries from paying dividends if a minimum availability under the revolving credit facility is not maintained, and both senior credit facilities restrict subsidiaries from paying dividends above certain levels or at all if an event of default has occurred. These restrictions would affect the Company indirectly since the Company relies principally on distributions from its subsidiaries to have funds available for the payment of dividends. In addition, the Company's revolving credit facility includes a requirement that, subject to certain exceptions, capital expenditures may not exceed $10,000 in any calendar year and, if certain minimum availability under the revolving credit facility is not maintained, that the Company comply with a monthly minimum fixed charge coverage ratio test of 1.0:1.0. Compliance with the fixed charge coverage ratio test is subject to certain cure rights under the Company's revolving credit facility. At December 31, 2011, the Company was in compliance with the respective covenants. The credit facilities are collateralized by substantially all assets of the Company.

        In accordance with the senior credit facilities, the Company is required to make additional principal prepayments over the above scheduled payments under certain conditions. This includes, in the case of the term loan facility, 100% of the net cash proceeds of certain asset sales, certain insurance or condemnation events, certain debt issuances, and, within 150 days of the end of the fiscal year, 50% of excess cash flow, as defined, including a deduction for certain distributions (which percentage is reduced to 25% or 0% upon the achievement of certain leverage ratio thresholds), for any fiscal year. Excess cash flow is defined in the senior credit facilities as consolidated adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) plus a working capital adjustment less the sum of repayments of debt and capital expenditures subject to certain adjustments, interest and taxes paid in cash, management fees and certain restricted payments (including dividends or distributions). Working capital adjustment is defined in the senior credit facilities as the change in working capital, defined as current assets excluding cash and cash equivalents less current liabilities excluding current portion of long term debt. As of December 31, 2011, the Company was not required

F-20

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

7. Long-Term Debt (Continued)

to make an excess cash flow payment. However, the Company expects to make a voluntary prepayment of $10,000 in 2012.

        Each of the senior secured facilities entered into in the second quarter of 2011 includes a hedge provision, which required the Company to enter into an interest rate hedge commencing 90 days after the closing date. The hedging provision required the Company to hedge the interest rate on at least 25% of the aggregate outstanding principal amount of the term loans. The purpose of the interest rate swap is to reduce the Company's exposure to interest rate volatility. Effective June 20, 2011, the Company entered into an interest rate swap agreement with a notional amount of $50,000. The interest rate swap negative fair value at December 31, 2011 of $621 is included in other long-term liabilities on the Consolidated Balance Sheet. The Company has counterparty credit risk resulting from the interest rate swap, which it monitors on an on-going basis. This risk lies with one global financial institution. Under the interest rate swap agreement, effective as of July 18, 2011, the Company either receives or makes payments on a monthly basis based on the differential between 6.335% and LIBOR plus 4.25% (with a LIBOR floor of 1.5%). The interest rate swap contract on the term loan expires in December 2014.

8. Accrued Expenses and Other Current Liabilities

        Accrued expenses and other current liabilities are summarized as follows:

	December 31,
	2011		2010
Payroll and related costs	$	4,756	$	2,993
Employee benefits		2,645		2,334
Accrued warranty		4,188		3,399
Other		4,166		3,197
	$	15,755	$	11,923

9. Warranty Liability

        The Company accrues for estimated warranty costs as sales are recognized and periodically assesses the adequacy of its recorded warranty liability and adjusts the amount as necessary. The Company's warranties generally provide, with respect to its snow and ice control equipment, that all material and workmanship will be free from defect for a period of two years after the date of purchase by the end-user, and with respect to its parts and accessories purchased separately, that such parts and accessories will be free from defect for a period of one year after the date of purchase by the end-user. Certain snowplows only provide for a one year warranty. The Company determines the amount of the estimated warranty costs (and its corresponding warranty reserve) based on the Company's prior five years of warranty history utilizing a formula driven by historical warranty expense and applying management's judgment. The Company adjusts its historical warranty costs to take into account unique factors such as the introduction of new products into the marketplace that do not provide a historical warranty record to assess. The warranty reserve is included with Accrued Expenses and Other Current Liabilities in the accompanying consolidated balance sheets.

F-21

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

9. Warranty Liability (Continued)

        The following is a rollforward of the Company's warranty liability:

	December 31,
	2011			2010			2009
Balance at the beginning of the period	$	3,399		$	3,040		$	2,272
Warranty provision		3,386			2,604			2,913
Claims paid/settlements		(2,597	)		(2,245	)		(2,145	)
Balance at the end of the period	$	4,188		$	3,399		$	3,040

10. Income Taxes

        The provision for income tax expense (benefit) consists of the following:

	Year ended December 31
	2011		2010		2009
Current:
Federal	$	2,697	$	—	$	1,284
State		326		231		892
		3,023		231		2,176
Deferred:
Federal		7,855		363		3,165
State		454		278		(1,355	)
		8,309		641		1,810
	$	11,332	$	872	$	3,986

        A reconciliation of income tax expense computed at the federal statutory rate to the provision for income taxes for the years ended December 31, 2011, 2010 and 2009 is as follows:

	2011			2010			2009
Federal income tax expense at statutory rate	$	10,630		$	862		$	4,840
State taxes, net of federal benefit		1,522			7			302
Valuation allowance changes		(47	)		311			(1,129	)
Change in uncertain tax positions, net		(150	)		(349	)		276
Research and development credit		(111	)		(117	)		(194	)
Rate change		(162	)		95			—
Manufacturing tax benefits		(552	)		—			—
Other		202			63			(109	)
	$	11,332		$	872		$	3,986

F-22

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

10. Income Taxes (Continued)

        Significant components of the Company's deferred tax liabilities and assets are as follows:

	December 31,
	2011			2010
Deferred tax assets:
Allowance for doubtful accounts	$	465		$	456
Inventory reserves		479			533
Warranty liability		1,552			1,291
Deferred compensation		911			666
Pension and retiree health benefit obligations		8,615			6,145
Accrued vacation		570			428
Medical claims reserve		242			214
State net operating losses		2,167			3,160
Federal net operating losses		—			3,310
Other accrued liabilities		1,583			886
Valuation allowance for state net operating losses		(830	)		(877	)
Total deferred tax assets		15,754			16,212
Deferred tax liabilities:
Tax deductible goodwill and other intangibles		(34,923	)		(30,434	)
Accelerated depreciation		(2,280	)		(865	)
Other		(556	)		(421	)
Total deferred tax liabilities		(37,759	)		(31,720	)
Net deferred tax liabilities	$	(22,005	)	$	(15,508	)

        Deferred income tax balances reflect the effects of temporary differences between the carrying amount of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

        During 2011, the Company carried back its previously generated Federal net operating loss, resulting in full utilization of the Federal net operating loss and eliminating the related deferred tax asset. State operating loss carry forwards for tax purposes were $38,297 at December 31, 2011 and are expected to result in future tax benefits of approximately $2,167. These loss carry-forwards will expire beginning in 2019. The Company evaluated the need to maintain a valuation allowance against certain deferred tax assets. Based on this evaluation, which included a review of recent profitability and future projections of profitability, the Company concluded that a valuation allowance of approximately $830 is necessary at December 31, 2011 for the state net operating loss carry-forwards which are likely to expire prior to the Company's ability to use the tax benefit.

F-23

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

10. Income Taxes (Continued)

        A reconciliation of the beginning and ending liability for uncertain tax positions is as follows:

	2011			2010
Balance at beginning of year	$	798		$	2,095
Increases for tax positions taken in the current year		—			—
Increases for tax positions taken in prior years		—			—
Decreases due to settlements with taxing authorities		(478	)		(1,297	)
Balance at the end of year	$	320		$	798

        The amount of the unrecognized tax benefits that would affect the effective tax rate, if recognized, was approximately $208 at December 31, 2011 and approximately $591 at December 31, 2010. The Company recognizes interest and penalties related to the unrecognized tax benefits in income tax expense. Approximately $54 and $174 of accrued interest and penalties is reported as an income tax liability at December 31, 2011 and 2010, respectively. The liability for unrecognized tax benefits is reported in Other Liabilities on the consolidated balance sheets at December 31, 2011 and 2010. The Company recognized ($120), ($478), and $153 of (benefits) expenses related to interest and penalties in income tax expense for the years ended December 31, 2011, 2010, and 2009, respectively.

        The Company files income tax returns in the United States (Federal), Wisconsin (state), Maine (state) and various other states. Tax years open to examination by tax authorities under the statute of limitations include 2009, 2010 and 2011 for Federal and 2007 through 2011 for most states. Tax returns for the 2011 tax year have not yet been filed.

11. Deferred Compensation

        The Company has a long-term incentive compensation plan covering certain management employees. Under the terms of the plan, prior to December 31, 2010 participants earned (lost) additional compensation based upon a percentage of the Company's cash flow from operations reduced by capital expenditures under a predetermined formula. In addition, participants' account balances under the plan increased or decreased on an annual basis based upon the Company's cash flow from operations reduced by capital expenditures under a predetermined formula. Amounts credited to participant accounts under the plan were, and continue to be as of December 31, 2011, non-forfeitable unless a participant is terminated for cause or voluntarily terminates his or her employment with the Company. In either of these events, the terminated participant will forfeit any positive amounts allocated to his or her account for the two years preceding the year of termination.

        Compensation earned under the plan is deferred until such time as the participant has an account balance of more than two times his or her base compensation, at which point 20% of the balance is

F-24

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

11. Deferred Compensation (Continued)

paid to the participant in cash in a lump sum. Participants are paid their vested account balances under the plan upon separation from the Company as follows:

	Payment Method
Death, long-term disability, or normal retirement	Lump sum
Balance of less than $75,000	Lump sum
Balance greater than $75,000	5 equal annual installments

        With respect to account balances paid in installments, participants earn interest each year on the unpaid balance at the one-year U.S. Treasury rate in effect at the beginning of the year.

        Activity for the plan is as follows:

	December 31
	2011			2010
Balance at beginning of year	$	1,292		$	1,705
Participant earnings according to the terms of the plan		—			128
Payments to current and former participants		(225	)		(258	)
Adjustments to plan		—			(283	)
Balance at end of year		1,067			1,292
Less current portion		(155	)		(225	)
Long Term balance at end of year	$	912		$	1,067

        Effective December 31, 2010, the Company froze the long-term incentive plan. The Company will continue to pay its obligations to previously designated recipients in accordance with the plan, but no new compensation will be earned under the plan. As there were modifications to the deferred compensation plan, the Company reduced its obligation for expected forfeitures which was based on historical turnover as included above as "Adjustments to Plan" in 2010.

12. Employee Retirement Plans

Pension benefits

        The Company provides noncontributory defined benefit pension plans for most employees. Plans covering salaried employees generally provide pension benefits that are based on the employee's average earnings and credited service. Plans covering hourly employees generally provide benefits of stated amounts for each year of service. The Company's funding policy for the plans is to contribute amounts sufficient to meet the minimum funding requirement of the Employee Retirement Income Security Act of 1974, plus any additional amounts that the Company may determine to be appropriate.

F-25

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

12. Employee Retirement Plans (Continued)

        The reconciliation of the beginning and ending balances of the fair value of plan assets, funded status of plans, and amounts recognized in the consolidated balance sheets consisted of the following:

	December 31
	2011			2010
Change in projected benefit obligation:
Benefit obligation at beginning of year	$	28,557		$	24,723
Service cost		961			800
Interest cost		1,539			1,432
Actuarial loss		4,126			2,884
Benefits paid		(975	)		(956	)
Effect of curtailment		(1,408	)		(326	)
Benefit obligation at end of year		32,800			28,557
Change in plan assets:
Fair value of plan assets at beginning of year		17,804			15,766
Actual return on plan assets		(109	)		2,085
Employer contributions through December 31		1,917			909
Benefits paid		(975	)		(956	)
Fair value of plan assets at end of year		18,637			17,804
Funded Status: accrued pension liability	$	(14,163	)	$	(10,753	)

        In May 2010, in connection with the closure of the Company's manufacturing facility in Johnson City, TN substantially all the employees at this facility were terminated. This resulted in a cessation of all future benefit accruals for these employees under the Company's pension plans. A liability gain of $326 from the curtailment was recognized as a reduction to the net actuarial loss, as the liability gain was less than the unrecognized net actuarial loss prior to the curtailment for the pension plan in the year ended December 31, 2010. Therefore, this did not impact the consolidated statement of income for the year ended December 31, 2010.

        In November 2011, the Company took the following actions with respect to its pension plans effective as of December 31, 2011: It froze benefits as of January 1, 2012 for all employees under the Company's Pension Plan for Hourly Employees, froze benefits as of January 1, 2012 for all employees under the Company's Salaried Pension Plan for employees with less than five years of service and grandfathered employees (other than certain highly compensated employees) under the Company's Salaried Pension Plan with five or more years of service, but reduced the benefit accrual from 1.67% of pay to 1.00% of pay. In order to offset the loss of these benefit to employees, the Company has enhanced its defined contribution plan. The company also established a nonqualified deferred compensation plan effective as of January 1, 2012, for certain highly compensated employees whose participation in the qualified plan is restricted. A liability gain of $1,408 from this curtailment was recognized as a reduction to the net actuarial loss, as the liability gain was less than the unrecognized net actuarial loss prior to the curtailment for the pension plan in the year ended December 31, 2011.

F-26

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

12. Employee Retirement Plans (Continued)

Therefore, this did not impact the consolidated statement of income for the year ended December 31, 2011.

        The components of net periodic pension cost consisted of the following for the years ended December 31,

	2011			2010			2009
Component of net periodic pension cost:
Service cost	$	961		$	800		$	820
Interest cost		1,539			1,432			1,355
Expected return on plan assets		(1,357	)		(1,162	)		(984	)
Amortization of net loss		454			324			519
Net periodic pension cost	$	1,597			1,394		$	1,710

        The accumulated benefit obligation for all pension plans as of December 31, 2011 and 2010, was $31,322 and $26,078, respectively.

        In accordance with its adoption of ASC 715-20, the Company uses December 31, as its measurement date for all periods presented. Assumptions used in determining net periodic pension cost for the plans consisted of the following:

	Year ended December 31
	2011			2010			2009
Discount rates		5.5	%		6.0	%		6.0	%
Rates of increase in compensation levels:
Salaried		3.5			3.5			3.5
Hourly		N/A			N/A			N/A
Expected long-term rate of return on assets		8.0			8.0			8.0

        The discount rate used to determine the benefit obligation at December 31, 2011 and 2010 is 4.6% and 5.5%, respectively.

        For 2012, the expected long-term rate of return on plan assets is 7.25%. To determine the long-term rate of return assumption for plan assets, the Company studies historical markets and preserves the long-term historical relationships between equities and fixed-income securities consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. The Company evaluates current market factors such as inflation and interest rates before it determines long-term capital market assumptions and reviews peer data and historical returns to check for reasonableness and appropriateness.

F-27

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

12. Employee Retirement Plans (Continued)

        The expected benefit payments under the pension plans are as follows:

2012	$	1,260
2013		1,310
2014		1,340
2015		1,360
2016		1,380
2017 - 2020		8,020

        The Company made required minimum pension funding contributions of $1,917 to the pension plans in 2011 and currently expects to make $2,512 required minimum pension funding contributions in 2012.

        The Company maintains target allocation percentages among various asset classes based on an investment policy established for the pension plans, which is designed to achieve long-term objectives of return, while mitigating downside risk and considering expected cash flows. The current weighted-average target asset allocations are reflective of actual investments at December 31, 2011 and 2010. The investment policy is reviewed periodically in order to achieve overall objectives in light of current circumstances.

        The Company's weighted-average asset allocation and actual allocation for the qualified pension plans by asset category at December 31 is as follows:

	Target			2011				2010
Large Cap Equity		37	%	$	5,901	32	%	$	6,297	35	%
Mid Cap Equity		4	%		750	4	%		799	5	%
Small Cap Equity		3	%		783	4	%		772	4	%
International Equity		12	%		2,041	11	%		2,379	13	%
Emerging markets Equity		2	%		353	2	%		284	2	%
Fixed Income and Cash Equivalents		34	%		6,966	37	%		6,148	35	%
Real Estate		8	%		1,843	10	%		1,125	6	%
Total		100	%	$	18,637	100	%	$	17,804	100	%

        The investment strategy is to build an efficient, well-diversified portfolio based on a long-term, strategic outlook of the investment markets. The investment market outlook utilizes both historical-based and forward-looking return forecasts to establish future return expectations for various asset classes. These return expectations are used to develop a core asset allocation based on the needs of the plan. The core asset allocation utilizes investment portfolios of various asset classes and multiple investment managers in order to help maximize the plan's return while providing multiple layers of diversification to help minimize risk.

F-28

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

12. Employee Retirement Plans (Continued)

        The following table presents the fair values of the plan assets related to the Company's pension plans within the fair value hierarchy as defined in Note 2.

        The fair values of the Company's pension plan assets as of December 31, 2011 are as follows:

	Balance as of December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Equity holdings	$	10,575	$	—	$	10,575	$	—
Fixed-income holdings		6,966		—		6,966		—
Alternative investments		1,096		—		—		1,096
Total pension plan assets	$	18,637	$	—	$	17,541	$	1,096

        The fair values of the Company's pension plan assets as of December 31, 2010 are as follows:

	Balance as of December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Equity holdings	$	10,938	$	—	$	10,938	$	—
Fixed-income holdings		6,148		—		6,148		—
Alternative investments		718		—		—		718
Total pension plan assets	$	17,804	$	—	$	17,086	$	718

        Level 2 investments are based on quoted prices for similar assets in markets that are not active while Level 3 investments are comprised of a real estate fund for which the fair value is determined by taking the appraised values of the properties on hand plus other assets and subtracting mortgage loans and other liabilities.

        The following table presents a reconciliation of the fair value measurements using significant unobservable inputs (Level 3):

	December 31,
	2011			2010
Balance, beginning of year	$	718		$	619
Deposits		408			—
Actual return on plan assets held at reporting date		129			99
Withdrawals		(159	)		—
Balance, end of year	$	1,096		$	718

F-29

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

12. Employee Retirement Plans (Continued)

Postretirement benefits

        The Company provides postretirement healthcare benefits for certain employee groups. The postretirement healthcare plans are contributory and contain certain other cost-sharing features such as deductibles and coinsurance. The plans are unfunded. Employees do not vest until they retire from active employment with the Company and have at least twelve years of service. These benefits can be amended or terminated at anytime and are subject to the same ongoing changes as our healthcare benefits for employees with respect to deductible, co-insurance and participant contributions.

        Effective January 1, 2004, the postretirement healthcare benefits were extended to all active employees of the Company as of December 31, 2003. The period of coverage was reduced and the retiree contribution percentage was increased in order to keep the cost of the plan equivalent to the previous plan design.

        Maximum coverage under the plan is limited to ten years. All benefits terminate upon the death of the retiree. Employees who began working for the Company after December 31, 2003, are not eligible for postretirement healthcare benefits.

        The reconciliation of the beginning and ending balances of the projected benefit obligation for the Company consisted of the following:

	December 31
	2011			2010
Change in projected benefit obligation:
Benefit obligation at beginning of year	$	7,576		$	8,198
Service cost		263			308
Interest cost		407			455
Participant contributions		95			94
Changes in actuarial assumptions		426			(154	)
Benefits paid		(365	)		(294	)
Plan Curtailment		—			(1,031	)
Projected benefit obligation at end of year	$	8,402		$	7,576
Amounts recognized in the consolidated balance sheets consisted
Accrued expenses and other current liabilities	$	349		$	341
Retiree health benefit obligation		8,053			7,235
	$	8,402		$	7,576

        In May 2010, in connection with the closure of the Company's manufacturing facility in Johnson City, TN substantially all the employees at this facility were terminated. This resulted in a cessation of all future benefit accruals for these employees under the Company's other post employment benefit ("OPEB") plan. The liability gain for the OPEB plan exceeded the unrecognized net actuarial loss prior to the curtailment and resulted in a gain of $1,031 of which $667 was recorded in selling, general and administrative expense in the consolidated statement of income for the year ended December 31,

F-30

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

12. Employee Retirement Plans (Continued)

2010 and $364 (before taxes) was recognized as a reduction to the net actuarial loss in accumulated other comprehensive loss at December 31, 2010.

        The components of postretirement healthcare benefit cost consisted of the following for the years ended December 31,

	2011			2010			2009
Component of net postretirement health benefit cost:
Service cost	$	263		$	308		$	305
Interest cost		407			455			419
Amortization of net gain		(61	)		(6	)		(73	)
Curtailment gain		—			(667	)		—
Net postretirement healthcare benefit cost	$	609		$	90		$	651

        The assumed discount and healthcare cost trend rates are summarized as follows:

	Year Ended December 31
	2011			2010			2009
Discount rate		5.5	%		6.0	%		6.0	%
Immediate healthcare cost trend rate		9.0			9.0			8.5
Ultimate healthcare cost trend rate		5.0			5.0			5.0
Assumed annual reduction in trend rate		*			0.5			0.5
Participation		80			80			80

*

Health Care Cost Trend rate is assumed to be 9.0% beginning in 2011 gradually reducing to an ultimate rate of 5.0% in 2017.

        The discount rate used to determine the benefit obligation at December 31, 2011 and 2010 is 4.4% and 5.5%, respectively. For the years ending December 31, 2009 and 2010 the combination of pension and postretirement benefit cash flows were used to develop a single equivalent discount rate as the results were materially the same. For 2011, a separate discount rate was determined for pension and postretirement benefits. For December 31, 2011, the health care cost trend rate is assumed to be 8.0% beginning in 2012 gradually reducing to an ultimate rate of 4.5% in 2019.

        A one percentage point change in the healthcare cost trend rate would have the following effect at December 31, 2011:

	1% Increase		1% Decrease
Effect on total service and interest cost	$	96	$	(81	)
Effect on postretirement benefit obligation		1,013		(866	)

F-31

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

12. Employee Retirement Plans (Continued)

        Amounts included in other comprehensive loss, net of tax, at December 31, 2011, which have not yet been recognized in net periodic pension or OPEB cost, were net actuarial gain (loss) of ($7,185) and $96 for the pension plans and postretirement healthcare benefits, respectively. The estimated actuarial gain (loss) for the defined benefit plans that will be amortized from accumulated other comprehensive loss into net periodic pension or OPEB cost during 2012 are ($770) and $16 for the pension plans and postretirement healthcare benefits, respectively.

Defined contribution plan

        The Company has a defined contribution plan, which qualifies under Section 401(k) of the Internal Revenue Code and provides substantially all employees an opportunity to accumulate personal funds for their retirement. Contributions are made on a before-tax basis to these plans.

        As determined by the provisions of the plan, the Company matches a portion of the employees' basic voluntary contributions. The Company matching contributions to the plan were approximately $140, $123 and $137 for the years ended December 31, 2011, 2010 and 2009, respectively. Beginning January 1, 2012, the Company amended its defined contribution plan to permit non-discretionary employer contributions. This enhancement of the defined contribution plan occurred contemporaneously with the pension plan amendments noted within this footnote under "Pension benefits".

13. Stock-Based Compensation

Amended and Restated 2004 Stock Incentive Plan

        In connection with the IPO, in May 2010, the Company's Board of Directors and stockholders amended and restated the Company's 2004 Stock Incentive Plan (as amended and restated, the "A&R 2004 Plan") and certain outstanding award agreements thereunder, to among other things, eliminate the ability of the holders thereunder to use a promissory note to pay any portion of the exercise price of the options, to provide that the use of "net exercises" to pay any portion of the exercise price of the options shall be at the sole discretion of the committee administering the A&R 2004 Plan, and to effect certain ministerial changes under the A&R 2004 Plan. In addition, in connection with the IPO, the Board of Directors also resolved not to issue any further awards under the A&R 2004 Plan. As of December 31, 2011, 37,240 shares of common stock are reserved for issuance upon the exercise of outstanding options under the A&R 2004 Plan. All outstanding options are fully vested. All options expire 10 years from the date of grant.

2010 Stock Incentive Plan

        In connection with the IPO, in May 2010, the Company's Board of Directors and stockholders adopted the 2010 Stock Incentive Plan (the "2010 Plan"). The 2010 Plan provides for the issuance of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock awards and restricted stock units, any of which may be performance-based, and for incentive bonuses, which may be paid in cash or stock or a combination of both, to eligible employees, officers, non-employee directors and other service providers to the Company and its subsidiaries. A maximum of 2,130,000

F-32

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

13. Stock-Based Compensation (Continued)

shares of common stock may be issued pursuant to all awards under the 2010 Plan. As of December 31, 2011, the Company had 1,800,214 shares of common stock available for future issuance of awards under the 2010 Plan. The shares of common stock to be issued under the 2010 Plan will be made available from authorized and unissued Company common stock.

Stock Options

        The following table summarizes information with respect to the Company's stock option activity under the A&R 2004 Plan for the years ended December 31, 2011, 2010 and 2009.

	December 31, 2011					December 31, 2010					December 31, 2009
	Options			Weighted average exercise price		Options			Weighted average exercise price		Options			Weighted average exercise price
Outstanding—beginning of year		356,623		$	4.21		819,185		$	4.21		908,556		$	4.21
Granted		—			—		—			—		—			—
Canceled		—			—		—			4.21		(89,371	)		4.21
Exercised		(319,383	)		4.21		(462,562	)		—		—			—
Outstanding—end of year		37,240		$	4.21		356,623		$	4.21		819,185		$	4.21
Exercisable—end of year		37,240		$	4.21		309,113		$	4.21		747,935		$	4.21

        Certain of the Company's option holders exercised 319,383 stock options during the year ended December 31, 2011, of which 184,236 options were exercised utilizing a broker assisted cashless exercise. The options exercised were granted under APB 25 with an exercise price equal to fair value at date of grant, and accordingly so, no compensation expense was recorded at the time of grant. The Company did not bear the risk and rewards of the options and thus, did not record stock based compensation expense. The option holders paid the Company the required exercise price for the remaining options at the time of exercise and therefore the Company did not record any stock based compensation expense.

        In connection with the IPO in 2010, certain of the Company's selling stockholders exercised 288,001 stock options and sold the underlying shares. Such stockholders paid the exercise price of such options through a net exercise. Subsequent to the IPO, certain of the Company's option holders exercised 174,571 stock options and paid the exercise price of such options through a net exercise, resulting in an additional 95,000 outstanding shares. The options exercised in conjunction with the IPO as well as those exercised subsequently in the year ended December 31, 2010 were granted under APB 25 with an exercise price equal to fair value at date of grant, and accordingly no compensation expense was recorded at the time of grant. Because of the net exercise mechanism, the option holders did not bear the risk and rewards of the options. As such, the Company recorded $2,975 of stock based compensation expense for the year ended December 31, 2010 related to stock options.

        On January 23, 2009, the Company entered into securities repurchase agreements with certain members of management. Pursuant to these agreements, the Company repurchased at fair value and

F-33

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

13. Stock-Based Compensation (Continued)

subsequently retired 32,633 shares of common stock and 89,371 stock options in exchange for aggregate consideration of $1,137, comprised of a cash payment of $1,000 and the satisfaction of the remaining principal amount of $137 on promissory notes held by the members of management. As a result of the repurchase of stock options, the Company recorded $732 of compensation expense in the first quarter of 2009, which represented the fair value of the repurchased options. See footnote 16, "Redeemable stock and stockholders' equity."

        As of December 31, 2011, 2010 and 2009, the weighted-average remaining contractual life of all outstanding options was 4.7, 4.0 and 4.8 years, respectively. As of December 31, 2011, 2010 and 2009, the weighted-average remaining contractual life of all exercisable options was 4.7, 3.6 and 4.6 years, respectively.

        The aggregate intrinsic value of the options at December 31, 2011 was $388 for both options outstanding and exercisable. The aggregate intrinsic value of the options at December 31, 2010 was $3,901 and $3,382 for options outstanding and exercisable, respectively. There were no options exercised for the year ended December 31, 2009. The aggregate intrinsic value of stock options exercised during 2011 and 2010 was $3,200 and $2,885, respectively.

        As of December 31, 2010, the Company had shareholders' notes receivable with recourse of $482 including accrued interest, respectively, related to the exercise of options, which are included as a component of shareholders' equity. The shareholders' notes receivable were repaid by the shareholders in conjunction with the secondary offering which closed on May 20, 2011.

Restricted Stock

        Restricted stock carries both voting and dividend rights. A summary of restricted stock activity for the year ended December 31, 2011 is as follows:

	Shares (In thousands)			Weighted Average Grant Date Fair value		Weighted Average Remaining Contractual Term
Unvested at December 31, 2009		—			—		—
Granted		242,088		$	11.68		—
Vested		—			—		—
Cancelled and forfeited		—			—		—
Unvested at December 31, 2010		242,088			11.68		4.01 years
Granted		43,690			14.99		2.00 years
Vested		(50,111	)		11.77		—
Cancelled and forfeited		—			—		—
Unvested at December 31, 2011		235,667		$	12.27		2.83 years
Expected to vest in the future at December 31, 2011		227,183		$	12.27		2.83 years

F-34

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

13. Stock-Based Compensation (Continued)

        The fair value of the Company's restricted stock awards is the closing stock price on the date of grant. The Company recognized $848 and $419 of compensation expense related to restricted stock awards for the years ended December 31, 2011 and December 31, 2010, respectively. The unrecognized compensation expense for shares expected to vest as of December 31, 2011 and December 31, 2010 was approximately $2,154 and $2,311, respectively. Meanwhile, no shares vested in 2010.

Unrestricted Stock

        The Company granted 68,224 and 44,350 shares of unrestricted stock as performance based awards under the 2010 plan in the years ended December 31, 2011 and December 31, 2010, respectively. The fair value of the Company's unrestricted stock awards is the closing stock price on the date of grant, or $15.01 and $14.32 per share, for grants in years ended December 31, 2011 and December 31, 2010, respectively. The Company recognized $1,024 and $635 of compensation expense related to unrestricted stock awards granted for the years ended December 31, 2011 and December 31, 2010, respectively. The unrestricted awards granted in 2010 were issued in March 2011, while the awards granted in 2011 will be issued in March 2012. There is no required vesting period for the unrestricted stock awards as recipients are entitled to shares upon grant and performance satisfaction, which both have occurred by the years ended December 31, 2010 and December 31, 2011.

Restricted Stock Units

        Restricted stock units ("RSUs") are issued to the board of directors and carry dividend rights but do not carry voting rights. Each RSU represents the right to receive one share of the Company's common stock and are subject to time based vesting restrictions. Participants are not required to pay any consideration to the Company at either the time of grant of a RSU or upon vesting.

        A summary of RSU activity for the year ended December 31, 2011 is as follows:

	Shares (In thousands)		Weighted Average Grant Date Fair value		Weighted Average Remaining Contractual Term
Unvested at December 31, 2010		—		—		—
Granted		20,612	$	15.21		2.00 years
Vested		1,719		15.25		—
Cancelled and forfeited		—		—		—
Unvested at December 31, 2011		18,893	$	15.20		2.00 years
Expected to vest in the future at December 31, 2011		18,893	$	15.20		2.00 years

        Vested RSU's are "settled" by the delivery to the participant or a designated brokerage firm of one share of common stock per vested RSU as soon as reasonably practicable following a termination of service of the participant that constitutes a separation from service, and in all events no later than

F-35

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

13. Stock-Based Compensation (Continued)

the end of the calendar year in which such termination of employment occurs or, if later, two and one-half months after such termination of employment.

14. Earnings Per Share

        Basic earnings per share of common stock is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share of common stock is computed by dividing net income by the weighted average number of common shares and common stock equivalents related to the assumed exercise of stock options, using the two-class method. Stock options for which the exercise price exceeds the average fair value have an anti-dilutive effect on earnings per share and are excluded from the calculation. There were no shares excluded from diluted earnings per share for the years presented.

        Subsequent to the payment of the third quarter 2010 dividend, which was the first dividend payment made subsequent to the IPO, management retroactively approved all restricted stockholders for shares issued and outstanding to participate in dividends. As such, the Company has calculated earnings per share pursuant to the two-class method, which is an earnings allocation formula that determines earnings per share for common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends.

	2011		2010		2009
Basic earnings per common share
Net income	$	19,040	$	1,662	$	9,843
Less income allocated to participating securities		233		12		—
Net income allocated to common shareholders	$	18,807	$	1,650	$	9,843
Weighted average common shares outstanding		21,650,736		18,799,761		14,423,470
	$	0.87	$	0.09	$	0.68
Earnings per common share assuming dilution
Net income	$	19,040	$	1,662	$	9,843
Less income allocated to participating securities		233		12		—
Net income allocated to common shareholders	$	18,807	$	1,650	$	9,843
Weighted average common shares outstanding		21,650,736		18,799,761		14,423,470
Incremental shares applicable to stock based compensation		163,881		487,685		325,328
Weighted average common shares assuming dilution		21,814,617		19,287,446		14,748,798
	$	0.85	$	0.09	$	0.67

F-36

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

15. Commitments and Contingencies

        In the ordinary course of business, the Company is engaged in various litigation including product liability and intellectual property disputes. However, the Company does not believe that any pending litigation will have a material adverse effect on its consolidated financial position, consolidated results of operations or liquidity. In addition, the Company is not currently a party to any environmental-related claims or legal matters.

16. Redeemable stock and stockholders' equity

Series A Redeemable Convertible Preferred Stock

        The authorized capital stock of the Company includes 100,000 shares of preferred stock, of which 65,000 shares have been designated as Series A preferred stock ("Series A"). All shares of Series A have been redeemed and therefore no shares of Series A were issued and outstanding as of December 31, 2011 and 2010. The par value of Series A is $0.01 per share.

        The Series A is non-voting except as required by Delaware law, and Series A stockholders do not have the right to elect any members of the Company's Board of Directors. The Series A ranks senior to the Series B and C preferred stock and common stock related to dividend rights and distributions upon liquidation, dissolution or winding up of the Company. Dividends accrue on the Series A at a rate of 10% per annum on the stated value of the Series A plus 10% of the aggregate of all annual dividends that a holder of Series A will have become entitled to receive but which has not been declared and paid by the Company. The Company accretes dividends based on the terms of the Series A set forth in the Company's certificate of incorporation.

        The Series A is subject to redemption at anytime, in whole or in part, at the option of the Board of Directors, which is controlled by the preferred stockholders and thus outside the control of the Company, at a redemption price per share equal to Series A stated value of $1,000 per share plus all accrued but unpaid cumulative dividends.

Series B Redeemable Preferred Stock

        One share of preferred stock has been designated as Series B preferred stock ("Series B") and no shares were issued and outstanding as of December 31, 2011 and December 31, 2010. The par value of Series B is $0.01 per share.

        In addition to any voting rights to which the holders of the Series B may be entitled by law, so long as the Series B remains outstanding, the holder of the share, voting as a single series, are entitled to elect four directors to the Company's Board of Directors. The Series B ranks junior to the Series A, on parity with the Series C preferred stock and senior to the common stock as to dividend rights and distributions upon liquidation, dissolution or winding up of the Company. The holder of Series B is not entitled to receive dividends. However, subject to certain exceptions, so long as any shares of Series B or Series C preferred stock are outstanding, the Company may not pay dividends or make other distributions with respect to its junior securities (including common stock). This dividend restriction may be waived by the affirmative vote of a majority of the outstanding shares of Series B and Series C preferred stock, voting as a single class.

F-37

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

16. Redeemable stock and stockholders' equity (Continued)

        The Series B is subject to mandatory redemption at any time the holder's ownership of both preferred stock and common stock falls below certain percentages. The fixed redemption price per share is $1,000 per share, which equals the initial amount paid for the share. At the time of any such redemption, any members of the Company's Board of Directors elected by the Series B shall cease to be members of the Board without further action of any kind by the Company or its stockholders. The Series B share was redeemed in conjunction with the IPO in May of 2010.

Series C Redeemable Preferred Stock

        One share of preferred stock has been designated as Series B preferred stock ("Series C") and no shares were issued and outstanding as of December 31, 2011 and December 31, 2010. The par value of Series C is $0.01 per share.

        In addition to any voting rights to which the holders of the Series C may be entitled by law, so long as the Series C remains outstanding, the holder of the share, voting as a single series, is entitled to elect two directors to the Company's Board of Directors. The Series C ranks junior to the Series A, on a parity with the Series B preferred stock and senior to the common stock as to dividend rights and distributions upon liquidation, dissolution or winding up of the Company. The holder of Series C is not entitled to receive dividends. However, subject to certain exceptions, so long as any shares of Series B or Series C preferred stock are outstanding, the Company may not pay dividends or make other distributions with respect to its junior securities (including common stock). This dividend restriction may be waived by the affirmative vote of a majority of the outstanding shares of Series B and Series C preferred stock, voting as a single class.

        The Series C is subject to mandatory redemption at any time the holder's beneficial ownership of both preferred stock and common stock falls below certain percentages. The fixed redemption price per share is $1,000 per share, which equals the initial amount paid for the share. At the time of any such redemption, any members of the Company's Board of Directors elected by the Series C shall cease to be members of the Board without further action of any kind by the Company or its stockholders. The Series C share was redeemed in conjunction with the IPO in May of 2010.

Common Stock

        The Company has 200,000,000 shares of common stock authorized, of which 22,020,694 and 21,579,655 were issued and outstanding as of December 31, 2011 and 2010, respectively. The par value of the common stock is $0.01 per share.

        The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, common stockholders would be entitled to share ratably in the Company's assets and funds remaining after payment of liabilities and after provision is made for each class of stock having preference over the Company's common stock, including Series A, B and C preferred stock.

F-38

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

16. Redeemable stock and stockholders' equity (Continued)

Deferred Stock Plan

        The Company has previously issued to certain members of management deferred common stock units and deferred preferred stock units, in each case representing the right to receive less than 1% of its fully-diluted equity capitalization. These deferred units were issued in consideration for the cancellation of accrued award balances in the Douglas Dynamics, LLC Long Term Incentive Plan. Deferred units were issued at a price equal to the fair value of the common stock at the date of issuance. Deferred units have all rights of common and preferred shareholders, excluding voting rights, and convert to common and preferred stock upon a change in control, or initial public offering of the Company's stock. As of December 31, 2011 and 2010 there were no deferred preferred stock units outstanding.

        As of both December 31, 2011 and 2010, the Company had no deferred common stock units outstanding. In the fourth quarter of 2010, the 174,229 deferred stock units converted into common stock, subsequent to the IPO of the Company's stock, upon expiration of the lock-up agreement.

Common Stock Repurchase

        On January 23, 2009, the Company entered into securities repurchase agreements with certain members of management. Pursuant to these agreements, the Company repurchased at fair value and subsequently retired 32,633 shares of common stock and 89,371 stock options in exchange for aggregate consideration of $1,137, comprised of a cash payment of $1,000 and the satisfaction of the remaining principal amount of $137 on promissory notes held by the members of management. As a result of the repurchase of stock options, the Company recorded $732 of compensation expense in the first quarter of 2009, which represented the fair value of the repurchased options.

F-39

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

17. Valuation and qualifying accounts

        The Company's valuation and qualifying accounts for the years ended December 31, 2011, 2010 and 2009 are as follows:

	Balance at beginning of year		Additions charged to earnings		Changes to reserve, net(1)			Balance at end of year
Year ended December 31, 2011
Allowance for doubtful accounts	$	1,200	$	1,106	$	(1,059	)	$	1,247
Reserves for inventory		1,404		1,080		(1,196	)		1,288
Valuation of deferred tax assets		877		—		(47	)		830
Year ended December 31, 2010
Allowance for doubtful accounts	$	755	$	966	$	(521	)	$	1,200
Reserves for inventory		1,931		930		(1,457	)		1,404
Valuation of deferred tax assets		566		343		(32	)		877
Year ended December 31, 2009
Allowance for doubtful accounts	$	622	$	281	$	(148	)	$	755
Reserves for inventory		1,736		1,347		(1,153	)		1,931
Valuation of deferred tax assets		1,695		84		(1,213	)		566

(1)

Deductions from the allowance for doubtful accounts equal accounts receivable written off, less recoveries, against the allowance. Deductions from the reserves for inventory excess and obsolete items equal inventory written off against the reserve as items were disposed of. Deductions to the valuation of deferred tax assets relate to the reversals due to changes in management's judgments regarding the future realization of the underlying deferred tax assets.

18. Restructuring

        On April 27, 2009, the Company announced a plan to close its Johnson City, TN manufacturing facility and move production from this facility to its Milwaukee, WI and Rockland, ME facilities. The company completed the closure of this facility as of August 31, 2010. The Company expects to realize significant annual cost savings and improved customer delivery performance as a result. The closure has resulted in the elimination of approximately 100 positions in Johnson City and the addition of approximately 50 positions in Rockland and approximately 35 positions in Milwaukee.

        Related to the facility closure, the Company recorded $50 of employee termination costs and $1,385 for other closure costs for the year ended December 31, 2010. Restructuring expenses of $1,054 were recorded for the year ended December 31, 2009. These costs are included in the selling, general and administrative expense line in the Company's consolidated statements of operations. For the year ended December 31, 2011, the Company did not incur any restructuring charges, nor does the Company expect to incur any additional costs related to the closure in the future.

F-40

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

18. Restructuring (Continued)

        The following represents a reconciliation of changes in the restructuring reserves related to this project through December 31, 2011.

	Employee Termination Costs			Other Exit Costs			Total
Accrued restructuring reserves as of December 31, 2008	$	—		$	—		$	—
Activity during year ended December 31, 2009:
Charges to earnings		690			364			1,054
Payments		—			(364	)		(364	)
Accrued restructuring reserves as of December 31, 2009	$	690		$	—		$	690
Activity during year ended December 31, 2010:
Charges to earnings		50			1,385			1,435
Payments		(710	)		(1,385	)		(2,095	)
Accrued restructuring reserves as of December 31, 2010	$	30		$	—		$	30
Payments		(30	)		—			(30	)
Accrued restructuring reserves as of December 31, 2011	$	—		$	—		$	—

        In connection with the restructuring, the Company reassessed the useful lives of its manufacturing facility and certain equipment. As a result of this assessment, the Company assigned shorter useful lives to these assets and recorded accelerated depreciation of $2,071 for the year ended December 31, 2010. This change in estimate reduced basic and diluted earnings per share by $0.07 and $0.07 for the year ended December 31, 2010. The Company recorded accelerated depreciation of $900 for the year ended December 31, 2009. This change in estimate reduced basic and diluted earnings per share by $0.04 and $0.04 for the year ended December 31, 2009.

        Because of actions taken in the restructuring, the Johnson City property is being actively marketed for sale and is classified as held for sale in the consolidated balance sheet.

19. Quarterly Financial Information (Unaudited)

	2011
	First			Second		Third		Fourth
Net sales	$	23,490		$	71,557	$	53,495	$	60,256
Gross profit	$	9,071		$	26,338	$	16,494	$	19,914
Income (loss) before taxes	$	(475	)	$	15,389	$	6,291	$	9,167
Net income (loss)	$	(800	)	$	9,723	$	3,967	$	6,150
Basic net earnings (loss) per common share attributable to common shareholders	$	(0.04	)	$	0.44	$	0.18	$	0.28
Earnings (loss) per common share assuming dilution attributable to common shareholders	$	(0.04	)	$	0.44	$	0.18	$	0.28
Dividends per share	$	0.57		$	0.20	$	0.20	$	0.21

F-41

Douglas Dynamics, Inc.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2011, 2010 and 2009

(Dollars in Thousands Except Per Share Data)

19. Quarterly Financial Information (Unaudited) (Continued)

	2010
	First			Second			Third		Fourth
Net sales	$	14,647		$	66,243		$	47,448	$	48,457
Gross profit	$	1,980		$	25,061		$	15,227	$	18,033
Income (loss) before taxes	$	(9,424	)	$	(1,302	)	$	4,464	$	8,796
Net income (loss)	$	(5,719	)	$	75		$	2,185	$	5,121
Basic net earnings (loss) per common share attributable to common shareholders	$	(0.40	)	$	—		$	0.10	$	0.24
Earnings (loss) per common share assuming dilution attributable to common shareholders	$	(0.40	)	$	—		$	0.10	$	0.23
Dividends per share	$	—		$	—		$	0.18	$	0.20

        Due to changes in stock prices during the year and timing of issuance of shares, the sum of quarterly earnings per share may not equal the annual earnings per share.

F-42

EX-10.34

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Exhibit 10.34

NOTE:    Execution of this Adoption Agreement creates a legal liability of the Employer with significant tax consequences to the Employer and Participants. Principal Life Insurance Company disclaims all liability for the legal and tax consequences which result from the elections made by the Employer in this Adoption Agreement.

Principal Life Insurance Company, Raleigh, NC 27612
A member of the Principal Financial Group®

THE EXECUTIVE NONQUALIFIED "EXCESS" PLAN

ADOPTION AGREEMENT

        THIS AGREEMENT is the adoption by Douglas Dynamics, L.L.C. (the "Company") of the Executive Nonqualified Excess Plan ("Plan").

W I T N E S S E T H:

        WHEREAS, the Company desires to adopt the Plan as an unfunded, nonqualified deferred compensation plan; and

        WHEREAS, the provisions of the Plan are intended to comply with the requirements of Section 409A of the Code and the regulations thereunder and shall apply to amounts subject to section 409A; and

        WHEREAS, the Company has been advised by Principal Life Insurance Company to obtain legal and tax advice from its professional advisors before adopting the Plan,

        NOW, THEREFORE, the Company hereby adopts the Plan in accordance with the terms and conditions set forth in this Adoption Agreement:

ARTICLE I

        Terms used in this Adoption Agreement shall have the same meaning as in the Plan, unless some other meaning is expressly herein set forth. The Employer hereby represents and warrants that the Plan has been adopted by the Employer upon proper authorization and the Employer hereby elects to adopt the Plan for the benefit of its Participants as referred to in the Plan. By the execution of this Adoption Agreement, the Employer hereby agrees to be bound by the terms of the Plan.

ARTICLE II

        The Employer hereby makes the following designations or elections for the purpose of the Plan:

2.6    Committee:    The duties of the Committee set forth in the Plan shall be satisfied by:

XX	(a)	Company
	(b)	The administrative committee appointed by the Board to serve at the pleasure of the Board.
	(c)	Board.
	(d)	Other (specify) :                                    .

2.8    Compensation:    The "Compensation" of a Participant shall mean all of a Participant's:

XX	(a)	Base salary.
XX	(b)	Service Bonus.
XX	(c)	Performance-Based Compensation earned in a period of 12 months or more.
	(d)	Commissions.
	(e)	Compensation received as an Independent Contractor reportable on Form 1099.
	(f)	Other:                                    .

2.9    Crediting Date:    The Deferred Compensation Account of a Participant shall be credited as follows:

        Participant Deferral Credits at the time designated below:

	(a)	The last business day of each Plan Year.
	(b)	The last business day of each calendar quarter during the Plan Year.
	(c)	The last business day of each month during the Plan Year.
	(d)	The last business day of each payroll period during the Plan Year.
	(e)	Each pay day as reported by the Employer.
XX	(f)	On any business day as specified by the Employer.
	(g)	Other:                                    .

        Employer Credits at the time designated below:

XX	(a)	On any business day as specified by the Employer.
	(b)	Other:                                    .

2.13    Effective Date:

XX	(a)	This is a newly-established Plan, and the Effective Date of the Plan is January 1, 2012.
	(b)	This is an amendment of a plan named                        dated          and governing all contributions to the plan through                    . The Effective Date of this amended Plan is                    .

2

2.20    Normal Retirement Age:    The Normal Retirement Age of a Participant shall be:

	(a)	Age    .
	(b)	The later of age    or the            anniversary of the participation commencement date. The participation commencement date is the first day of the first Plan Year in which the Participant commenced participation in the Plan.
XX	(c)	Other:    Not applicable.

2.23    Participating Employer(s):    As of the Effective Date, the following Participating Employer(s) are parties to the Plan:

Name of Employer	Address	Telephone No.	EIN
Douglas Dynamics, L.L.C.	7777 N. 73rd Street P.O. Box 245038 Milwaukee, WI 53224	414-362-3942	42-1623692

2.26    Plan:    The name of the Plan is Douglas Dynamics Nonqualified Deferred Compensation Plan.

2.28    Plan Year:    The Plan Year shall end each year on the last day of the month of December.

2.30    Seniority Date:    The date on which a Participant has:

	(a)	Attained age    .
	(b)	Completed    Years of Service from First Date of Service.
	(c)	Attained age    and completed        Years of Service from First Date of Service.
	(d)	Attained an age as elected by the Participant.
XX	(e)	Not applicable—distribution elections for Separation from Service are not based on Seniority Date

3

4.1    Participant Deferral Credits:    Subject to the limitations in Section 4.1 of the Plan, a Participant may elect to have his Compensation (as selected in Section 2.8 of this Adoption Agreement) deferred within the annual limits below by the following percentage or amount as designated in writing to the Committee:

XX	(a)	Base salary:
		minimum deferral:                %
		maximum deferral:    $            or           80%
XX	(b)	Service Bonus:
		minimum deferral:                    %
		maximum deferral:    $            or         100%
XX	(c)	Performance-Based Compensation:
		minimum deferral:                    %
		maximum deferral:    $            or         100%
	(d)	Commissions:
		minimum deferral:                    %
		maximum deferral :    $            or                    %
	(e)	Form 1099 Compensation:
		minimum deferral:                    %
		maximum deferral :    $            or                    %
	(f)	Other:
		minimum deferral:                    %
		maximum deferral:    $            or                    %
	(g)	Participant deferrals not allowed.

4

4.2    Employer Credits:    Employer Credits will be made in the following manner:

XX	(a)	Employer Discretionary Credits:    The Employer may make discretionary credits to the Deferred Compensation Account of each Active Participant in an amount determined as follows:
		XX    (i)    An amount determined each Plan Year by the Employer.
		(ii)   Other:                                                                           .
	(b)	Other Employer Credits:    The Employer may make other credits to the Deferred Compensation Account of each Active Participant in an amount determined as follows:
		(i)    An amount determined each Plan Year by the Employer.
		(ii)   Other:                                                                       .
	(c)	Employer Credits not allowed.

5.2    Disability of a Participant:

	(a)	A Participant's becoming Disabled shall be a Qualifying Distribution Event and the Deferred Compensation Account shall be paid by the Employer as provided in Section 7.1.
XX	(b)	A Participant becoming Disabled shall not be a Qualifying Distribution Event.

5.3    Death of a Participant:    If the Participant dies while in Service, the Employer shall pay a benefit to the Beneficiary in an amount equal to the vested balance in the Deferred Compensation Account of the Participant determined as of the date payments to the Beneficiary commence, plus:

	(a)	An amount to be determined by the Committee.
	(b)	Other:                                                                       .
XX	(c)	No additional benefits.

5

5.4    In-Service or Education Distributions:    In-Service and Education Accounts are permitted under the Plan:

XX	(a)	In-Service Accounts are allowed with respect to:
		XX    Participant Deferral Credits only.
		Employer Credits only.
		Participant Deferral and Employer Credits.
		In-service distributions may be made in the following manner:
		XX    Single lump sum payment.
		XX    Annual installments over a term certain not to exceed 5 years.
		Education Accounts are allowed with respect to:
		XX    Participant Deferral Credits only.
		Employer Credits only.
		Participant Deferral and Employer Credits.
		Education Accounts distributions may be made in the following manner:
		XX    Single lump sum payment.
		XX    Annual installments over a term certain not to exceed 5 years.
		If applicable, amounts not vested at the time payments due under this Section cease will be:
		Forfeited
		Distributed at Separation from Service if vested at that time
	(b)	No In-Service or Education Distributions permitted.

5.5    Change in Control Event:

	(a)	Participants may elect upon initial enrollment to have accounts distributed upon a Change in Control Event.
XX	(b)	A Change in Control shall not be a Qualifying Distribution Event.

5.6    Unforeseeable Emergency Event:

XX	(a)	Participants may apply to have accounts distributed upon an Unforeseeable Emergency event.
	(b)	An Unforeseeable Emergency shall not be a Qualifying Distribution Event

6

6.    Vesting:    An Active Participant shall be fully vested in the Employer Credits made to the Deferred Compensation Account upon the first to occur of the following events:

	(a)	Normal Retirement Age.
	(b)	Death.
	(c)	Disability.
	(d)	Change in Control Event
XX	(e)	Other:    For each Employer Credit, completion of continuous Service until December 15 following the Crediting Date.
	(f)	Satisfaction of the vesting requirement as specified below:
		Employer Discretionary Credits:
			(i)	Immediate 100% vesting.
			(ii)	100% vesting after    Years of Service.
			(iii)	100% vesting at age    .
			(iv)	Number of Years of Service		Vested Percentage
				Less than    1		%
				1		%
				2		%
				3		%
				4		%
				5		%
				6		%
				7		%
				8		%
				9		%
				10	or more	%
		For this purpose, Years of Service of a Participant shall be calculated from the date designated below:
			(1)	First Day of Service.
			(2)	Effective Date of Plan Participation.
			(3)	Each Crediting Date. Under this option (3), each EmployerCredit shall vest based on the Years of Service of aParticipant from the Crediting Date on which each Employer Discretionary Credit is made to his or her Deferred Compensation Account.
		Other Employer Credits:
			(i)	Immediate 100% vesting.
			(ii)	100% vesting after    Years of Service.
			(iii)	100% vesting at age    .

7

	(iv)	Number of Years of Service		Vested Percentage
		Less than    1		%
		1		%
		2		%
		3		%
		4		%
		5		%
		6		%
		7		%
		8		%
		9		%
		10	or more	%
For this purpose, Years of Service of a Participant shall be calculated from the date designated below:
	(1)	First Day of Service.
	(2)	Effective Date of Plan Participation.
	(3)	Each Crediting Date. Under this option (3), each Employer Credit shall vest based on the Years of Service of a Participant from the Crediting Date on which eachEmployer Discretionary Credit is made to his or her Deferred Compensation Account.

7.1    Payment Options:    Any benefit payable under the Plan upon a permitted Qualifying Distribution Event may be made to the Participant or his Beneficiary (as applicable) in any of the following payment forms, as selected by the Participant in the Participation Agreement:

(a)

Separation from Service prior to Seniority Date, or Separation from Service if Seniority Date is Not Applicable

XX	(i)	A lump sum.
XX	(ii)	Annual installments over a term certain as elected by the Participant not to exceed 10 years.
	(iii)	Other:                                                             .

(b)

Separation from Service on or After Seniority Date, If Applicable

	(i)	A lump sum.
	(ii)	Annual installments over a term certain as elected by the Participant not to exceed      years.
XX	(iii)	Other:    Not applicable

(c)

Separation from Service Upon a Change in Control Event

XX	(i)	A lump sum.
XX	(ii)	Annual installments over a term certain as elected by the Participant not to exceed 10 years.
	(iii)	Other:                                                             .

8

(d)

Death

XX	(i)	A lump sum.
	(ii)	Annual installments over a term certain as elected by the Participant not to exceed      years.
	(iii)	Other:                                                             .

(e)

Disability

	(i)	A lump sum.
	(ii)	Annual installments over a term certain as elected by the Participant not to exceed      years.
	(iii)	Other:                                                             .
XX	(iv)	Not applicable.

If applicable, amounts not vested at the time payments due under this Section cease will be:

Forfeited

Distributed at Separation from Service if vested at that time

(f)

Change in Control Event

	(i)	A lump sum.
	(ii)	Annual installments over a term certain as elected by the Participant not to exceed            years.
	(iii)	Other:                                         .
XX	(iv)	Not applicable.

If applicable, amounts not vested at the time payments due under this Section cease will be:

Forfeited
Distributed at Separation from Service if vested at that time

9

7.4    De Minimis Amounts.

XX	(a)	Notwithstanding any payment election made by the Participant, the vested balance in the Deferred Compensation Account of the Participant will be distributed in a single lump sum payment at the time designated under the Plan if at the time of a permitted Qualifying Distribution Event that is either a Separation from Service, death, Disability (if applicable) or Change in Control Event (if applicable) the vested balance does not exceed $25,000. In addition, the Employer may distribute a Participant's vested balance at any time if the balance does not exceed the limit in Section 402(g)(1)(B) of the Code and results in the termination of the Participant's entire interest in the Plan
	(b)	There shall be no pre-determined de minimis amount under the Plan; however, the Employer may distribute a Participant's vested balance at any time if the balance does not exceed the limit in Section 402(g)(1)(B) of the Code and results in the termination of the Participant's entire interest in the Plan.

10.1    Contractual Liability:    Liability for payments under the Plan shall be the responsibility of the:

XX	(a)	Company.
	(b)	Employer or Participating Employer who employed the Participant when amounts were deferred.

10

14.    Amendment and Termination of Plan:    Notwithstanding any provision in this Adoption Agreement or the Plan to the contrary, the following sections are amended:

Section 4.1.2 of the Plan shall be amended to read as provided in attached Exhibit A.

Section 4.1.3 of the Plan shall be amended to read as provided in attached Exhibit B.

Section 4.1.4 and Section 4.1.5 of the Plan shall be amended to read as provided in attached Exhibit C.

Section 4.2 of the Plan shall be amended to read as provided in attached Exhibit D.

Section 7.1 of the Plan shall be amended to read as provided in attached Exhibit E.

Section 13 of the Plan shall be amended to read as provided in attached Exhibit F.

Section 14.1.2 and Section 14.1.3 of the Plan shall be amended to read as provided in attached Exhibit G.

Section 14.1.4 of the Plan shall be amended to read as provided in attached Exhibit H.

Section 17.10 of the Plan shall be amended to read as provided in attached Exhibit I.

17.9    Construction:    The provisions of the Plan shall be construed and enforced according to the laws of the State of Wisconsin, except to the extent that such laws are superseded by ERISA and the applicable provisions of the Code.

        IN WITNESS WHEREOF, this Agreement has been executed as of the day and year stated below.

Douglas Dynamics, L.L.C. Name of Employer
By:	/s/ Robert Young
	Authorized Person
Date:	February 29, 2012

11

Amendments to the
Douglas Dynamics Nonqualified Deferred Compensation Plan

Exhibit A

        4.1.2  An election pursuant to this Section 4.1 shall be made by the Participant by executing and delivering a Participation Agreement to the Employer. Except as otherwise provided in this Section 4.1, the Participation Agreement shall become effective with respect to such Participant as of the first day of January following the date such Participation Agreement is received by the Employer. A Participant's election may be changed at any time prior to the last permissible date for making the election as permitted in this Section 4.1, and shall thereafter be irrevocable. The election of a Participant shall continue in effect for subsequent years until modified by the Participant as permitted in this Section 4.1.

Exhibit B

        4.1.3  A Participant may execute and deliver a Participation Agreement to the Employer within 30 days after the date the Participant first becomes eligible to participate in the Plan (and any other arrangement required to be aggregated with the Plan under Section 409A of the Code and the regulations thereunder). Whether a Participant is treated as newly eligible for participation under this Section shall be determined in accordance with Section 409A of the Code and the regulations thereunder, including (i) rules that treat all elective deferral account balance plans as one plan, and (ii) rules that treat a previously eligible Employee as newly eligible if his benefits had been previously distributed or if he has been ineligible for 24 months. For Compensation that is earned based upon a specified performance period (for example, an annual bonus), where a deferral election is made under this Section but after the beginning of the performance period, the election will only apply to the portion of the Compensation equal to the total amount of the Compensation for the service period multiplied by the ratio of the number of days remaining in the performance period after the election over the total number of days in the performance period.

Exhibit C

        4.1.4  A Participant may unilaterally modify a Participation Agreement (either to terminate, increase or decrease the portion of his future Compensation which is subject to deferral within the percentage limits set forth in Section 4.1 of the Adoption Agreement) by providing a written modification of the Participation Agreement to the Employer. The modification shall become effective as of the first day of January following the date such written modification is received by the Employer.

        4.1.5  If the Participant performed services continuously from the later of the beginning of the performance period or the date upon which the performance criteria are established through the date upon which the Participant makes an initial deferral election, a Participation Agreement relating to the deferral of Performance-Based Compensation may be executed and delivered to the Employer no later than the date which is 6 months prior to the end of the performance period, provided that in no event may an election to defer Performance-Based Compensation be made after such Compensation has become readily ascertainable.

Exhibit D

4.2   Employer Credits.    If designated by the Employer in the Adoption Agreement, the Employer shall cause the Committee to credit to the Deferred Compensation Account of each Active Participant an Employer Credit as determined in accordance with the Adoption Agreement. A Participant must make distribution elections with respect to any Employer Credits credited to his Deferred Compensation Account by the deadline that would apply under Section 4.1 for distribution elections

12

with respect to Participant Deferral Credits credited at the same time, on a Participation Agreement that is timely executed and delivered to the Employer pursuant to Section 4.1.

Exhibit E

7.1   Payment Options.    The Employer shall designate in the Adoption Agreement the payment options which may be elected by the Participant (lump sum, annual installments, or a combination of both). Different payment options may be made available for each Qualifying Distribution Event, and different payment options may be available for different types of Separations from Service, all as designated in the Adoption Agreement. The Participant shall elect in the Participation Agreement the method under which the vested balance in the Deferred Compensation Account attributable to Compensation earned after the Participation Agreement becomes effective will be distributed from among the designated payment options. The Participant may elect in the Participation Agreement a different method of payment for each Qualifying Distribution Event as specified in the Adoption Agreement. If the Participant is permitted by the Employer in the Adoption Agreement to elect different payment options and does not make a valid election, the vested balance in the Deferred Compensation Account will be distributed as a lump sum. Notwithstanding the foregoing, if certain Qualifying Distribution Events occur prior to the date on which the vested balance of a Participant's Deferred Compensation Account is completely paid pursuant to this Section 7.1 following the occurrence of certain initial Qualifying Distribution Events, the following rules apply:

Exhibit F

Section 13.    Beneficiary:

        The Participant's beneficiary shall be the person, persons, entity or entities designated by the Participant on the beneficiary designation form provided by and last filed with the Company or its designee by the Participant while living. If the Participant does not designate a beneficiary, the beneficiary shall be his Surviving Spouse. If the Participant does not designate a beneficiary and has no Surviving Spouse, the beneficiary shall be the Participant's estate. The designation of a beneficiary may be changed or revoked only by filing a new beneficiary designation form with the Committee or its designee. If a beneficiary (the "primary beneficiary") is receiving or is entitled to receive payments under the Plan and dies before receiving all of the payments due him, the balance to which he is entitled shall be paid to the contingent beneficiary, if any, named in the Participant's current beneficiary designation form. If there is no contingent beneficiary, the balance shall be paid to the estate of the primary beneficiary. Any beneficiary may disclaim all or any part of any benefit to which such beneficiary shall be entitled hereunder by filing a written disclaimer with the Committee before payment of such benefit is to be made. Such a disclaimer shall be made in a form satisfactory to the Committee and shall be irrevocable when filed. Any benefit disclaimed shall be payable from the Plan in the same manner as if the beneficiary who filed the disclaimer had predeceased the Participant.

Exhibit G

        14.1.2  No payments other than payments that would be payable under the terms of the Plan if the termination had not occurred are made within 12 months of the date the Employer takes all necessary action to irrevocably terminate and liquidate the Plan.

        14.1.3  All benefits under the Plan are paid within 24 months of the date the Employer takes all necessary action to irrevocably terminate and liquidate the Plan.

Exhibit H

        14.1.4  The Employer does not adopt a new arrangement that would be aggregated with the Plan under Section 1.409A-1(c) of the Treasury Regulations providing for the deferral of compensation at

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any time within 3 years following the date the Employer takes all necessary action to irrevocably terminate and liquidate the Plan.

Exhibit I

17.10  Taxes.    The Employer or other payor may withhold a benefit payment under the Plan or a Participant's wages, or the Employer may reduce a Participant's Deferred Compensation Account balance, in order to meet any federal, state, or local or employment tax withholding obligations with respect to Plan benefits, as permitted under Section 409A of the Code. The Employer or other payor shall report Plan payments and other Plan-related information to the appropriate governmental agencies as required under applicable laws.

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THE EXECUTIVE NONQUALIFIED EXCESS PLAN
PLAN DOCUMENT

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THE EXECUTIVE NONQUALIFIED EXCESS PLAN

Section 1.Purpose:

        By execution of the Adoption Agreement, the Employer has adopted the Plan set forth herein, and in the Adoption Agreement, to provide a means by which certain management Employees or Independent Contractors of the Employer may elect to defer receipt of current Compensation from the Employer in order to provide retirement and other benefits on behalf of such Employees or Independent Contractors of the Employer, as selected in the Adoption Agreement. The Plan is intended to be a nonqualified deferred compensation plan that complies with the provisions of Section 409A of the Internal Revenue Code (the "Code"). The Plan is also intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation benefits for a select group of management or highly compensated employees under Sections 201(2), 301(a)(3) and 401(a)(l) of the Employee Retirement Income Security Act of 1974 ("ERISA") and independent contractors. Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated and administered in a manner consistent with these intentions.

Section 2.Definitions:

        As used in the Plan, including this Section 2, references to one gender shall include the other, unless otherwise indicated by the context:

2.1   "Active Participant" means, with respect to any day or date, a Participant who is in Service on such day or date; provided, that a Participant shall cease to be an Active Participant (i) immediately upon a determination by the Committee that the Participant has ceased to be an Employee or Independent Contractor, or (ii) at the end of the Plan Year that the Committee determines the Participant no longer meets the eligibility requirements of the Plan.

2.2   "Adoption Agreement" means the written agreement pursuant to which the Employer adopts the Plan. The Adoption Agreement is a part of the Plan as applied to the Employer.

2.3   "Beneficiary" means the person, persons, entity or entities designated or determined pursuant to the provisions of Section 13 of the Plan.

2.4   "Board" means the Board of Directors of the Company, if the Company is a corporation. If the Company is not a corporation, "Board" shall mean the Company.

2.5   "Change in Control Event" means an event described in Section 409A(a)(2)(A)(v) of the Code (or any successor provision thereto) and the regulations thereunder.

2.6   "Committee" means the persons or entity designated in the Adoption Agreement to administer the Plan. If the Committee designated in the Adoption Agreement is unable to serve, the Employer shall satisfy the duties of the Committee provided for in Section 9.

2.7   "Company" means the company designated in the Adoption Agreement as such.

2.8   "Compensation" shall have the meaning designated in the Adoption Agreement.

2.9   "Crediting Date" means the date designated in the Adoption Agreement for crediting the amount of any Participant Deferral Credits or Employer Credits to the Deferred Compensation Account of a Participant.

2.10     "Deferred Compensation Account" means the account maintained with respect to each Participant under the Plan. The Deferred Compensation Account shall be credited with Participant Deferral Credits and Employer Credits, credited or debited for deemed investment gains or losses, and adjusted for payments in accordance with the rules and elections in effect under Section 8. The Deferred Compensation Account of a Participant shall include any In-Service or Education Account of the Participant, if applicable.

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2.11     "Disabled" means Disabled within the meaning of Section 409A of the Code and the regulations thereunder. Generally, this means that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering Employees of the Employer.

2.12     "Education Account" is an In-Service Account which will be used by the Participant for educational purposes.

2.13     "Effective Date" shall be the date designated in the Adoption Agreement.

2.14     "Employee" means an individual in the Service of the Employer if the relationship between the individual and the Employer is the legal relationship of employer and employee. An individual shall cease to be an Employee upon the Employee's Separation from Service.

2.15     "Employer" means the Company, as identified in the Adoption Agreement, and any Participating Employer which adopts this Plan. An Employer may be a corporation, a limited liability company, a partnership or sole proprietorship.

2.16     "Employer Credits" means the amounts credited to the Participant's Deferred Compensation Account by the Employer pursuant to the provisions of Section 4.2.

2.17     "Grandfathered Amounts" means, if applicable, the amounts that were deferred under the Plan and were earned and vested within the meaning of Section 409A of the Code and regulations thereunder as of December 31, 2004. Grandfathered Amounts shall be subject to the terms designated in the Adoption Agreement.

2.18     "Independent Contractor" means an individual in the Service of the Employer if the relationship between the individual and the Employer is not the legal relationship of employer and employee. An individual shall cease to be an Independent Contractor upon the termination of the Independent Contractor's Service. An Independent Contractor shall include a director of the Employer who is not an Employee.

2.19     "In-Service Account" means a separate account to be kept for each Participant that has elected to take in-service distributions as described in Section 5.4. The In-Service Account shall be adjusted in the same manner and at the same time as the Deferred Compensation Account under Section 8 and in accordance with the rules and elections in effect under Section 8.

2.20     "Normal Retirement Age" of a Participant means the age designated in the Adoption Agreement.

2.21     "Participant" means with respect to any Plan Year an Employee or Independent Contractor who has been designated by the Committee as a Participant and who has entered the Plan or who has a Deferred Compensation Account under the Plan; provided that if the Participant is an Employee, the individual must be a highly compensated or management employee of the Employer within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.

2.22     "Participant Deferral Credits" means the amounts credited to the Participant's Deferred Compensation Account by the Employer pursuant to the provisions of Section 4.1.

2.23     "Participating Employer" means any trade or business (whether or not incorporated) which adopts this Plan with the consent of the Company identified in the Adoption Agreement.

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2.24     "Participation Agreement" means a written agreement entered into between a Participant and the Employer pursuant to the provisions of Section 4.1

2.25     "Performance-Based Compensation" means compensation where the amount of, or entitlement to, the compensation is contingent on the satisfaction of preestablished organizational or individual performance criteria relating to a performance period of at least twelve months. Organizational or individual performance criteria are considered preestablished if established in writing within 90 days after the commencement of the period of service to which the criteria relates, provided that the outcome is substantially uncertain at the time the criteria are established. Performance-based compensation may include payments based upon subjective performance criteria as provided in regulations and administrative guidance promulgated under Section 409A of the Code.

2.26     "Plan" means The Executive Nonqualified Excess Plan, as herein set out and as set out in the Adoption Agreement, or as duly amended. The name of the Plan as applied to the Employer shall be designated in the Adoption Agreement.

2.27     "Plan-Approved Domestic Relations Order" shall mean a judgment, decree, or order (including the approval of a settlement agreement) which is:

        2.27.1  Issued pursuant to a State's domestic relations law;

        2.27.2  Relates to the provision of child support, alimony payments or marital property rights to a Spouse, former Spouse, child or other dependent of the Participant;

        2.27.3  Creates or recognizes the right of a Spouse, former Spouse, child or other dependent of the Participant to receive all or a portion of the Participant's benefits under the Plan;

        2.27.4  Requires payment to such person of their interest in the Participant's benefits in a lump sum payment at a specific time; and

        2.27.5  Meets such other requirements established by the Committee.

2.28     "Plan Year" means the twelve-month period ending on the last day of the month designated in the Adoption Agreement; provided that the initial Plan Year may have fewer than twelve months.

2.29     "Qualifying Distribution Event" means (i) the Separation from Service of the Participant, (ii) the date the Participant becomes Disabled, (iii) the death of the Participant, (iv) the time specified by the Participant for an In-Service or Education Distribution, (v) a Change in Control Event, or (vi) an Unforeseeable Emergency, each to the extent provided in Section 5.

2.30     "Seniority Date" shall have the meaning designated in the Adoption Agreement.

2.31     "Separation from Service" or "Separates from Service" means a "separation from service" within the meaning of Section 409A of the Code.

2.32     "Service" means employment by the Employer as an Employee. For purposes of the Plan, the employment relationship is treated as continuing intact while the Employee is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Employee's right to reemployment is provided either by statute or contract. If the Participant is an Independent Contractor, "Service" shall mean the period during which the contractual relationship exists between the Employer and the Participant. The contractual relationship is not terminated if the Participant anticipates a renewal of the contract or becomes an Employee.

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2.33     "Service Bonus" means any bonus paid to a Participant by the Employer which is not Performance-Based Compensation.

2.34     "Specified Employee" means an Employee who meets the requirements for key employee treatment under Section 416(i)(l)(A)(i), (ii) or (iii) of the Code (applied in accordance with the regulations thereunder and without regard to Section 416(i)(5) of the Code) at any time during the twelve month period ending on December 31 of each year (the "identification date"). Unless binding corporate action is taken to establish different rules for determining Specified Employees for all plans of the Company and its controlled group members that are subject to Section 409A of the Code, the foregoing rules and the other default rules under the regulations of Section 409A of the Code shall apply. If the person is a key employee as of any identification date, the person is treated as a Specified Employee for the twelve-month period beginning on the first day of the fourth month following the identification date.

2.35     "Spouse" or "Surviving Spouse" means, except as otherwise provided in the Plan, a person who is the legally married spouse or surviving spouse of a Participant.

2.36     "Unforeseeable Emergency" means an "unforeseeable emergency" within the meaning of Section 409A of the Code.

2.37     "Years of Service" means each Plan Year of Service completed by the Participant. For vesting purposes, Years of Service shall be calculated from the date designated in the Adoption Agreement and Service shall be based on service with the Company and all Participating Employers.

Section 3.Participation:

        The Committee in its discretion shall designate each Employee or Independent Contractor who is eligible to participate in the Plan. A Participant who Separates from Service with the Employer and who later returns to Service will not be an Active Participant under the Plan except upon satisfaction of such terms and conditions as the Committee shall establish upon the Participant's return to Service, whether or not the Participant shall have a balance remaining in the Deferred Compensation Account under the Plan on the date of the return to Service.

Section 4.Credits to Deferred Compensation Account:

4.1   Participant Deferral Credits.    To the extent provided in the Adoption Agreement, each Active Participant may elect, by entering into a Participation Agreement with the Employer, to defer the receipt of Compensation from the Employer by a dollar amount or percentage specified in the Participation Agreement. The amount of Compensation the Participant elects to defer, the Participant Deferral Credit, shall be credited by the Employer to the Deferred Compensation Account maintained for the Participant pursuant to Section 8. The following special provisions shall apply with respect to the Participant Deferral Credits of a Participant:

        4.1.1    The Employer shall credit to the Participant's Deferred Compensation Account on each Crediting Date an amount equal to the total Participant Deferral Credit for the period ending on such Crediting Date.

        4.1.2    An election pursuant to this Section 4.1 shall be made by the Participant by executing and delivering a Participation Agreement to the Committee. Except as otherwise provided in this Section 4.1, the Participation Agreement shall become effective with respect to such Participant as of the first day of January following the date such Participation Agreement is received by the Committee. A Participant's election may be changed at any time prior to the last permissible date for making the election as permitted in this Section 4.1, and shall thereafter be irrevocable. The election of a Participant shall continue in effect for subsequent years until modified by the Participant as permitted in this Section 4.1.

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        4.1.3    A Participant may execute and deliver a Participation Agreement to the Committee within 30 days after the date the Participant first becomes eligible to participate in the Plan to be effective as of the first payroll period next following the date the Participation Agreement is fully executed by the Participant. Whether a Participant is treated as newly eligible for participation under this Section shall be determined in accordance with Section 409A of the Code and the regulations thereunder, including (i) rules that treat all elective deferral account balance plans as one plan, and (ii) rules that treat a previously eligible Employee as newly eligible if his benefits had been previously distributed or if he has been ineligible for 24 months. For Compensation that is earned based upon a specified performance period (for example, an annual bonus), where a deferral election is made under this Section but after the beginning of the performance period, the election will only apply to the portion of the Compensation equal to the total amount of the Compensation for the service period multiplied by the ratio of the number of days remaining in the performance period after the election over the total number of days in the performance period.

        4.1.4    A Participant may unilaterally modify a Participation Agreement (either to terminate, increase or decrease the portion of his future Compensation which is subject to deferral within the percentage limits set forth in Section 4.1 of the Adoption Agreement) by providing a written modification of the Participation Agreement to the Committee. The modification shall become effective as of the first day of January following the date such written modification is received by the Committee.

        4.1.5    If the Participant performed services continuously from the later of the beginning of the performance period or the date upon which the performance criteria are established through the date upon which the Participant makes an initial deferral election, a Participation Agreement relating to the deferral of Performance-Based Compensation may be executed and delivered to the Committee no later than the date which is 6 months prior to the end of the performance period, provided that in no event may an election to defer Performance-Based Compensation be made after such Compensation has become readily ascertainable.

        4.1.6    If the Employer has a fiscal year other than the calendar year, Compensation relating to Service in the fiscal year of the Employer (such as a bonus based on the fiscal year of the Employer), of which no amount is paid or payable during the fiscal year, may be deferred at the Participant's election if the election to defer is made not later than the close of the Employer's fiscal year next preceding the first fiscal year in which the Participant performs any services for which such Compensation is payable.

        4.1.7    Compensation payable after the last day of the Participant's taxable year solely for services provided during the final payroll period containing the last day of the Participant's taxable year (i.e., December 31) is treated for purposes of this Section 4.1 as Compensation for services performed in the subsequent taxable year.

        4.1.8    The Committee may from time to time establish policies or rules consistent with the requirements of Section 409A of the Code to govern the manner in which Participant Deferral Credits may be made.

        4.1.9    If a Participant becomes Disabled, or applies for and is eligible for a distribution on account of an Unforeseeable Emergency during a Plan Year or as required due to a hardship distribution under Section 1.401(k)-1(d)(3) of the Code, his deferral election for such Plan Year shall be cancelled.

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4.2   Employer Credits.    If designated by the Employer in the Adoption Agreement, the Employer shall cause the Committee to credit to the Deferred Compensation Account of each Active Participant an Employer Credit as determined in accordance with the Adoption Agreement. A Participant must make distribution elections with respect to any Employer Credits credited to his Deferred Compensation Account by the deadline that would apply under Section 4.1 for distribution elections with respect to Participant Deferral Credits credited at the same time, on a Participation Agreement that is timely executed and delivered to the Committee pursuant to Section 4.1.

4.3   Deferred Compensation Account.    All Participant Deferral Credits and Employer Credits shall be credited to the Deferred Compensation Account of the Participant as provided in Section 8.

Section 5.Qualifying Distribution Events:

5.1   Separation from Service.    If the Participant Separates from Service with the Employer, the vested balance in the Deferred Compensation Account shall be paid to the Participant by the Employer as provided in Section 7. Notwithstanding the foregoing, no distribution shall be made earlier than six months after the date of Separation from Service (or, if earlier, the date of death) with respect to a Participant who as of the date of Separation from Service is a Specified Employee of a corporation the stock in which is traded on an established securities market or otherwise. Any payments to which such Specified Employee would be entitled during the first six months following the date of Separation from Service shall be accumulated and paid on the first day of the seventh month following the date of Separation from Service.

5.2   Disability.    If the Employer designates in the Adoption Agreement that distributions are permitted under the Plan when a Participant becomes Disabled, and the Participant becomes Disabled while in Service, the vested balance in the Deferred Compensation Account shall be paid to the Participant by the Employer as provided in Section 7.

5.3   Death.    If the Participant dies while in Service, the Employer shall pay a benefit to the Participant's Beneficiary in the amount designated in the Adoption Agreement. Payment of such benefit shall be made by the Employer as provided in Section 7.

5.4   In-Service or Education Distributions.    If the Employer designates in the Adoption Agreement that in-service or education distributions are permitted under the Plan, a Participant may designate in the Participation Agreement to have a specified amount credited to the Participant's In-Service or Education Account for in-service or education distributions at the date specified by the Participant. In no event may an in-service or education distribution of an amount be made before the date that is two years after the first day of the year in which such amount was credited to the In-Service or Education Account. Notwithstanding the foregoing, if a Participant incurs a Qualifying Distribution Event prior to the date on which the entire balance in the In-Service or Education Account has been distributed, then the balance in the In-Service or Education Account on the date of the Qualifying Distribution Event shall be paid as provided under Section 7.1 for payments on such Qualifying Distribution Event.

5.5   Change in Control Event.    If the Employer designates in the Adoption Agreement that distributions are permitted under the Plan upon the occurrence of a Change in Control Event, the Participant may designate in the Participation Agreement to have the vested balance in the Deferred Compensation Account paid to the Participant upon a Change in Control Event by the Employer as provided in Section 7.

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5.6   Unforeseeable Emergency.    If the Employer designates in the Adoption Agreement that distributions are permitted under the Plan upon the occurrence of an Unforeseeable Emergency event, a distribution from the Deferred Compensation Account may be made to a Participant in the event of an Unforeseeable Emergency, subject to the following provisions:

        5.6.1    A Participant may, at any time prior to his Separation from Service for any reason, make application to the Committee to receive a distribution in a lump sum of all or a portion of the vested balance in the Deferred Compensation Account (determined as of the date the distribution, if any, is made under this Section 5.6) because of an Unforeseeable Emergency. A distribution because of an Unforeseeable Emergency shall not exceed the amount required to satisfy the Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution, after taking into account the extent to which the Unforeseeable Emergency may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant's assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by stopping current deferrals under the Plan pursuant to Section 4.1.9.

        5.6.2    The Participant's request for a distribution on account of Unforeseeable Emergency must be made in writing to the Committee. The request must specify the nature of the financial hardship, the total amount requested to be distributed from the Deferred Compensation Account, and the total amount of the actual expense incurred or to be incurred on account of the Unforeseeable Emergency.

        5.6.3    If a distribution under this Section 5.6 is approved by the Committee, such distribution will be made as soon as practicable following the date it is approved. The processing of the request shall be completed as soon as practicable from the date on which the Committee receives the properly completed written request for a distribution on account of an Unforeseeable Emergency. If a Participant's Separation from Service occurs after a request is approved in accordance with this Section 5.6.3, but prior to distribution of the full amount approved, the approval of the request shall be automatically null and void and the benefits which the Participant is entitled to receive under the Plan shall be distributed in accordance with the applicable distribution provisions of the Plan.

        5.6.4    The Committee may from time to time adopt additional policies or rules consistent with the requirements of Section 409A of the Code to govern the manner in which such distributions may be made so that the Plan may be conveniently administered.

Section 6.Vesting:

        A Participant shall be fully vested in the portion of his Deferred Compensation Account attributable to Participant Deferral Credits, and all income, gains and losses attributable thereto. A Participant shall become fully vested in the portion of his Deferred Compensation Account attributable to Employer Credits, and income, gains and losses attributable thereto, in accordance with the vesting schedule and provisions designated by the Employer in the Adoption Agreement. If a Participant's Deferred Compensation Account is not fully vested upon Separation from Service, the portion of the Deferred Compensation Account that is not fully vested shall thereupon be forfeited.

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Section 7.Distribution Rules:

7.1   Payment Options.    The Employer shall designate in the Adoption Agreement the payment options which may be elected by the Participant (lump sum, annual installments, or a combination of both). Different payment options may be made available for each Qualifying Distribution Event, and different payment options may be available for different types of Separations from Service, all as designated in the Adoption Agreement. The Participant shall elect in the Participation Agreement the method under which the vested balance in the Deferred Compensation Account will be distributed from among the designated payment options. The Participant may at such time elect a different method of payment for each Qualifying Distribution Event as specified in the Adoption Agreement. If the Participant is permitted by the Employer in the Adoption Agreement to elect different payment options and does not make a valid election, the vested balance in the Deferred Compensation Account will be distributed as a lump sum.

        Notwithstanding the foregoing, if certain Qualifying Distribution Events occur prior to the date on which the vested balance of a Participant's Deferred Compensation Account is completely paid pursuant to this Section 7.1 following the occurrence of certain initial Qualifying Distribution Events, the following rules apply:

        7.1.1    If the initial Qualifying Distribution Event is a Separation from Service or Disability, and the Participant subsequently dies, the remaining unpaid vested balance of a Participant's Deferred Compensation Account shall be paid as a lump sum.

        7.1.2    If the initial Qualifying Distribution Event is a Change in Control Event, and any subsequent Qualifying Distribution Event occurs (except an In-Service or Education Distribution described in Section 2.29(iv)), the remaining unpaid vested balance of a Participant's Deferred Compensation Account shall be paid as provided under Section 7.1 for payments on such subsequent Qualifying Distribution Event.

7.2   Timing of Payments.    Payment shall be made in the manner elected by the Participant and shall commence as soon as practicable after (but no later than 60 days after) the distribution date elected for the Qualifying Distribution Event. In the event the Participant fails to make a valid election of the payment method, the distribution will be made in a single lump sum payment as soon as practicable after (but no later than 60 days after) the Qualifying Distribution Event. A payment may be further delayed to the extent permitted in accordance with regulations and guidance under Section 409A of the Code.

7.3   Installment Payments.    If the Participant elects to receive installment payments upon a Qualifying Distribution Event, the payment of each annual installment shall be made on the anniversary of the date of the first installment payment, and the amount of the annual installment shall be adjusted on such anniversary for credits or debits to the Participant's account pursuant to Section 8 of the Plan. Such adjustment shall be made by dividing the balance in the Deferred Compensation Account on such date by the number of annual installments remaining to be paid hereunder; provided that the last annual installment due under the Plan shall be the entire amount credited to the Participant's account on the date of payment.

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7.4   De Minimis Amounts.    Notwithstanding any payment election made by the Participant, if the Employer designates a pre-determined de minimis amount in the Adoption Agreement, the vested balance in the Deferred Compensation Account of the Participant will be distributed in a single lump sum payment if at the time of a permitted Qualifying Distribution Event the vested balance does not exceed such pre-determined de minimis amount; provided, however, that such distribution will be made only where the Qualifying Distribution Event is a Separation from Service, death, Disability (if applicable) or Change in Control Event (if applicable). Such payment shall be made on or before the later of (i) December 31 of the calendar year in which the Qualifying Distribution Event occurs, or (ii) the date that is 2¹/2 months after the Qualifying Distribution Event occurs. In addition, the Employer may distribute a Participant's vested balance at any time if the balance does not exceed the limit in Section 402(g)(1)(B) of the Code and results in the termination of the Participant's entire interest in the Plan as provided under Section 409A of the Code.

7.5   Subsequent Elections.    With the consent of the Committee, a Participant may delay or change the method of payment of the Deferred Compensation Account subject to the following requirements:

        7.5.1    The new election may not take effect until at least 12 months after the date on which the new election is made.

        7.5.2    If the new election relates to a payment for a Qualifying Distribution Event other than the death of the Participant, the Participant becoming Disabled, or an Unforeseeable Emergency, the new election must provide for the deferral of the payment for a period of at least five years from the date such payment would otherwise have been made.

        7.5.3    If the new election relates to a payment from the In-Service or Education Account, the new election must be made at least 12 months prior to the date of the first scheduled payment from such account.

For purposes of this Section 7.5 and Section 7.6, a payment is each separately identified amount to which the Participant is entitled under the Plan; provided, that entitlement to a series of installment payments is treated as the entitlement to a single payment.

7.6   Acceleration Prohibited.    The acceleration of the time or schedule of any payment due under the Plan is prohibited except as expressly provided in regulations and administrative guidance promulgated under Section 409A of the Code (such as accelerations for domestic relations orders and employment taxes). It is not an acceleration of the time or schedule of payment if the Employer waives or accelerates the vesting requirements applicable to a benefit under the Plan.

Section 8.Accounts; Deemed Investment; Adjustments to Account:

8.1   Accounts.    The Committee shall establish a book reserve account, entitled the "Deferred Compensation Account," on behalf of each Participant. The Committee shall also establish an In-Service or Education Account as a part of the Deferred Compensation Account of each Participant, if applicable. The amount credited to the Deferred Compensation Account shall be adjusted pursuant to the provisions of Section 8.3.

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8.2   Deemed Investments.    The Deferred Compensation Account of a Participant shall be credited with an investment return determined as if the account were invested in one or more investment funds made available by the Committee. The Participant shall elect the investment funds in which his Deferred Compensation Account shall be deemed to be invested. Such election shall be made in the manner prescribed by the Committee and shall take effect upon the entry of the Participant into the Plan. The investment election of the Participant shall remain in effect until a new election is made by the Participant. In the event the Participant fails for any reason to make an effective election of the investment return to be credited to his account, the investment return shall be determined by the Committee.

8.3   Adjustments to Deferred Compensation Account.    With respect to each Participant who has a Deferred Compensation Account under the Plan, the amount credited to such account shall be adjusted by the following debits and credits, at the times and in the order stated:

        8.3.1    The Deferred Compensation Account shall be debited each business day with the total amount of any payments made from such account since the last preceding business day to him or for his benefit. Unless otherwise specified by the Employer, each deemed investment fund will be debited pro-rata based on the value of the investment funds as of the end of the preceding business day.

        8.3.2    The Deferred Compensation Account shall be credited on each Crediting Date with the total amount of any Participant Deferral Credits and Employer Credits to such account since the last preceding Crediting Date.

        8.3.3    The Deferred Compensation Account shall be credited or debited on each day securities are traded on a national stock exchange with the amount of deemed investment gain or loss resulting from the performance of the investment funds elected by the Participant in accordance with Section 8.2. The amount of such deemed investment gain or loss shall be determined by the Committee and such determination shall be final and conclusive upon all concerned.

Section 9.Administration by Committee:

9.1   Membership of Committee.    If the Committee consists of individuals appointed by the Board, they will serve at the pleasure of the Board. Any member of the Committee may resign, and his successor, if any, shall be appointed by the Board.

9.2   General Administration.    The Committee shall be responsible for the operation and administration of the Plan and for carrying out its provisions. The Committee shall have the full authority and discretion to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions, including interpretations of this Plan, as may arise in connection with this Plan. Any such action taken by the Committee shall be final and conclusive on any party. To the extent the Committee has been granted discretionary authority under the Plan, the Committee's prior exercise of such authority shall not obligate it to exercise its authority in a like fashion thereafter. The Committee shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Employer with respect to the Plan. The Committee may, from time to time, employ agents and delegate to such agents, including Employees of the Employer, such administrative or other duties as it sees fit.

9.3   Indemnification.    To the extent not covered by insurance, the Employer shall indemnify the Committee, each Employee, officer, director, and agent of the Employer, and all persons formerly serving in such capacities, against any and all liabilities or expenses, including all legal fees relating thereto, arising in connection with the exercise of their duties and responsibilities with respect to the Plan, provided however that the Employer shall not indemnify any person for liabilities or expenses due to that person's own gross negligence or willful misconduct.

25

Section 10.Contractual Liability, Trust:

10.1     Contractual Liability.    Unless otherwise elected in the Adoption Agreement, the Company shall be obligated to make all payments hereunder. This obligation shall constitute a contractual liability of the Company to the Participants, and such payments shall be made from the general funds of the Company. The Company shall not be required to establish or maintain any special or separate fund, or otherwise to segregate assets to assure that such payments shall be made, and the Participants shall not have any interest in any particular assets of the Company by reason of its obligations hereunder. To the extent that any person acquires a right to receive payment from the Company, such right shall be no greater than the right of an unsecured creditor of the Company.

10.2     Trust.    The Employer may establish a trust to assist it in meeting its obligations under the Plan. Any such trust shall conform to the requirements of a grantor trust under Revenue Procedures 92-64 and 92-65 and at all times during the continuance of the trust the principal and income of the trust shall be subject to claims of general creditors of the Employer under federal and state law. The establishment of such a trust would not be intended to cause Participants to realize current income on amounts contributed thereto, and the trust would be so interpreted and administered.

Section 11.Allocation of Responsibilities:

        The persons responsible for the Plan and the duties and responsibilities allocated to each are as follows:

11.1     Board.

(i)

To amend the Plan;



(ii)

To appoint and remove members of the Committee; and



(iii)

To terminate the Plan as permitted in Section 14.

11.2     Committee.

(i)

To designate Participants;



(ii)

To interpret the provisions of the Plan and to determine the rights of the Participants under the Plan, except to the extent otherwise provided in Section 16 relating to claims procedure;



(iii)

To administer the Plan in accordance with its terms, except to the extent powers to administer the Plan are specifically delegated to another person or persons as provided in the Plan;



(iv)

To account for the amount credited to the Deferred Compensation Account of a Participant;



(v)

To direct the Employer in the payment of benefits;



(vi)

To file such reports as may be required with the United States Department of Labor, the Internal Revenue Service and any other government agency to which reports may be required to be submitted from time to time; and



(vii)

To administer the claims procedure to the extent provided in Section 16.

26

Section 12.Benefits Not Assignable; Facility of Payments:

12.1     Benefits Not Assignable.    No portion of any benefit credited or paid under the Plan with respect to any Participant shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void, nor shall any portion of such benefit be in any manner payable to any assignee, receiver or any one trustee, or be liable for his debts, contracts, liabilities, engagements or torts. Notwithstanding the foregoing, in the event that all or any portion of the benefit of a Participant is transferred to the former Spouse of the Participant incident to a divorce, the Committee shall maintain such amount for the benefit of the former Spouse until distributed in the manner required by an order of any court having jurisdiction over the divorce, and the former Spouse shall be entitled to the same rights as the Participant with respect to such benefit.

12.2     Plan-Approved Domestic Relations Orders.    The Committee shall establish procedures for determining whether an order directed to the Plan is a Plan-Approved Domestic Relations Order. If the Committee determines that an order is a Plan-Approved Domestic Relations Order, the Committee shall cause the payment of amounts pursuant to or segregate a separate account as provided by (and to prevent any payment or act which might be inconsistent with) the Plan-Approved Domestic Relations Order.

12.3     Payments to Minors and Others.    If any individual entitled to receive a payment under the Plan shall be physically, mentally or legally incapable of receiving or acknowledging receipt of such payment, the Committee, upon the receipt of satisfactory evidence of his incapacity and satisfactory evidence that another person or institution is maintaining him and that no guardian or committee has been appointed for him, may cause any payment otherwise payable to him to be made to such person or institution so maintaining him. Payment to such person or institution shall be in full satisfaction of all claims by or through the Participant to the extent of the amount thereof.

Section 13.Beneficiary:

        The Participant's beneficiary shall be the person, persons, entity or entities designated by the Participant on the beneficiary designation form provided by and filed with the Committee or its designee. If the Participant does not designate a beneficiary, the beneficiary shall be his Surviving Spouse. If the Participant does not designate a beneficiary and has no Surviving Spouse, the beneficiary shall be the Participant's estate. The designation of a beneficiary may be changed or revoked only by filing a new beneficiary designation form with the Committee or its designee. If a beneficiary (the "primary beneficiary") is receiving or is entitled to receive payments under the Plan and dies before receiving all of the payments due him, the balance to which he is entitled shall be paid to the contingent beneficiary, if any, named in the Participant's current beneficiary designation form. If there is no contingent beneficiary, the balance shall be paid to the estate of the primary beneficiary. Any beneficiary may disclaim all or any part of any benefit to which such beneficiary shall be entitled hereunder by filing a written disclaimer with the Committee before payment of such benefit is to be made. Such a disclaimer shall be made in a form satisfactory to the Committee and shall be irrevocable when filed. Any benefit disclaimed shall be payable from the Plan in the same manner as if the beneficiary who filed the disclaimer had predeceased the Participant.

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Section 14.Amendment and Termination of Plan:

        The Company may amend any provision of the Plan or terminate the Plan at any time; provided, that in no event shall such amendment or termination reduce the balance in any Participant's Deferred Compensation Account as of the date of such amendment or termination, nor shall any such amendment affect the terms of the Plan relating to the payment of such Deferred Compensation Account. Notwithstanding the foregoing, the following special provisions shall apply:

14.1     Termination in the Discretion of the Employer.    Except as otherwise provided in Sections 14.2, the Company in its discretion may terminate the Plan and distribute benefits to Participants subject to the following requirements and any others specified under Section 409A of the Code:

        14.1.1  All arrangements sponsored by the Employer that would be aggregated with the Plan under Section 1.409A-l(c) of the Treasury Regulations are terminated.

        14.1.2  No payments other than payments that would be payable under the terms of the Plan if the termination had not occurred are made within 12 months of the termination date.

        14.1.3  All benefits under the Plan are paid within 24 months of the termination date.

        14.1.4  The Employer does not adopt a new arrangement that would be aggregated with the Plan under Section 1.409A-1(c) of the Treasury Regulations providing for the deferral of compensation at any time within 3 years following the date of termination of the Plan.

        14.1.5  The termination does not occur proximate to a downturn in the financial health of the Employer.

14.2     Termination Upon Change in Control Event.    If the Company terminates the Plan within thirty days preceding or twelve months following a Change in Control Event, the Deferred Compensation Account of each Participant shall become fully vested and payable to the Participant in a lump sum within twelve months following the date of termination, subject to the requirements of Section 409A of the Code.

Section 15.Communication to Participants:

        The Employer shall make a copy of the Plan available for inspection by Participants and their beneficiaries during reasonable hours at the principal office of the Employer.

Section 16.Claims Procedure:

        The following claims procedure shall apply with respect to the Plan:

16.1     Filing of a Claim for Benefits.    If a Participant or Beneficiary (the "claimant") believes that he is entitled to benefits under the Plan which are not being paid to him or which are not being accrued for his benefit, he shall file a written claim therefore with the Committee.

16.2     Notification to Claimant of Decision.    Within 90 days after receipt of a claim by the Committee (or within 180 days if special circumstances require an extension of time), the Committee shall notify the claimant of the decision with regard to the claim. In the event of such special circumstances requiring an extension of time, there shall be furnished to the claimant prior to expiration of the initial 90-day period written notice of the extension, which notice shall set forth the special circumstances and the date by which the decision shall be furnished. If such claim shall be wholly or partially denied, notice thereof shall be in writing and worded in a manner calculated to be understood by the claimant, and shall set forth: (i) the specific reason or reasons for the denial; (ii) specific reference to pertinent provisions of the Plan on which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the procedure for review of the denial and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under ERISA following an adverse benefit determination on review. Notwithstanding the foregoing, if the claim relates to a disability determination, the Committee shall notify the claimant of the decision within 45 days (which may be extended for an additional 30 days if required by special circumstances).

28

16.3     Procedure for Review.    Within 60 days following receipt by the claimant of notice denying his claim, in whole or in part, or, if such notice shall not be given, within 60 days following the latest date on which such notice could have been timely given, the claimant may appeal denial of the claim by filing a written application for review with the Committee. Following such request for review, the Committee shall fully and fairly review the decision denying the claim. Prior to the decision of the Committee, the claimant shall be given an opportunity to review pertinent documents and to submit issues and comments in writing.

16.4     Decision on Review.    The decision on review of a claim denied in whole or in part by the Committee shall be made in the following manner:

        16.4.1  Within 60 days following receipt by the Committee of the request for review (or within 120 days if special circumstances require an extension of time), the Committee shall notify the claimant in writing of its decision with regard to the claim. In the event of such special circumstances requiring an extension of time, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. Notwithstanding the foregoing, if the claim relates to a disability determination, the Committee shall notify the claimant of the decision within 45 days (which may be extended for an additional 45 days if required by special circumstances).

        16.4.2  With respect to a claim that is denied in whole or in part, the decision on review shall set forth specific reasons for the decision, shall be written in a manner calculated to be understood by the claimant, and shall set forth:

(i)

the specific reason or reasons for the adverse determination;



(ii)

specific reference to pertinent Plan provisions on which the adverse determination is based;



(iii)

a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits; and



(iv)

a statement describing any voluntary appeal procedures offered by the Plan and the claimant's right to obtain the information about such procedures, as well as a statement of the claimant's right to bring an action under ERISA section 502(a).

        16.4.3  The decision of the Committee shall be final and conclusive.

16.5     Action by Authorized Representative of Claimant.    All actions set forth in this Section 16 to be taken by the claimant may likewise be taken by a representative of the claimant duly authorized by him to act in his behalf on such matters. The Committee may require such evidence as either may reasonably deem necessary or advisable of the authority to act of any such representative.

Section 17.Miscellaneous Provisions:

17.1     Set off.    Notwithstanding any other provision of this Plan, the Employer may reduce the amount of any payment otherwise payable to or on behalf of a Participant hereunder (net of any required withholdings) at the time payment is due by the amount of any loan, cash advance, extension of credit or other obligation of the Participant to the Employer that is then due and payable, and the Participant shall be deemed to have consented to such reduction. In addition, the Employer may at any time offset a Participant's Deferral Compensation Account by an amount up to $5,000 to collect any such amount in accordance with the requirements of Section 409A of the Code.

29

17.2     Notices.    Each Participant who is not in Service and each Beneficiary shall be responsible for furnishing the Committee or its designee with his current address for the mailing of notices and benefit payments. Any notice required or permitted to be given to such Participant or Beneficiary shall be deemed given if directed to such address and mailed by regular United States mail, first class, postage prepaid. If any check mailed to such address is returned as undeliverable to the addressee, mailing of checks will be suspended until the Participant or Beneficiary furnishes the proper address. This provision shall not be construed as requiring the mailing of any notice or notification otherwise permitted to be given by posting or by other publication.

17.3     Lost Distributees.    A benefit shall be deemed forfeited if the Committee is unable to locate the Participant or Beneficiary to whom payment is due by the fifth anniversary of the date payment is to be made or commence; provided, that the deemed investment rate of return pursuant to Section 8.2 shall cease to be applied to the Participant's account following the first anniversary of such date; provided further, however, that such benefit shall be reinstated if a valid claim is made by or on behalf of the Participant or Beneficiary for all or part of the forfeited benefit.

17.4     Reliance on Data.    The Employer and the Committee shall have the right to rely on any data provided by the Participant or by any Beneficiary. Representations of such data shall be binding upon any party seeking to claim a benefit through a Participant, and the Employer and the Committee shall have no obligation to inquire into the accuracy of any representation made at any time by a Participant or Beneficiary.

17.5     Receipt and Release for Payments.    Subject to the provisions of Section 17.1, any payment made from the Plan to or with respect to any Participant or Beneficiary, or pursuant to a disclaimer by a Beneficiary, shall, to the extent thereof, be in full satisfaction of all claims hereunder against the Plan and the Employer with respect to the Plan. The recipient of any payment from the Plan may be required by the Committee, as a condition precedent to such payment, to execute a receipt and release with respect thereto in such form as shall be acceptable to the Committee.

17.6     Headings.    The headings and subheadings of the Plan have been inserted for convenience of reference and are to be ignored in any construction of the provisions hereof.

17.7     Continuation of Employment.    The establishment of the Plan shall not be construed as conferring any legal or other rights upon any Employee or any persons for continuation of employment, nor shall it interfere with the right of the Employer to discharge any Employee or to deal with him without regard to the effect thereof under the Plan.

17.8     Merger or Consolidation; Assumption of Plan.    No Employer shall consolidate or merge into or with another corporation or entity, or transfer all or substantially all of its assets to another corporation, partnership, trust or other entity (a "Successor Entity") unless such Successor Entity shall assume the rights, obligations and liabilities of the Employer under the Plan and upon such assumption, the Successor Entity shall become obligated to perform the terms and conditions of the Plan. Nothing herein shall prohibit the assumption of the obligations and liabilities of the Employer under the Plan by any Successor Entity.

17.9     Construction.    The Employer shall designate in the Adoption Agreement the state according to whose laws the provisions of the Plan shall be construed and enforced, except to the extent that such laws are superseded by ERISA and the applicable requirements of the Code.

17.10   Taxes.    The Employer or other payor may withhold a benefit payment under the Plan or a Participant's wages, or the Employer may reduce a Participant's Account balance, in order to meet any federal, state, or local or employment tax withholding obligations with respect to Plan benefits, as permitted under Section 409A of the Code. The Employer or other payor shall report Plan payments and other Plan-related information to the appropriate governmental agencies as required under applicable laws.

30

Section 18.Transition Rules:

        This Section 18 does not apply to plans newly established on or after January 1, 2009.

18.1     2005 Election Termination.    Notwithstanding Section 4.1.4, at any time during 2005, a Participant may terminate a Participation Agreement, or modify a Participation Agreement to reduce the amount of Compensation subject to the deferral election, so long as the Compensation subject to the terminated or modified Participation Agreement is includible in the income of the Participant in 2005 or, if later, in the taxable year in which the amounts are earned and vested.

18.2     2005 Deferral Election.    The requirements of Section 4.1.2 relating to the timing of the Participation Agreement shall not apply to any deferral elections made on or before March 15, 2005, provided that (a) the amounts to which the deferral election relate have not been paid or become payable at the time of the election, (b) the Plan was in existence on or before December 31, 2004, (c) the election to defer compensation is made in accordance with the terms of the Plan as in effect on December 31, 2005 (other than a requirement to make a deferral election after March 15, 2005), and (d) the Plan is otherwise operated in accordance with the requirements of Section 409A of the Code.

18.3     2005 Termination of Participation; Distribution.    Notwithstanding anything in this Plan to the contrary, at any time during 2005, a Participant may terminate his or her participation in the Plan and receive a distribution of his Deferred Compensation Account balance on account of that termination, so long as the full amount of such distribution is includible in the Participant's income in 2005 or, if later, in the taxable year of the Participant in which the amount is earned and vested.

18.4     Payment Elections.    Notwithstanding the provisions of Sections 7.1 or 7.5 of the Plan, a Participant may elect on or before December 31, 2008, the time or form of payment of amounts subject to Section 409A of the Code provided that such election applies only to amounts that would not otherwise be payable in the year of the election and does not cause an amount to paid in the year of the election that would not otherwise be payable in such year.

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Exhibit 10.34

THE EXECUTIVE NONQUALIFIED "EXCESS" PLAN ADOPTION AGREEMENT
W I T N E S S E T H
ARTICLE I
ARTICLE II
Amendments to the Douglas Dynamics Nonqualified Deferred Compensation Plan
THE EXECUTIVE NONQUALIFIED EXCESS PLAN PLAN DOCUMENT
THE EXECUTIVE NONQUALIFIED EXCESS PLAN

EX-21.1

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Exhibit 21.1

Subsidiary List

Douglas Dynamics, L.L.C., a Delaware limited liability company

Douglas Dynamics Finance Company, a Delaware corporation

Fisher, LLC, a Delaware limited liability company

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Exhibit 21.1

Subsidiary List

EX-23.1

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Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

        We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-169342) pertaining to the Amended and Restated 2010 Stock Incentive Plan of Douglas Dynamics, Inc. of our report dated March 13, 2012, with respect to the consolidated financial statements of Douglas Dynamics, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2011.

Milwaukee, Wisconsin	/s/ Ernst & Young LLP
March 13, 2012

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Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

EX-31.1

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Exhibit 31.1

Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934

I, James L. Janik, certify that:

1.

I have reviewed this Annual Report on Form 10-K of Douglas Dynamics, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 13, 2012 /s/ JAMES L. JANIK
James L. Janik
President and Chief Executive Officer

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Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934

EX-31.2

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Exhibit 31.2

Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934

I, Robert McCormick, certify that:

1.

I have reviewed this Annual Report on Form 10-K of Douglas Dynamics, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 13, 2012 /s/ ROBERT L. MCCORMICK
Robert L. McCormick
Executive Vice President and Chief Financial Officer

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Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934

EX-32.1

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Exhibit 32.1

Written Statement of the Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350

        Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Chief Financial Officer of Douglas Dynamics, Inc. (the "Company"), hereby certify, based on our knowledge, that the Annual Report on Form 10-K of the Company for the year ended December 31, 2011 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JAMES L. JANIK
James L. Janik
Chief Executive Officer

/s/ ROBERT L. MCCORMICK
Robert L. McCormick
Chief Financial Officer

Date: March 13, 2012

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Exhibit 32.1

Written Statement of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

XML

Restructuring

12 Months Ended

Dec. 31, 2011

Restructuring

Restructuring

18. Restructuring

        On April 27, 2009, the Company announced a plan to close its Johnson City, TN manufacturing facility and move production from this facility to its Milwaukee, WI and Rockland, ME facilities. The company completed the closure of this facility as of August 31, 2010. The Company expects to realize significant annual cost savings and improved customer delivery performance as a result. The closure has resulted in the elimination of approximately 100 positions in Johnson City and the addition of approximately 50 positions in Rockland and approximately 35 positions in Milwaukee.

        Related to the facility closure, the Company recorded $50 of employee termination costs and $1,385 for other closure costs for the year ended December 31, 2010. Restructuring expenses of $1,054 were recorded for the year ended December 31, 2009. These costs are included in the selling, general and administrative expense line in the Company's consolidated statements of operations. For the year ended December 31, 2011, the Company did not incur any restructuring charges, nor does the Company expect to incur any additional costs related to the closure in the future.

        The following represents a reconciliation of changes in the restructuring reserves related to this project through December 31, 2011.

	Employee Termination Costs			Other Exit Costs			Total
Accrued restructuring reserves as of December 31, 2008	$	—		$	—		$	—
Activity during year ended December 31, 2009:
Charges to earnings		690			364			1,054
Payments		—			(364	)		(364	)
Accrued restructuring reserves as of December 31, 2009	$	690		$	—		$	690
Activity during year ended December 31, 2010:
Charges to earnings		50			1,385			1,435
Payments		(710	)		(1,385	)		(2,095	)
Accrued restructuring reserves as of December 31, 2010	$	30		$	—		$	30
Payments		(30	)		—			(30	)
Accrued restructuring reserves as of December 31, 2011	$	—		$	—		$	—

        In connection with the restructuring, the Company reassessed the useful lives of its manufacturing facility and certain equipment. As a result of this assessment, the Company assigned shorter useful lives to these assets and recorded accelerated depreciation of $2,071 for the year ended December 31, 2010. This change in estimate reduced basic and diluted earnings per share by $0.07 and $0.07 for the year ended December 31, 2010. The Company recorded accelerated depreciation of $900 for the year ended December 31, 2009. This change in estimate reduced basic and diluted earnings per share by $0.04 and $0.04 for the year ended December 31, 2009.

        Because of actions taken in the restructuring, the Johnson City property is being actively marketed for sale and is classified as held for sale in the consolidated balance sheet.

XML

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2011

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of consolidation

        The accompanying consolidated financial statements include the accounts of Douglas Dynamics, Inc. and its direct wholly-owned subsidiary, Douglas Dynamics, L.L.C., and its indirect wholly-owned subsidiaries, Douglas Dynamics Finance Company (an inactive subsidiary) and Fisher, LLC (hereinafter collectively referred to as the "Company"). All intercompany balances and transactions have been eliminated in consolidation.

Use of estimates

        The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Accordingly, actual results could differ from those estimates.

Cash and Cash Equivalents

        The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

Accounts receivable and allowance for doubtful accounts

        The Company carries its accounts receivable at their face amount less an allowance for doubtful accounts. The majority of the Company's accounts receivable are due from distributors of truck equipment. Credit is extended based on an evaluation of a customer's financial condition. On a periodic basis, the Company evaluates its accounts receivable and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances and credit conditions based on a history of write-offs and collections. A receivable is considered past due if payments have not been received within agreed upon invoice terms. Accounts receivable are written off after all collection efforts have been exhausted. The Company takes a security interest in the inventory as collateral for the receivable but often does not have a priority security interest.

Financing program

        The Company is party to a financing program in which certain distributors may elect to finance their purchases from the Company through a third party financing company. The Company provides the third party financing company recourse against the Company regarding the collectability of the receivable under the program due to the fact that if the third party financing company is unable to collect from the distributor the amounts due in respect of the product financed, the Company would be obligated to repurchase any remaining inventory related to the product financed and reimburse any legal fees incurred by the financing company. During the years ended December 31, 2011, 2010 and 2009, distributors financed purchases of $2,752, $1,696 and $3,269 through this financing program, respectively. At December 31, 2011 there were $55 of uncollectible outstanding receivables related to sales financed under the financing program, all of which is fully reserved for in the allowance for doubtful accounts. There were no outstanding or uncollectible amounts related to sales financed under the financing program for the years ended December 31, 2010. The amount owed by our distributors to the third party financing company under this program at December 31, 2011 and 2010 was $1,714 and $1,267, respectively. The Company was required to repurchase repossessed inventory of $41, $91 and $19 for the years ended December 31, 2011, December 31, 2010 and December 31, 2009, respectively.

        In the past, minimal losses have been incurred under this agreement. However, an adverse change in distributor retail sales could cause this situation to change and thereby require the Company to repurchase repossessed units. Any repossessed units are inspected to ensure they are current, unused product and are restocked and resold.

Interest Rate Swap

        As required by the new debt agreement the Company entered into in the second quarter of 2011, the Company entered into an interest-rate swap agreement to hedge against the potential impact on earnings from increases in market interest rates. Under the interest rate swap agreement, effective as of July 18, 2011 the Company either receives or makes payments on a monthly basis based on the differential between 6.335% and LIBOR plus 4.25% (with a LIBOR floor of 1.5%). See Comprehensive income (loss) for treatment of gains and losses on the interest rate swap agreement.

Inventories

        Inventories are stated at the lower of cost or market. Market is determined based on estimated realizable values. Inventory costs are primarily determined by the first-in, first-out (FIFO) method. The Company periodically reviews our inventory for slow moving, damaged and discontinued items and provides reserves to reduce such items identified to their recoverable amounts.

Property, plant and equipment

        Property, plant and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed using straight-line methods over the estimated useful lives for financial statement purposes and an accelerated method for income tax reporting purposes. The estimated useful lives of the assets are as follows:

	Years
Land improvements and buildings		15 - 40
Machinery and equipment		3 - 20
Furniture and fixtures		3 - 12
Mobile equipment and other		3 - 10

        Depreciation expense was $2,975, $5,704, and $5,797 for the years ended December 31, 2011, 2010 and 2009, respectively.

        Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to operations when incurred. Repairs and maintenance expenses amounted to $4,025, $2,909 and $3,079 for the years ended December 31, 2011, 2010 and 2009, respectively. When assets are sold or retired, the cost of the asset and the related accumulated depreciation are eliminated from the accounts and any gain or loss is recognized in the results of operations.

Impairment of long-lived assets

        Long-lived assets are reviewed for potential impairment when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying value of such assets to the undiscounted future cash flows expected to be generated by the assets. If the carrying value of an asset exceeds its estimated undiscounted future cash flows, an impairment provision is recognized to the extent that the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or the fair value of the asset, less costs of disposition. Management of the Company considers such factors as current results, trends and future prospects, current market value, and other economic and regulatory factors in performing these analyses. The Company determined that no long-lived assets were impaired as of December 31, 2011 and 2010.

Goodwill and other intangible assets

        Goodwill and indefinite-lived intangible assets are tested for impairment annually in the fourth quarter, or sooner if impairment indicators arise. The fair value of indefinite-lived intangible assets is estimated based upon a market approach. In reviewing goodwill for impairment, potential impairment is identified by comparing the estimated fair value of the reporting unit to its carrying value. The Company has determined it has one reporting unit. When the fair value is less than the carrying value of the net assets of the reporting unit, including goodwill, an impairment loss may be recognized. The Company has determined that goodwill and indefinite lived assets were not impaired as of December 31, 2011 and 2010.

        Intangible assets with estimable useful lives are amortized over their respective estimated useful lives and also reviewed at least annually for impairment or as events or circumstances arise. The Company amortizes its distribution network intangible over periods ranging from 15 to 20 years, trademarks over 7 to 10 years, patents over 7 to 20 years, and noncompete agreements over 5 years. The Company has determined that finite lived intangible assets were not impaired as of December 31, 2011 and 2010.

Income taxes

        Deferred income taxes are accounted for under the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates. Deferred income tax provisions or benefits are based on the change in the deferred tax assets and liabilities from period to period. Deferred income tax assets are reduced by a valuation allowance if it is more likely than not that some portion of the deferred income tax asset will not be realized. Additionally, when applicable, the Company would classify interest and penalties related to uncertain tax positions in income tax expense.

Deferred financing costs

        The costs of obtaining financing are capitalized and amortized over the term of the related financing on a basis that approximates the effective interest method. The changes in deferred financing costs are as follows:

Balance at January 1, 2009	$	4,520
Amortization of deferred financing costs		(1,209	)
Balance at December 31, 2009		3,311
Write-off of unamortized deferred financing costs		(2,045	)
Deferred financing costs capitalized on new debt		559
Amortization of deferred financing costs		(872	)
Balance at December 31, 2010		953
Write-off of unamortized deferred financing costs		(335	)
Deferred financing costs capitalized on new debt		3,471
Amortization of deferred financing costs		(687	)
Balance at December 31, 2011	$	3,402

        For the year ended December 31, 2011, the Company recorded the write-off of deferred financing costs as a loss on extinguishment of debt, in the consolidated statements of operations as a result of an amendment to the Company's term loan facility. The amendment of the term loan facility resulted in a significant modification of the debt which resulted in the write off of unamortized capitalized deferred financing costs of $335. See further details in Note 7. For the year ended December 31, 2010 the Company recorded a loss on extinguishment of debt of $7,967 as a result of an amendment to the Company's term loan facility and the repayment of the senior notes as follows. The amendment of the term loan facility resulted in a significant modification of the debt, which resulted in the write off of unamortized deferred financing costs of $995. The Company also incurred expenditures of $2,045 related to financing costs paid to existing lenders. The Company wrote off $1,050 of unamortized deferred financing costs related to the senior notes and paid $3,876 for a redemption call premium and post payoff interest on the senior notes redemption.

Fair Value

        Fair value is the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

        The following table presents financial assets and liabilities measured at fair value on a recurring basis and discloses the fair value of long-term debt:

	Fair Value at 12/31/2011		Fair Value at 12/31/2010
Assets:
Assets(a)	$	—	$	—
Total Assets	$	—	$	—
Liabilities:
Long term debt(b)		122,709		120,397
Other non-current liabilities—Interest rate swap(c)		621		—
Total Liabilities	$	123,330	$	120,397

(a)

The Company does not have any financial assets that are required to be measured at fair value on a recurring basis.

(b)

The fair value of the Company's long-term debt, including current maturities, is estimated using discounted cash flows based on the Company's current incremental borrowing rates for similar types of borrowing arrangements, which is a level 2 input for all periods presented. Meanwhile, long-term debt is recorded at carrying amount, net of discount, as disclosed on the face of the balance sheet.

(c)

Valuation models are calibrated to initial trade price. Subsequent valuations are based on observable inputs to the valuation model (e.g. interest rates and credit spreads). Model inputs are changed only when corroborated by market data. A credit risk adjustment is made using observable market credit spreads. Thus, inputs used to determine fair value of the interest rate swap are level 2 inputs.

Concentration of credit risk

        The Company's cash is deposited with multiple financial institutions. At times, deposits in these institutions exceed the amount of insurance provided on such deposits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant risk on these balances.

        No distributor represented more than 10% of the Company's net sales or accounts receivable during the years ended December 31, 2011, 2010 and 2009.

Revenue recognition

        The Company recognizes revenues upon shipment to the customer, which is when title passes and all of the following conditions are satisfied: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) the product has been shipped and the Company has no further obligations. Customers have no right of return privileges. Historically, product returns have not been material and are permitted on an exception basis only.

        The Company offers a variety of discounts and sales incentives to our distributors. The estimated liability for sales discounts and allowances is recorded at the time of sale as a reduction of net sales. The liability is estimated based on the costs of the program, the planned duration of the program and historical experience.

Cost of sales

        Cost of sales includes all costs associated with the manufacture of the Company's products, including raw materials, purchased parts, freight, plant operating expenses, property insurance and taxes, and plant depreciation. All payroll costs and employee benefits for the hourly workforce, manufacturing management, and engineering costs are included in cost of sales.

Warranty cost recognition

        The Company accrues for estimated warranty costs as revenue is recognized. See note 9 for further details.

Advertising expenses

        Advertising expenses include costs for the production of marketing media, literature, CD-ROM, and displays. The Company participates in trade shows and advertises in the yellow pages and billboards. Advertising expenses amounted to $2,718, $2,805 and $2,528 for the years ended December 31, 2011, 2010 and 2009, respectively. The Company also provides its distributors with pre-approved, cooperative advertising programs, which are recorded as advertising expense in selling, general and administrative expense. All costs associated with the Company's advertising programs are expensed as incurred.

Shipping and handling costs

        Generally, shipping and handling costs are paid directly by the customer to the shipping agent. Those shipping and handling costs billed by the Company are recorded as a component of sales with the corresponding costs included in cost of sales.

Share-based payments

        The Company applies the guidance codified in ASC 718—Compensation—Stock Compensation. This standard requires the measurement of the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award at the grant date and recognition of the compensation expense over the period during which an employee is required to provide service in exchange for the award (generally the vesting period). Because the Company used the minimum-value method to measure compensation cost for employee stock options prior to January 1, 2006 the date on which ASC 718 was adopted, under this previous guidance, it was required to use the prospective method of adoption for this standard. Under the prospective method, the Company continues to account for non-vested awards outstanding at the date of adoption using the same method as prior to adoption for financial statement recognition purposes. All awards granted, modified, or settled after the date of adoption are accounted for using the measurement, recognition, and attribution provisions of ASC 718.

Comprehensive income (loss)

        Comprehensive income (loss) is defined as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner resources and is comprised of net income or loss and "other comprehensive income (loss)". The Company's other comprehensive income (loss) is comprised of the adjustments for pension and postretirement benefit liabilities as well as the impact of our interest rate swap. The interest rate swap contract on $50,000 notional amount of the term loan expires in December 2014. The Company does not expect to record any unrecognized loss into earnings in the next twelve months. Additionally, other comprehensive income (loss) includes the net income (loss) of the Company plus/minus the Company's adjustments for its defined benefit retirement plans based on the measurement date as of the Company's year-end.

        Components of accumulated other comprehensive loss are as follows:

	December 31,
	2011			2010
Interest rate swap, net of tax	$	(391	)	$	—
Unrecognized pension and postretirement benefit plan liabilities, net of tax		(7,089	)		(4,431	)
	$	(7,480	)	$	(4,431	)

Segment Reporting

        The Company operates in and reports as a single operating segment, which is the manufacture and sale of snow and ice control products. Net sales are generated through the sale of snow and ice control products and accessories to distributors. The chief operating decision maker (the Company's Chief Executive Officer) manages and evaluates its operations as one segment primarily due to similarities in the nature of the products, production processes and methods of distribution. All of the Company's identifiable assets are located in the United States. The Company's sales outside North America are not material, representing less than 1% of net sales.

        The Company's product offerings primarily consist of snow and ice control products and accessories. Equipment and parts and accessories are each a similar class of products based on similar customer usage.

	Year ended December 31,
	2011		2010		2009
Equipment	$	177,806	$	151,808	$	147,478
Parts and accessories		30,992		24,987		26,864
Net Sales	$	208,798	$	176,795	$	174,342

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Description of business and basis of presentation

12 Months Ended

Dec. 31, 2011

Description of business and basis of presentation

Description of business and basis of presentation

1. Description of business and basis of presentation

        Douglas Dynamics, Inc., (the "Company") is the North American leader in the design, manufacture and sale of snow and ice control equipment for light trucks, which is comprised of snowplows and sand and salt spreaders, and related parts and accessories. The Company's snow and ice control products are sold through a network of over 720 truck equipment distributors that purchase directly from the Company and are located throughout the snowbelt regions in North America (primarily the Midwest, East and Northeast regions of the United States as well as all provinces of Canada). The Company sells its products under the WESTERN®, FISHER®, and BLIZZARD® brands. The Company is headquartered in Milwaukee, WI and currently has manufacturing facilities in Milwaukee, WI, and Rockland, ME. The Company closed its Johnson City, TN facility in August 2010. The Company operates as a single segment.

        On May 20, 2011 and December 6, 2011, certain of the stockholders of the Company, including affiliates of Aurora Capital Group and Ares Management, closed registered secondary offerings of 5,750,000 and 1,996,479 shares, respectively, of the Company's common stock. The Company did not receive any proceeds from the sale of its stock by the selling stockholders in the offerings.

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 39,432	$ 20,149
Accounts receivable, net	34,019	37,040
Inventories	24,005	23,481
Deferred income taxes	4,952	7,142
Prepaid income taxes		29
Prepaid and other current assets	1,054	1,131
Total current assets	103,462	88,972
Property, plant, and equipment, net	21,340	21,962
Assets held for sale	1,732	1,779
Goodwill	107,222	107,222
Other intangible assets, net	121,747	126,948
Deferred financing costs, net	3,402	953
Other long-term assets	112	207
Total assets	359,017	348,043
Current liabilities:
Accounts payable	5,040	2,847
Accrued expenses and other current liabilities	15,755	11,923
Accrued interest	350	23
Income taxes payable	395
Current portion of long-term debt	11,071	1,183
Total current liabilities	32,611	15,976
Retiree health benefit obligation	8,053	7,235
Pension obligation	14,163	10,753
Deferred income taxes	26,957	22,650
Deferred compensation	912	1,067
Long-term debt, less current portion	111,866	119,971
Other long-term liabilities	1,066	898
Shareholders' equity:
Common Stock, par value $0.01, 200,000,000 shares authorized, 22,020,694 and 21,579,655 shares issued and outstanding at December 31, 2011 and December 31, 2010, respectively	220	216
Additional paid-in capital	130,907	127,695
Shareholders' notes receivable		(482)
Retained earnings	39,742	46,495
Accumulated other comprehensive loss, net of tax	(7,480)	(4,431)
Total shareholders' equity	163,389	169,493
Total liabilities and shareholders' equity	$ 359,017	$ 348,043

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Adjustment for pension and postretirement benefit liability, tax benefit (expense)	$ 1,560	$ 327	$ 365
Adjustment for interest rate swap, tax benefit	$ 230

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Commitments and Contingencies

Commitments and Contingencies

15. Commitments and Contingencies

        In the ordinary course of business, the Company is engaged in various litigation including product liability and intellectual property disputes. However, the Company does not believe that any pending litigation will have a material adverse effect on its consolidated financial position, consolidated results of operations or liquidity. In addition, the Company is not currently a party to any environmental-related claims or legal matters.

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Valuation and qualifying accounts

12 Months Ended

Dec. 31, 2011

Valuation and qualifying accounts

Valuation and qualifying accounts

17. Valuation and qualifying accounts

        The Company's valuation and qualifying accounts for the years ended December 31, 2011, 2010 and 2009 are as follows:

	Balance at beginning of year		Additions charged to earnings		Changes to reserve, net(1)			Balance at end of year
Year ended December 31, 2011
Allowance for doubtful accounts	$	1,200	$	1,106	$	(1,059	)	$	1,247
Reserves for inventory		1,404		1,080		(1,196	)		1,288
Valuation of deferred tax assets		877		—		(47	)		830
Year ended December 31, 2010
Allowance for doubtful accounts	$	755	$	966	$	(521	)	$	1,200
Reserves for inventory		1,931		930		(1,457	)		1,404
Valuation of deferred tax assets		566		343		(32	)		877
Year ended December 31, 2009
Allowance for doubtful accounts	$	622	$	281	$	(148	)	$	755
Reserves for inventory		1,736		1,347		(1,153	)		1,931
Valuation of deferred tax assets		1,695		84		(1,213	)		566

(1)

Deductions from the allowance for doubtful accounts equal accounts receivable written off, less recoveries, against the allowance. Deductions from the reserves for inventory excess and obsolete items equal inventory written off against the reserve as items were disposed of. Deductions to the valuation of deferred tax assets relate to the reversals due to changes in management's judgments regarding the future realization of the underlying deferred tax assets.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Operating activities
Net income	$ 19,040	$ 1,662	$ 9,843
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	8,176	11,705	11,958
Amortization of deferred financing costs and debt discount	832	872	1,209
Loss on extinguishment of debt	673	7,967
Stock-based compensation	1,873	4,029	732
Provision for losses on accounts receivable	47	445	133
Deferred income taxes	6,497	641	1,810
Changes in operating assets and liabilities:
Accounts receivable	2,974	(5,313)	(3,717)
Inventories	(524)	3,216	2,105
Prepaid and other assets and prepaid income taxes	201	1,437	(776)
Accounts payable	2,193	(2,323)	218
Accrued expenses and other current liabilities	4,554	(7,201)	1,127
Deferred compensation	(155)	(415)	(162)
Benefit obligations and other long-term liabilities	1,347	(945)	1,091
Net cash provided by operating activities	47,728	15,777	25,571
Investing activities
Capital expenditures	(2,373)	(3,009)	(8,200)
Proceeds from sale of equipment	67	226
Net cash used in investing activities	(2,306)	(2,783)	(8,200)
Financing activities
Stock repurchases		(166)	(1,000)
Proceeds from exercise of stock options	1,343
Payment of call premium and post payoff interest on senior notes redemption		(3,876)
Collection of shareholders' notes receivable	482	531
Payments of financing costs	(3,471)	(2,605)
Proceeds from initial public offering, net		63,929
Borrowings on long-term debt	123,750	40,000
Dividends paid	(25,793)	(8,222)
Repayment of long-term debt	(122,450)	(151,509)	(850)
Net cash used in financing activities	(26,139)	(61,918)	(1,850)
Change in cash and cash equivalents	19,283	(48,924)	15,521
Cash and cash equivalents at beginning of year	20,149	69,073	53,552
Cash and cash equivalents at end of year	39,432	20,149	69,073
Supplemental disclosure of cash flow information
Income taxes paid	2,479	1,663	1,895
Interest paid	$ 7,767	$ 16,886	$ 14,410

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2011	Dec. 31, 2010
CONSOLIDATED BALANCE SHEETS
Common Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, shares authorized	200,000,000	200,000,000
Common Stock, shares issued	22,020,694	21,579,655
Common Stock, shares outstanding	22,020,694	21,579,655

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Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

10. Income Taxes

        The provision for income tax expense (benefit) consists of the following:

	Year ended December 31
	2011		2010		2009
Current:
Federal	$	2,697	$	—	$	1,284
State		326		231		892
		3,023		231		2,176
Deferred:
Federal		7,855		363		3,165
State		454		278		(1,355	)
		8,309		641		1,810
	$	11,332	$	872	$	3,986

        A reconciliation of income tax expense computed at the federal statutory rate to the provision for income taxes for the years ended December 31, 2011, 2010 and 2009 is as follows:

	2011			2010			2009
Federal income tax expense at statutory rate	$	10,630		$	862		$	4,840
State taxes, net of federal benefit		1,522			7			302
Valuation allowance changes		(47	)		311			(1,129	)
Change in uncertain tax positions, net		(150	)		(349	)		276
Research and development credit		(111	)		(117	)		(194	)
Rate change		(162	)		95			—
Manufacturing tax benefits		(552	)		—			—
Other		202			63			(109	)
	$	11,332		$	872		$	3,986

        Significant components of the Company's deferred tax liabilities and assets are as follows:

	December 31,
	2011			2010
Deferred tax assets:
Allowance for doubtful accounts	$	465		$	456
Inventory reserves		479			533
Warranty liability		1,552			1,291
Deferred compensation		911			666
Pension and retiree health benefit obligations		8,615			6,145
Accrued vacation		570			428
Medical claims reserve		242			214
State net operating losses		2,167			3,160
Federal net operating losses		—			3,310
Other accrued liabilities		1,583			886
Valuation allowance for state net operating losses		(830	)		(877	)
Total deferred tax assets		15,754			16,212
Deferred tax liabilities:
Tax deductible goodwill and other intangibles		(34,923	)		(30,434	)
Accelerated depreciation		(2,280	)		(865	)
Other		(556	)		(421	)
Total deferred tax liabilities		(37,759	)		(31,720	)
Net deferred tax liabilities	$	(22,005	)	$	(15,508	)

        Deferred income tax balances reflect the effects of temporary differences between the carrying amount of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

        During 2011, the Company carried back its previously generated Federal net operating loss, resulting in full utilization of the Federal net operating loss and eliminating the related deferred tax asset. State operating loss carry forwards for tax purposes were $38,297 at December 31, 2011 and are expected to result in future tax benefits of approximately $2,167. These loss carry-forwards will expire beginning in 2019. The Company evaluated the need to maintain a valuation allowance against certain deferred tax assets. Based on this evaluation, which included a review of recent profitability and future projections of profitability, the Company concluded that a valuation allowance of approximately $830 is necessary at December 31, 2011 for the state net operating loss carry-forwards which are likely to expire prior to the Company's ability to use the tax benefit.

        A reconciliation of the beginning and ending liability for uncertain tax positions is as follows:

	2011			2010
Balance at beginning of year	$	798		$	2,095
Increases for tax positions taken in the current year		—			—
Increases for tax positions taken in prior years		—			—
Decreases due to settlements with taxing authorities		(478	)		(1,297	)
Balance at the end of year	$	320		$	798

        The amount of the unrecognized tax benefits that would affect the effective tax rate, if recognized, was approximately $208 at December 31, 2011 and approximately $591 at December 31, 2010. The Company recognizes interest and penalties related to the unrecognized tax benefits in income tax expense. Approximately $54 and $174 of accrued interest and penalties is reported as an income tax liability at December 31, 2011 and 2010, respectively. The liability for unrecognized tax benefits is reported in Other Liabilities on the consolidated balance sheets at December 31, 2011 and 2010. The Company recognized ($120), ($478), and $153 of (benefits) expenses related to interest and penalties in income tax expense for the years ended December 31, 2011, 2010, and 2009, respectively.

        The Company files income tax returns in the United States (Federal), Wisconsin (state), Maine (state) and various other states. Tax years open to examination by tax authorities under the statute of limitations include 2009, 2010 and 2011 for Federal and 2007 through 2011 for most states. Tax returns for the 2011 tax year have not yet been filed.

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Document and Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Mar. 13, 2012	Jun. 30, 2011
Document and Entity Information
Entity Registrant Name	DOUGLAS DYNAMICS, INC
Entity Central Index Key	0001287213
Document Type	10-K
Document Period End Date	Dec. 31, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 291
Entity Common Stock, Shares Outstanding		22,130,996
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY

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Deferred Compensation

12 Months Ended

Dec. 31, 2011

Deferred Compensation

Deferred Compensation

11. Deferred Compensation

        The Company has a long-term incentive compensation plan covering certain management employees. Under the terms of the plan, prior to December 31, 2010 participants earned (lost) additional compensation based upon a percentage of the Company's cash flow from operations reduced by capital expenditures under a predetermined formula. In addition, participants' account balances under the plan increased or decreased on an annual basis based upon the Company's cash flow from operations reduced by capital expenditures under a predetermined formula. Amounts credited to participant accounts under the plan were, and continue to be as of December 31, 2011, non-forfeitable unless a participant is terminated for cause or voluntarily terminates his or her employment with the Company. In either of these events, the terminated participant will forfeit any positive amounts allocated to his or her account for the two years preceding the year of termination.

        Compensation earned under the plan is deferred until such time as the participant has an account balance of more than two times his or her base compensation, at which point 20% of the balance is paid to the participant in cash in a lump sum. Participants are paid their vested account balances under the plan upon separation from the Company as follows:

	Payment Method
Death, long-term disability, or normal retirement	Lump sum
Balance of less than $75,000	Lump sum
Balance greater than $75,000	5 equal annual installments

        With respect to account balances paid in installments, participants earn interest each year on the unpaid balance at the one-year U.S. Treasury rate in effect at the beginning of the year.

        Activity for the plan is as follows:

	December 31
	2011			2010
Balance at beginning of year	$	1,292		$	1,705
Participant earnings according to the terms of the plan		—			128
Payments to current and former participants		(225	)		(258	)
Adjustments to plan		—			(283	)
Balance at end of year		1,067			1,292
Less current portion		(155	)		(225	)
Long Term balance at end of year	$	912		$	1,067

        Effective December 31, 2010, the Company froze the long-term incentive plan. The Company will continue to pay its obligations to previously designated recipients in accordance with the plan, but no new compensation will be earned under the plan. As there were modifications to the deferred compensation plan, the Company reduced its obligation for expected forfeitures which was based on historical turnover as included above as "Adjustments to Plan" in 2010.

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CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Net sales	$ 208,798	$ 176,795	$ 174,342
Cost of sales	136,981	116,494	117,264
Gross profit	71,817	60,301	57,078
Selling, general, and administrative expense	26,389	26,509	20,085
Intangibles amortization	5,201	6,001	6,161
Management fees-related party	46	6,383	1,393
Income from operations	40,181	21,408	29,439
Interest expense, net	(8,918)	(10,943)	(15,520)
Loss on extinguishment of debt	(673)	(7,967)
Other income (expense), net	(218)	36	(90)
Income before taxes	30,372	2,534	13,829
Income tax expense	11,332	872	3,986
Net income	19,040	1,662	9,843
Less: Net income attributable to participating securities	233	12
Net income attributable to common shareholders	$ 18,807	$ 1,650	$ 9,843
Earnings per share:
Basic earnings per common share attributable to common shareholders (in dollars per share)	$ 0.87	$ 0.09	$ 0.68
Earnings per common share assuming dilution attributable to common shareholders (in dollars per share)	$ 0.85	$ 0.09	$ 0.67
Cash dividends declared and paid per share (in dollars per share)	$ 1.18	$ 0.38	$ 0.00

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Property, plant and equipment

12 Months Ended

Dec. 31, 2011

Property, plant and equipment

Property, plant and equipment

5. Property, plant and equipment

        Property, plant and equipment are summarized as follows:

	December 31,
	2011			2010
Land	$	960		$	960
Land improvements		1,768			1,768
Buildings		12,660			12,554
Machinery and equipment		23,253			22,343
Furniture and fixtures		7,255			6,482
Mobile equipment and other		1,216			1,019
Construction-in-process		748			422
Total property, plant and equipment		47,860			45,548
Less accumulated depreciation		(26,520	)		(23,586	)
Net property, plant and equipment	$	21,340		$	21,962

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Inventories

12 Months Ended

Dec. 31, 2011

Inventories

Inventories

4. Inventories

        Inventories consist of the following:

	December 31,
	2011		2010
Finished goods and work-in-process	$	22,630	$	21,896
Raw material and supplies		1,375		1,585
	$	24,005	$	23,481

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Redeemable stock and stockholders' equity

12 Months Ended

Dec. 31, 2011

Redeemable stock and stockholders' equity

Redeemable stock and stockholders' equity

16. Redeemable stock and stockholders' equity

Series A Redeemable Convertible Preferred Stock

        The authorized capital stock of the Company includes 100,000 shares of preferred stock, of which 65,000 shares have been designated as Series A preferred stock ("Series A"). All shares of Series A have been redeemed and therefore no shares of Series A were issued and outstanding as of December 31, 2011 and 2010. The par value of Series A is $0.01 per share.

        The Series A is non-voting except as required by Delaware law, and Series A stockholders do not have the right to elect any members of the Company's Board of Directors. The Series A ranks senior to the Series B and C preferred stock and common stock related to dividend rights and distributions upon liquidation, dissolution or winding up of the Company. Dividends accrue on the Series A at a rate of 10% per annum on the stated value of the Series A plus 10% of the aggregate of all annual dividends that a holder of Series A will have become entitled to receive but which has not been declared and paid by the Company. The Company accretes dividends based on the terms of the Series A set forth in the Company's certificate of incorporation.

        The Series A is subject to redemption at anytime, in whole or in part, at the option of the Board of Directors, which is controlled by the preferred stockholders and thus outside the control of the Company, at a redemption price per share equal to Series A stated value of $1,000 per share plus all accrued but unpaid cumulative dividends.

Series B Redeemable Preferred Stock

        One share of preferred stock has been designated as Series B preferred stock ("Series B") and no shares were issued and outstanding as of December 31, 2011 and December 31, 2010. The par value of Series B is $0.01 per share.

        In addition to any voting rights to which the holders of the Series B may be entitled by law, so long as the Series B remains outstanding, the holder of the share, voting as a single series, are entitled to elect four directors to the Company's Board of Directors. The Series B ranks junior to the Series A, on parity with the Series C preferred stock and senior to the common stock as to dividend rights and distributions upon liquidation, dissolution or winding up of the Company. The holder of Series B is not entitled to receive dividends. However, subject to certain exceptions, so long as any shares of Series B or Series C preferred stock are outstanding, the Company may not pay dividends or make other distributions with respect to its junior securities (including common stock). This dividend restriction may be waived by the affirmative vote of a majority of the outstanding shares of Series B and Series C preferred stock, voting as a single class.

        The Series B is subject to mandatory redemption at any time the holder's ownership of both preferred stock and common stock falls below certain percentages. The fixed redemption price per share is $1,000 per share, which equals the initial amount paid for the share. At the time of any such redemption, any members of the Company's Board of Directors elected by the Series B shall cease to be members of the Board without further action of any kind by the Company or its stockholders. The Series B share was redeemed in conjunction with the IPO in May of 2010.

Series C Redeemable Preferred Stock

        One share of preferred stock has been designated as Series B preferred stock ("Series C") and no shares were issued and outstanding as of December 31, 2011 and December 31, 2010. The par value of Series C is $0.01 per share.

        In addition to any voting rights to which the holders of the Series C may be entitled by law, so long as the Series C remains outstanding, the holder of the share, voting as a single series, is entitled to elect two directors to the Company's Board of Directors. The Series C ranks junior to the Series A, on a parity with the Series B preferred stock and senior to the common stock as to dividend rights and distributions upon liquidation, dissolution or winding up of the Company. The holder of Series C is not entitled to receive dividends. However, subject to certain exceptions, so long as any shares of Series B or Series C preferred stock are outstanding, the Company may not pay dividends or make other distributions with respect to its junior securities (including common stock). This dividend restriction may be waived by the affirmative vote of a majority of the outstanding shares of Series B and Series C preferred stock, voting as a single class.

        The Series C is subject to mandatory redemption at any time the holder's beneficial ownership of both preferred stock and common stock falls below certain percentages. The fixed redemption price per share is $1,000 per share, which equals the initial amount paid for the share. At the time of any such redemption, any members of the Company's Board of Directors elected by the Series C shall cease to be members of the Board without further action of any kind by the Company or its stockholders. The Series C share was redeemed in conjunction with the IPO in May of 2010.

Common Stock

        The Company has 200,000,000 shares of common stock authorized, of which 22,020,694 and 21,579,655 were issued and outstanding as of December 31, 2011 and 2010, respectively. The par value of the common stock is $0.01 per share.

        The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, common stockholders would be entitled to share ratably in the Company's assets and funds remaining after payment of liabilities and after provision is made for each class of stock having preference over the Company's common stock, including Series A, B and C preferred stock.

Deferred Stock Plan

        The Company has previously issued to certain members of management deferred common stock units and deferred preferred stock units, in each case representing the right to receive less than 1% of its fully-diluted equity capitalization. These deferred units were issued in consideration for the cancellation of accrued award balances in the Douglas Dynamics, LLC Long Term Incentive Plan. Deferred units were issued at a price equal to the fair value of the common stock at the date of issuance. Deferred units have all rights of common and preferred shareholders, excluding voting rights, and convert to common and preferred stock upon a change in control, or initial public offering of the Company's stock. As of December 31, 2011 and 2010 there were no deferred preferred stock units outstanding.

        As of both December 31, 2011 and 2010, the Company had no deferred common stock units outstanding. In the fourth quarter of 2010, the 174,229 deferred stock units converted into common stock, subsequent to the IPO of the Company's stock, upon expiration of the lock-up agreement.

Common Stock Repurchase

        On January 23, 2009, the Company entered into securities repurchase agreements with certain members of management. Pursuant to these agreements, the Company repurchased at fair value and subsequently retired 32,633 shares of common stock and 89,371 stock options in exchange for aggregate consideration of $1,137, comprised of a cash payment of $1,000 and the satisfaction of the remaining principal amount of $137 on promissory notes held by the members of management. As a result of the repurchase of stock options, the Company recorded $732 of compensation expense in the first quarter of 2009, which represented the fair value of the repurchased options.

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Employee Retirement Plans

12 Months Ended

Dec. 31, 2011

Employee Retirement Plans

Employee Retirement Plans

12. Employee Retirement Plans

Pension benefits

        The Company provides noncontributory defined benefit pension plans for most employees. Plans covering salaried employees generally provide pension benefits that are based on the employee's average earnings and credited service. Plans covering hourly employees generally provide benefits of stated amounts for each year of service. The Company's funding policy for the plans is to contribute amounts sufficient to meet the minimum funding requirement of the Employee Retirement Income Security Act of 1974, plus any additional amounts that the Company may determine to be appropriate.

        The reconciliation of the beginning and ending balances of the fair value of plan assets, funded status of plans, and amounts recognized in the consolidated balance sheets consisted of the following:

	December 31
	2011			2010
Change in projected benefit obligation:
Benefit obligation at beginning of year	$	28,557		$	24,723
Service cost		961			800
Interest cost		1,539			1,432
Actuarial loss		4,126			2,884
Benefits paid		(975	)		(956	)
Effect of curtailment		(1,408	)		(326	)
Benefit obligation at end of year		32,800			28,557
Change in plan assets:
Fair value of plan assets at beginning of year		17,804			15,766
Actual return on plan assets		(109	)		2,085
Employer contributions through December 31		1,917			909
Benefits paid		(975	)		(956	)
Fair value of plan assets at end of year		18,637			17,804
Funded Status: accrued pension liability	$	(14,163	)	$	(10,753	)

        In May 2010, in connection with the closure of the Company's manufacturing facility in Johnson City, TN substantially all the employees at this facility were terminated. This resulted in a cessation of all future benefit accruals for these employees under the Company's pension plans. A liability gain of $326 from the curtailment was recognized as a reduction to the net actuarial loss, as the liability gain was less than the unrecognized net actuarial loss prior to the curtailment for the pension plan in the year ended December 31, 2010. Therefore, this did not impact the consolidated statement of income for the year ended December 31, 2010.

        In November 2011, the Company took the following actions with respect to its pension plans effective as of December 31, 2011: It froze benefits as of January 1, 2012 for all employees under the Company's Pension Plan for Hourly Employees, froze benefits as of January 1, 2012 for all employees under the Company's Salaried Pension Plan for employees with less than five years of service and grandfathered employees (other than certain highly compensated employees) under the Company's Salaried Pension Plan with five or more years of service, but reduced the benefit accrual from 1.67% of pay to 1.00% of pay. In order to offset the loss of these benefit to employees, the Company has enhanced its defined contribution plan. The company also established a nonqualified deferred compensation plan effective as of January 1, 2012, for certain highly compensated employees whose participation in the qualified plan is restricted. A liability gain of $1,408 from this curtailment was recognized as a reduction to the net actuarial loss, as the liability gain was less than the unrecognized net actuarial loss prior to the curtailment for the pension plan in the year ended December 31, 2011. Therefore, this did not impact the consolidated statement of income for the year ended December 31, 2011.

        The components of net periodic pension cost consisted of the following for the years ended December 31,

	2011			2010			2009
Component of net periodic pension cost:
Service cost	$	961		$	800		$	820
Interest cost		1,539			1,432			1,355
Expected return on plan assets		(1,357	)		(1,162	)		(984	)
Amortization of net loss		454			324			519
Net periodic pension cost	$	1,597			1,394		$	1,710

        The accumulated benefit obligation for all pension plans as of December 31, 2011 and 2010, was $31,322 and $26,078, respectively.

        In accordance with its adoption of ASC 715-20, the Company uses December 31, as its measurement date for all periods presented. Assumptions used in determining net periodic pension cost for the plans consisted of the following:

	Year ended December 31
	2011			2010			2009
Discount rates		5.5	%		6.0	%		6.0	%
Rates of increase in compensation levels:
Salaried		3.5			3.5			3.5
Hourly		N/A			N/A			N/A
Expected long-term rate of return on assets		8.0			8.0			8.0

        The discount rate used to determine the benefit obligation at December 31, 2011 and 2010 is 4.6% and 5.5%, respectively.

        For 2012, the expected long-term rate of return on plan assets is 7.25%. To determine the long-term rate of return assumption for plan assets, the Company studies historical markets and preserves the long-term historical relationships between equities and fixed-income securities consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. The Company evaluates current market factors such as inflation and interest rates before it determines long-term capital market assumptions and reviews peer data and historical returns to check for reasonableness and appropriateness.

        The expected benefit payments under the pension plans are as follows:

2012	$	1,260
2013		1,310
2014		1,340
2015		1,360
2016		1,380
2017 - 2020		8,020

        The Company made required minimum pension funding contributions of $1,917 to the pension plans in 2011 and currently expects to make $2,512 required minimum pension funding contributions in 2012.

        The Company maintains target allocation percentages among various asset classes based on an investment policy established for the pension plans, which is designed to achieve long-term objectives of return, while mitigating downside risk and considering expected cash flows. The current weighted-average target asset allocations are reflective of actual investments at December 31, 2011 and 2010. The investment policy is reviewed periodically in order to achieve overall objectives in light of current circumstances.

        The Company's weighted-average asset allocation and actual allocation for the qualified pension plans by asset category at December 31 is as follows:

	Target			2011				2010
Large Cap Equity		37	%	$	5,901	32	%	$	6,297	35	%
Mid Cap Equity		4	%		750	4	%		799	5	%
Small Cap Equity		3	%		783	4	%		772	4	%
International Equity		12	%		2,041	11	%		2,379	13	%
Emerging markets Equity		2	%		353	2	%		284	2	%
Fixed Income and Cash Equivalents		34	%		6,966	37	%		6,148	35	%
Real Estate		8	%		1,843	10	%		1,125	6	%
Total		100	%	$	18,637	100	%	$	17,804	100	%

        The investment strategy is to build an efficient, well-diversified portfolio based on a long-term, strategic outlook of the investment markets. The investment market outlook utilizes both historical-based and forward-looking return forecasts to establish future return expectations for various asset classes. These return expectations are used to develop a core asset allocation based on the needs of the plan. The core asset allocation utilizes investment portfolios of various asset classes and multiple investment managers in order to help maximize the plan's return while providing multiple layers of diversification to help minimize risk.

        The following table presents the fair values of the plan assets related to the Company's pension plans within the fair value hierarchy as defined in Note 2.

        The fair values of the Company's pension plan assets as of December 31, 2011 are as follows:

	Balance as of December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Equity holdings	$	10,575	$	—	$	10,575	$	—
Fixed-income holdings		6,966		—		6,966		—
Alternative investments		1,096		—		—		1,096
Total pension plan assets	$	18,637	$	—	$	17,541	$	1,096

        The fair values of the Company's pension plan assets as of December 31, 2010 are as follows:

	Balance as of December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Equity holdings	$	10,938	$	—	$	10,938	$	—
Fixed-income holdings		6,148		—		6,148		—
Alternative investments		718		—		—		718
Total pension plan assets	$	17,804	$	—	$	17,086	$	718

        Level 2 investments are based on quoted prices for similar assets in markets that are not active while Level 3 investments are comprised of a real estate fund for which the fair value is determined by taking the appraised values of the properties on hand plus other assets and subtracting mortgage loans and other liabilities.

        The following table presents a reconciliation of the fair value measurements using significant unobservable inputs (Level 3):

	December 31,
	2011			2010
Balance, beginning of year	$	718		$	619
Deposits		408			—
Actual return on plan assets held at reporting date		129			99
Withdrawals		(159	)		—
Balance, end of year	$	1,096		$	718

Postretirement benefits

        The Company provides postretirement healthcare benefits for certain employee groups. The postretirement healthcare plans are contributory and contain certain other cost-sharing features such as deductibles and coinsurance. The plans are unfunded. Employees do not vest until they retire from active employment with the Company and have at least twelve years of service. These benefits can be amended or terminated at anytime and are subject to the same ongoing changes as our healthcare benefits for employees with respect to deductible, co-insurance and participant contributions.

        Effective January 1, 2004, the postretirement healthcare benefits were extended to all active employees of the Company as of December 31, 2003. The period of coverage was reduced and the retiree contribution percentage was increased in order to keep the cost of the plan equivalent to the previous plan design.

        Maximum coverage under the plan is limited to ten years. All benefits terminate upon the death of the retiree. Employees who began working for the Company after December 31, 2003, are not eligible for postretirement healthcare benefits.

        The reconciliation of the beginning and ending balances of the projected benefit obligation for the Company consisted of the following:

	December 31
	2011			2010
Change in projected benefit obligation:
Benefit obligation at beginning of year	$	7,576		$	8,198
Service cost		263			308
Interest cost		407			455
Participant contributions		95			94
Changes in actuarial assumptions		426			(154	)
Benefits paid		(365	)		(294	)
Plan Curtailment		—			(1,031	)
Projected benefit obligation at end of year	$	8,402		$	7,576
Amounts recognized in the consolidated balance sheets consisted
Accrued expenses and other current liabilities	$	349		$	341
Retiree health benefit obligation		8,053			7,235
	$	8,402		$	7,576

        In May 2010, in connection with the closure of the Company's manufacturing facility in Johnson City, TN substantially all the employees at this facility were terminated. This resulted in a cessation of all future benefit accruals for these employees under the Company's other post employment benefit ("OPEB") plan. The liability gain for the OPEB plan exceeded the unrecognized net actuarial loss prior to the curtailment and resulted in a gain of $1,031 of which $667 was recorded in selling, general and administrative expense in the consolidated statement of income for the year ended December 31, 2010 and $364 (before taxes) was recognized as a reduction to the net actuarial loss in accumulated other comprehensive loss at December 31, 2010.

        The components of postretirement healthcare benefit cost consisted of the following for the years ended December 31,

	2011			2010			2009
Component of net postretirement health benefit cost:
Service cost	$	263		$	308		$	305
Interest cost		407			455			419
Amortization of net gain		(61	)		(6	)		(73	)
Curtailment gain		—			(667	)		—
Net postretirement healthcare benefit cost	$	609		$	90		$	651

        The assumed discount and healthcare cost trend rates are summarized as follows:

	Year Ended December 31
	2011			2010			2009
Discount rate		5.5	%		6.0	%		6.0	%
Immediate healthcare cost trend rate		9.0			9.0			8.5
Ultimate healthcare cost trend rate		5.0			5.0			5.0
Assumed annual reduction in trend rate		*			0.5			0.5
Participation		80			80			80

*

Health Care Cost Trend rate is assumed to be 9.0% beginning in 2011 gradually reducing to an ultimate rate of 5.0% in 2017.

        The discount rate used to determine the benefit obligation at December 31, 2011 and 2010 is 4.4% and 5.5%, respectively. For the years ending December 31, 2009 and 2010 the combination of pension and postretirement benefit cash flows were used to develop a single equivalent discount rate as the results were materially the same. For 2011, a separate discount rate was determined for pension and postretirement benefits. For December 31, 2011, the health care cost trend rate is assumed to be 8.0% beginning in 2012 gradually reducing to an ultimate rate of 4.5% in 2019.

        A one percentage point change in the healthcare cost trend rate would have the following effect at December 31, 2011:

	1% Increase		1% Decrease
Effect on total service and interest cost	$	96	$	(81	)
Effect on postretirement benefit obligation		1,013		(866	)

        Amounts included in other comprehensive loss, net of tax, at December 31, 2011, which have not yet been recognized in net periodic pension or OPEB cost, were net actuarial gain (loss) of ($7,185) and $96 for the pension plans and postretirement healthcare benefits, respectively. The estimated actuarial gain (loss) for the defined benefit plans that will be amortized from accumulated other comprehensive loss into net periodic pension or OPEB cost during 2012 are ($770) and $16 for the pension plans and postretirement healthcare benefits, respectively.

Defined contribution plan

        The Company has a defined contribution plan, which qualifies under Section 401(k) of the Internal Revenue Code and provides substantially all employees an opportunity to accumulate personal funds for their retirement. Contributions are made on a before-tax basis to these plans.

        As determined by the provisions of the plan, the Company matches a portion of the employees' basic voluntary contributions. The Company matching contributions to the plan were approximately $140, $123 and $137 for the years ended December 31, 2011, 2010 and 2009, respectively. Beginning January 1, 2012, the Company amended its defined contribution plan to permit non-discretionary employer contributions. This enhancement of the defined contribution plan occurred contemporaneously with the pension plan amendments noted within this footnote under "Pension benefits".

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Accrued Expenses and Other Current Liabilities

12 Months Ended

Dec. 31, 2011

Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities

8. Accrued Expenses and Other Current Liabilities

        Accrued expenses and other current liabilities are summarized as follows:

	December 31,
	2011		2010
Payroll and related costs	$	4,756	$	2,993
Employee benefits		2,645		2,334
Accrued warranty		4,188		3,399
Other		4,166		3,197
	$	15,755	$	11,923

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Other Intangible Assets

12 Months Ended

Dec. 31, 2011

Other Intangible Assets

Other Intangible Assets

6. Other Intangible Assets

        The following is a summary of the Company's other intangible assets:

	Gross Carrying Amount		Less Accumulated Amortization		Net Carrying Amount
December 31, 2011:
Indefinite-lived intangibles:
Trademark and tradenames	$	60,000	$	—	$	60,000
Amortizable intangibles:
Dealer network		80,000		31,000		49,000
Customer relations		2,000		822		1,178
Patents		15,116		4,735		10,381
Noncompete agreements		5,050		5,050		—
Trademark—Blizzard		3,100		1,912		1,188
License		20		20		—
Amortizable intangibles, net		105,286		43,539		61,747
Total	$	165,286	$	43,539	$	121,747

	Gross Carrying Amount		Less Accumulated Amortization		Net Carrying Amount
December 31, 2010:
Indefinite-lived intangibles:
Trademark and tradenames	$	60,000	$	—	$	60,000
Amortizable intangibles:
Dealer network		80,000		27,000		53,000
Customer relations		2,000		689		1,311
Patents		15,116		3,977		11,139
Noncompete agreements		5,050		5,050		—
Trademark—Blizzard		3,100		1,602		1,498
License		20		20		—
Amortizable intangibles, net		105,286		38,338		66,948
Total	$	165,286	$	38,338	$	126,948

        Amortization expense for intangible assets was $5,201, $6,001 and $6,161 for the years ended December 31, 2011, 2010 and 2009, respectively. Estimated amortization expense for the next five years is as follows:

2012	$	5,199
2013		5,193
2014		5,193
2015		5,142
2016		4,883

        The weighted average remaining life for intangible assets is 12.2 years.

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Long-Term Debt

12 Months Ended

Dec. 31, 2011

Long-Term Debt

Long-Term Debt

7. Long-Term Debt

        Long-term debt is summarized below:

	December 31,
	2011		2010
Term Loan, net of debt discount of $1,125 and $358 at December 31, 2011 and December 31, 2010, respectively:	$	122,937	$	121,154
Total long-term debt		122,937		121,154
Less current maturities		11,071		1,183
	$	111,866	$	119,971

        The scheduled maturities on long-term debt at December 31, 2011, are as follows:

2012	$	11,071
2013		1,071
2014		1,071
2015		1,071
2016		1,071
Thereafter		107,582
	$	122,937

        On April 18, 2011, the Company amended its senior credit facilities to, among other things, (i) increase the borrowing ability under the revolving credit agreement by $10,000, and (ii) amend certain of the provisions in its senior credit facilities which govern the Company's ability to pay dividends. Consequently, as of April 18, 2011, the Company's senior credit facilities consisted of a $125,000 term loan facility and a $70,000 revolving credit facility with a group of banks. The previous term loans consisted of an initial term loan of $85,000 and a "tack on" of $40,000 and a $60,000 revolving credit facility. Prior to the April 2011 changes to the Company's senior credit facilities, the interest on the original $85,000 term loan facility was (at the Company's option) either the base rate (which shall be no less than 3%) plus 3.5% or the eurodollar rate (which shall be no less than 2%) plus 4.5%. The interest for the additional $40,000 in the Company's term loan facility was an interest rate equal to (at the Company's option) either the base rate (which shall be no less than 3%) plus 4% or the eurodollar rate (which shall be no less than 2%) plus 5%. Under the previous revolving credit facility, the margin for base rate loans was either 0.25% or 0.50% and the margin for eurodollar rate loans was either 1.25% or 1.50%, in each case determined based on the Company's leverage ratio from time to time.

        The agreement for the new term loan (the "Term Loan Credit Agreement") provides for a senior secured term loan facility in the aggregate principal amount of $125,000 and generally bears interest at (at the Company's election) either (i) 3.25% per annum plus the greatest of (a) the Prime Rate (as defined in the Term Loan Credit Agreement) in effect on such day, (b) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers plus 0.50% and (c) 1.00% plus the greater of (1) the London Interbank Offered Rate for a one month interest period multiplied by the Statutory Reserve Rate (as defined in the Term Loan Credit Agreement) and (2) 1.50% or (ii) 4.25% per annum plus the greater of (a) the London Interbank Offered Rate for the applicable interest period multiplied by the Statutory Reserve Rate and (b) 1.50%. The revolving credit facility as amended and restated (the "Revolving Credit Agreement") provides that the Company has the option to select whether borrowings will bear interest at either (i) 2.25% per annum plus the London Interbank Offered Rate for the applicable interest period multiplied by the Statutory Reserve Rate or (ii) 1.25% per annum plus the greatest of (a) the Prime Rate in effect on such day, (b) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers plus 0.50% and (c) the London Interbank Offered Rate for a one month interest period multiplied by the Statutory Reserve Rate plus 1%. The maturity date for the Company's amended and restated revolving credit facility is April 18, 2016, and the Company's new term loan amortizes in nominal amounts quarterly with the balance payable on April 18, 2018.

        The new term loan entered into in the second quarter of 2011 was issued at a $1,250 discount which is being amortized over the term of the new term loan.

        The Company's entry into the new term loan facility resulted in a significant modification of the Company's debt which resulted in the write off of unamortized capitalized deferred financing costs of $335 and write off of unamortized debt discount of $338 which in total resulted in a loss on extinguishment of debt of $673 in the Consolidated Statement of Income during the year ended December 31,2011.

        At December 31, 2011, the Company had no outstanding borrowings on the revolving credit facility and remaining borrowing availability of $70,000.

        The Company's senior credit facilities include certain negative and operating covenants, including restrictions on its ability to pay dividends, and other customary covenants, representations and warranties and events of default. The senior credit facilities entered into and recorded by the Company's subsidiaries significantly restrict its subsidiaries from paying dividends and otherwise transferring assets to Douglas Dynamics, Inc. The terms of the Company's revolving credit facility specifically restrict subsidiaries from paying dividends if a minimum availability under the revolving credit facility is not maintained, and both senior credit facilities restrict subsidiaries from paying dividends above certain levels or at all if an event of default has occurred. These restrictions would affect the Company indirectly since the Company relies principally on distributions from its subsidiaries to have funds available for the payment of dividends. In addition, the Company's revolving credit facility includes a requirement that, subject to certain exceptions, capital expenditures may not exceed $10,000 in any calendar year and, if certain minimum availability under the revolving credit facility is not maintained, that the Company comply with a monthly minimum fixed charge coverage ratio test of 1.0:1.0. Compliance with the fixed charge coverage ratio test is subject to certain cure rights under the Company's revolving credit facility. At December 31, 2011, the Company was in compliance with the respective covenants. The credit facilities are collateralized by substantially all assets of the Company.

        In accordance with the senior credit facilities, the Company is required to make additional principal prepayments over the above scheduled payments under certain conditions. This includes, in the case of the term loan facility, 100% of the net cash proceeds of certain asset sales, certain insurance or condemnation events, certain debt issuances, and, within 150 days of the end of the fiscal year, 50% of excess cash flow, as defined, including a deduction for certain distributions (which percentage is reduced to 25% or 0% upon the achievement of certain leverage ratio thresholds), for any fiscal year. Excess cash flow is defined in the senior credit facilities as consolidated adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) plus a working capital adjustment less the sum of repayments of debt and capital expenditures subject to certain adjustments, interest and taxes paid in cash, management fees and certain restricted payments (including dividends or distributions). Working capital adjustment is defined in the senior credit facilities as the change in working capital, defined as current assets excluding cash and cash equivalents less current liabilities excluding current portion of long term debt. As of December 31, 2011, the Company was not required to make an excess cash flow payment. However, the Company expects to make a voluntary prepayment of $10,000 in 2012.

        Each of the senior secured facilities entered into in the second quarter of 2011 includes a hedge provision, which required the Company to enter into an interest rate hedge commencing 90 days after the closing date. The hedging provision required the Company to hedge the interest rate on at least 25% of the aggregate outstanding principal amount of the term loans. The purpose of the interest rate swap is to reduce the Company's exposure to interest rate volatility. Effective June 20, 2011, the Company entered into an interest rate swap agreement with a notional amount of $50,000. The interest rate swap negative fair value at December 31, 2011 of $621 is included in other long-term liabilities on the Consolidated Balance Sheet. The Company has counterparty credit risk resulting from the interest rate swap, which it monitors on an on-going basis. This risk lies with one global financial institution. Under the interest rate swap agreement, effective as of July 18, 2011, the Company either receives or makes payments on a monthly basis based on the differential between 6.335% and LIBOR plus 4.25% (with a LIBOR floor of 1.5%). The interest rate swap contract on the term loan expires in December 2014.

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Warranty Liability

12 Months Ended

Dec. 31, 2011

Warranty Liability

Warranty Liability

9. Warranty Liability

        The Company accrues for estimated warranty costs as sales are recognized and periodically assesses the adequacy of its recorded warranty liability and adjusts the amount as necessary. The Company's warranties generally provide, with respect to its snow and ice control equipment, that all material and workmanship will be free from defect for a period of two years after the date of purchase by the end-user, and with respect to its parts and accessories purchased separately, that such parts and accessories will be free from defect for a period of one year after the date of purchase by the end-user. Certain snowplows only provide for a one year warranty. The Company determines the amount of the estimated warranty costs (and its corresponding warranty reserve) based on the Company's prior five years of warranty history utilizing a formula driven by historical warranty expense and applying management's judgment. The Company adjusts its historical warranty costs to take into account unique factors such as the introduction of new products into the marketplace that do not provide a historical warranty record to assess. The warranty reserve is included with Accrued Expenses and Other Current Liabilities in the accompanying consolidated balance sheets.

        The following is a rollforward of the Company's warranty liability:

	December 31,
	2011			2010			2009
Balance at the beginning of the period	$	3,399		$	3,040		$	2,272
Warranty provision		3,386			2,604			2,913
Claims paid/settlements		(2,597	)		(2,245	)		(2,145	)
Balance at the end of the period	$	4,188		$	3,399		$	3,040

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Earnings Per Share

12 Months Ended

Dec. 31, 2011

Earnings Per Share

Earnings Per Share

14. Earnings Per Share

        Basic earnings per share of common stock is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share of common stock is computed by dividing net income by the weighted average number of common shares and common stock equivalents related to the assumed exercise of stock options, using the two-class method. Stock options for which the exercise price exceeds the average fair value have an anti-dilutive effect on earnings per share and are excluded from the calculation. There were no shares excluded from diluted earnings per share for the years presented.

        Subsequent to the payment of the third quarter 2010 dividend, which was the first dividend payment made subsequent to the IPO, management retroactively approved all restricted stockholders for shares issued and outstanding to participate in dividends. As such, the Company has calculated earnings per share pursuant to the two-class method, which is an earnings allocation formula that determines earnings per share for common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends.

	2011		2010		2009
Basic earnings per common share
Net income	$	19,040	$	1,662	$	9,843
Less income allocated to participating securities		233		12		—
Net income allocated to common shareholders	$	18,807	$	1,650	$	9,843
Weighted average common shares outstanding		21,650,736		18,799,761		14,423,470
	$	0.87	$	0.09	$	0.68
Earnings per common share assuming dilution
Net income	$	19,040	$	1,662	$	9,843
Less income allocated to participating securities		233		12		—
Net income allocated to common shareholders	$	18,807	$	1,650	$	9,843
Weighted average common shares outstanding		21,650,736		18,799,761		14,423,470
Incremental shares applicable to stock based compensation		163,881		487,685		325,328
Weighted average common shares assuming dilution		21,814,617		19,287,446		14,748,798
	$	0.85	$	0.09	$	0.67

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Quarterly Financial Information (Unaudited)

12 Months Ended

Dec. 31, 2011

Quarterly Financial Information (Unaudited)

Quarterly Financial Information (Unaudited)

19. Quarterly Financial Information (Unaudited)

	2011
	First			Second		Third		Fourth
Net sales	$	23,490		$	71,557	$	53,495	$	60,256
Gross profit	$	9,071		$	26,338	$	16,494	$	19,914
Income (loss) before taxes	$	(475	)	$	15,389	$	6,291	$	9,167
Net income (loss)	$	(800	)	$	9,723	$	3,967	$	6,150
Basic net earnings (loss) per common share attributable to common shareholders	$	(0.04	)	$	0.44	$	0.18	$	0.28
Earnings (loss) per common share assuming dilution attributable to common shareholders	$	(0.04	)	$	0.44	$	0.18	$	0.28
Dividends per share	$	0.57		$	0.20	$	0.20	$	0.21

	2010
	First			Second			Third		Fourth
Net sales	$	14,647		$	66,243		$	47,448	$	48,457
Gross profit	$	1,980		$	25,061		$	15,227	$	18,033
Income (loss) before taxes	$	(9,424	)	$	(1,302	)	$	4,464	$	8,796
Net income (loss)	$	(5,719	)	$	75		$	2,185	$	5,121
Basic net earnings (loss) per common share attributable to common shareholders	$	(0.40	)	$	—		$	0.10	$	0.24
Earnings (loss) per common share assuming dilution attributable to common shareholders	$	(0.40	)	$	—		$	0.10	$	0.23
Dividends per share	$	—		$	—		$	0.18	$	0.20

        Due to changes in stock prices during the year and timing of issuance of shares, the sum of quarterly earnings per share may not equal the annual earnings per share.

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock	Additional Paid-in Capital	Shareholders' Notes Receivable	Retained Earnings	Accumulated Other Comprehensive Loss	Comprehensive Income (Loss)	Series B Redeemable Preferred	Series C Redeemable Preferred
Balance at Dec. 31, 2008	$ 98,059	$ 144	$ 60,378	$ (1,116)	$ 43,212	$ (4,559)		$ 1	$ 1
Balance (in shares) at Dec. 31, 2008		14,454,369						1	1
Increase (Decrease) in Stockholders' Equity
Net income	9,843				9,843		9,843
Adjustment for pension and postretirement benefit liability, net of tax of $1,560, $327 and $365 for the year ended 2011, 2010 and 2009, respectively	622					622	622
Interest on shareholders' notes receivable	(34)			(34)
Stock repurchases and retirement	(268)		(405)	137
Stock repurchases and retirement (in shares)		(32,633)
Total comprehensive income (loss)							10,465
Balance at Dec. 31, 2009	108,222	144	59,973	(1,013)	53,055	(3,937)		1	1
Balance (in shares) at Dec. 31, 2009		14,421,736						1	1
Increase (Decrease) in Stockholders' Equity
Net income	1,662				1,662		1,662
Dividends paid	(8,222)				(8,222)
Adjustment for pension and postretirement benefit liability, net of tax of $1,560, $327 and $365 for the year ended 2011, 2010 and 2009, respectively	(494)					(494)	(494)
Interest on shareholders' notes receivable	(28)			(28)
Issuance and sales of common stock by Company through IPO	63,929	65	63,864
Issuance and sales of common stock by Company through IPO (in shares)		6,500,000
Issuance of non-vested common stock in connection with IPO		2	(2)
Issuance of non-vested common stock in connection with IPO (in shares)		208,130
Shares issued for options exercised in connection with IPO	1,661	2	1,659
Shares issued for options exercised in connection with IPO (in shares)		180,567
Fractional shares repurchased and retired in connection with IPO		(7)
Stock repurchases and retirement	559			559				(1)	(1)
Stock repurchases and retirement (in shares)								(1)	(1)
Deferred stock units converted		2	(2)
Deferred stock units converted (in shares)		174,229
Shares issued for options exercised	1,068	1	1,067
Shares issued for options exercised (in shares)		95,000
Stock based compensation	1,136		1,136
Total comprehensive income (loss)							1,168
Balance at Dec. 31, 2010	169,493	216	127,695	(482)	46,495	(4,431)
Balance (in shares) at Dec. 31, 2010		21,579,655
Increase (Decrease) in Stockholders' Equity
Net income	19,040				19,040		19,040
Dividends paid	(25,793)				(25,793)
Adjustment for pension and postretirement benefit liability, net of tax of $1,560, $327 and $365 for the year ended 2011, 2010 and 2009, respectively	(2,658)					(2,658)	(2,658)
Adjustment for interest rate swap, net of tax of $230	(391)					(391)	(391)
Interest on shareholders' notes receivable	(7)			(7)
Repayment of stockholders' note receivable	489			489
Shares issued for options exercised	1,343	3	1,340
Shares issued for options exercised (in shares)		319,383
Stock based compensation	1,873	1	1,872
Stock based compensation (in shares)		121,656
Total comprehensive income (loss)							15,991
Balance at Dec. 31, 2011	$ 163,389	$ 220	$ 130,907		$ 39,742	$ (7,480)
Balance (in shares) at Dec. 31, 2011		22,020,694

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Related-Party Transactions

12 Months Ended

Dec. 31, 2011

Related-Party Transactions

Related-Party Transactions

3. Related-Party Transactions

        The Company was party to a Joint Management Services Agreement with Aurora Management Partners, LLC ("AMP") and ACOF Management, LP ("ACOF"), who were affiliates of its principal stockholders at that time. Prior to the Company's initial public offering ("IPO") of its common stock in May 2010, this agreement obligated the Company to pay an annual management fee of $1,250 per annum, to AMP and ACOF, pro rata in accordance with their respective holdings, plus reimbursement of reasonable out-of-pocket expenses, in exchange for consultation and advice in fields such as financial services, accounting, general business management, acquisitions, dispositions and banking.

        In connection with the Company's IPO, the Company amended and restated the terms of its Joint Management Services Agreement to, among other things, (i) extend the term of service until the earlier of (A) the fifth anniversary of the consummation of the Company's IPO, (B) such time as AMP and ACOF, together with their affiliates, collectively hold less than 5% of the Company's outstanding common stock and (C) such time as all parties mutually agree in writing, while eliminating all other termination events (other than termination for cause); (ii) eliminate the annual management fee, as well as the provision obligating the Company to pay AMP and ACOF a transaction fee in the event of an acquisition or any sale or disposition of the Company or any of its divisions or any sale of substantially all Company assets or similar transactions in exchange for a one-time fee of $5,800 upon the consummation of the IPO, pro rata in accordance with their respective holdings; and (iii) modify the expense reimbursement provisions to include reimbursement for out-of-pocket expenses incurred in connection with SEC and other legally required filings made by each of AMP and ACOF with respect to the Company's securities and certain other expenses. The one-time management fee was paid on May 10, 2010, and is included in management fees—related party expense for the year ended December 31, 2010.

        On December 6, 2011, the Company completed a secondary offering by certain stockholders. Immediately following the secondary offering, AMP and ACOF were no longer shareholders in the Company.

        The Company recognized management fees and related expense of $46, $6,383 and $1,393 for the years ended December 31, 2011, 2010 and 2009, respectively.

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2011

Stock-Based Compensation

Stock-Based Compensation

13. Stock-Based Compensation

Amended and Restated 2004 Stock Incentive Plan

        In connection with the IPO, in May 2010, the Company's Board of Directors and stockholders amended and restated the Company's 2004 Stock Incentive Plan (as amended and restated, the "A&R 2004 Plan") and certain outstanding award agreements thereunder, to among other things, eliminate the ability of the holders thereunder to use a promissory note to pay any portion of the exercise price of the options, to provide that the use of "net exercises" to pay any portion of the exercise price of the options shall be at the sole discretion of the committee administering the A&R 2004 Plan, and to effect certain ministerial changes under the A&R 2004 Plan. In addition, in connection with the IPO, the Board of Directors also resolved not to issue any further awards under the A&R 2004 Plan. As of December 31, 2011, 37,240 shares of common stock are reserved for issuance upon the exercise of outstanding options under the A&R 2004 Plan. All outstanding options are fully vested. All options expire 10 years from the date of grant.

2010 Stock Incentive Plan

        In connection with the IPO, in May 2010, the Company's Board of Directors and stockholders adopted the 2010 Stock Incentive Plan (the "2010 Plan"). The 2010 Plan provides for the issuance of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock awards and restricted stock units, any of which may be performance-based, and for incentive bonuses, which may be paid in cash or stock or a combination of both, to eligible employees, officers, non-employee directors and other service providers to the Company and its subsidiaries. A maximum of 2,130,000 shares of common stock may be issued pursuant to all awards under the 2010 Plan. As of December 31, 2011, the Company had 1,800,214 shares of common stock available for future issuance of awards under the 2010 Plan. The shares of common stock to be issued under the 2010 Plan will be made available from authorized and unissued Company common stock.

Stock Options

        The following table summarizes information with respect to the Company's stock option activity under the A&R 2004 Plan for the years ended December 31, 2011, 2010 and 2009.

	December 31, 2011					December 31, 2010					December 31, 2009
	Options			Weighted average exercise price		Options			Weighted average exercise price		Options			Weighted average exercise price
Outstanding—beginning of year		356,623		$	4.21		819,185		$	4.21		908,556		$	4.21
Granted		—			—		—			—		—			—
Canceled		—			—		—			4.21		(89,371	)		4.21
Exercised		(319,383	)		4.21		(462,562	)		—		—			—
Outstanding—end of year		37,240		$	4.21		356,623		$	4.21		819,185		$	4.21
Exercisable—end of year		37,240		$	4.21		309,113		$	4.21		747,935		$	4.21

        Certain of the Company's option holders exercised 319,383 stock options during the year ended December 31, 2011, of which 184,236 options were exercised utilizing a broker assisted cashless exercise. The options exercised were granted under APB 25 with an exercise price equal to fair value at date of grant, and accordingly so, no compensation expense was recorded at the time of grant. The Company did not bear the risk and rewards of the options and thus, did not record stock based compensation expense. The option holders paid the Company the required exercise price for the remaining options at the time of exercise and therefore the Company did not record any stock based compensation expense.

        In connection with the IPO in 2010, certain of the Company's selling stockholders exercised 288,001 stock options and sold the underlying shares. Such stockholders paid the exercise price of such options through a net exercise. Subsequent to the IPO, certain of the Company's option holders exercised 174,571 stock options and paid the exercise price of such options through a net exercise, resulting in an additional 95,000 outstanding shares. The options exercised in conjunction with the IPO as well as those exercised subsequently in the year ended December 31, 2010 were granted under APB 25 with an exercise price equal to fair value at date of grant, and accordingly no compensation expense was recorded at the time of grant. Because of the net exercise mechanism, the option holders did not bear the risk and rewards of the options. As such, the Company recorded $2,975 of stock based compensation expense for the year ended December 31, 2010 related to stock options.

        On January 23, 2009, the Company entered into securities repurchase agreements with certain members of management. Pursuant to these agreements, the Company repurchased at fair value and subsequently retired 32,633 shares of common stock and 89,371 stock options in exchange for aggregate consideration of $1,137, comprised of a cash payment of $1,000 and the satisfaction of the remaining principal amount of $137 on promissory notes held by the members of management. As a result of the repurchase of stock options, the Company recorded $732 of compensation expense in the first quarter of 2009, which represented the fair value of the repurchased options. See footnote 16, "Redeemable stock and stockholders' equity."

        As of December 31, 2011, 2010 and 2009, the weighted-average remaining contractual life of all outstanding options was 4.7, 4.0 and 4.8 years, respectively. As of December 31, 2011, 2010 and 2009, the weighted-average remaining contractual life of all exercisable options was 4.7, 3.6 and 4.6 years, respectively.

        The aggregate intrinsic value of the options at December 31, 2011 was $388 for both options outstanding and exercisable. The aggregate intrinsic value of the options at December 31, 2010 was $3,901 and $3,382 for options outstanding and exercisable, respectively. There were no options exercised for the year ended December 31, 2009. The aggregate intrinsic value of stock options exercised during 2011 and 2010 was $3,200 and $2,885, respectively.

        As of December 31, 2010, the Company had shareholders' notes receivable with recourse of $482 including accrued interest, respectively, related to the exercise of options, which are included as a component of shareholders' equity. The shareholders' notes receivable were repaid by the shareholders in conjunction with the secondary offering which closed on May 20, 2011.

Restricted Stock

        Restricted stock carries both voting and dividend rights. A summary of restricted stock activity for the year ended December 31, 2011 is as follows:

	Shares (In thousands)			Weighted Average Grant Date Fair value		Weighted Average Remaining Contractual Term
Unvested at December 31, 2009		—			—		—
Granted		242,088		$	11.68		—
Vested		—			—		—
Cancelled and forfeited		—			—		—
Unvested at December 31, 2010		242,088			11.68		4.01 years
Granted		43,690			14.99		2.00 years
Vested		(50,111	)		11.77		—
Cancelled and forfeited		—			—		—
Unvested at December 31, 2011		235,667		$	12.27		2.83 years
Expected to vest in the future at December 31, 2011		227,183		$	12.27		2.83 years

        The fair value of the Company's restricted stock awards is the closing stock price on the date of grant. The Company recognized $848 and $419 of compensation expense related to restricted stock awards for the years ended December 31, 2011 and December 31, 2010, respectively. The unrecognized compensation expense for shares expected to vest as of December 31, 2011 and December 31, 2010 was approximately $2,154 and $2,311, respectively. Meanwhile, no shares vested in 2010.

Unrestricted Stock

        The Company granted 68,224 and 44,350 shares of unrestricted stock as performance based awards under the 2010 plan in the years ended December 31, 2011 and December 31, 2010, respectively. The fair value of the Company's unrestricted stock awards is the closing stock price on the date of grant, or $15.01 and $14.32 per share, for grants in years ended December 31, 2011 and December 31, 2010, respectively. The Company recognized $1,024 and $635 of compensation expense related to unrestricted stock awards granted for the years ended December 31, 2011 and December 31, 2010, respectively. The unrestricted awards granted in 2010 were issued in March 2011, while the awards granted in 2011 will be issued in March 2012. There is no required vesting period for the unrestricted stock awards as recipients are entitled to shares upon grant and performance satisfaction, which both have occurred by the years ended December 31, 2010 and December 31, 2011.

Restricted Stock Units

        Restricted stock units ("RSUs") are issued to the board of directors and carry dividend rights but do not carry voting rights. Each RSU represents the right to receive one share of the Company's common stock and are subject to time based vesting restrictions. Participants are not required to pay any consideration to the Company at either the time of grant of a RSU or upon vesting.

        A summary of RSU activity for the year ended December 31, 2011 is as follows:

	Shares (In thousands)		Weighted Average Grant Date Fair value		Weighted Average Remaining Contractual Term
Unvested at December 31, 2010		—		—		—
Granted		20,612	$	15.21		2.00 years
Vested		1,719		15.25		—
Cancelled and forfeited		—		—		—
Unvested at December 31, 2011		18,893	$	15.20		2.00 years
Expected to vest in the future at December 31, 2011		18,893	$	15.20		2.00 years

        Vested RSU's are "settled" by the delivery to the participant or a designated brokerage firm of one share of common stock per vested RSU as soon as reasonably practicable following a termination of service of the participant that constitutes a separation from service, and in all events no later than the end of the calendar year in which such termination of employment occurs or, if later, two and one-half months after such termination of employment.