Description of business and basis of presentation

12 Months Ended

Dec. 31, 2019

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 a premier manufacturer and upfitter of commercial vehicle attachments and equipment. The Company’s portfolio includes snow and ice management attachments sold under the BLIZZARD^®, FISHER^®, HENDERSON^®, SNOWEX^® and WESTERN^® brands, turf care equipment under the TURFEX^® brand, and industrial maintenance equipment under the SWEEPEX^® brand.  The Company’s portfolio also includes the up-fit of market leading attachments and storage solutions under the HENDERSON® brand, and the DEJANA® brand and its related sub-brands. The Company is headquartered in Milwaukee, WI and currently owns manufacturing and upfit facilities in Milwaukee, WI, Manchester Iowa, Rockland, ME,  Madison Heights, MI and Huntley, IL. The Company also leases fifteen manufacturing and upfit facilities located in Iowa, Maryland, Missouri, New Jersey, New York, Ohio, Pennsylvania, and Rhode Island.  Additionally, the Company operates a sourcing office in China.  

The Company conducts business in two segments: Work Truck Attachments and Work Truck Solutions. During the first quarter of 2019, the Company reorganized its business segments to reflect a new operating structure as a result of a change in how the Company’s chief operating decision maker allocates resources, makes operating decisions and assesses the performance of the business. Financial information regarding these segments is in Note 17 to the Consolidated Financial Statements.

Recently adopted accounting standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02 Leases (Topic 842). ASU 2016-02 increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In July 2018, the FASB issued ASU No. 2018-11 Leases: Targeted Improvements which allows entities to apply the new lease standard at the adoption date, rather than at the earliest period presented. In transition, lessees and lessors are required to recognize and measure leases using a modified retrospective approach. The Company adopted the standard effective January 1, 2019. The Company elected several available practical expedients and implemented certain internal controls to ensure the accurate presentation of financial information on adoption.

The standard had a material impact on the Company’s Condensed Consolidated Balance Sheets, but did not have an impact on the Condensed Consolidated Statements of Operations and Comprehensive Income. There was no cumulative catch-up adjustment made to opening retained earnings. The most significant impact was the recognition of right-of-use assets and lease liabilities for operating leases, while the accounting for finance leases (previously capital leases) remained substantially unchanged. As the Company elected to apply the standard at adoption as allowed under ASU No. 2018-11, there is no impact to previously reported results. The impact of this standard was the recognition of a lease liability and right-of-use asset of approximately $22.0 million, with immaterial differences related to prepaid rent, on the Consolidated Balance Sheet for lease contracts which were previously accounted for as operating leases. 

As allowed under Topic 842, the Company has adopted the following practical expedients:

● Practical expedient package, which allows the following:

o To not reassess whether any expired or existing contracts is or contains a lease.

o To not reassess the lease classification of any expired or existing leases.

o To not reassess the initial direct costs for any existing lease.

● Short-term lease practical expedient

o Allows the Company not to apply the recognition requirements in ASC 842 to short-term leases for all asset classes. Short term leases are leases that, at commencement date, have a

term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

● Separating lease components practical expedient

o Allows the Company not to separate lease components form nonlease components for all asset classes and instead account for each separate lease and the nonlease components associated with that lease component as a single lease component.

See Note 22 for a summary of recent accounting pronouncements not yet adopted and the Company’s evaluation of their impact on the financial statements.