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

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

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

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  1. DOUGLAS DYNAMICS INC. TEAM MEMBERS: BHARATH CHANDRASHEKHAR, ROBERT EBERHAD, PURVI MITTAL, SHALINI R SIVARAJAH Presented: April 22, 2014

  2. AGENDA • Introduction • Company Overview • Macroeconomic Overview • Market Prospects • Financial and Ratio Analysis • Financial Projections • Valuation Tools • Recommendation

  3. COMPANY OVERVIEW • North American leader in the design, manufacture and sale of snow and ice control equipment for light trucks • Founded in 1977, but traces history back to 1948 founding of Fisher Engineering • Headquartered in Milwaukee • Previously owned by steel companies and private equity; went public in May 2010 • Acquired TrynEx International in 2013 to expand product line and geographic reach

  4. DISTRIBUTION NETWORK • Worldwide distribution network of over 2,100 points of sale • Focus on “snow belt regions in North America • 80% of distributors are east of the Mississippi River Source: Company 10-K and 2013 Investor Presentation

  5. CONSUMER LOYALTY • Installed base of over 500,000 units • Actively used snowplows are replaced every 7-9 years • Different brands based on needs of user Sources: Company 10-K and 2013 Investor Presentation

  6. EMPLOYEES AND LEAN MANUFACTURING • Non-union workforce with an average tenure of 9.3 years • Temporary workers allow for low fixed cost model to respond to consumer demand • Intense focus on lean manufacturing leads to high operational efficiency Source: 2013 Investor Presentation

  7. MACROECONOMIC OVERVIEW

  8. KEY INDUSTRY DRIVERS • Annual average rainfall (precipitation) • Value of Construction • World price of Steel • Trade-Weighted Index Source: Ibisworld

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

  10. PORTER’S INDUSTRY ANALYSIS

  11. SWOT ANALYSIS

  12. STOCK PERFORMANCE

  13. MARKET PROSPECTS Source: Yahoo.Finance

  14. MARKET COMPARISON

  15. COMPARABLES Source: CapitalIQ

  16. COMPARABLES VALUATION Source: Yahoo.Finance

  17. FINANCIAL ANALYSIS

  18. PROJECTIONS & DISCOUNT RATE

  19. VALUATION - DCF

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

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