# Dear Fellow Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NYSE_PLOW_2019/NYSE_PLOW_2019.mmd` · pages 1-7_

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Dear Fellow Shareholders,

## Our World Today

As of the printing of this letter, we are facing an unprecedented global situation caused by the coronavirus pandemic. These are unsettling times for all of us. Today, there is little clarity on how this pandemic will ultimately affect the world's economies and the work truck market we serve. However, please do not mistake this uncertainty for pessimism. I do not know exactly when or how this situation will be solved, but I firmly believe in our people, and in our ability to utilize DDMS to react wisely to any challenges we face. The safety and security of our people and partners remain our top priorities, and we have contingency plans and the right team in place to allow us to adapt to the changing circumstances. We have an amazing team who support and provide our customers with tremendous value every day. We remain confident that our team will pull together during this difficult time, and that our Company will emerge from this situation stronger and wiser."

## 2019: My First Year as President & CEO

It really is hard for me to fully explain just how much it means to me to be the President and CEO of Douglas Dynamics. Over the past 16 years, I have dedicated my energy to helping this company achieve its enormous potential, first as Chief Financial Officer, then as Chief Operating Officer, and now as CEO. During this time, the company has evolved and expanded considerably, and I am pleased to say there is a lot more still to achieve! As I look back on my first year in my new role, I am grateful for the strength of the amazing team around me, our ability to work together closely to drive the business forward, and the potential opportunities on the horizon.
Like any successful company, Douglas Dynamics has, and will always be, a large and diverse team that comes together to create a cohesive organization greater than the sum of its parts. However, I would be remiss in not highlighting the "hand on the tiller" for most of the past twenty years, our Chairman Jim Janik. Jim served as President and CEO until I took the reins last year and his tenure marked a period of unprecedented growth and strategic expansion at the company. After working closely as a team for more than fifteen years, Jim and I remain business partners today, and I'm grateful that he remains actively involved with the company as a sounding board and providing counsel in his Chairman role.

## Celebrating a Decade as a Public Company

As we rapidly approach our 10-year anniversary as a public company in May, I want to outline why we have been able to expand our offering and grow successfully, and continue to see significant opportunities for development. To profitably build our businesses and expand market share, we need to continually deliver meaningful, demonstrable competitive advantages, primarily:

Custom Solution Provider—Today, Douglas Dynamics is a total solutions provider, designing, manufacturing and up-fitting innovative products, which improve productivity and efficiency of work trucks across North America.

Industry Leading Lead Times—Regardless of how our business will evolve in the future, one factor will always be important: providing our equipment to our customers in the shortest time possible. Whether it is delivering a crucial product needed for an impending snowstorm, or delivering a fleet of vehicles on time, lead times always matter!

World Class Quality—Simply put, our products meet and exceed performance expectations of our customers.

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When combined, providing the customer a high performance, high quality custom product in the shortest lead time is a winning combination!

## DDMS is the Fuel

To consistently maintain and expand these competitive advantages, we developed our continuous improvement business model—the Douglas Dynamics Management System (DDMS)—which is really at the center of everything we do.

Developed more than 15 years ago, DDMS was our initial answer to successfully growing a business that is heavily influenced by winter weather each and every year. In an industry that, during the snow season, typically took weeks to deliver a product, we implemented DDMS philosophies and created a culture that thrives on improvement to deliver products in a few days. Building our own continuous improvement program became the fuel that continues to drive success across all our businesses today.

DDMS is built around empowerment, pushing decision making throughout the organization from "the few to the many", creating hundreds of decision-makers who come in every day asking, "how can we improve?" Everyone at Douglas Dynamics lives by the simple mantra—Get Better Every Day!

## Delivering Outstanding Results

Thanks to the hard work of all of our teams, we were able to deliver a banner year in 2019! Full year net sales were a record $572 million, a 9% increase over last year. We produced full year net income of $49.2 million, or $2.11 earnings per diluted share. These significant increases compared to the prior year are due to the strength in performance across all operations.

This outstanding performance in 2019 is even more impressive considering the headwinds we experienced throughout the year, namely below average snowfall for the season ending in March 2019, continued long lead times on class 8 chassis, and an uneven supply of class 4 through 6 chassis.

In the Work Truck Attachments segment, we overcame the below average 2019 snow season, delivering near record results. This outstanding performance was driven by a combination of the ongoing success of new product launches for our non-truck mounted equipment, such as plows for skids steers and UTVs, strong acceptance of a more robust parts and accessories offering, plus strong operational execution.
In the Work Truck Solutions segment, our record top and bottom-line performance were driven by a combination of increased volume and price, and improved operational performance. Our order patterns remained strong during 2019. The teams at both Dejana and Henderson are seeing success in applying DDMS continuous improvement concepts in a custom up-fit environment, resulting in both reduced lead times and margin improvement.

## Investing in Talent

At Douglas Dynamics, one of the things we take great pride in is "seeing around corners." One of the downsides of such a robust, long running, favorable economy is a tightening labor market, especially in manufacturing. Because this is something that most US companies have been experiencing in recent years, we have doubled down on our commitment to attract and retain talent by building high performance, organizational development capabilities to drive ongoing development of our most precious resource—our people.

In 2019, we delivered 50 training and development sessions to more than 360 people, largely targeted to managers and supervisors at our facilities around the country. We believe this group is key to promoting development across the teams they manage. Our main focus for 2020 is to reach more shop floor associates, and to ensure that we are tailoring the programs to support their continuous improvement DDMS initiatives. I feel strongly that if you provide your people with the proper tools and training, put them in a collaborative continuous improvement environment, and ask them to focus on better serving our customers, good things will happen!

## Balanced Capital Deployment

Our ability to drive strong cash generation allows us to reinvest in the business to support our continued growth. It also gives us an ability to continue to return cash to our shareholders. We recently increased our dividend to twenty-eight cents per share for the first quarter of 2020. This increase marks the 12 \( ^{th} \)  time that we've raised our dividend in the past ten years, reinforcing the fact that the dividend remains our top priority and our board is firmly committed to protecting and growing it over the long-term.

We also continue to make new investments across the company to best position ourselves for sustained success. We believe these investments will translate into our organization being able to deliver even-higher quality products and services to our customers in a more

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efficient manner, and to ensure we maintain our leading positions in the markets we serve.

Finally, we also want to ensure we have capital available to pursue strategic acquisitions, which will add important products and services to our portfolio in the years ahead.

## Focused on Execution in 2020

At Douglas, we are used to navigating through dynamic situations and use problem solving skills honed through DDMS to adjust and adapt. We will focus on the factors within our control while working through the impact of chassis supply changes and the unpredictable economic impact of the unfolding coronavirus crisis.

We are taking a realistic view of 2020, given the various external factors that will hinder our growth plus the strength of our performance in 2019, which will make for a tough comparison in 2020. We continue to be focused on the factors within our control and remain confident in the long-term goals for our company that we outlined at our Investor Event in October 2019. We hope those targets provide a good understanding of our future trajectory over the course of the next several years. We firmly believe the underlying fundamentals of both of our segments are strong and we are well-positioned for long-term success.

## Getting Better Everyday

I am proud of our strong full year 2019 performance and the strides that we've made across our organization. External challenges will always exist, 2020 will have more than its fair share. At Douglas, our business model is built around mitigating the impact of multiple factors outside of our control. What I can promise you is that, while navigating these challenges, our teams will be laser-focused on serving our customers, and getting better every day. That means when conditions improve, we will be better positioned to meet our long-term profitable growth goals, we will have expanded our market leading positions, and will be a more efficient company. We continue to relentlessly pursue new business opportunities and deliver first-class execution and dedication to our customers. We are encouraged by many of the long-term trends across the work truck industry and look forward to addressing the challenges ahead. Overall, we have the confidence to execute our strategy, knowing we are capable of achieving our stated goals.

Before I close, and as this is my first shareholder letter, I'd like to share a phrase that describes my personal approach to business: If you make it about everybody else...they will make it about you! People who work with me have frequently heard this phrase and know this is really how I operate. Whether it's customers, employees, suppliers or shareholders, I always try to focus on the needs of our partners. I've consistently found that if you take care of everyone else, then they will repay your efforts tenfold, building loyalty along the way.

Finally, and most importantly, on behalf of the management team and Board of Directors, I want to thank everyone at Douglas Dynamics for their hard work, dedication, and relentless pursuit of improvement, which allows us to not only successfully manage through the present, but to continue to effectively position the company for future success.

Sincerely,

![](images/3_0.jpg)

and the

Bob McCormick
President & CEO