Form 8-K/A DOUGLAS DYNAMICS, INC For: Jul 15

Delaware

  001-34728  

134275891

(State or other
jurisdiction of
incorporation)

(Commission File
Number)

(IRS Employer
Identification No.)

1.

Nature of Business and Basis of Presentation

The combined financial statements include the accounts of the following entities, all of which are under common ownership and control (collectively, the “Company”). All significant intercompany accounts and transactions have been eliminated.

Huntington Hills Service Center, Inc. (“HHSC”) - HHSC is a holding company which wholly owns Dejana Realty of Huntington, LLC and Dejana Truck and Utility Equipment Co. Inc.

Dejana Truck and Utility Equipment Co. Inc. (“Dejana Truck NY”) -Dejana Truck NY’s operations involve the installation of utility and truck equipment onto truck chassis (“upfitting”), truck fleet maintenance and repairs, part sales and snow plow sales and installations to the New York metropolitan market.

Dejana Truck and Utility Equipment Co. of New England, Inc. (“Dejana Truck NE”) - Dejana Truck NE’s operations involve the installation of utility and truck equipment onto truck chassis (“upfitting”), truck fleet maintenance and repairs, part sales and snow plow sales and installations to the New England markets.

Dejana Truck and Utility Equipment Co. of Mid-Atlantic, LLC (“Dejana Truck MD”) - Dejana Truck MD’s operations involve the installation of utility and truck equipment onto truck chassis (“upfitting”), truck fleet maintenance and repairs, part sales and snow plow sales and installations to the Mid-Atlantic markets.

Dejana Truck Equipment of Greater Philadelphia, Inc. (“Dejana Truck GTR PA”) - Dejana Truck GTR PA’s operations involve the installation of utility and truck equipment onto truck chassis (“upfitting”), truck fleet maintenance and repairs, part sales and snow plow sales and installations to the New Jersey, Pennsylvania, and Philadelphia metropolitan markets.

Dejana Truck and Utility Equipment Co. of Pennsylvania, LLC (“Dejana Truck PA”) - Dejana Truck PA’s operations involve the installation of utility and truck equipment onto truck chassis (“upfitting”), specializing in the manufacture of specific custom builds for the utility cable industry.

Dejana Cargo and Van Body Equipment Company, Inc. (“Dejana Cargo”) - Dejana Cargo’s operations involve the manufacturing and installation of box truck equipment onto truck chassis (“upfitting”), sold mainly throughout the East Coast markets.

Dejana Cargo and Van Interiors, Inc. and Dejana Cargo and Van Interiors of Jacksonville, Inc. (“Dejana Transit”) - Dejana Transit’s operations involve performing the ship through modifications on Ford Motor Company’s Transit Connect vehicle. As a Ship Through Modifier, the Company supplies its proprietary commercial-floor conversion kits and installs accessory packages (“upfitting”) before placing the Transit Connect vehicles back into the Ford Transportation System for delivery to dealership customers throughout the United States and Canada (see Note 14).

Dejana Aerial Equipment Company, LLC (“Dejana Aerial”) - Dejana Aerial’s operations involve the installation of aerial equipment onto truck chassis (“upfitting”).

Dejana Equipment Leasing Inc. (“Dejana Leasing”) - Dejana Leasing leases various truck and utility equipment primarily to fleet customers. However, Dejana Leasing had no operations during the years ended December 31, 2015 and 2014.

Dejana Realty Co. of New England, LLC (“Dejana Realty NE”) - Dejana Realty NE owns a plant and office facility in Smithfield, RI, which it leases to a third party (see Note 11).

Dejana Realty Co. of Baltimore, LLC (“Dejana Realty BA”) - Dejana Realty BA owns an office and plant facility located in Baltimore, MD, which it leases to Dejana Truck MD.

Dejana Realty Co. of New York, LLC (“Dejana Realty NY”) - Dejana Realty NY owns a rental residential building in Baltimore, MD.

Dejana Realty Holdings, LLC (“Holdings”) - Holdings owns the office and plant facility, located in Kings Park, NY, which is leased to Dejana Truck NY.

Dejana Kenwood, LLC (“Dejana Kenwood”) - Dejana Kenwood owned a rental residential building in Baltimore City, MD. This property was sold in December 2010.

Dejana Realty of Maryland, LLC (“Dejana Realty MD”) - Dejana Realty MD owns an office and plant facility located in Baltimore, MD, which is leased to Dejana Cargo.

Dejana Eastbrook, LLC (“Dejana Eastbrook”) - Dejana Eastbrook owns a rental residential building in Baltimore, MD.

Dejana Rosedale, LLC (“Dejana Rosedale”) - Dejana Rosedale owns commercial property located in Baltimore, MD, which is used by Dejana Cargo, Dejana Transit, and Dejana Truck MD.

Dejana Realty of Huntington, LLC (“Dejana Realty HT”) - Dejana Realty HT owns a commercial building in Huntington, NY, which it leases to Dejana Truck NY.

Dejana Realty of New Jersey, LLC (“Dejana Realty NJ”) - Dejana Realty NJ owns an office and plant facility in Cinnaminson, NJ, which it leases to Dejana Truck GTR PA.

Dejana Island Realty, LLC (“Dejana Island Realty”) - Dejana Island Realty owns a residential building in Suffolk County, NY.

Dejana Realty of Smithfield, RI, LLC (“Dejana Realty Smithfield”) - Dejana Realty Smithfield owns an office and plant facility located in Smithfield, RI, which it leases to Dejana Truck NE.

Dejana Realty of Kings Park, NY, LLC (“Dejana Realty Kings Park”) - Dejana Realty Kings Park owns land located in Kings Park, NY.

2.

Summary of Significant Accounting Policies

Cash and cash equivalents - The Company considers cash and cash equivalents to include cash on hand, cash in various checking accounts at banks and investments in short term money market funds. The Company maintains cash and cash equivalents in various accounts, which at times may exceed federally insured limits.

Marketable securities - The Company accounts for its marketable securities in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 320, “Investments - Debt and Equity Securities.” In accordance with the provisions of FASB ASC 320, the Company’s marketable securities are classified as available for sale and are reported at their fair value. Fair value of mutual funds and other equity securities is based on quoted prices in active markets (Level 1 of the fair value hierarchy established under FASB ASC 820, “Fair Value Measurement”).

Accounts receivable - Accounts receivable are reported in the balance sheet at their outstanding principal balance net of an estimated allowance for doubtful accounts. Sales terms usually provide for payment within 30 days from the completion of the “upfitting” process. An allowance for doubtful accounts is estimated based upon a review of outstanding receivables, historical collection information, and existing economic conditions. During the years ended December 31, 2015 and 2014, bad debt expense of $13,864 and $59,671, respectively, was recognized and is reflected in general and administrative expenses. Accounts receivable are charged against the allowance when substantially all collection efforts cease. The Company’s sales arrangements generally do not provide for interest on past due amounts. Recoveries of accounts receivable previously charged off are recognized when received.

Inventories - Inventories are stated at the lower of cost, on a first-in, first-out basis, or market.

Property, plant and equipment - Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is computed on the straight-line method over the estimated useful lives (three to forty years) of the related assets.

The Company reviews its property, plant and equipment and other long-lived assets for impairment when there are indications that the carrying amounts of these assets may not be recoverable. No impairment losses were recognized during the years ended December 31, 2015 and 2014.

Deferred costs - Deferred costs, consisting of leasing commissions, are amortized using the straight-line method over the term of the respective lease.

Revenue recognition - Under the terms of the Company’s arrangements with its customers, title to and risk of loss for finished goods passes upon completion of the “upfitting” process. Accordingly, revenue is recognized upon completion of “upfitting.”

Service revenue from repairs and maintenance is recognized as the services are performed. Revenue from the sale of parts is recognized when the title and risk of loss transfers to the customer.

Sales tax - The Company collects sales tax from nonexempt customers, on certain sales transactions, and remits the entire amount to various states. The Company’s accounting policy is to exclude the tax collected and remitted to these states from revenue and cost of sales.

Comprehensive income - FASB ASC 220, “Comprehensive Income,” establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive income includes net income and other comprehensive income. Comprehensive income is defined as the change in net assets of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Other comprehensive income for the years ended December 31, 2015 and 2014 is presented in the combined statements of operations and comprehensive income.

Reclassification - Net sales and interest expense in the 2014 combined statement of operations and comprehensive income have been increased by $780,380 and $149,032, respectively, as reclassifications from cost of sales to conform to the 2015 presentation.

Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the carrying amounts of assets and liabilities, disclosure of contingent assets and liabilities, as well as the revenue and expenses reported for the period. Significant estimates include the valuation of accounts receivable, inventories and long-lived assets. Actual results could differ from those estimates.

Fair value of financial instruments - FASB ASC 825, “Financial Instruments,” requires disclosure of the fair value of certain financial instruments in the Company’s financial statements. The Company estimates that the fair value of its cash and cash equivalents, accounts receivable, floor plan obligations and accounts payable and accrued expenses approximate their carrying amounts due to the short maturity of these instruments. The estimated fair value of the Company’s long-term liabilities approximates their carrying amounts based on interest rates currently available to the Company. The carrying amount of the Company’s marketable securities approximates their fair value.

Income taxes - HHSC and its subsidiary Dejana Truck NY, Dejana Truck NE, Dejana Truck GTR PA, Dejana Cargo, Dejana Transit, and Dejana Leasing have elected to be taxed under the Subchapter S provisions of the Internal Revenue Code and the applicable state statutes. Pursuant to applicable tax regulations, the taxable income and tax credits of an electing corporation are passed through directly to the shareholders. Accordingly, the entities do not provide for Federal and state income taxes. The Company has made provisions for applicable minimum state taxes.

Dejana Truck MD, Dejana Aerial, Holdings, Dejana Realty NE, Dejana Realty BA, Dejana Realty NY, Dejana Kenwood, Dejana Realty MD, Dejana Rosedale, Dejana Eastbrook, Dejana Realty HT, Dejana Realty NJ, Dejana Island Realty, Dejana Realty Smithfield, and Dejana Realty Kings Park are all single member LLC’s. Pursuant to provisions of the Internal Revenue Code, each item of income, gain, loss, deduction or credit is reportable by the member.

Dejana Truck PA, a limited liability company, is not subject to income taxes as an entity since taxable income or loss is reportable by its members. Effective January 1, 2015, Dejana Truck PA became a single member LLC.

The Company follows the provisions pertaining to uncertain tax positions of FASB ASC 740, “Income Taxes,” and has determined that there are no material uncertain tax positions that require recognition or disclosure in the financial statements.

Swap transaction - FASB ASC 815, “Derivatives and Hedging,” establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the combined balance sheets at fair value. For a derivative designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income (loss) and are recognized in the income statement when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings.

The Company uses derivative instruments to manage exposure to interest rate risks. The Company’s objectives for holding derivatives are to minimize the risks using the most effective methods to eliminate or reduce the impacts of this exposure. The Company is a party to an interest rate swap transaction with a termination date of November 2019 and a notional amount of $475,000 as of December 31, 2015 and 2014. The swap hedges the variable rate on the long-term debt (see Note 10). Under the swap, the Company pays a fixed interest rate of 2.89% on the notional amount and receives a LIBOR-based floating rate. The notional amount of the swap transaction amortizes in amounts corresponding to the note payable. The fair value of the swap was a liability of $2,000 and $3,000 as of December 31, 2015 and 2014, respectively. Accordingly, the Company has not recorded any asset or liability and has not recorded any comprehensive income or loss on the swap since the fair value of the swap is deemed insignificant.

Advertising - The Company expenses the costs of advertising as incurred, which totaled $857,526 and $708,322 for the years ended December 31, 2015 and 2014, respectively.

Shipping and handling - Shipping and handling costs incurred during the years ended December 31, 2015 and 2014 were $172,614 and $137,501, respectively, and are included as a component of selling and shipping expenses.

Subsequent events - The Company has evaluated events and transactions for potential recognition or disclosure through September 27, 2016, the date the financial statements were available to be issued.

3.

Marketable Securities

Marketable securities classified as available for sale at December 31, 2015, 2014 and 2013 consist of municipal bond funds and other equity securities as follows:

4.

Property, Plant
and Equipment

Property, plant and equipment are summarized as follows: