TEAM MEMBERS: BHARATH CHANDRASHEKHAR, ROBERT EBERHAD, PURVI MITTAL, SHALINI R SIVARAJAHPresented: April 22, 2014

DOUGLAS DYNAMICS INC.

AGENDA

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

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

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

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

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

MACROECONOMIC OVERVIEW

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

Source: Ibisworld

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

PORTER’S INDUSTRY ANALYSIS

Rivalry CompetitionMEDIUM

Supplier’s Bargaining PowerHIGH

Buyer’s Bargaining PowerMEDIUM

SubstitutesLOW

Threat of new entrantsLOW

SWOT ANALYSIS

STRENGTHS-Leading NA snowplow manufacturer for light trucks-Customer loyalty and Brand equity-Extensive Distribution network~2100 points of sale-Flexible, Lean Enterprise platform

OPPORTUNITIES-TrynEx Acquisition expanded product lines-Growth potential in Europe and Asia-Replacement driven business-Unique Financing program for distributors

WEAKNESSES-Decline in snowfall levels is business risk-Issues with dependencies on Management -Lack of Financing options for end-users

THREATS-Fluctuating steel and petroleum prices-Financial market conditions affects their pension plans-Interest rate risk due to variable debt obligations

SWOT

STOCK PERFORMANCE

MARKET PROSPECTS

Source: Yahoo.Finance

MARKET COMPARISON

4/19/20124/30/20125/11/20125/22/20126/2/20126/13/20126/24/20127/5/20127/16/20127/27/20128/7/20128/18/20128/29/20129/9/20129/20/201210/1/201210/12/201210/23/201211/3/201211/14/201211/25/201212/6/201212/17/201212/28/20121/8/20131/19/20131/30/20132/10/20132/21/20133/4/20133/15/20133/26/20134/6/20134/17/20134/28/20135/9/20135/20/20135/31/20136/11/20136/22/20137/3/20137/14/20137/25/20138/5/20138/16/20138/27/20139/7/20139/18/20139/29/201310/10/201310/21/201311/1/201311/12/201311/23/201312/4/201312/15/201312/26/20131/6/20141/17/20141/28/20142/8/20142/19/20143/2/20143/13/20143/24/20144/4/20144/15/2014

-15.00%

-5.00%

5.00%

15.00%

25.00%

35.00%

45.00%

55.00%

PLOW Returns vs S&P Returns and iShares Micro-cap Returns

PLOWS&PIWC

COMPARABLES

Source: CapitalIQ

CY Revenue ($mm)

CY EBITDA ($mm) CY EPS ($) CY BPS ($)

EV / CY Revenue

EV / CY EBITDA P/E P/B D/A

Ticker Company NamePrice ($)

4/17/2014

Market Cap ($mm)

4/17/2014

Enterprise Value ($mm)4/17/2014 2013A 2013A 2013A 2013A 2013A 2013A 2013A 2013A 2013A

EBIT/ Tangible Assets EBIT/EV

US $

ACAT Arctic Cat Inc. 42.30 556 443 698 69 2.47 15.80 0.6 6.5 17.1 2.7 0.0 25.6% 12.3%PII Polaris Industries, Inc. 135.39 8,919 9,115 3,823 670 5.13 8.16 2.4 13.6 26.4 16.6 0.2 100.9% 6.3%BBD.B Bombardier Inc. 3.65 6,360 9,529 18,151 930 0.26 1.2 0.5 10.2 14.2 3.1 0.2 31.2% 7.5%

60.45 5278.60 6362.46 7557.43 556.20 2.62 8.39 1.18 10.10 19.23 7.44 0.14 52.5% 8.7%42.30 6360.47 9114.73 3822.97 670.01 2.47 8.16 0.63 10.25 17.09 3.05 0.17 31.2% 7.5%

PLOW Douglas Dynamics, Inc. 16.69 372 476 194 42 0.70 6.99 2.4 11.3 23.7 2.4 0.6 46.0% 11.0%MedianMean

Greenblatt Ratios

COMPARABLES VALUATIONCompany Name Weights

Arctic Cat Inc. 70.00%Polaris Industries, Inc. 15.00%

Bombardier Inc 15.00%100.0%

Source: Yahoo.Finance

MultipleMultiple

Value Weight Weighted average P/E 18.1x 50% $18.06

EV/EBITDA 8.1x 25% $8.10EBIT/EV 10.6% 25% $5.84

Implied Price per Share 100% $12.51

FINANCIAL ANALYSIS

Activity Ratios 2009 2010 2011 2012 2013A/R TURNOVER 5.42 4.77 6.14 5.51 4.59 INVENTORY TURNOVER 4.39 4.96 5.71 3.17 4.60 ASSET TURNOVER 0.43 0.51 0.58 0.41 0.53 A/P TURNOVER 22.68 40.92 27.18 17.89 16.69

Liquidity Ratios 2009 2010 2011 2012 2013Current Ratio 5.30 5.57 3.17 5.37 2.73 Quick Ratio 4.02 3.58 2.25 3.27 1.80 Interest Coverage 1.90 1.96 4.51 2.25 3.30

Dupont 2009 2010 2011 2012 2013EBIT/SALES 16.89% 12.11% 19.24% 13.47% 14.16%EBT/EBIT 46.98% 11.84% 75.59% 53.82% 69.14%NET INCOME/EBT 71.18% 65.59% 61.92% 58.52% 60.26%SALES/TOTAL ASSETS 0.43 0.51 0.58 0.41 0.53 TOTAL ASSETS/TOTAL EQUITY 3.74 2.05 2.20 2.20 2.35 ROE 9.10% 0.98% 11.51% 3.87% 7.38%

Profitability Ratios 2009 2010 2011 2012 2013Revenue growth -3.20% 1.41% 18.10% -32.93% 38.77%Gross Margin 32.74% 34.11% 34.40% 31.39% 33.78%SGA Margin 11.52% 14.99% 12.66% 14.21% 16.40%Operating Margin 16.89% 12.11% 19.24% 13.47% 14.16%Net Income Margin 5.65% 0.94% 9.01% 4.24% 5.90%ROE 9.10% 0.98% 11.51% 3.87% 7.38%ROA 2.43% 0.48% 5.24% 1.76% 3.15%

2009 2010 2011 2012 2013Greenblatt EBIT/Tangible Assets 43% 32% 69% 31% 46%EBIT/Enterprise Value 10%

Degree of Operating Leverage (19.39) 4.84 1.61 1.18 Degree of Financial Leverage 3.05 11.92 1.29 2.04

2009 2010 2011 2012 2013Net Income 1,662 19,040 6,012 11,639 Dividends Paid 8,222 25,793 18,231 18,699 Dividends per share 0.38 1.17 0.82 0.84

PROJECTIONS & DISCOUNT RATE

WACC 8.19%BUSINESS RISK PREMIUM 3.00%DISCOUNT RATE 11.19%

COST OF DEBT 6.72%TAX RATE 38.80%AFTER TAX COST OF DEBT 4.11%DEBT/CAP 0.57

Cost of EquityMarket Risk Premium 6%Beta 0.90 Risk Free Rate 2.70%Cost of Equity 8.09% 50%ROE 7.38%Return To Owners 19.28% 50%Weighted Cost of Equity 13.69%EQUITY/CAP 0.43

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Net Sales 174,342 176,795 208,798 140,033 194,320 233,184 174,888 183,632 220,359 209,341 Revenue growth -3% 1% 18% -33% 39% 20% -25% 5% 20% -5%

PROJECTIONSHISTORICAL

VALUATION - DCF

10.73$ 7% 9% 11% 13% 15%1.5% 21.03$ 13.93$ 9.83$ 7.15$ 5.27$ 2.0% 23.19$ 14.98$ 10.42$ 7.53$ 5.52$ 2.5% 25.83$ 16.19$ 11.10$ 7.94$ 5.80$ 3.0% 29.13$ 17.61$ 11.85$ 8.40$ 6.10$ 3.5% 33.37$ 19.28$ 12.70$ 8.90$ 6.42$

Discount Rate

Terminal Growth

PLOW - DCF2014 2015 2016 2017 2018 2018+

EBIT 45,665 32,797 34,914 42,625 40,261 - Tax (18,266) (13,119) (13,965) (17,050) (16,104) + D&A 12,869 9,652 10,135 12,161 11,553 - Capex (3,089) (2,317) (2,433) (2,919) (2,773) - Change in NWC (5,653) 17,580 (2,542) (6,369) 1,716

FCF 31,526 44,594 26,108 28,448 34,652 408,571 Discounted FCF 28,353 36,067 18,991 18,610 20,386 240,365

PROJECTIONS

Enterprise Value 362,772

Debt 123,994 Equity Value 238,778 Shares Outstanding 22,260

Stock Price 10.73$

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