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 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 Also have distributors in China, Finland, South Korea, Scotland, Northern Ireland, Germany, Norway, Sweden, Spain, and Australia 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 Razor/blade model – even in years that someone doesn’t replace high durability items, they will replace consumables more frequently or as usage allows, i.e. in heavy snow fall years, users are less likely to replace entire system but instead make sure that the equipment will work through maintenance. When snow stops (summer months and poor snowfall years) they are more likely to “decommission” the plow long enough to replace the major components because they are not missing out on revenue opportunities 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 - Production facilities in Milwaukee; Rockland, Maine; and Madison Heights, Michigan Source: 2013 Investor Presentation

MACROECONOMIC OVERVIEW

KEY INDUSTRY DRIVERS Annual average rainfall (precipitation) Value of Construction World price of Steel Trade-Weighted Index World price of steel The price of steel moves in response to global supply and demand for steel. In periods of strong demand, rolled and drawn steel producers can pass on part of the cost increases to customers through higher prices, resulting in higher revenue but generally lower profit. Conversely, when demand for steel weakens, producers are forced to undercut their selling prices, lowering revenue. The world price of steel is expected to decrease in 2014, posing a potential threat to the industry. 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 *Douglas decided to close one of its 3 domestic manuf plants in 2010 Source: Ibisworld

PORTER’S INDUSTRY ANALYSIS Rivalry Competition MEDIUM Supplier’s Bargaining Power HIGH Buyer’s Bargaining Power Substitutes LOW Threat of new entrants

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

COMPARABLES Source: CapitalIQ

COMPARABLES VALUATION Source: Yahoo.Finance

FINANCIAL ANALYSIS

PROJECTIONS & DISCOUNT RATE

VALUATION - DCF

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