The following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2010, 2011 and 2012 should be read together with our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategies for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in, or implied by, the forward-looking statements contained in this Annual Report on Form 10-K.

Results of Operations

Overview

In assessing our results of operations in a given period, one of the primary factors we consider is the level of snowfall experienced within the prior snow season. We typically compare the snowfall level in a given period both to the snowfall level in the prior season and to those snowfall levels we consider to be average. References to "average snowfall" levels below refer to the aggregate average inches of snowfall recorded in 66 cities in 26 snow-belt states in the United States during the annual snow season, from October 1 through March 31, from 1980 to 2012. During this period, snowfall averaged 3,000 inches, with the low in such period being 1,794 inches and the high being 4,502 inches.

During the six-month snow season ending March 31, 2012 snowfall was 1,794 inches which was 40.2% lower than average as well as the lowest in the period from 1980 to 2012. Meanwhile, during the six-month snow seasons ending March 31, 2010 and 2011, we experienced above average snowfall (approximately 19% and 39% above average during the six months ending March 31, 2010 and 2011 snow seasons, respectively). In addition to the historically low snowfall levels for the six-month snow season ending March 31, 2012, we believe that other factors also negatively affected our business. These additional factors included the timing, amount, and location of snowfall in the fourth quarter of 2012, which had an adverse impact on our fourth quarter 2012 results, the record drought in the summer of 2012 and the continued macro-economic uncertainty.

Sales of parts and accessories for 2012 and 2011 were $16.7 million and $31.0 million, respectively, or approximately 21% below and 46% higher than average annual parts and accessories sales over the preceding ten years, respectively. Sales of equipment unit sales for 2012 and 2011 were $123.3 million and $177.8 million, respectively. In 2012, equipment unit sales decreased 32.2% as we sold 34,457 equipment units in 2012 as compared to 50,801 equipment units in 2011. We believe that the decline of both parts and accessories sales and equipment unit sales in 2012 as compared to the prior calendar year is a direct result of the historically low snowfall and the lingering impact of economic uncertainty in the marketplace. Meanwhile, we believe that pent up demand due to deferred new equipment purchases still exists in the marketplace and could be released in or following a year of average or better snowfall that is accompanied by stronger macro-economic conditions. We believe this deferral of new equipment purchases could result in an elevated multi-year replacement cycle as the economy recovers.

The following table shows our sales of snow and ice control equipment and related parts and accessories as a percentage of net sales for the periods indicated. During the years ended December 31,

2010, 2011 and 2012, we sold 45,054, 50,801 and 34,457 units of snow and ice control equipment, respectively.

                                                  Year Ended
                                                 December 31,
                                             2010    2011    2012
                     Equipment                  86 %    85 %    88 %
                     Parts and accessories      14 %    15 %    12 %

The following table sets forth, for the periods presented, the consolidated statements of income of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the table below and throughout this "Management's Discussion and Analysis of Financial Condition and Results of Operations," consolidated statements of income data for the years ended December 31, 2010, 2011 and 2012 have been derived from our audited consolidated financial statements. The information contained in the table below should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.

                                                          For the year ended
                                                             December 31,
                                                     2010        2011        2012
                                                            (in thousands)
    Net sales                                      $ 176,795   $ 208,798   $ 140,033
    Cost of sales                                    116,494     136,981      96,070

    Gross profit                                      60,301      71,817      43,963
    Selling, general, and administrative expense      26,509      26,389      19,895
    Intangibles amortization                           6,001       5,201       5,199
    Management fees-related party                      6,383          46           -

    Income from operations                            21,408      40,181      18,869
    Interest expense, net                            (10,943 )    (8,918 )    (8,393 )
    Loss on extinguishment of debt                    (7,967 )      (673 )         -
    Other income (expense), net                           36        (218 )      (320 )

    Income before taxes                                2,534      30,372      10,156
    Income tax expense                                   872      11,332       4,144

    Net income                                     $   1,662   $  19,040   $   6,012

The following table sets forth, for the periods indicated, the percentage of certain items in our consolidated statement of income data, relative to net sales:

                                                         For the year ended
                                                            December 31,
                                                     2010       2011       2012
                                                           (in thousands)
     Net sales                                        100.0 %    100.0 %    100.0 %
     Cost of sales                                     65.9 %     65.6 %     68.6 %

     Gross profit                                      34.1 %     34.4 %     31.4 %
     Selling, general, and administrative expense      15.0 %     12.7 %     14.2 %
     Intangibles amortization                           3.4 %      2.5 %      3.7 %
     Management fees-related party                      3.6 %      0.0 %      0.0 %

     Income from operations                            12.1 %     19.2 %     13.5 %
     Interest expense, net                             (6.2 )%    (4.3 )%    (6.0 )%
     Loss on extinguishment of debt                    (4.5 )%    (0.3 )%     0.0 %
     Other income (expense), net                        0.0 %     (0.1 )%    (0.2 )%

     Income before taxes                                1.4 %     14.5 %      7.3 %
     Income tax expense                                 0.5 %      5.4 %      3.0 %

     Net income                                         0.9 %      9.1 %      4.3 %

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Net Sales. Net sales were $140.0 million for the year ended December 31, 2012 compared to $208.8 million in 2011, a decrease of $68.8 million, or 33.0%. This decrease was driven by decreases of $54.5 million in sales of snow and ice control equipment and $14.3 million in parts and accessories sales. The decrease in sales of snow and ice control equipment for the year ended December 31, 2012 was attributable to a decrease in sales volume of snow and ice control equipment of $57.2 million, or 32.2%, as compared to the prior year, slightly offset by price increases that we implemented in the fourth quarter of 2011 and that extended throughout the remainder of 2011 and 2012 and an additional price increase that was effective in the third and fourth quarters of 2012. The decrease in sales volume was largely a result of the below average snow season ending March 31, 2012. Net sales of parts and accessories decreased in the year ended December 31, 2012 from the year ended December 31, 2011 by 46.0%, from $31.0 million to $16.7 million. Net sales of parts and accessories remained comparatively low in 2012, below the preceding ten-year average by approximately 21.2%. As discussed above, the comparatively lower sales of parts and accessories was due in large part to below average snowfall resulting in decreased equipment usage. Additionally, equipment sales were lower (30% below the immediately preceding ten-year average), mainly attributable to lack of snowfall.

Cost of Sales. Cost of sales was $96.1 million for the year ended December 31, 2012 compared to $137.0 million in 2011, a decrease of $40.9 million, or 29.9%. This decrease was driven primarily by decreased volume. Cost of sales as a percentage of net sales increased from 65.6% for the year ended December 31, 2011 to 68.6% for the year ended December 31, 2012 as a result of lower volumes to absorb fixed spending. In 2012, inflationary commodity experience was cost neutral as compared to negative inflationary commodity experience throughout 2011. The favorability of inflation experienced in 2012 was more than offset by negative fixed cost absorption resulting from decreases in volume of equipment units and parts and accessories. As a percentage of cost of sales, fixed and variable costs were approximately 18% and 82%, respectively, for the year ended December 31, 2012 versus approximately 15% and 85%, respectively for the year ended December 31, 2011.

Gross Profit. Gross profit was $44.0 million for the year ended December 31, 2012 compared to $71.8 million in 2011, a decrease of $27.8 million, or 38.7%, due to the decrease in net sales volume described above under "-Net Sales" and "-Cost of Sales." As a percentage of net sales, gross profit decreased from 34.4% for the year ended December 31, 2011 to 31.4% for the corresponding period in 2012, as a result of the factors discussed above under "-Net Sales" and "-Cost of Sales."

Selling, General and Administrative Expense. Selling, general and administrative expenses, including intangible asset amortization and management fees, were $25.1 million for the year ended December 31, 2012 compared to $31.6 million for the year ended December 31, 2011, a decrease of $6.5 million, or 20.6%, driven by lower incentive based compensation of $3.4 million due to lower operating results. We spent $1.3 million in 2011 on offering costs to allow our former principal stockholders to dispose of their remaining holdings in our common stock while we did not incur any offering costs in 2012. The remaining decrease in 2012 is a result of management pulling back on discretionary spending in order to preserve profitability in a low sales volume year. As a percentage of net sales, selling, general and administrative expenses, including intangibles amortization and management fees, increased from 15.2% for the year ended December 31, 2011 to 17.9% for the corresponding period in 2012 due to items discussed above.

Interest Expense. Interest expense was $8.4 million for the year ended December 31, 2012 compared to $8.9 million in the corresponding period in 2011. The decrease in interest expense for the year ended December 31, 2012 as compared to the prior year was due to a voluntary $10 million payment made on the term loan in January 2012.

Loss on Extinguishment of Debt. Loss on extinguishment of debt was zero for the year ended December 31, 2012 compared to a total of $0.7 million for the year ended December 31, 2011. The loss on extinguishment of debt in 2011 was entirely driven by our entry into a new term loan facility resulting in a significant modification of our debt which resulted in the write off of unamortized capitalized deferred financing costs of $0.3 million and write off of unamortized debt discount of $0.3 million.

Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The largest item affecting deferred taxes is the difference between book and tax amortization of goodwill and other intangibles amortization. Our effective combined federal and state tax rate for 2012 was 40.8% compared to 37.3% for 2011. The effective tax rate for the year ended December 31, 2012 is higher than 2011 as we were in a taxable loss position in 2012 and thus unable to utilize the domestic production activities deduction while we were in a taxable income position in 2011 and able to utilize the domestic production activities deduction.

Net Income. Net income for the year ended December 31, 2012 was $6.0 million compared to net income of $19.0 million for the corresponding period in 2011, a decrease of $13.0 million. This decrease was driven by the factors described above.

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Net Sales. Net sales were $208.8 million for the year ended December 31, 2011 compared to $176.8 million in 2010, an increase of $32.0 million, or 18.1%. This increase was primarily driven by increases of $26.0 million in sales of snow and ice control equipment and $6.0 million in parts and accessories sales. The increase in sales of snow and ice control equipment for the year ended December 31, 2011 was attributable to (1) an increase in sales volume of snow and ice control equipment of $19.4 million, or 12.8%, as compared to the prior year and (2) price increases that we implemented in the third quarter of 2010 and that extended throughout the remainder of 2010 and 2011. Additionally, we implemented a temporary one percent surcharge in both the second and third

quarters of 2011 due to inflationary costs due to increases in costs of commodities, while no such surcharges existed in 2010 and we increased prices effective in the fourth quarter of 2011. The increase in sales volume was largely a result of the above average snow season ending March 31, 2011. Net sales of parts and accessories increased in the year ended December 31, 2011 from the year ended December 31, 2010 by 24.0%, from $25.0 million to $31.0 million. Net sales of parts and accessories remained comparatively high in 2011, exceeding the preceding ten-year average by approximately 51.2%. The comparatively strong sales of parts and accessories was due in large part to above average snowfall resulting in increased equipment usage and subsequent repair. Additionally, equipment sales were only slightly higher (1% above the immediately preceding ten-year average), as many end-users continue to repair their existing snow and ice control equipment instead of purchasing new equipment.

Cost of Sales. Cost of sales was $137.0 million for the year ended December 31, 2011 compared to $116.5 million in 2010, an increase of $20.5 million, or 17.6%. This increase was driven primarily by increased volume as cost of sales as a percentage of total sales did not fluctuate significantly. Cost of sales as a percentage of net sales decreased slightly from 65.9% for the year ended December 31, 2010 to 65.6% for the year ended December 31, 2011. Negative inflationary commodity experience throughout the year was more than offset by lower costs per unit resulting from increases in volume of equipment units and parts and accessories. As a percentage of cost of sales, fixed and variable costs were approximately 15% and 85%, respectively, for the year ended December 31, 2011 versus approximately 19% and 81%, respectively for the year ended December 31, 2010.

Gross Profit. Gross profit was $71.8 million for the year ended December 31, 2011 compared to $60.3 million in 2010, an increase of $11.5 million, or 19.1%, due to the increase in net sales volume described above under "-Net Sales" and "-Cost of Sales." As a percentage of net sales, gross profit increased from 34.1% for the year ended December 31, 2010 to 34.4% for the corresponding period in 2011, as a result of the factors discussed above under "-Net Sales" and "-Cost of Sales."

Selling, General and Administrative Expense. Selling, general and administrative expenses, including intangible asset amortization and management fees, were $31.6 million for the year ended December 31, 2011 compared to $38.9 million for the year ended December 31, 2010, a decrease of $7.3 million, or 18.7%, driven by non-recurring expenses incurred at the time of the IPO in 2010. The non-recurring charges associated with the IPO totaled $8.5 million, and were comprised of the buyout of the management services agreement at $5.8 million, compensation expense associated with net exercises of stock options totaling $1.7 million and the expense and payment of cash bonuses under the our liquidity bonus plan of $1.0 million. Additionally, in 2010 there was non-recurring compensation expense associated with net exercises of stock options subsequent to the IPO totaling $1.2 million. In addition, the closure costs associated with the Johnson City facility were $0.7 million in the prior year. Amortization expense decreased $0.8 million compared to 2010 due to certain intangible assets becoming fully amortized. Additionally, contributing to the reduction, in 2011, we spent $0.9 million less on legal and consulting fees compared to 2010 in order to defend patents and explore potential acquisitions. Meanwhile, offsetting the decreases, in 2011 we incurred higher incentive based compensation of $2.1 million due to better operating results. Recurring stock based compensation increased $0.8 million compared to 2010 due to a full year as a public company in the current year. We spent $1.3 million in 2011 on offering costs to allow our former principal stockholders to dispose of their remaining holdings in our common stock. Finally, health insurance costs increased $0.6 million in the year ended December 31, 2011 compared to 2010. As a percentage of net sales, selling, general and administrative expenses, including intangibles amortization and management fees, decreased from 22.0% for the year ended December 31, 2010 to 15.2% for the corresponding period in 2011 due to items discussed above.

Interest Expense. Interest expense was $8.9 million for the year ended December 31, 2011 compared to $10.9 million in the corresponding period in 2010, a decrease of $2.0 million. This

decrease was due to less interest expense as a result of the redemption of our 73/4% Senior Notes due 2012 ("Senior Notes") with proceeds from the IPO, additional borrowings under our senior credit facilities and cash on hand. Additionally, interest expense was lower for year ending December 31, 2011 compared to 2010 as we incurred a favorable rate as a result of the April 2011 refinancing.

Loss on Extinguishment of Debt. Loss on extinguishment of debt totaling $0.7 million for the year ended December 31, 2011 was entirely driven by our entry into a new term loan facility resulting in a significant modification of our debt which resulted in the write off of unamortized capitalized deferred financing costs of $0.3 million and write off of unamortized debt discount of $0.3 million. Loss on extinguishment of debt totaling $8.0 million for the year ended December 31, 2010 was entirely driven by costs associated with the amendment of our senior credit facilities and the redemption of the Senior Notes, including both the call premium on the redemption of our Senior Notes, and the write-off of unamortized deferred financing costs relating to the redemption of our Senior Notes and the amendment of our senior credit facilities.

Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The largest item affecting deferred taxes is the difference between book and tax amortization of goodwill and other intangibles amortization. Our effective combined federal and state tax rate for 2011 was 37.3% compared to 34.4% for 2010. The effective tax rate for the year ended December 31, 2011 is higher than 2010 due to an increase in federal rate from 34.0% in year ending December 31, 2010 compared to 35.0% for the year ending December 31, 2011.

Net Income. Net income for the year ended December 31, 2011 was $19.0 million compared to net income of $1.7 million for the corresponding period in 2010, an increase of $17.3 million. This increase was driven by the factors described above, and primarily by the non-recurring charges associated with the IPO incurred in 2010.

Non-GAAP Financial Measures

This Annual Report on Form 10-K contains financial information calculated other than in accordance with U.S. generally accepted accounting principles ("GAAP").

These non-GAAP measures include:

º •
º Free cash flow;

º •
º Adjusted net income; and

º •
º Adjusted EBITDA.

These non-GAAP disclosures should not be construed as an alternative to the reported results determined in accordance with GAAP.

Free cash flow (as defined below) for the year ended December 31, 2012 was $14.2 million compared to $45.4 million in 2011, a decrease in free cash flow of $31.2 million, or 68.7%. The decrease in free cash flow is primarily a result of $32.2 million less cash provided by operating activities, as discussed below under Liquidity and Capital Resources. In addition to the changes in cash provided by operating activities, capital expenditures decreased by $1.0 million. In 2012, there were lower capital expenditures to preserve cash flow following a low snowfall season ending March 2012.

Free cash flow is a non-GAAP financial measure, which we define as net cash provided by operating activities less capital expenditures. Free cash flow should be evaluated in addition to, and not considered a substitute for, other financial measures such as net income and cash flow provided by operations. We believe that free cash flow represents our ability to generate additional cash flow from our business operations.

The following table reconciles net cash provided by operating activities, a GAAP measure, to free cash flow, a non-GAAP measure.

                                                  For the year ended December 31,
                                                  2010            2011         2012
                                                          (in thousands)
  Net cash provided by operating activities    $    15,777     $    47,728   $ 15,619
  Acquisition of property and equipment             (3,009 )        (2,373 )   (1,446 )

  Free cash flow                               $    12,768     $    45,355   $ 14,173

Adjusted net income represents net income as determined under GAAP, excluding certain expenses incurred at the time of our IPO in 2010 (namely the buyout of our management services agreement, loss on extinguishment of debt, stock based compensation expense associated with the net exercise of stock options and the payment of cash bonuses under our liquidity bonus plan); loss on extinguishment of debt incurred in 2011, costs incurred to pursue potential acquisitions in 2011 and certain expenses incurred at the time of our secondary offerings in 2011. We believe that the presentation of adjusted net income for the years ended December 30, 2010, December 31, 2011 and December 30, 2012 allows investors to make meaningful comparisons of our operating performance between periods and to view our business from the same perspective as our management. Because the excluded items are not predictable or consistent, management does not consider them when evaluating our performance or when making decisions regarding allocation of resources.

The following table presents a reconciliation of net income, the most comparable GAAP financial measure, to adjusted net income for the years ending December 31, 2010, December 31, 2011 and December 31, 2012.

                                                           Years Ended
                                          December 31,     December 31,    December 31,
(in millions)                                 2010             2011            2012
Net income-(GAAP)                          $        1.7     $       19.0     $       6.0
Addback non-recurring expenses, net of
tax at 38.0% and 37.0% for 2010 and
2011, respectively:
-Buyout of management service
agreement                                           3.6                -               -
-Loss on extinguishment of debt                     4.9              0.4               -
-Liquidity bonus payment                            0.6                -               -
-Acquisition costs                                    -              0.6               -
-Non-recurring stock based
compensation                                        1.9                -               -
-Offering costs                                       -              0.8               -

Adjusted net income-(non-GAAP)             $       12.7     $       20.8     $       6.0

Adjusted EBITDA represents net income before interest, taxes, depreciation and amortization, as further adjusted for certain charges consisting of unrelated legal and consulting fees, as well as management fees paid by us to affiliates of our former principal stockholders, stock based compensation, payment of cash bonuses under our liquidity bonus plan, loss on extinguishment of debt and offering costs. We use, and we believe our investors benefit from the presentation of Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with additional tools to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. In addition, we believe that Adjusted EBITDA is useful to investors and other external users of our consolidated financial statements in evaluating our operating performance as compared to that of other companies, because it allows them to measure a company's operating performance without regard to items such as

. . .