-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MouLJDhOEH9fbxZF+MRN/dpoWq62LSvaJ/R7bi/XKRPzLGpYljeAUl5dSWl1GeS5 333ruWu8T4uVsxJ606bhGA== 0000950152-96-003994.txt : 19960813 0000950152-96-003994.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950152-96-003994 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960628 FILED AS OF DATE: 19960812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAYTON SUPERIOR CORP CENTRAL INDEX KEY: 0000854709 STANDARD INDUSTRIAL CLASSIFICATION: STEEL PIPE & TUBES [3317] IRS NUMBER: 310676346 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11781 FILM NUMBER: 96608418 BUSINESS ADDRESS: STREET 1: 721 RICHARD ST CITY: MIAMISBURG STATE: OH ZIP: 45342 BUSINESS PHONE: 5138660711 MAIL ADDRESS: STREET 1: 721 RICHARD ST CITY: MIAMISBURG STATE: OH ZIP: 45342 10-Q 1 DAYTON SUPERIOR CORPORATION QUARTERLY REPORT 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED COMMISSION FILE NUMBER JUNE 28, 1996 1-11781 DAYTON SUPERIOR CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) OHIO 31-0676346 ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 721 Richard Street Miamisburg, Ohio 45342 --------------------- ----------------- (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: 513-866-0711 ------------ NOT APPLICABLE - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- ---- 5,609,350 Shares of Common Stock were outstanding as of June 28, 1996 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
December 31, June 28, 1995 1996 --------- --------- (Unaudited) (Amounts in thousands) ASSETS CURRENT ASSETS: Cash $ 643 $ 638 Accounts Receivable, net of allowance for doubtful accounts of $708 and $720 11,724 21,413 Inventories (Note 2) 12,392 15,538 Rental equipment, net 1,235 1,587 Prepaid expenses 474 657 Prepaid income taxes 436 427 Future tax benefits 1,393 1,393 --------- --------- Total current assets 28,297 41,653 --------- --------- PROPERTY, PLANT & EQUIPMENT: 27,560 30,258 Less accumulated depreciation (10,000) (11,650) --------- --------- Net property, plant & equipment 17,560 18,608 --------- --------- GOODWILL AND INTANGIBLE ASSETS, net of accumulated amortization (Note 2) 57,734 58,180 OTHER ASSETS 269 -- --------- --------- Total assets $ 103,860 $ 118,441 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt (Note 4) $ 32 $ 3,282 Accounts payable 8,043 13,965 Accrued compensation and benefits 3,889 4,114 Accrued liabilities 3,987 3,391 Due to Ripplewood Holdings LLC (Note 3) -- 611 Accrued interest 2,063 14 --------- --------- Total current liabilities 18,014 25,377 LONG-TERM DEBT (Note 4) 52,980 37,602 DEFFERED INCOME TAXES 2,781 2,663 OTHER LONG-TERM LIABILITIES 2,600 3,186 --------- --------- Total liabilities 76,375 68,828 --------- --------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Class A Common Shares 17,483 31,800 Class B Common Shares 1,942 10,123 Cumulative foreign currency translation adjustment (139) (141) Excess pension liability (50) (50) Retained earnings 8,330 7,881 Treasury shares, Class A Common, at cost (81) -- --------- --------- Total shareholders' equity 27,485 49,613 --------- --------- Total liabilities and shareholders' equity $ 103,860 $ 118,441 ========= =========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements 3 DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Three Fiscal Months Ended Six Fiscal Months Ended ------------------------- ----------------------- June 30, June 28, June 30, June 28, 1995 1996 1995 1996 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Amounts in thousands, except share and per share amounts) NET SALES $ 25,982 $ 36,461 $ 43,959 $ 60,076 COST OF SALES 17,956 24,911 30,511 41,057 ----------- ----------- ----------- ----------- Gross profit 8,026 11,550 13,448 19,019 SELLING, GENERAL AND ADMINSTRATIVE EXPENSES 4,414 5,818 8,729 11,447 AMORTIZATION OF GOODWILL AND INTANGIBLES 350 426 699 832 ----------- ----------- ----------- ----------- Operating income 3,262 5,306 4,020 6,740 OTHER EXPENSES: Interest expense, net 980 1,594 1,889 3,179 Other, net -- (24) -- (16) ----------- ----------- ----------- ----------- Income before income taxes and extraordinary item 2,282 3,736 2,131 3,577 PROVISION FOR INCOME TAXES -- 1,470 -- 1,712 ----------- ----------- ----------- ----------- Income before extraordinary item 2,282 2,266 2,131 1,865 EXTRAORDINARY ITEM, Loss on extinguishment of debt, net of income tax effect of $1,418 (Note 5) -- (2,314) -- (2,314) ----------- ----------- ----------- ----------- Net income (loss) 2,282 (48) 2,131 (449) Dividends on Redeemable Preferred Shares (150) -- (300) -- Accretion on Redeemable Preferred Shares (61) -- (123) -- ----------- ----------- ----------- ----------- Net income (loss) available to common shareholders $ 2,071 ($ 48) $ 1,708 ($ 449) =========== =========== =========== =========== Income per share before extraordinary item $ 0.60 $ 0.64 $ 0.49 $ 0.54 Extraordinary item per share $ 0.00 ($ 0.65) $ 0.00 ($ 0.67) ----------- ----------- ----------- ----------- Net income (loss) per share $ 0.60 ($ 0.01) $ 0.49 ($ 0.13) =========== =========== =========== =========== Weighted average common and common equivalent shares outstanding 3,479,461 3,562,794 3,479,461 3,449,278 =========== =========== =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements 4 DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the Period Ended June 28, 1996
Cumulative Class A Class B Foreign Common Shares Common Shares Translation Shares Amount Shares Amount Adjustment ------ ------ ------ ------ ---------- Balances, June 30, 1995 2,040,000 $14,554 873,400 $1,714 ($143) Net income Foreign currency translation adjustment 4 Excess pension liability adjustment Dividends on Redeemable Preferred Class A Shares, $3.40 per share Accretion on Redeemable Preferred Class B Shares Acquisition of Common Shares (873,400) (1,714) Redemption of Redeemable Preferred Shares Issuance of Common Shares for cash, net is issuance costs 764,500 2,929 485,500 1,942 --------------------------------------------------------------------------------- Balances, December 31, 1995 2,804,500 17,483 485,500 1,942 (139) Net income (loss) Foreign currency translation adjustment (2) Conversion of Class B Common Shares to Class A Common Shares 485,500 1,942 (485,500) (1,942) Conversion of Class A Common Shares to Class B Common Shares (1,522,550) (10,123) 1,522,550 10,123 Exercise of Warrants 346,600 0 Retirement of Treasury shares (2,000) (81) Issuance of Common Shares for cash, net of issuance costs 1,974,750 22,579 --------------------------------------------------------------------------------- Balances, June 28, 1996 4,086,800 $31,800 1,522,550 10,123 ($141) ================================================================================= Excess Treasury Pension Retained Shares Liability Earnings Shares Amount Total --------- -------- ------ ------ ----- Balances, June 30, 1995 ($295) $13,647 2,000 ($81) $29,396 Net income 1,574 1,574 Foreign currency translation adjustment 4 Excess pension liability adjustment 245 245 Dividends on Redeemable Preferred Class A Shares, $3.40 per share (170) (170) Accretion on Redeemable Preferred Class B Shares (69) (69) Acquisition of Common Shares (3,680) (5,394) Redemption of Redeemable Preferred Shares (2,972) (2,972) Issuance of Common Shares for cash, net is issuance costs 4,871 ----------------------------------------------------------------- Balances, December 31, 1995 (50) 8,330 2,000 (81) 27,485 Net income (loss) (449) (449) Foreign currency translation adjustment (2) Conversion of Class B Common Shares to Class A Common Shares 0 Conversion of Class A Common Shares to Class B Common Shares 0 Exercise of Warrants 0 Retirement of Treasury shares (2,000) 81 0 Issuance of Common Shares for cash, net of issuance costs 22,579 ----------------------------------------------------------------- Balances, June 28, 1996 ($50) $7,881 0 $0 $49,613 =================================================================
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements 5 DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Fiscal Months Ended June 30, 1995 and June 28, 1996
June 30, June 28, 1995 1996 ------- -------- (Unaudited) (Unaudited) (Amounts in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 2,131 ($ 449) Adjustments to reconcile net income (loss) to net cash used in operating activities: Extraordinary loss on extinguishment of debt -- 2,314 Depreciation 1,183 1,872 Amortization of goodwill and intangibles 699 832 Deferred income taxes -- (118) Amortization of debt discount and deferred financing costs 148 136 Loss (gain) on sales of assets (3) (6) Change in assets and liabilities, net of the effects of acquisition: Accounts receivable (6,021) (7,455) Inventories (1,031) (2,267) Rental equipment (552) (539) Accounts payable 2,083 2,495 Accrued liabilities (274) (47) Due to Ripplewood Holdings LLC (Note 3) -- 611 Other, net (127) 431 ------- -------- Net cash used in operating activities (1,764) (2,190) ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Property, plant and equipment additions (1,048) (1,255) Proceeds from sales of assets 4 5 Acquisition of the net assets of Steel Structures, Inc. (Note 6) -- (3,800) ------- -------- Net cash used in investing activities (1,044) (5,050) ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of long-term debt, net 2,330 27,293 Repayment of long-term debt -- (40,000) Prepayment premium on extinguishment of long-term debt -- (2,400) Financing costs and fees -- (235) Issuance of common stock -- 22,579 ------- -------- Net cash provided by financing activities 2,330 7,237 ------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 14 (2) ------- -------- Net decrease in cash (464) (5) CASH, beginning of period 464 643 ------- -------- CASH, end of period $ 0 $ 638 ======= ======== SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid for income taxes $ 346 $ 502 Cash paid for interest 1,642 5,091 SUPPLEMENTAL NONCASH DISCLOSURES: Accretion of preferred stock 123 -- Accrual of preferred stock dividends 300 --
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements 6 DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995 AND JUNE 28, 1996 (AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS) (UNAUDITED) (1) CONSOLIDATED FINANCIAL STATEMENTS The interim consolidated financial statements included herein have been prepared by the Company, without audit, and include, in the opinion of management, all adjustments necessary to state fairly the information set forth therein. Any such adjustments were of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these unaudited consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's annual financial statements for the year ended December 31, 1995. (2) ACCOUNTING POLICIES The interim consolidated financial statements have been prepared in accordance with the accounting policies described in the notes to the Company's consolidated financial statements for the year ended December 31, 1995. While management believes that the procedures followed in the preparation of interim financial information are reasonable, the accuracy of some estimated amounts is dependent upon facts that will exist or calculations that will be accomplished at year end. Examples of such estimates include changes in the LIFO reserve (based upon the Company's best estimate of inflation to date) and management bonuses. Any adjustments pursuant to such estimates during the fiscal quarter were of a normal recurring nature (a) Fiscal Quarter - The Company's fiscal quarters are defined as the periods ending on the last Friday in March, June or September. (b) Inventories - Substantially all finished products and raw materials are stated at the lower of last in, first out (LIFO) cost or market (which approximates current cost). Following is a summary of the components of inventories as of December 31, 1995 and June 29, 1996:
December 31, June 28, 1995 1996 ------- ------- Raw materials ........................... $ 2,562 $ 5,095 Finished goods .......................... 9,830 10,443 ------- ------- 12,392 15,538 LIFO reserve ............................ --- --- ------- ------- $12,392 $15,538 ======= =======
(3) BALANCE DUE TO RIPPLEWOOD HOLDINGS LLC At June 28, 1996, the Company owed $611 to Ripplewood Holdings LLC. The 7 balance represents $600 for services associated with the stock offering and $11 in reimbursable expenses. (4) CREDIT ARRANGEMENTS On June 17, 1996, the Company entered into an Amended Credit Facility (as so amended, the "Amended Credit Facility") with Bank One, Dayton, NA and Bank of America Illinois (collectively, the "Banks"). The Amended Credit Facility provided for (I) a Term Loan and (ii) a Revolving Credit Facility, each of which will be secured by substantially all the assets of the Company. At June 28, 1996, $36,730 was available under the Revolving Credit Facility, of which $27,600 was outstanding at interest rates of 8.35%. Average borrowings under the Revolving Credit Facility and its predecessors were $17,637 and $1,744 during the six fiscal months ended June 28, 1996 and June 30, 1995, respectively, at an approximate weighted average interest rate of 8.3% and 12.3%, respectively. The maximum borrowings outstanding during the six fiscal months ended June 28, 1996 and June 30, 1995, was $27,600 and $3,120, respectively. Following is a summary of the Company's long-term debt as of December 31, 1995 and June 28, 1996:
December 31, June 28, 1995 1996 ----------- ----------- Revolving lines of credit $ 13,280 $ 27,600 Term Loan, bearing interest at 8.35% -- 13,000 City of Parsons, KS Economic Development Loan 307 284 Unsecured Senior Promissory notes, prepaid during 1996 (Note 5) 40,000 -- Unamortized debt discount (575) -- ----------- ----------- Total long-term debt 53,012 40,884 Less current portion (32) (3,282) ----------- ----------- Long-term portion $ 52,980 $ 37,602 =========== ===========
(5) EXTRAORDINARY LOSS ON DEBT EXTINGUISHMENT In June 1996, the Company extinguished its $40,000 of unsecured promissory notes. In conjunction therewith, the Company paid a prepayment premium of $2,400 and expensed unamortized financing costs and debt discount of $795 and $537, respectively. The Company recorded an extraordinary loss of $2,314, net of an income tax effect of $1,418. The Company funded this repayment with $22,579 in proceeds from its public stock offering, $13,000 in Term Loans and $6,821 in draws on its Revolving Credit Facility. (6) ACQUISITION OF THE NET ASSETS OF STEEL STRUCTURES, INC. On April 29, 1996, the Company purchased, certain of the assets and assumed certain of the liabilities of Steel Structures, Inc., a privately held regional concrete paving products manufacturer based in Kankakee, IL. Steel Structures was an epoxy coater and fabricator of paving products and, prior to the acquisition, was both a major supplier of epoxy coating to the Company and competitor in its concrete paving product line. Certain of the Company's existing paving manufacturing equipment is being relocated from another plant 8 to the former Steel Structures facility in Kankakee. The acquisition will be operated by the Company under the name American Highway Technology. The purchase price, including acquisition related costs, is $5,614, subject to post closing adjustments. As of June 28, 1996, the Company has paid $3,800 of the purchase price with the balance due over the next two years. The acquisition has been accounted for as a purchase. The cost of the acquisition was funded through draws under the Revolving Credit Facility. This purchase price has been allocated on the basis of appraised fair value of the assets acquired and liabilities assumed. Certain appraisals and evaluations are preliminary estimates and may change. In management's opinion, the preliminary allocation of the purchase price is not expected to differ materially from the final allocation. Current assets $3,262 Property, plant and equipment 1,477 Goodwill and intangibles 1,898 ------ Total assets acquired 6,637 Liabilities assumed (1,023) ------ Net assets acquired $5,614 ======
(7) PUBLIC OFFERING OF COMPANY SHARES On June 20 ,1996, the Company completed an initial public offering of Company 1,974,750 shares of Class A Common Shares and received proceeds of $22,579, net of expenses. (8) SUBSEQUENT EVENT - PUBLIC OFFERING OF COMPANY SHARES On July 16, 1996, the underwriters of the Company's initial public offering of Class A Common Shares exercised a portion of their over-allotment option pursuant to which and the Company issued and sold 56,200 shares of Class A Common Shares and Ripplewood Holdings LLC converted 56,200 shares of its Class B Common Shares into Class A Common Shares and sold those shares. The Company's proceeds of $683 from the issuance of those shares were used to reduce the outstanding balance of the Revolving Credit Facility. 9 PART I ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company is the largest North American manufacturer and distributor of specialized metal accessories used in concrete and masonry construction. The company's products are used primarily in two segments of the construction industry. Non residential building projects such as institutional buildings, including schools, hospitals and prisons, retail sites, commercial offices and manufacturing facilities make up the first segment. The second segment is infrastructure construction projects such as highways, bridges, utilities, water and waste treatment facilities and airports. RESULTS OF OPERATIONS The following table sets forth, the Company's results of operations as a percentage of net sales:
Three fiscal months ended Six fiscal months ended June 30, 1995 June 28, 1996 June 30, 1995 June 28, 1996 ------------ ------------ ------------ ------------ Concrete accessories 100.0% 79.8% 100.0% 79.5% Masonry accessories -- 20.2 -- 20.5 ----- ------ ------- ------- Net sales 100.0 100.0 100.0 100.0 Cost of sales 69.1 68.3 69.4 68.3 ----- ------ ------- ------- Gross profit 30.9 31.7 30.6 31.7 Selling, general and administrative expenses 17.0 16.0 19.9 19.1 Amortization of goodwill and intangibles 1.3 1.2 1.6 1.4 ----- ------ ------- ------- Operating income 12.6 14.5 9.1 11.2 Interest expense, net 3.8 4.4 4.3 5.3 Other, net -- (0.1) -- (0.1) ----- ------ ------- ------- Income before taxes and extraordinary item 8.8 10.2 4.8 6.0 Provision for income taxes -- 4.0 -- 2.9 ----- ------ ------- ------- Income before extraordinary item 8.8 6.2 4.8 3.1 Extraordinary item -- (6.3) -- (3.8) ----- ------ ------- ------- Net income (loss) 8.8% (0.1)% 4.8% (0.7)% ===== ====== ======= =======
COMPARISON OF THE THREE FISCAL MONTHS ENDED JUNE 30, 1995 AND JUNE 28, 1996 The Company reported record net sales of $36,461,000 for the second quarter of 1996, a 40.3% increase from $25,982,000 for the second quarter of 1995. The increase in sales included $7,369,000 from the Company's Dur-O-Wal, Inc. subsidiary, which was acquired in October 1995. The reminder of the growth in net sales is attributable to strong levels of activity in the 10 U.S. heavy construction market and, to a lesser extent, new concrete accessory product sales. Net sales of masonry accessories in the second quarter of 1996 increased $179,000, or 2.5%, on a pro forma basis over the second quarter of 1995, reflecting a recovery from the effects of severe winter weather experienced in the first quarter of 1996. On April 29, 1996, the Company purchased, certain of the assets and assumed certain of the liabilities of Steel Structures, Inc., a privately held regional concrete paving products manufacturer based in Kankakee, IL. Steel Structures was an epoxy coater and fabricator of paving products and, prior to the acquisition, was both a major supplier of epoxy coating to the Company and competitor in its concrete paving product line. Certain of the Company's existing paving manufacturing equipment is being relocated from another plant to the former Steel Structures facility in Kankakee. The acquisition will be operated by the Company under the name American Highway Technology. This combination is excepted to provide synergies in purchasing, freight and handling costs and cross-sourcing of products. The impact of this acquisition on sales in the second quarter is estimated by management to have been approximately $900,000. Gross profit increased $3,524,000, or 43.9%, from $8,026,000 in the second quarter of 1995 to $11,550,000 in the second quarter of 1996. The increase is largely due to gross profit on the sales related to the Company's acquisition of Dur-O-Wal, but higher gross profits were also realized on the Company's sales due to improved selling prices, favorable raw material costs and, to a lesser extent, a shift in sales mix in favor of higher margin products. Major investments in fixed assets, particularly in the concrete paving products line, in 1995 are also providing improved margins in 1996. As a percentage of sales, gross profit increased from 30.9% in 1995 to 31.7% in 1996. Selling, general and administrative expenses, excluding the amortization of goodwill and intangibles ("SG&A"), increased $1,404,000, or 31.8%, from $4,414,000 in the second quarter of 1995 to $5,818,000 in the second quarter of 1996. As a percent of sales, SG&A expenses fell from 17.0% in the second quarter of 1995 to 16.0% in the second quarter of 1996. On a pro forma basis with Dur-O-Wal, SG&A expenses would have been $5,337,000, or 16.1% of sales, in the second quarter of 1995. Additional expenses associated with the new Kankakee operation acquired in April 1996 and the Westfield, MA service center opened in July 1995 also contributed to the dollar increase in the second quarter of 1996. Operating income of $5,306,000 in the second quarter of 1996 was also a record, up from $3,262,000 in the first six months of 1995, an increase of 62.7%. Operating income increased due to the factors discussed above. On a pro forma basis including Dur-O-Wal, 1995 second quarter operating income would have been $3,996,000. Net interest expense increased by $614,000, or 62.7%, from $980,000 in the second quarter of 1995 to $1,594,000 in the second quarter of 1996, due to higher debt levels resulting from the acquisition of Dur-O-Wal, the redemption of $10,000,000 of the Company's preferred shares in October 1995 and the acquisition of the net assets from Steel Structures. 11 Income before income taxes and extraordinary items was $3,736,000 in the second quarter of 1996 compared to $2,282,000 for the second quarter of 1995, for the reasons discussed above. On a pro forma basis with Dur-O-Wal, income before income taxes and extraordinary item was $4,480,000 for the second quarter of 1996 compared to $3,047,000 for the second quarter of 1995. The Company did not have a provision for income taxes in the second quarter of 1995 as U.S. net operating carryforward losses were being utilized. The second quarter provision for income taxes returned to a normal level. An extraordinary loss on the extinguishment of debt in June 1996 resulted from a $2,400,000 prepayment premium on the Company's $40 million 11.75% unsecured senior notes and $1,333,000 in associated unamortized debt discount and financing costs, net of $1,419,000 in income tax benefits. The proceeds of the Company's June 1996 stock offering, and bank borrowings were used to repay the senior notes. (See Liquidity and Capital Resources below). The net loss of $48,000 in the second quarter of 1996 compares to a net income of $2,282,000 in the second quarter of 1995. The decrease is attributable to the factors described above. COMPARISON OF THE SIX FISCAL MONTHS ENDED JUNE 30, 1995 AND JUNE 28, 1996 For the first six months of 1996, net sales were a record $60,076,000, a 36.7% increase from $43,959,000 in 1995. Sales by Dur-O-Wal accounted for $12,343,000 of the sales increase. Concrete accessories increased 8.6% from $43,959,000 in the first six months of 1995 to $47,733,000 in the first six months of 1996, due to strong heavy construction activity in the U.S., the April 1996 acquisition of Steel Structures and, to a lesser extent, new concrete accessories product sales. Net sales of masonry accessories decreased $827,000, to $12,343,000 for the first half of 1996 from $13,170,000, on a pro forma basis with Dur-O-Wal, from record volumes in 1995. Masonry accessory sales declined in the first half due to severe winter weather which adversely affected the sales of hot-dipped galvanized masonry accessories which are used in exterior building walls. In addition, a competitor entered the market for hot-dipped masonry accessories in late 1995 which also adversely affected sales of this product in the first six months of 1996. Gross profit for the first six months of 1996 was $19,019,000, a 41.4% increase over $13,448,000 in the first half of 1995. As a percent of sales, gross margins were also improved at 31.7%, up from 30.6% in 1995. The increase in gross profit is attributable to improved selling prices, favorable raw material costs and, to a lesser extent, a shift in sales mix in favor of higher margin products. Major investments in fixed assets, particularly in the concrete paving products line, in 1995 are also providing payback in the form of improved margins in 1996. On a pro forma basis with Dur-O-Wal, gross profits were up 13.9%, from $16,694,000 for the first half of 1995. SG&A expenses were down as a percent of sales from 19.9% in the first half of 1995 to 19.1% in the first half of 1996. SG&A expenses increased $2,718,000, or 31.1% from $8,729,000 in the 12 first half of 1995 compared to $11,447,000 in the first half of 1996. On a pro forma basis with Dur-O-Wal, SG&A expenses in the first half of 1995 were $10,473,000, or 18.3% of sales. SG&A expenses were up 8.1% , or $974,000, over 1995 pro forma first half results in part due to new product literature and promotional costs, the addition of the Kankakee operation in April 1996 and the addition of a new service center in Westfield, MA in July 1995. Operating income of $6,740,000 in the first six months of 1996 was also a record, up from $4,020,000 in the first six months of 1995, an increase of 67.7%. Operating income increased due to the factors discussed above. On a pro forma basis with Dur-O-Wal, 1995 first half operating income would have been $5,308,000. Interest expense increased 68.3% from $1,889,000 in the first half of 1995 to $3,179,000 in the first half of 1996, due to higher debt resulting from the acquisition of Dur-O-Wal, the redemption of $10,000,000 of the Company's preferred shares in October 1995 and the acquisition of the Kankakee operation in April 1996. On a pro forma basis with Dur-O-Wal and the stock offering, interest expense would have been $1,767,000 in the first half 1995 compared to $1,781,000 in the first half of 1996. Income before income taxes and extraordinary item increased to $3,577,000 in the first half of 1996 compared to $2,131,000 for the same period in 1995, due to the reasons discussed above. On a pro forma basis, income before income taxes and extraordinary item increased to $5,100,000 for the first half of 1996 compared to $3,505,000 in 1995. The Company did not have a provision for income taxes in the first half of 1995 as U.S. net operating carry forward losses were being utilized. The first half provision for income taxes returned to a normal level. An extraordinary loss on the extinguishment of debt in June 1996 resulted from a $2,400,000 prepayment premium on the extinguishment of the Company's $40 million 11.75% unsecured senior notes and $1,333,000 in associated unamortized debt discount and financing costs, net of $1,419,000 in income tax benefits. The proceeds of the June 1996 stock offering, new term notes and additional borrowing on the line of credit were used to repay the senior notes. (See the Liquidity and Capital Resources below.) The Company had a net loss of $449,000 for the first half of 1996. Net income in 1995 was $2,131,000 for the first half. The decrease is attributable to the factors described above. LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements relate primarily to capital expenditures, debt service and the cost of acquisitions. Historically, the Company's primary sources of financing have been cash from operations, borrowings under its revolving line of credit and, in 1994 and 1995, the issuance of long-term debt and equity. Net cash used in operating activities for the first six months of 1996 was $2,190,000. Uses of 13 operating cash flow included seasonal increases in accounts receivable and inventory of $7,455,000 and $2,267,000, respectively. Sources of operating cash flow for the first six months of 1996 included $1,865,000 in income before the extraordinary item, $2,704,000 from non-cash charges for depreciation and amortization and seasonal growth in accounts payable of $2,495,000. At June 28, 1996, working capital was $16,276,000 compared to $14,142,000 at June 30, 1995. Deferred tax benefits recognized in the latter part of 1995, resulted in $1,814,000 of the increase, while $2,185,000 of the increase is attributable to the acquisition of Dur-O-Wal, Inc. The current portion of the new borrowings decreased working capital by $3,250,000. Approximately $850,000 of the increase is a result of the acquisition of the net assets of Steel Structures, Inc. The ratio of current assets to current liabilities was 1.6 to 1.0 at June 28, 1996 and 2.1 to 1.0 at June 30, 1995. On June 17, 1996, the Company entered into the Amended Credit Facility with Bank One, Dayton, NA and Bank of America Illinois. The Amended Credit Facility provides for (i) term loans to the Company and Dur-O-Wal (together, the "Term Loan") and (ii) revolving credit facilities for the Company and Dur-O-Wal (together, the "Revolving Credit Facility"), each of which is secured by substantially all of the assets of the Company and Dur-O-Wal. The Revolving Credit Facility will terminate in four years and has interest rate options based on (a) Bank One, Dayton, NA's prime rate or (b) LIBOR plus an amount between 1.00% and 2.75% (LIBOR plus 1.75% at June 28, 1996) depending on the level of EBITDA and certain other financial ratios. A commitment fee of between 0.125% and 0.50% per annum (0.25% per annum at June 28, 1996) will be payable on the average unused amount with the rate dependent on the level of EBITDA and certain other financial ratios. Amounts available under the Revolving Credit Facility will be equal to the lessor of (i) $37,000 or (ii) the sum of (x) 85% of eligible accounts receivable, (y) 60% of eligible inventories and (z) an amount of up to $10,000,000 at closing, decreasing in steps to zero on October 1, 1997. At June 28, 1996, $36,730,000 of the Revolving Credit Facility was available, of which $27,600,000 of borrowings were outstanding. The principal amount of the Term Loan is $13,000,000 which is due in full in four years with mandatory quarterly principal payments of $812,500 plus interest beginning on October 1, 1996. The Term Loan permits the Company to choose from various interest rate options. The Amended Credit Facility contains restrictive covenants, which, among other things, require the Company to maintain certain specified financial ratios and limit the Company's ability to incur debt, make acquisitions and capital expenditures and pay dividends. The Company used $7,056,000 in Revolving Credit Facility borrowings and $13,000,000 in Term Loan borrowing together with the net public stock offering proceeds of $22,579,000 to repay $40,000,000 in long term debt, $2,400,000 in associated prepayment premium and $235,000 in financing costs on the Amended Credit Facility. Borrowing levels vary during the course of a year based upon the Company's seasonal working capital needs. The Company's sales are highly seasonal due to the impact weather on the heavy construction industry. Beginning at the end of the first quarter, the Company's sales typically increase sharply, reaching a peak around the end of the second quarter or beginning of the third quarter. The Company's accounts receivable normally increase from the beginning of the year to 14 the end of the third quarter. Inventory generally begins to buildup during the middle of the first quarter and remains at a high level until the fourth quarter. This results in a seasonal need for working capital. At June 28, 1996, the Company had $40,884,000 of long-term debt outstanding, $3,282,000 of which was current. The approximate weighted average interest rate on the outstanding debt was 8.35%. The Company invested $1,250,000 in property, plant and equipment additions during the first six months of 1996 and has additional planned capital expenditures during the remainder of 1996 of approximately $1,100,000. In addition, the Company has paid $3,800,000 of the $5,614,000 purchase price for the net assets of Steel Structures, Inc. $1,014,000 of the remaining purchase price will be paid during the third quarter of 1996 with the balance payable over the next two years. The Company believes that its liquidity, capital resources and cash flows from operations are sufficient to fund planned capital expenditures, working capital requirements and debt service in absence of additional acquisitions. The Company intends to fund future acquisitions with cash, securities or a combination of cash and securities. To the extent the Company uses cash for all or part of any such acquisitions, it expects to raise such cash primarily from cash generated from operations, borrowings under the Amended Credit Facility or, if feasible and attractive, issuances of long-term debt or additional Class A Common Shares. 15 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DAYTON SUPERIOR CORPORATION --------------------------- DATE: August 9, 1996 BY: /s/Richard L. Braswell ------------------------ ------------------------------------------- Richard L. Braswell Vice President Finance and Treasurer (Principal Financial and Accounting Officer) 16 INDEX TO EXHIBITS ----------------- (11) Statement Re: Computation of Earnings Per Share: 11.1 Computation of Earnings Per Share...................................... * (27) Financial Data Schedule......................................................... * - ------------------- "*" Indicates the Exhibit is filed with this Report.
EX-11 2 EXHIBIT 11 1 DAYTON SUPERIOR CORPORATION EXHIBIT 11 - COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Three Fiscal Months Ended Six Fiscal Months Ended ------------------------- ----------------------- June 30, June 28, June 30, June 28, 1995 1996 1995 1996 -------------------------- -------------------------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Amounts in thousands, except share and per share amounts) Weighted average number of common shares outstanding during the period 2,911,400 3,517,584 2,911,400 3,404,068 Common equivalent shares outstanding (a) 568,061 45,210 568,061 45,210 Weighted average common and common -------------------------- -------------------------- equivalent shares outstanding 3,479,461 3,562,794 3,479,461 3,449,278 Income before income taxes and extraordinary item $2,282 $2,266 $2,131 $1,865 Extraordinary item -- (2,314) -- (2,314) -------------------------- -------------------------- Net income 2,282 (48) 2,131 (449) Dividends on Redeemable Preferred Shares (150) -- (300) -- Accretion on Redeemable Preferred Shares (61) -- (123) -- -------------------------- -------------------------- Net income available to common shareholders $2,071 ($48) $1,708 ($449) ========================== ========================== Income per share before extraordinary item $0.60 $0.64 $0.49 $0.54 Extraordinary item -- (0.65) -- (0.67) -------------------------- -------------------------- Net income per share $0.60 ($0.01) $0.49 ($0.13) ========================== ========================== Fully diluted earnings per share are not significantly different from primary earnings per share. ======================== Notes: (a) Common equivalent share in periods with a loss are shares issuable upon the exercise of stock options and warrants granted within 12 months of the stock offering.
EX-27 3 EXHIBIT 27
5 0000854709 DAYTON SUPERIOR CORPORATION 1,000 U.S. DOLLARS 3-MOS DEC-31-1996 MAR-30-1996 JUN-28-1996 1 638 0 21,413 720 15,538 41,653 30,258 11,650 118,441 25,377 37,602 41,923 0 0 7,690 118,441 60,076 60,076 41,057 41,057 12,263 53 3,179 3,577 1,712 1,865 1,865 (2,314) 0 (449) (0.13) (0.13)
-----END PRIVACY-ENHANCED MESSAGE-----