-----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, PC7cFvanm20EzL0uU5v8plZDcSzlliDhK2NqLUAa7imrhgABY5hDO+18G59vuA0h cRvo2NTfNw2RkL/bxrJOBw== /in/edgar/work/20000814/0000950152-00-006095/0000950152-00-006095.txt : 20000921 0000950152-00-006095.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950152-00-006095 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAYTON SUPERIOR CORP CENTRAL INDEX KEY: 0000854709 STANDARD INDUSTRIAL CLASSIFICATION: [3317 ] IRS NUMBER: 310676346 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11781 FILM NUMBER: 700742 BUSINESS ADDRESS: STREET 1: 7777 WASHINGTON VILLAGE DRIVE STREET 2: SUITE 130 CITY: DAYTON STATE: OH ZIP: 45459 BUSINESS PHONE: 9374287172 MAIL ADDRESS: STREET 1: 7777 WASHINGTON VILLAGE DRIVE STREET 2: SUITE 130 CITY: DAYTON STATE: OH ZIP: 45459 10-Q 1 e10-q.txt DAYTON SUPERIOR CORPORATION FORM 10-Q 1 UNITED STATES 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 30, 2000 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.) 7777 Washington Village Dr., Suite 130 Dayton, Ohio 45459 - -------------------------------------- ---------- (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: 937-428-6360 NOT APPLICABLE ---------------------------------------------------- (Former name, former address and former fiscal year, if changed from 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 ------- ------- 3,693,990 Class A Common Shares were outstanding as of August 9, 2000 2 PART I. - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS Dayton Superior Corporation and Subsidiaries Consolidated Balance Sheets As of June 30, 2000 and December 31, 1999 (Amounts in thousands) (Unaudited)
June 30, December 31, 2000 1999 ASSETS --------- ------------ Current assets Cash $ 391 $ 4,553 Accounts receivable, net of allowances for doubtful accounts and sales returns and allowances of $6,918 and $5,589 67,112 45,085 Inventories (Note 4) 41,266 39,340 Prepaid expenses and other current assets 3,969 5,551 Prepaid income taxes 5,655 1,038 Future income tax benefits 3,921 3,998 --------- --------- Total current assets 122,314 99,565 --------- --------- Rental equipment, net (Note 4) 63,815 58,748 --------- --------- Property, plant and equipment 76,697 73,651 Less accumulated depreciation (31,991) (29,741) --------- --------- Net property, plant and equipment 44,706 43,910 --------- --------- Goodwill and intangible assets, net of accumulated amortization 80,690 75,522 Other assets 940 934 --------- --------- Total assets $ 312,465 $ 278,679 --------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current portion of long-term debt (Note 5) $ 7,590 $ 5,032 Accounts payable 29,973 22,802 Accrued compensation 10,287 11,302 Other accrued liabilities 9,247 9,960 Payable for lawsuit judgment (Note 9) 15,000 -- --------- --------- Total current liabilities 72,097 49,096 Long-term debt (Note 5) 212,590 100,141 Deferred income taxes 15,005 16,566 Other long-term liabilities 4,662 4,548 --------- --------- Total liabilities 304,354 170,351 --------- --------- Company-obligated mandatorily redeemable convertible trust preferred securities of Dayton Superior Capital Trust which holds solely debentures -- 19,556 --------- --------- Shareholders' equity Class A common shares 138,623 47,417 Class A treasury shares -- (387) Cumulative other comprehensive income (294) (254) Retained earnings (accumulated deficit) (130,218) 41,996 --------- --------- Total shareholders' equity 8,111 88,772 --------- --------- Total liabilities and shareholders' equity $ 312,465 $ 278,679 ========= =========
The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets. 2 3 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Income For The Three and Six Fiscal Months Ended June 30, 2000 and July 2, 1999 (Amounts in thousands) (Unaudited)
Three Fiscal Months Ended Six Fiscal Months Ended ------------------------- ------------------------- June 30, July 2, June 30, July 2, 2000 1999 2000 1999 --------- -------- -------- -------- Net sales $98,000 $88,636 $174,505 $156,832 Cost of sales 59,717 55,895 108,261 99,793 ------- ------- -------- -------- Gross profit 38,283 32,741 66,244 57,039 Selling, general and administrative expenses 23,791 19,486 47,528 40,808 Amortization of goodwill and intangibles 452 536 1,076 1,183 ------- ------- -------- -------- Income from operations 14,040 12,719 17,640 15,048 Other expenses Interest expense, net 3,728 3,049 6,456 6,024 Non-recurring item - Lawsuit judgment (Note 9) 15,000 -- 15,000 -- Other expense, net 134 85 153 85 ------- ------- -------- -------- Income (loss) before provision for income taxes and extraordinary item (4,822) 9,585 (3,969) 8,939 Provision (benefit) for income taxes (1,850) 4,314 (1,470) 4,023 ------- ------- -------- -------- Income (loss) before extraordinary item (2,972) 5,271 (2,499) 4,916 Extraordinary loss, net of income tax benefit (Note 2) (4,812) -- (4,812) -- ------- ------- -------- -------- Net income (loss) (7,784) 5,271 (7,311) 4,916 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit (267) -- (583) -- ------- ------- -------- -------- Net income (loss) available to common shareholders $(8,051) $ 5,271 $ (7,894) $ 4,916 ======= ======= ======== ========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 3 4 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Cash Flows For The Six Fiscal Months Ended June 30, 2000 and July 2, 1999 (Amounts in thousands) (Unaudited)
Six Fiscal Months Ended -------------------------- June 30, July 2, 2000 1999 --------- -------- Cash Flows From Operating Activities: Net income (loss) $ (7,311) $ 4,916 Adjustments to reconcile net income to net cash used in operating activities: Extraordinary loss 4,812 -- Lawsuit judgment (Note 9) 15,000 -- Depreciation 6,175 5,948 Amortization of goodwill and intangibles 1,076 1,183 Deferred income taxes (1,484) (640) Amortization of deferring financing costs and debt discount 492 419 Gain on sales of rental equipment and property, plant and equipment (3,458) (3,345) Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable (21,885) (12,740) Inventories (1,720) (1,869) Prepaid income taxes (1,668) (486) Accounts payable 7,005 2,695 Accrued liabilities and other long-term liabilities (1,665) (3,538) Other, net 941 1,691 --------- -------- Net cash used in operating activities (3,690) (5,766) --------- -------- Cash Flows From Investing Activities: Property, plant and equipment additions (4,210) (3,057) Proceeds from sales of fixed assets 30 232 Rental equipment additions (10,182) (9,469) Proceeds from sales of rental equipment 5,832 5,177 Acquisitions (Note 3) (1,472) (5,575) Refunds of purchase price on acquisitions (Note 3) 2,115 -- --------- -------- Net cash used in investing activities (7,887) (12,692) --------- -------- Cash Flows From Financing Activities: Repayments of long-term debt (120,825) -- Issuance of long-term debt 212,427 19,544 Prepayment premium on extinguishments of long-term debt and interest rate swap agreements (Note 2) (476) -- Financing cost on unused long-term debt commitment (Note 2) (750) -- Financing costs incurred (9,616) -- Purchase of treasury shares -- (242) Redemption of Class A common shares (164,315) -- Issuance of Class A common shares, net of issuance costs 91,593 181 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit (583) -- --------- -------- Net cash provided by financing activities 7,455 19,483 --------- -------- Effect of Exchange Rate Changes on Cash (40) 62 --------- -------- Net increase (decrease) in cash (4,162) 1,087 Cash, beginning of period 4,553 560 --------- -------- Cash, end of period $ 391 $ 1,647 ========= ======== Supplemental Disclosures: Cash paid for income taxes $ 532 $ 5,139 Cash paid for interest 5,099 5,822 Conversion of Company-obligated mandatorily redeemable convertible trust preferred securities into long-term debt 23,375 -- Redemption of Class A common shares in conjunction with acquisition (Note 3) -- (117)
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 4 5 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Comprehensive Income For The Three and Six Fiscal Months Ended June 30, 2000 and July 2, 1999 (Amounts in thousands) (Unaudited)
Three Fiscal Months Ended Six Fiscal Months Ended ------------------------- ----------------------- June 30, July 2, June 30, July 2, 2000 1999 2000 1999 ---------- -------- -------- -------- Net income (loss) $(2,972) $5,271 $(2,499) $4,916 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit (267) -- (583) -- Other comprehensive income: Foreign currency translation adjustment (48) 44 (40) 62 ------- ------ ------- ------ Comprehensive income (loss) $(3,287) $5,315 $(3,122) $4,978 ======= ====== ======= ======
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 5 6 DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2000 AND JULY 2, 1999 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER 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 accounting principles generally accepted in the United States 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, 1999. (2) RECAPITALIZATION On January 19, 2000, the Company signed a definitive merger agreement with an affiliate of Odyssey Investment Partners, LLC, the manager of a New York based private equity investment fund, for $27.00 per share in cash. The transaction was completed on June 16, 2000 and was recorded as a recapitalization. In connection with the recapitalization, the Company refinanced its existing bank indebtedness. Additionally, the Dayton Superior Capital Trust, which held solely debentures, was dissolved. The Company-obligated mandatorily redeemable convertible trust preferred securities converted to debentures having the right to receive cash in the amount of $22.00, plus accrued dividends, per preferred security. As a result, the Company recorded an extraordinary loss of $4,812, comprised of the following:
Expense deferred financing costs on previous long-term debt $ 2,719 Prepayment premium on extinguishments of long-term debt and interest rate swap agreements 476 Expense issuance costs on Company-obligated mandatorily redeemable convertible trust preferred securities 1,691 Prepayment premium on conversion of Company-obligated mandatorily redeemable convertible trust preferred securities into debentures 2,125 Financing cost for unused long-term debt commitment 750 ------- 7,761 Income tax benefit (2,949) ------- Extraordinary loss $ 4,812 =======
6 7 (3) ACQUISITIONS (a) Symons Corporation--On September 29, 1997, the Company purchased the stock of Symons Corporation ("Symons"). The purchase agreement between the Company and the former stockholders of Symons ("the Former Stockholders") relating to the acquisition provides for an adjustment to the purchase price under certain circumstances. In the second quarter of 2000, the Company received a purchase price reduction of approximately $1,800, net of professional fees, which was recorded as a reduction of goodwill. (b) Cempro, Inc.--Effective January 1, 1999, the Company acquired substantially all of the assets and assumed certain of the liabilities of Cempro, Inc. ("Cempro") for approximately $5,400 in cash. The business is being operated as a part of the Company's concrete accessories business. The acquisition has been accounted for as a purchase, and the results of Cempro have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the estimated fair values of the assets acquired and liabilities assumed. Certain appraisals and evaluations are preliminary and may change. Pro forma financial information is not required. (c) Symons Concrete Forms, Inc.--In May 1998, the Company purchased the stock of Symons Concrete Forms, Inc. (formerly known as CAI). A purchase price reduction of approximately $100 (6,456 Class A Common Shares) in 1999 related to uncollected accounts receivable. (d) Southern Construction Products, Inc.--On October 4, 1999, the Company acquired substantially all of the assets and assumed certain of the liabilities of Southern Construction Products, Inc. ("Southern") for approximately $8,300 in cash, including acquisition costs, and net of a purchase price reduction of approximately $300 received in January 2000. The business is being operated as part of the Company's masonry products and concrete accessories businesses. The acquisition has been accounted for as a purchase, and the results of Southern have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the estimated fair values of the assets acquired and liabilities assumed. Certain appraisals and evaluations are preliminary and may change. Pro forma financial information is not required. (e) Polytite Manufacturing Corp.--On February 9, 2000, the Company acquired substantially all of the assets and assumed certain of the liabilities of Polytite Manufacturing Corp. ("Polytite") for approximately $1,500 in cash, including acquisition costs and is subject to a working capital adjustment. The business is 7 8 being operated as part of the Company's masonry products and concrete accessories businesses. The acquisition has been accounted for as a purchase, and the results of Polytite have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the estimated fair values of the assets acquired and liabilities assumed. Certain appraisals and evaluations are preliminary and may change. Pro forma financial information is not required. (4) 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, 1999. 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 year end is December 31. The Company's fiscal quarters are defined as the periods ending on the Friday nearest to the end of March, June and September. (b) Inventories--Substantially all inventories of the domestic Dayton Superior and Dur-O-Wal operations are stated at the lower of last in, first out (LIFO) cost or market (which approximates current cost). All other inventories are stated at the lower of first-in, first-out (FIFO) cost or market. The Company had no LIFO reserve as of June 30, 2000 and December 31, 1999. Following is a summary of the components of inventories as of June 30, 2000 and December 31, 1999:
June 30, December 31, 2000 1999 -------- ------------ Raw materials $ 9,748 $ 8,787 Finished goods and work in progress 34,617 32,920 -------- -------- 44,365 41,707 Net realizable value reserve (3,099) (2,367) -------- -------- $ 41,266 $ 39,340 ======== ========
8 9 (c) Rental Equipment--Rental equipment is manufactured by the Company for resale and for rent to others on a short-term basis. Rental equipment is recorded at the lower of FIFO cost or market and is depreciated over the estimated useful life of the equipment, twelve to fifteen years, on a straight-line basis. The balances as of June 30, 2000 and December 31, 1999 are net of accumulated depreciation of $12,333 and $9,855, respectively. Rental revenues and cost of sales associated with rental revenue are as follows:
Three fiscal months ended Six fiscal months ended ------------------------- ------------------------ June 30, July 2, June 30, July 2, 2000 1999 2000 1999 ---------- ------- -------- ------- Rental revenue $13,385 $12,309 $24,665 $22,818 Cost of sales 2,391 2,093 4,566 3,993
(d) Financial Instruments--Prior to the recapitalization, the Company used interest rate swaps to manage interest rate risk associated with its floating rate borrowings. The swap agreements were contracts to exchange floating rate for fixed interest payments periodically over the life of the agreements without the exchange of the underlying amounts. The differential paid or received on the interest rate agreements was recognized as an adjustment to interest expense. The interest rate swaps were terminated as a result of the recapitalization. (e) Reclassifications--Certain reclassifications have been made to the 1999 amounts to conform to their 2000 classifications. (5) CREDIT ARRANGEMENTS As of June 30, 2000, the new credit facility consists of (i) a $50,000 revolving credit facility maturing June 2006, (ii) a $30,000 acquisition facility, converting from revolving loans into term loans three years from the closing and maturing June 2006 and (iii) term loan facilities in an aggregate principal amount of $53,500, consisting of a $23,500 delayed-draw tranche A facility maturing June 2006 and a $30,000 tranche B facility maturing June 2008. The new credit facility provides that the Company will repay (i) the tranche A facility in quarterly installments commencing March 2002, (ii) the tranche B facility in quarterly installments, commencing March 2002 and (iii) the acquisition facility, in equal quarterly installments commencing three years from the closing. The new credit facility has several interest rate options. The Senior Subordinated Notes have a principal amount of $170,000 and mature in June 2009. The notes were issued at a discount, which is being accreted to the face value using the effective interest method and is reflected as interest expense. The notes were issued with warrants that allow the holder to purchase 117,276 of the Company's Class A Common Shares for $0.01 per share. 9 10 Following is a summary of the Company's long-term debt as of June 30, 2000 and December 31, 1999:
June 30, December 31, 2000 1999 --------- ------------ Revolving line of credit, weighted average interest rate of 10.8% $ 4,100 $ -- Term Loan A, weighted average interest rate of 9.3% 20,817 Term Loan B, weighted average interest rate of 9.8% 30,000 Senior Subordinated Notes, interest rate of 13.0% 170,000 -- Debt discount on Senior Subordinated Notes (12,460) -- Debentures previously held by Dayton Superior Capital Trust, interest rate of 9.1%, due on demand 2,558 -- Old Term Loan -- 100,000 Note payable to one of the Former Stockholders, 10.5% 5,000 5,000 City of Parsons, Kansas Economic Development Loan, 7.0% 165 173 --------- --------- Total long-term debt 220,180 105,173 Less current portion (7,590) (5,032) --------- --------- Long-term portion $ 212,590 $ 100,141 ========= =========
At June 30, 2000, all of the $50,000 Revolving Credit Facility was available, of which $4,100 of borrowings was outstanding. The average borrowing, maximum borrowing, and weighted average interest rate on the revolving line of credit and its predecessor for the periods indicated were as follows:
Three fiscal months Six fiscal months ended ended ----------------------- ----------------------- June 30, July 2, June 30, July 2, 2000 1999 2000 1999 ------- ------- ------- ------- Average borrowing $12,137 $32,356 $ 8,841 $27,674 Maximum borrowing 16,420 37,140 16,420 37,140 Weighted average interest rate 8.2% 6.6% 8.6% 6.8%
The new credit facility contains certain restrictive covenants which, among other things, require that the Company maintain a minimum interest coverage ratio and a minimum EBITDA level and not exceed a certain leverage ratio. (6) STOCK OPTION PLANS The Company has five stock option plans all of which provide for an option exercise price equal to the stock's market price on the date of grant and all of which are accounted for under APB Opinion No. 25, under which no compensation costs have been recognized. Had compensation cost for these plans been determined consistent with Statement of Financial Accounting Standards No.123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company's income (loss) before extraordinary item for the three and six fiscal months ended June 30, 2000 and July 2, 1999 would 10 11 have been reduced to the following pro forma amounts:
Three fiscal months ended Six fiscal months ended ------------------------- ------------------------ June 30, July 2, June 30, July 2, 2000 1999 2000 1999 -------- -------- -------- ------- Income (loss) before extraordinary item As Reported $(2,972) $5,271 $(2,499) $4,916 Pro Forma (3,009) 5,191 (2,594) 4,836
Because the SFAS 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. A summary of the activity of the Company's stock option plans for the six fiscal months ended June 30, 2000 is presented in the table below:
Weighted Average Number of Exercise Price Shares Per Share --------- ---------------- Outstanding at December 31, 1999 442,283 $ 9.28 Exercised (344,353) 8.85 -------- ------ Outstanding at June 30, 2000 97,930 $10.81 ======== ======
(7) RETIREMENT PLANS In 1999, the Company terminated and merged various defined benefit plans. As a result, the Company recorded a $797 non-recurring pension plan termination gain, $120 of which was recorded as a reduction of cost of sales and $677 of which was recorded as a reduction of selling, general, and administrative expenses. (8) SEGMENT REPORTING The Company operates in four segments, each with a general manager: concrete accessories, concrete forming systems, paving products, and masonry products. The segments are differentiated by their products and services, all of which serve the construction industry. Sales between segments are recorded at normal selling price by the selling division and at cost for the buying division, with the profit recorded as an intersegment elimination. Segment assets include accounts receivable; inventories; property, plant, and equipment; rental equipment; and an allocation of goodwill. Corporate and unallocated assets include cash, prepaid income taxes, future tax benefits, and financing costs. Export sales and sales by non-U.S. affiliates are not significant. 11 12 Information about the income (loss) of each segment and the reconciliations to the consolidated amounts for the three and six fiscal months ended June 30, 2000 and July 2, 1999 is as follows:
Three fiscal months Six fiscal months ended ended ------------------------ ------------------------- June 30, July 2, June 30, July 2, 2000 1999 2000 1999 -------- ------- -------- -------- Concrete Accessories $ 42,562 $39,730 $ 77,482 $ 70,411 Concrete Forming Systems 33,600 30,665 60,087 55,541 Paving Products 12,368 11,065 19,663 17,738 Masonry Products 9,470 7,176 17,273 13,142 -------- ------- -------- -------- Net sales to external customers $ 98,000 $88,636 $174,505 $156,832 ======== ======= ======== ======== Concrete Accessories $ 877 $ 970 $ 2,126 $ 2,127 Concrete Forming Systems 1,771 1,395 3,777 2,627 Paving Products 757 -- 1,416 -- Masonry Products 270 -- 310 -- -------- ------- -------- -------- Net sales to other segments $ 3,675 $ 2,365 $ 7,629 $ 4,754 ======== ======= ======== ======== Concrete Accessories $ 1,045 $ 918 $ 1,781 $ 1,893 Concrete Forming Systems 2,196 1,806 3,858 3,507 Paving Products 219 181 349 363 Masonry Products 268 144 468 261 -------- ------- -------- -------- Interest expense $ 3,728 $ 3,049 $ 6,456 $ 6,024 ======== ======= ======== ======== Concrete Accessories $ 7,863 $ 7,093 $ 11,990 $ 9,608 Concrete Forming Systems (11,050) 2,965 (10,641) 3,268 Paving Products 1,559 950 1,410 451 Masonry Products 530 526 348 140 Corporate (1,678) (732) (3,161) (2,130) Intersegment Eliminations (2,046) (1,217) (3,915) (2,398) -------- ------- -------- -------- Income (loss) before income taxes and extraordinary item $ (4,822) $ 9,585 $ (3,969) $ 8,939 ======== ======= ======== ======== Concrete Accessories $ 824 $ 826 $ 1,718 $ 1,579 Concrete Forming Systems 1,645 1,888 3,248 3,214 Paving Products 231 214 445 437 Masonry Products 378 361 729 693 Corporate 21 12 35 25 -------- ------- -------- -------- Depreciation $ 3,099 $ 3,301 $ 6,175 $ 5,948 ======== ======= ======== ======== Concrete Accessories $ 353 $ 353 $ 710 $ 720 Concrete Forming Systems (80) 21 17 130 Paving Products 42 54 71 118 Masonry Products 137 108 278 215 -------- ------- -------- -------- Amortization of goodwill and intangibles $ 452 $ 536 $ 1,076 $ 1,183 ======== ======= ======== ========
12 13 Information regarding capital expenditures by segment and the reconciliation to the consolidated amounts for the three and six fiscal months ended June 30, 2000 and July 2, 1999 is as follows:
Three fiscal months ended Six fiscal months ended ------------------------- ----------------------- June 30, July 2, June 30, July 2, 2000 1999 2000 1999 --------- --------- --------- ------- Concrete Accessories $ 921 $ 569 $ 1,545 $1,316 Concrete Forming Systems 454 303 957 688 Paving Products 265 186 733 461 Masonry Products 292 358 859 513 Corporate 71 34 116 79 ------ ------ ------- ------ Property, Plant, and Equipment Additions $2,003 $1,450 $ 4,210 $3,057 ====== ====== ======= ====== Concrete Accessories $ 415 $ 615 $ 1,315 $ 943 Concrete Forming Systems 5,594 2,842 8,854 8,526 Masonry Products 13 -- 13 -- ------ ------ ------- ------ Rental Equipment Additions $6,022 $3,457 $10,182 $9,469 ====== ====== ======= ======
There has been no material change in the relative assets employed by each segment since December 31, 1999. (9) CONTINGENCIES Symons is currently a defendant involved in a civil suit brought by EFCO Corp., a competitor of Symons in one portion of their business. EFCO Corp. alleged that Symons engaged in false advertising, misappropriation of trade secrets, intentional interference with contractual relations, and certain other activities. After a jury trial, preliminary damages of approximately $14,000 were awarded against Symons in January 1999. In ruling on post-trial motions in April 1999, the Judge dismissed EFCO's claim of intentional interference with contractual relations, but increased the damages awarded to EFCO by $100. Symons appealed the trial court's decision to the United States Court of Appeals for the Eighth Circuit. A three-judge panel issued its decision on July 18, 2000, affirming the district court's ruling in all respects. On August 1, 2000, Symons filed a petition for a rehearing before the full court of appeals. As a result of the decision of the Court of Appeals, the Company has recorded a $15,000 pre-tax liability for the judgment and estimated post-judgment interest. In the event Symons is unsuccessful in its petition for a rehearing, payment of the judgment may have an adverse effect on the Company's consolidated financial position, results of 13 14 operations, or cash flows, even though the Company has available financial resources to fund the payment. (10) SUBSEQUENT EVENT In July 2000, the Company acquired the stock of Conspec Marketing and Manufacturing Co., Inc., Conspec Performance Products, Inc. and Bristol Investments, Inc. (collectively, "Conspec") for approximately $23,500 in cash, including approximately $1,000 in acquisition costs, which was funded through an increase to the tranche B credit facility. The purchase price is subject to a working capital adjustment. The acquisition has been accounted for as a purchase, and the results of Conspec will be included in the accompanying consolidated financial statements from the date of acquisition. The purchase price will be allocated based on the estimated fair values of the assets acquired and liabilities assumed. Pro forma financial information is not required. 14 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW We believe we are the largest North American manufacturer and distributor of metal accessories and forms used in concrete construction and of metal accessories used in masonry construction. Although almost all of our products are used in concrete or masonry construction, the function and nature of the products differ widely. As of June 30, 2000, we have four principal operating divisions, which are organized around the following product lines: o Concrete Accessories; o Concrete Forming Systems; o Paving Products; and o Masonry Products. ACQUISITIONS We have completed and integrated four acquisitions since the beginning of 1999. These acquisitions are summarized in the following table:
Purchase Price Date Business Acquired Division (In millions) ---- ----------------- -------- -------------- January 1999 Cempro Concrete Accessories $5.4 October 1999 Southern Construction Products Masonry Products and Concrete Accessories 8.3 February 2000 Polytite Masonry Products and Concrete Accessories 1.5* July 2000 Conspec Chemicals 23.5*
*Subject to working capital adjustment 15 16 RESULTS OF OPERATIONS The following table summarizes the Company's results of operations as a percentage of net sales.
THREE FISCAL MONTHS ENDED SIX FISCAL MONTHS ENDED ------------------------- ----------------------- June 30, July 2, June 30, July 2, 2000 1999 2000 1999 --------- ------- --------- -------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 60.9 63.1 62.0 63.6 ----- ----- ----- ----- Gross profit 39.1 36.9 38.0 36.4 ----- ----- ----- ----- Selling, general and administrative expenses 24.3 22.0 27.3 26.0 Amortization of goodwill and intangibles 0.5 0.6 0.6 0.8 ----- ----- ----- ----- Total selling, general and administrative expenses 24.8 22.6 27.9 26.8 ----- ----- ----- ----- Income from operations 14.3 14.3 10.1 9.6 Interest expense, net 3.9 3.5 3.8 3.9 Nonrecurring item-Lawsuit judgment 15.3 -- 8.6 -- ----- ----- ----- ----- Income (loss) before income taxes and extraordinary item (4.9) 10.8 (2.3) 5.7 Provision (benefit) for income taxes (1.9) 4.9 (0.9) 2.6 ----- ----- ----- ----- Income (loss) before extraordinary item (3.0) 5.9 (1.4) 3.1 Extraordinary item, net of income tax benefit (4.9) -- (2.8) -- ----- ----- ----- ----- Net income (loss) (7.9) 5.9 (4.2) 3.1 Dividends from Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit (0.3) -- (0.3) -- ----- ----- ----- ----- Net income (loss) available to common shareholders (8.2%) 5.9% (4.5%) 3.1% ===== ===== ===== =====
COMPARISON OF THREE FISCAL MONTHS ENDED JUNE 30, 2000 AND JULY 2, 1999 NET SALES Net sales increased $9.4 million, or 10.6%, to $98.0 million in the second quarter of 2000 from $88.6 million in the second quarter of 1999. The following table summarizes our net sales by segment:
Three fiscal months ended ---------------------------------------------------- June 30, 2000 July 2, 1999 ---------------------- ---------------------- (In thousands) Net Sales % Net Sales % % Change --------- ----- --------- ----- -------- Concrete accessories $43,439 44.3% $40,700 45.9% 6.7% Concrete forming systems 35,371 36.1 32,060 36.2 10.3 Paving products 13,125 13.4 11,065 12.5 18.6 Masonry products 9,740 9.9 7,176 8.1 35.7 Intersegment eliminations (3,675) (3.7) (2,365) (2.7) 55.4 ------- ----- ------- ----- Net sales $98,000 100.0% $88,636 100.0% 10.6% ======= ===== ======= =====
16 17 Net sales of concrete accessories increased 6.7% to $43.4 million in the second quarter of 2000 from $40.7 million in the second quarter of 1999, primarily due to increases in volume and new product initiatives and, to a lesser extent, the contribution of Southern Construction Products. Net sales of concrete forming systems increased 10.3% to $35.4 million for the second quarter of 2000 compared to $32.1 million in the second quarter of 1999, primarily due to increases in volume and the expansion and introduction of new products, including distribution rights to two European forming systems. Net sales of paving products increased $2.1 million, or 18.6%, in the second quarter of 2000 compared to the second quarter of 1999 primarily due to an increase in volume as a result of the Transportation Equity Act for the 21st Century, known as TEA-21. Net sales of masonry products increased $2.6 million, or 35.7%, primarily due to the acquisition of Southern Construction Products. GROSS PROFIT Gross profit for the second quarter of 2000 was $38.3 million, a 16.9% increase from $32.7 million in the second quarter of 1999, primarily due to the increased net sales. Gross margin was 39.1% in the second quarter of 2000, increasing from 36.9% in 1999 primarily due to higher manufacturing efficiencies in the concrete accessories and concrete forming systems divisions. OPERATING EXPENSES Selling, general, and administrative expenses, including amortization of goodwill and intangibles ("SG&A expenses"), increased $4.2 to $24.2 million in the second quarter of 2000, from $20.0 million in the second quarter of 1999, due to acquisitions and higher volume. Additionally, the Company recorded a $0.7 million non-recurring pension plan termination gain in the second quarter of 1999. SG&A expenses increased as a percent of net sales to 24.8% in the second quarter of 2000 from 22.6% in the second quarter of 1999 (23.5% without the non-recurring pension plan termination gain), primarily due to planned spending to develop customers, markets, new products, and employees. OTHER EXPENSES Interest expense increased to $3.7 million in the second quarter of 2000 from $3.0 million in the second quarter of 1999 primarily due to increased long-term debt and higher interest rates resulting from the recapitalization. Symons is currently a defendant involved in a civil suit brought by EFCO Corp., a competitor of Symons in one portion of their business. EFCO Corp. alleged that Symons engaged in false advertising, misappropriation of trade secrets, intentional interference with contractual relations, and certain other activities. After a jury trial, preliminary damages of approximately $14,000 were awarded against Symons in January 1999. In ruling on post-trial motions in April 1999, the Judge dismissed EFCO's claim of intentional interference with contractual relations, but increased the damages awarded to EFCO by $100. 17 18 Symons appealed the trial court's decision to the United States Court of Appeals for the Eighth Circuit. A three-judge panel issued its decision on July 18, 2000, affirming the district court's ruling in all respects. On August 1, 2000, Symons filed a petition for a rehearing before the full court of appeals. While such petitions are infrequently granted, Symons believes that the three-judge panel's decision conflicts with recent Supreme Court and Eighth Circuit precedent. As a result of the decision of the Court of Appeals, the Company has recorded a one-time $15,000 pre-tax liability for the judgment and post-judgment interest. In the event Symons is unsuccessful in its petition for a rehearing, payment of the judgment may have an adverse effect on the Company's consolidated financial position, results of operations, or cash flows, even though the Company has available financial resources to fund the payment. INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM Income (loss) before income taxes and extraordinary item in the second quarter of 2000 was a loss of $4.8 million as compared to income of $9.6 million in the second quarter of 1999 and was comprised of the following:
Three fiscal months ended ------------------------------ June 30, 2000 July 2, 1999 ------------- ------------ (In thousands) Concrete accessories $ 7,863 $ 7,093 Concrete forming systems (11,050) 2,965 Paving products 1,559 950 Masonry products 530 526 Corporate (1,678) (732) Intersegment eliminations (2,046) (1,217) -------- ------- Income before income taxes $ (4,822) $ 9,585 ======== =======
Concrete accessories' income before income taxes of $7.9 million in the second quarter of 2000 increased from $7.1 million in the second quarter of 1999 due to increased net sales and manufacturing efficiencies. Concrete forming systems' income (loss) before income taxes was ($11.1) million in the second quarter of 2000 in comparison to income of $3.0 million in the second quarter of 1999 due to the lawsuit judgment. Without such judgment, concrete forming systems' income before income taxes would have increased 33% to $4.0 million, due to higher net sales and manufacturing efficiencies. Income before income taxes from paving products increased to $1.6 million in the second quarter of 2000 from $0.9 million in the second quarter of 1999 due to the increase in net sales. Income before income taxes from masonry products remained flat at $0.5 million despite the higher net sales due to the higher interest expense from the acquisition of Southern Construction Products. Corporate expenses increased to $1.7 million from $0.7 million due to the non-recurring pension plan termination gain in 1999. Elimination of profit on intersegment sales was $2.0 million in the second quarter of 2000 compared to $1.2 million in the second quarter of 1999. 18 19 NET INCOME The effective tax rate decreased to 38.3% in the second quarter of 2000 from 45.0% in the second quarter of 1999 primarily due to the permanent benefit of stock option exercises. Income (loss) before extraordinary item for the second quarter of 2000 was ($3.0) million compared to $5.3 million in the second quarter of 1999 due to the factors described above. As described in footnote 2 to the consolidated financial statements, the Company's recapitalization resulted in an extraordinary loss of $4.8 million in the second quarter of 2000. COMPARISON OF SIX FISCAL MONTHS ENDED JUNE 30, 2000 AND JULY 2, 1999 NET SALES Net sales increased $17.7 million, or 11.3%, to $174.5 million in the first half of 2000 from $156.8 million in the first half of 1999. The following table summarizes our net sales by segment:
Six fiscal months ended ------------------------------------------------------ June 30, 2000 July 2, 1999 -------------------- --------------------- (In thousands) Net Sales % Net Sales % % Change --------- ---- --------- ---- -------- Concrete accessories $ 79,608 45.6% $ 72,538 46.3% 9.7% Concrete forming systems 63,864 36.6 58,168 37.1 9.8 Paving products 21,079 12.1 17,738 11.3 18.8 Masonry products 17,583 10.1 13,142 8.4 33.8 Intersegment eliminations (7,629) (4.4) (4,754) (3.1) 60.5 -------- ----- -------- ----- Net sales $174,505 100.0% $156,832 100.0% 11.3% ======== ===== ======== =====
Net sales of concrete accessories increased 9.7% to $79.6 million in the first half of 2000 from $72.5 million in the first half of 1999, due to increases in volume and new product initiatives and, to a lesser extent, the contribution from Southern Construction Products. Net sales of concrete forming systems were $63.9 million for the first half of 2000 compared to $58.2 million in the first half of 1999 primarily due to an increase in volume and the expansion and introduction of new products including distribution rights to two European forming systems. Net sales of paving products increased $3.3 million, or 18.8%, in the first half of 2000 compared to the first half of 1999 due to an increase in volume as a result of the Transportation Equity Act for the 21st Century, known as TEA-21. Net sales of masonry products increased $4.4 million, or 33.8%, primarily due to the acquisition of Southern Construction Products. GROSS PROFIT Gross profit for the first half of 2000 was $66.2 million, a 16.1% increase from $57.0 million in the first half of 1999, due primarily to increased net sales. Gross margin was 38.0% in the first half of this year, increasing from 36.4% last year due to manufacturing efficiencies in the concrete accessories and concrete forming systems segments. 19 20 OPERATING EXPENSES SG&A expenses increased $6.6 million to $48.6 million in the first half of 2000 from $42.0 million in the first half of 1999, due to the acquisitions and higher volume. Additionally, the Company recorded a $0.7 million non-recurring pension plan termination gain in the first half of 1999. SG&A expenses increased as a percent of net sales to 27.9% in the first half of 2000 from 26.8% in the first half of 1999 (27.2% without the non-recurring pension plan termination gain), primarily due to planned spending to develop customers, markets, new products, and employees. OTHER EXPENSES Interest expense increased to $6.5 million in the first half of 2000 from $6.0 million in the first half of 1999 primarily due to increased long-term debt and higher interest rates resulting from the recapitalization. Symons is currently a defendant involved in a civil suit brought by EFCO Corp., a competitor of Symons in one portion of their business. EFCO Corp. alleged that Symons engaged in false advertising, misappropriation of trade secrets, intentional interference with contractual relations, and certain other activities. After a jury trial, preliminary damages of approximately $14,000 were awarded against Symons in January 1999. In ruling on post-trial motions in April 1999, the Judge dismissed EFCO's claim of intentional interference with contractual relations, but increased the damages awarded to EFCO by $100. Symons appealed the trial court's decision to the United States Court of Appeals for the Eighth Circuit. A three-judge panel issued its decision on July 18, 2000, affirming the district court's ruling in all respects. On August 1, 2000, Symons filed a petition for a rehearing before the full court of appeals. While such petitions are infrequently granted, Symons believes that the three-judge panel's decision conflicts with recent Supreme Court and Eighth Circuit precedent. As a result of the decision of the Court of Appeals, the Company has recorded a $15,000 pre-tax liability for the judgment and estimated post-judgment interest. In the event Symons is unsuccessful in its petition for a rehearing, payment of the judgment may have an adverse effect on the Company's consolidated financial position, results of operations, or cash flows, even though the Company has available financial resources to fund the payment. INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM Income (loss) before income taxes and extraordinary item in the first half of 2000 was a loss of $4.0 million as compared to income of $8.9 million in the first half of 1999 and was comprised of the following: 20 21
Six fiscal months ended ----------------------------- June 30, 2000 July 2, 1999 ------------- ------------ (In thousands) Concrete accessories $ 11,990 $ 9,608 Concrete forming systems (10,641) 3,268 Paving products 1,410 451 Masonry products 348 140 Corporate (3,161) (2,130) Intersegment eliminations (3,915) (2,398) -------- ------- Income before income taxes $ (3,969) $ 8,939 ======== =======
Concrete accessories' income before income taxes of $12.0 million in the first half of 2000 increased 24.8% from $9.6 million in the first half of 1999 due primarily to the increase in net sales and manufacturing efficiencies. Concrete forming systems' income (loss) before income taxes was ($10.6) million in the first half of 2000 compared to $3.3 million in the first half of 1999 due to the lawsuit judgment. Without such judgment, concrete forming systems' income before income taxes would have increased 33.4% to $4.4 million, due to higher net sales and manufacturing efficiencies. Income before income taxes from paving products increased to $1.4 million in the first half of 2000 from $0.5 million in the first half of 1999 due to the increase in net sales. Income before income taxes from masonry products was $0.3 million in the first half of 2000 compared to $0.1 million in the first half of 1999 due to the increase in net sales. Corporate expenses increased to $3.2 million from $2.1 million due to the non-recurring pension plan termination gain in 1999. Elimination of profit on intersegment sales was $3.9 million in the first half of 2000 as compared to $2.4 million in the first half of 1999. NET INCOME The effective tax rate decreased to 37.0% in the first half of 2000 from 45.0% in the first half of 1999 primarily due to the permanent benefit of stock option exercises. Income (loss) before extraordinary item for the first half of 2000 was ($2.5) million compared to $4.9 million in the first half of 1999 due to the factors described above. As described in footnote 2 to the consolidated financial statements, the Company's recapitalization resulted in an extraordinary loss of $4.8 million in the second quarter of 2000. LIQUIDITY AND CAPITAL RESOURCES The Company's key statistics for measuring liquidity and capital resources are net cash provided by operating activities, capital expenditures, amounts available under our revolving credit facility and cash gap. Cash gap is defined as the number of days of outstanding accounts receivable, plus the number of days of inventory on hand, less the number of days of outstanding accounts payable. 21 22 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 the issuance of long-term debt and equity. Net cash used in operating activities in the first half of 2000 was $3.7 million and was comprised of the following: o ($7.3) million of net loss, o $22.6 million of non-cash reductions to net income, and o ($19.0) million of normal seasonal working capital growth. The Company invested in the following: o $8.5 million in net capital expenditures and o ($0.6) million of acquisitions. In connection with the recapitalization, the Company incurred substantial new indebtedness and refinanced certain outstanding indebtedness. As of June 30, 2000, the Company has long-term debt of: (a) $170.0 million in principal amount of Senior Subordinated Notes, with a net book value of $157.5 million, (b) $54.9 million outstanding of a $133.5 million new credit facility, which consists of a $50.0 million revolving credit facility, a $30.0 million acquisition facility, a $23.5 million term loan under the delayed-draw tranche A facility and a $30.0 million term loan under the tranche B facility, (c) $2.6 million of debentures previously held by the Dayton Superior Capital Trust, (d) $5.0 million to one of the former stockholders of Symons Corporation, and (e) $0.2 million to the City of Parsons, Kansas. At June 30, 2000, all of the $50.0 million revolving credit facility was available, of which $4.1 million of borrowings were outstanding. None of the $30.0 million acquisition facility had been drawn, and $20.8 million of the delayed-draw tranche A facility had been drawn. All of the $30.0 million tranche B facility was outstanding. At June 30, 2000, working capital was $50.2 million, compared to $50.5 million at December 31, 1999. The decline in working capital is primarily attributable to the $15.0 million non-recurring lawsuit judgment, offset by normal seasonal growth. For the first half of 2000 the Company's average cash gap days were 66, an improvement of 2 days from 68 days in the first half of 1999 due to the Company's continued focus on working capital management. The Company believes its liquidity, capital resources and cash flows from operations are sufficient to fund planned capital expenditures, working capital requirements and debt service in the 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 acquisitions. The Company expects to raise such cash from operations or from borrowings under the new credit facility, or, if feasible and attractive, issuances of long-term debt or additional Class A common shares. 22 23 As previously described, the court of appeals affirmed in all respect the decision of the trial court in the EFCO litigation. The Company has, however, filed a petition for a rehearing en banc which is now pending before the court. If the appellate court denies the petition for a rehearing and the Company is required to make payment on the judgment, the Company could finance that payment with a drawing under the new credit facility. SEASONALITY The Company's operations are seasonal in nature with approximately 60% of sales historically occurring in the second and third quarters. Working capital and borrowings fluctuate with sales volume. Historically, more than 50% of cash flow from operations is generated in the fourth quarter. INFLATION The Company does not believe inflation had a significant impact on its operations over the past two years. In the past, the Company has been able to pass along all or a portion of the effects of increases in the price of steel, its principal raw material. There can be no assurance the Company will be able to continue to pass on the cost of such increases in the future. FORWARD-LOOKING STATEMENTS This Form 10-Q includes, and future filings by the Company on Form 10-K, Form 10-Q, and Form 8-K, and future oral and written statements by the Company and its management may include, certain forward-looking statements, including (without limitation) statements with respect to anticipated future operating and financial performance, growth opportunities and growth rates, acquisition and divestitive opportunities and other similar forecasts and statements of expectation. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and "should," and variations of these words and similar expressions, are intended to identify these forward-looking statements. Forward-looking statements by the Company and its management are based on estimates, projections, beliefs and assumptions of management and are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information, or otherwise. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by the Company and its management as the result of a number of important factors. Representative examples of these factors include (without limitation) the cyclical nature of nonresidential building and infrastructure construction activity, which can be affected by factors outside the Company's control such as weakness in the general economy, a decrease in governmental spending, interest rate increases, and changes in banking and tax laws; an unsuccessful outcome in the Company's legal proceedings and disputes; the Company's ability to successfully identify, finance, complete and integrate 23 24 acquisitions; increases in the price of steel (the principal raw material in the Company's products) and the Company's ability to pass along such price increases to its customers; and the effects of weather and seasonality on the construction industry; increasing consolidation of the Company's customers; the mix of products the Company sells; the competitive nature of our industry; and the amount of debt we must service. This list is not intended to be exhaustive. In addition to these factors, actual future performance, outcomes and results may differ materially because of other, more general, factors including (without limitation) general industry and market conditions and growth rates, domestic economic conditions, governmental and public policy changes and the continued availability of financing in the amounts, at the terms and on the conditions necessary to support the Company's future business. 24 25 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As of June 30, 2000, the Company had financial instruments that were sensitive to changes in interest rates. These financial instruments consist of $170.0 million of principal amount of fixed rate Senior Subordinated Notes, with a book value of $157.5 million, a $133.5 million new credit facility, of which $54.9 million was outstanding and $7.8 million in other fixed-rate, long-term debt. The Senior Subordinated Notes bear interest at 13.0% on the $170.0 million of principal and mature in 2009. The estimated fair value of the notes is $162.5 million. The new credit facility has several interest rate options which re-price on a short-term basis. Accordingly, the fair value of the new credit facility approximates its $54.9 million face value. The weighted average interest rate at June 30, 2000 was 9.7%. Other long-term debt consists of a.) a $5.0 million, 10.5% note payable due in 2004 with an estimated fair value of $5.2 million, b.) $2.6 million of debentures previously held by the Dayton Superior Capital Trust, with a fair value of $2.6 million and c.) a $0.2 million, 7.0% loan due in installments of $32 thousand per year with an estimated fair value of $0.1 million. Management does not believe there will be any significant changes in interest rates in the near future. However, no assurances can be given that economic conditions or interest rates will remain stable for any particular period. In the ordinary course of its business, the Company also is exposed to price changes in raw materials (particularly steel bar and rod and steel flat plate) and products purchased for resale. The prices of these items can change significantly due to changes in the markets in which the Company's suppliers operate. The Company generally does not use financial instruments to manage its exposure to changes in commodity prices. 25 26 PART II. - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Symons is currently a defendant involved in a civil suit brought by EFCO Corp., a competitor of Symons in one portion of their business. EFCO Corp. alleged that Symons engaged in false advertising, misappropriation of trade secrets, intentional interference with contractual relations, and certain other activities. After a jury trial, preliminary damages of approximately $14,000 were awarded against Symons in January 1999. In ruling on post-trial motions in April 1999, the Judge dismissed EFCO's claim of intentional interference with contractual relations, but increased the damages awarded to EFCO by $100. Symons appealed the trial court's decision to the United States Court of Appeals for the Eighth Circuit. A three-judge panel issued its decision on July 18, 2000, affirming the district court's ruling in all respects. On August 1, 2000, Symons filed a petition for a rehearing before the full court of appeals. While such petitions are infrequently granted, Symons believes that the three-judge panel's decision conflicts with recent Supreme Court and Eighth Circuit precedent. As a result of the decision of the Court of Appeals, the Company has recorded a one time $15,000 pre-tax liability for the judgment and post-judgment interest. In the event Symons is unsuccessful in its petition for a rehearing, payment of the judgment may have an adverse effect on the Company's consolidated financial position, results of operations, or cash flows, even though the Company has available financial resources to fund the payment. The Company and all of its directors were named as defendants in a purported shareholder class action lawsuit which was brought in January 2000 in the Court of Common Pleas for Montgomery County in Dayton, Ohio. This lawsuit was dismissed by the court on May 19, 2000. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (a) In connection with the Company's recapitalization on June 16, 2000, the Dayton Superior Capital Trust was dissolved and the holders of the convertible trust preferred securities issued by the Trust received the Company's 10% convertible subordinated debentures due September 30, 2029 in exchange for their preferred securities. In addition, under the conversion provisions of the debentures, as a result of the recapitalization the convertible subordinated debentures became convertible only into the right to receive cash, and no longer may be converted into the Company's common shares. As noted under "Liquidity and Capital Resources" above, the Company also incurred substantial new indebtedness in connection with the recapitalization as to all of which the convertible subordinated debentures are subordinated. (c) In connection with the Company's recapitalization, the Company also sold an aggregate of 19,444 common shares to 3 of its executive officers in transactions not registered under the Securities Act of 1933. These shares were sold at a price of $27 per share, payable in cash, and were not registered under the Securities Act in reliance on the exemption from registration set forth in Section 4(2) of the Act for transactions not involving a public offering based on the limited nature of the offering and the sophistication of the purchasers. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS A special meeting of the Company was held on May 23, 2000. At the special meeting, the shareholders voted to (i) adopt the Agreement and Plan of Merger dated January 19, 2000 between Dayton Superior and Stone Acquisition Corp. which provided for the recapitalization of the Company through the merger of Stone Acquisition Corp. into the Company ("Issue 1"), and (ii) approve the proposal to permit the proxies for the special meeting, in their discretion, to adjourn the special meeting for the sole purpose of soliciting more votes or proxies in favor of adoption of the Agreement and Plan of Merger. The number of votes cast for, against or withheld and the number of broker nonvotes on Issue 1 and Issue 2 were as follows: For Against Withheld Broker Nonvotes --- ------- -------- --------------- Issue 1 4,387,327 8,360 13,775 -- Issue 2 3,571,411 802,666 35,385 -- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. See Index to Exhibit following the signature page to this report for a list of Exhibits. (b) Reports on Form 8-K. During the quarter ended June 30, 2000, the Company did not file any Current Reports on Form 8-K. 26 27 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 14, 2000 BY: /s/ Alan F. McIlroy ---------------- ------------------------ Alan F. McIlroy Chief Financial Officer 27 28 INDEX TO EXHIBITS Exhibit No. Description - ----------- ----------- (27) Financial Data Schedule 27.1 Financial Data Schedule** - ------------ ** Filed herewith 28 EX-27 2 ex27.txt EXHIBIT 27
5 0000854709 DAYTON SUPERIOR CORPORATION 1,000 U.S. DOLLARS 6-MOS DEC-31-2000 JAN-1-2000 JUN-30-2000 1 391 0 74,030 (6,918) 41,266 122,314 76,697 (31,991) 312,465 72,097 212,590 0 0 138,623 (130,512) 312,465 174,505 174,505 108,261 108,261 48,604 15,000 6,456 (3,969) (1,470) (2,499) 0 (4,812) 0 (7,311) 0 0
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