-----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, Dfa21sxFTmjrzBbHWSkJE4l+PE4sWR0+E79MM0gitKDJ/okAYMZUOi3DDGE0rRFE S4ufcE/SwRvm6IeuS7kRPg== /in/edgar/work/0000950152-00-007845/0000950152-00-007845.txt : 20001114 0000950152-00-007845.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950152-00-007845 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000929 FILED AS OF DATE: 20001113 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: 761510 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 l84492ae10-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 SEPTEMBER 29, 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 November 10, 2000 2 PART I. - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS Dayton Superior Corporation and Subsidiaries Consolidated Balance Sheets As of September 29, 2000 and December 31, 1999 (Amounts in thousands) (Unaudited)
September 29, December 31, 2000 1999 ------------- ------------ ASSETS Current assets Cash $ 10,624 $ 4,553 Accounts receivable, net of allowances for doubtful accounts and sales returns and allowances of $6,434 and $5,589 72,477 45,085 Inventories (Note 4) 45,020 39,340 Prepaid expenses and other current assets 3,026 5,551 Prepaid income taxes 4,764 1,038 Future income tax benefits 3,911 3,998 --------- --------- Total current assets 139,822 99,565 --------- --------- Rental equipment, net (Note 4) 64,038 58,748 --------- --------- Property, plant and equipment 82,188 73,651 Less accumulated depreciation (33,698) (29,741) --------- --------- Net property, plant and equipment 48,490 43,910 --------- --------- Goodwill and intangible assets, net of accumulated amortization 98,568 75,522 Other assets 763 934 --------- --------- Total assets $ 351,681 $ 278,679 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current portion of long-term debt (Note 5) $ 7,043 $ 5,032 Accounts payable 32,441 22,802 Accrued compensation 11,365 11,302 Accrued interest 8,645 2,059 Other accrued liabilities 9,377 7,901 Payable for lawsuit judgment (Note 9) 15,341 -- --------- --------- Total current liabilities 84,212 49,096 Long-term debt (Note 5) 232,708 100,141 Deferred income taxes 14,680 16,566 Other long-term liabilities 5,997 4,548 --------- --------- Total liabilities 337,597 170,351 --------- --------- 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 140,763 47,417 Class A treasury shares -- (387) Cumulative other comprehensive income (336) (254) Retained earnings (accumulated deficit) (126,343) 41,996 --------- --------- Total shareholders' equity 14,084 88,772 --------- --------- Total liabilities and shareholders' equity $ 351,681 $ 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 Operations For The Three and Nine Fiscal Months Ended September 29, 2000 and October 1, 1999 (Amounts in thousands) (Unaudited) Three Fiscal Months Ended Nine Fiscal Months Ended -------------------------- -------------------------- September 29, October 1, September 29, October 1, 2000 1999 2000 1999 --------- --------- --------- --------- Net sales $ 107,717 $ 93,729 $ 282,222 $ 250,561 Cost of sales 64,531 55,323 172,792 155,117 --------- --------- --------- --------- Gross profit 43,186 38,406 109,430 95,444 Selling, general and administrative expenses 24,479 21,177 72,007 61,984 Facility closing reserve (Note 3) 1,527 -- 1,527 -- Amortization of goodwill and intangibles 716 578 1,792 1,761 --------- --------- --------- --------- Income from operations 16,464 16,651 34,104 31,699 Other expenses Interest expense, net 8,131 2,921 14,587 8,945 Non-recurring item - Lawsuit judgment (Note 9) 341 -- 15,341 -- Other expense, net 106 92 259 177 --------- --------- --------- --------- Income before provision for income taxes and extraordinary item 7,886 13,638 3,917 22,577 Provision for income taxes 4,016 6,137 2,546 10,160 --------- --------- --------- --------- Income before extraordinary item 3,870 7,501 1,371 12,417 Extraordinary loss, net of income tax benefit (Note 2) -- -- (4,812) -- --------- --------- --------- --------- Net income (loss) 3,870 7,501 (3,441) 12,417 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit -- -- (583) -- --------- --------- --------- --------- Net income (loss) available to common shareholders $ 3,870 $ 7,501 $ (4,024) $ 12,417 ========= ========= ========= =========
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 Nine Fiscal Months Ended September 29, 2000 and October 1, 1999 (Amounts in thousands) (Unaudited)
Nine Fiscal Months Ended ----------------------------- September 29, October 1, 2000 1999 --------- --------- Cash Flows From Operating Activities: Net income (loss) $ (3,441) $ 12,417 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Extraordinary loss 4,812 -- Lawsuit judgment (Note 9) 15,341 -- Depreciation 9,301 8,649 Amortization of goodwill and intangibles 1,792 1,761 Deferred income taxes (1,799) (1,082) Amortization of deferred financing costs and debt discount 967 643 Gain on sales of rental equipment and property, plant and equipment (7,205) (5,198) Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable (23,846) (15,505) Inventories (2,932) 26 Prepaid income taxes (735) 3,999 Accounts payable 6,885 4,491 Accrued liabilities and other long-term liabilities 7,035 (3,776) Other, net 2,112 953 --------- --------- Net cash provided by operating activities 8,287 7,378 --------- --------- Cash Flows From Investing Activities: Property, plant and equipment additions (6,855) (5,006) Proceeds from sales of fixed assets 196 292 Rental equipment additions (13,232) (13,144) Proceeds from sales of rental equipment 11,592 8,395 Acquisitions (Note 3) (24,819) (5,415) Refunds of purchase price on acquisitions (Note 3) 2,115 -- --------- --------- Net cash used in investing activities (31,003) (14,878) --------- --------- Cash Flows From Financing Activities: Repayments of long-term debt (121,348) -- Issuance of long-term debt 232,342 10,606 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 (9,734) -- Purchase of treasury shares -- (242) Redemption of Class A common shares (164,315) -- Issuance of Class A common shares, net of issuance costs 93,733 181 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit (583) -- --------- --------- Net cash provided by financing activities 28,869 10,545 --------- --------- Effect of Exchange Rate Changes on Cash (82) (21) --------- --------- Net increase in cash 6,071 3,024 Cash, beginning of period 4,553 560 --------- --------- Cash, end of period $ 10,624 $ 3,584 ========= ========= Supplemental Disclosures: Cash paid for income taxes $ 1,689 $ 7,182 Cash paid for interest 7,037 8,778 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 Nine Fiscal Months Ended September 29, 2000 and October 1, 1999 (Amounts in thousands) (Unaudited) Three Fiscal Months Ended Nine Fiscal Months Ended --------------------------- -------------------------- September 29, October 1, September 29, October 1, 2000 1999 2000 1999 -------- -------- -------- -------- Net income (loss) $ 3,870 $ 7,501 $ (3,441) $ 12,417 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit -- -- (583) -- Other comprehensive income: Foreign currency translation adjustment (42) (83) (82) (21) -------- -------- -------- -------- Comprehensive income (loss) $ 3,828 $ 7,418 $ (4,106) $ 12,396 ======== ======== ======== ========
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 SEPTEMBER 29, 2000 AND OCTOBER 1, 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) 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) was received in 1999 related to uncollected accounts receivable. (c) 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. Pro forma financial information is not required. (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 was 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 $1,600 in cash, including acquisition costs. 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 Polytite have been included in the accompanying consolidated financial statements since the 7 8 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. (f) CONSPEC MARKETING & MANUFACTURING CO., INC.--On July 17, 2000, the Company acquired all of the stock of Conspec Marketing & Manufacturing Co., Inc., Conspec Performance Products, Inc. and Bristol Investments, Inc. (collectively "Conspec") for approximately $23,200 in cash, including acquisitions costs, and is subject to a working capital adjustment. The business is being operated as part of the Company's concrete accessories business. The acquisition has been accounted for as a purchase, and the results of Conspec 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. As a result of the acquisition of Conspec, the Company has decided to consolidate certain of the Company's existing operations. One facility has been closed and a second facility has reduced its operations. Accordingly, a facility closing reserve of $1,527 has been recorded, of which $432 relates to idle machinery and equipment write-offs, and $1,095 relates to future lease payments and other exit costs. (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 yearend 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 September 29, 2000 and December 31, 1999. 8 9 Following is a summary of the components of inventories as of September 29, 2000 and December 31, 1999: September 29, December 31, 2000 1999 ------------- ------------ Raw materials $ 12,224 $ 8,787 Finished goods and work in progress 35,571 32,920 -------- -------- 47,795 41,707 Net realizable value reserve (2,775) (2,367) -------- -------- $ 45,020 $ 39,340 ======== ======== (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 September 29, 2000 and December 31, 1999 are net of accumulated depreciation of $12,900 and $9,855, respectively. Rental revenues and cost of sales associated with rental revenue are as follows:
Three fiscal months ended Nine fiscal months ended ------------------------- ------------------------ September 29, October 1, September 29, October 1, 2000 1999 2000 1999 ---- ---- ---- ---- Rental revenue $15,387 $14,306 $40,052 $37,124 Cost of sales 2,234 2,253 6,790 6,256
(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 September 29, 2000, the Company's new credit facility consisted 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 $77,000, consisting of a $23,500 delayed-draw tranche A facility maturing June 2006 and a $53,500 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 9 10 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. Following is a summary of the Company's long-term debt as of September 29, 2000 and December 31, 1999:
September 29, December 31, 2000 1999 --------- --------- Term Loan A, weighted average interest rate of 9.2% $ 21,331 $ -- Term Loan B, weighted average interest rate of 9.7% 53,500 -- Senior Subordinated Notes, interest rate of 13.0% 170,000 -- Debt discount on Senior Subordinated Notes (12,281) -- Debentures previously held by Dayton Superior Capital Trust, interest rate of 9.1%, due on demand 2,043 -- Old Term Loan -- 100,000 Note payable to one of the former stockholders of Symons Corporation, 10.5% 5,000 5,000 City of Parsons, Kansas Economic Development Loan, 7.0% 158 173 --------- --------- Total long-term debt 239,751 105,173 Less current portion (7,043) (5,032) --------- --------- Long-term portion $ 232,708 $ 100,141 ========= =========
At September 29, 2000, all of the $50,000 Revolving Credit Facility was available, none of which 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 ended Nine fiscal months ended --------------------------- ----------------------------- September 29, October 1, September 29, October 1, 2000 1999 2000 1999 ---- ---- ---- ---- Average borrowing $ 1,112 $27,656 $ 6,265 $27,668 Maximum borrowing 6,150 32,560 16,420 37,140 Weighted average interest rate, excluding commitment fee 10.9% 6.8% 7.9% 6.7% Unused commitment fee $ 62 $ 12 $ 104 $ 30
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. The Company was in compliance with its loan covenants as of September 29, 2000. 10 11 (6) STOCK OPTION PLANS The Company has a stock option plan which provides 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 before extraordinary item for the three and nine fiscal months ended September 29, 2000 and October 1, 1999 would have been reduced to the following pro forma amounts:
Three fiscal months ended Nine fiscal months ended ----------------------------- ------------------------------- September 29, October 1, September 29, October 1, 2000 1999 2000 1999 ---- ---- ---- ---- Income before extraordinary item As Reported $3,870 $7,501 $1,371 $12,417 Pro Forma 3,833 7,416 1,239 12,100
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 plan for the nine fiscal months ended September 29, 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 September 29, 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. 11 12 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. Information about the income (loss) of each segment and the reconciliations to the consolidated amounts for the three and nine fiscal months ended September 29, 2000 and October 1, 1999 is as follows:
Three fiscal months Nine fiscal months ended ended ---------------------------- ----------------------------- September 29, October 1, September 29, October 1, 2000 1999 2000 1999 --------- --------- --------- --------- Concrete Accessories $ 48,917 $ 40,428 $ 126,399 $ 110,839 Concrete Forming Systems 36,683 33,206 96,770 88,747 Paving Products 13,210 12,721 32,873 30,459 Masonry Products 8,907 7,374 26,180 20,516 --------- --------- --------- --------- Net sales to external customers $ 107,717 $ 93,729 $ 282,222 $ 250,561 ========= ========= ========= ========= Concrete Accessories $ 1,629 $ 53 $ 3,755 $ 851 Concrete Forming Systems 1,635 1,043 5,412 3,670 Paving Products 681 35 2,097 132 Masonry Products 260 -- 570 -- --------- --------- --------- --------- Net sales to other segments $ 4,205 $ 1,131 $ 11,834 $ 4,653 ========= ========= ========= ========= Concrete Accessories $ 2,294 $ 878 $ 4,075 $ 2,771 Concrete Forming Systems 4,771 1,742 8,629 5,249 Paving Products 480 153 829 516 Masonry Products 586 148 1,054 409 --------- --------- --------- --------- Interest expense $ 8,131 $ 2,921 $ 14,587 $ 8,945 ========= ========= ========= ========= Concrete Accessories $ 6,769 $ 9,428 $ 18,759 $ 18,370 Concrete Forming Systems 3,137 3,987 (7,504) 7,255 Paving Products 1,613 1,461 3,023 1,912 Masonry Products (359) 786 (11) 926 Corporate (1,601) (1,466) (4,762) (3,596) Intersegment Eliminations (1,673) (558) (5,588) (2,290) --------- --------- --------- --------- Income before income taxes and extraordinary item $ 7,886 $ 13,638 $ 3,917 $ 22,577 ========= ========= ========= ========= Concrete Accessories $ 899 $ 712 $ 2,617 $ 2,860 Concrete Forming Systems 1,577 1,430 4,825 4,120 Paving Products 223 211 668 634 Masonry Products 410 332 1,139 994 Corporate 17 16 52 41 --------- --------- --------- --------- Depreciation $ 3,126 $ 2,701 $ 9,301 $ 8,649 ========= ========= ========= =========
12 13 Concrete Accessories $ 476 $ 366 $ 1,186 $ 1,086 Concrete Forming Systems 64 82 81 212 Paving Products 29 24 100 142 Masonry Products 147 106 425 321 --------- --------- --------- --------- Amortization of goodwill and intangibles $ 716 $ 578 $ 1,792 $ 1,761 ========= ========= ========= =========
Information regarding capital expenditures by segment and the reconciliation to the consolidated amounts for the three and nine fiscal months ended September 29, 2000 and October 1, 1999 is as follows:
Three fiscal months ended Nine fiscal months ended ---------------------------- ----------------------------- September 29, October 1, September 29, October 1, 2000 1999 2000 1999 --------- --------- --------- --------- Concrete Accessories $ 1,218 $ 851 $ 2,763 $2,421 Concrete Forming Systems 239 759 1,196 1,433 Paving Products 257 273 990 753 Masonry Products 752 66 1,611 352 Corporate 179 -- 295 47 --------- --------- --------- --------- Property, Plant and Equipment Additions $ 2,645 $1,949 $ 6,855 $5,006 ========= ========= ========= ========= Concrete Accessories $ 484 $ 591 $1,801 $1,534 Concrete Forming Systems 2,565 2,990 11,419 11,516 Masonry Products -- 94 13 94 --------- --------- --------- --------- Rental Equipment Additions $ 3,049 $ 3,675 $ 13,233 $13,144 ========= ========= ========= =========
There has been no material change in the relative assets employed by each segment since December 31, 1999. (9) CONTINGENCIES Symons was a defendant 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 and enjoined both parties from engaging in certain conduct. 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 13 14 before the full court of appeals. The petition for a rehearing was denied by the court of appeals on September 20, 2000. In October 2000, Symons satisfied the judgment of $14,100, post-judgment interest of $1,134, and defense costs of $107, by payment to EFCO from the Company's cash on hand and from the Company's revolving credit facility. Symons has made a claim to its primary and excess insurance carriers for "advertising injury" under its insurance policies to recover its defense costs and for indemnification of the false advertising and the misappropriation of trade secrets portions of the EFCO judgment. Royal Insurance Co., Symons' primary commercial general liability insurance carrier, filed a lawsuit against Symons in the Superior Court in San Francisco, California, on September 11, 2000, seeking a declaration from the court of its rights and obligations under its insurance policies for Symons' claim for defense and indemnification of the EFCO lawsuit. 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 September 29, 2000, we have four principal operating divisions, which are organized around the following product lines: - Concrete Accessories; - Concrete Forming Systems; - Paving Products; and - 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 1.6 July 2000 Conspec Concrete Accessories 23.2*
*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 NINE FISCAL MONTHS ENDED ------------------------------- ----------------------------- September 29, October 1, September 29, October 1, 2000 1999 2000 1999 -------- -------- -------- ------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 59.9 59.0 61.2 61.9 -------- -------- -------- ------- Gross profit 40.1 41.0 38.8 38.1 -------- -------- -------- ------- Selling, general and administrative expenses 22.7 22.6 25.5 24.7 Facility closing reserve 1.4 -- 0.5 -- Amortization of goodwill and intangibles 0.7 0.6 0.6 0.7 -------- -------- -------- ------- Total selling, general and administrative expenses 24.8 23.2 26.6 25.4 -------- -------- -------- ------- Income from operations 15.3 17.8 12.2 12.7 Interest expense, net 7.6 3.1 5.2 3.6 Nonrecurring item-Lawsuit judgment 0.3 -- 5.5 -- Other expense, net 0.1 0.1 0.1 0.1 -------- -------- -------- ------- Income before provision for income taxes and extraordinary item 7.3 14.6 1.4 9.0 Provision for income taxes 3.7 6.6 0.9 4.0 -------- -------- -------- ------- Income before extraordinary item 3.6 8.0 0.5 5.0 Extraordinary loss, net of income tax benefit -- -- (1.7) -- -------- -------- -------- ------- Net income (loss) 3.6 8.0 (1.2) 5.0 Dividends from Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit -- -- (0.2) -- -------- -------- -------- ------- Net income (loss) available to common shareholders 3.6% 8.0% (1.4)% 5.0% ======== ======== ======== =======
COMPARISON OF THREE FISCAL MONTHS ENDED SEPTEMBER 29, 2000 AND OCTOBER 1, 1999 NET SALES Net sales increased $14.0 million, or 14.9%, to $107.7 million in the third quarter of 2000 from $93.7 million in the third quarter of 1999. The following table summarizes our net sales by segment:
Three fiscal months ended ------------------------------------------------------------ September 29, 2000 October 1, 1999 -------------------------- -------------------------- (In thousands) Net Sales % Net Sales % % Change --------- ------- --------- ------- -------- Concrete accessories $ 50,546 46.9% $ 40,481 43.2% 24.9% Concrete forming systems 38,318 35.6 34,249 36.5 11.9 Paving products 13,891 12.9 12,756 13.6 8.9 Masonry products 9,167 8.5 7,374 7.9 24.3 Intersegment eliminations (4,205) (3.9) (1,131) (1.2) 271.8 --------- ------- --------- ------- Net sales $ 107,717 100.0% $ 93,729 100.0% 14.9% ========= ======= ========= =======
16 17 Net sales of concrete accessories increased 24.9% to $50.5 million in the third quarter of 2000 from $40.5 million in the third quarter of 1999, primarily due to the acquisition of Conspec, as well as increases in volume and the contribution of Southern Construction Products. Net sales of concrete forming systems increased 11.9% to $38.3 million for the third quarter of 2000 compared to $34.2 million in the third 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 $1.1 million, or 8.9%, in the third quarter of 2000 compared to the third 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 $1.8 million, or 24.3%, primarily due to the acquisition of Southern Construction Products. GROSS PROFIT Gross profit for the third quarter of 2000 was $43.2 million, a 12.4% increase from $38.4 million in the third quarter of 1999, primarily due to the increased net sales. Gross margin was 40.1% in the third quarter of 2000, decreasing from 41.0% in 1999. Approximately half of the decrease was due to the effect of Conspec's lower gross margins. Additionally, competitive pricing pressures decreased gross margins in masonry products and concrete accessories. OPERATING EXPENSES Selling, general, and administrative expenses ("SG&A expenses") increased $3.3 million to $24.5 million in the third quarter of 2000, from $21.2 million in the third quarter of 1999, due to acquisitions and higher net sales volume, including planned spending to develop customers, markets, new products, and employees. A facility closing reserve of $1.5 million was recorded for the consolidation of operations as a result of the acquisition of Conspec. Amortization of goodwill and intangibles increased to $0.7 million in the third quarter of 2000 from $0.6 million in the third quarter of 1999 due to the acquisition of Conspec. OTHER EXPENSES Interest expense increased to $8.1 million in the third quarter of 2000 from $2.9 million in the third quarter of 1999 due to increased long-term debt and higher interest rates resulting from the recapitalization. A $0.3 million adjustment to the previous $15.0 million estimate for the EFCO lawsuit judgment was also recorded in the third quarter of 2000. 17 18 INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM Income before income taxes and extraordinary item in the third quarter of 2000 was $7.9 million as compared to income of $13.6 million in the third quarter of 1999 and was comprised of the following: Three fiscal months ended -------------------------------- September 29, October 1, 2000 1999 -------- -------- (In thousands) Concrete accessories $ 6,769 $ 9,428 Concrete forming systems 3,137 3,987 Paving products 1,613 1,461 Masonry products (359) 786 Corporate (1,601) (1,466) Intersegment eliminations (1,673) (558) -------- -------- Income before income taxes $ 7,886 $ 13,638 ======== ======== Concrete accessories' income before income taxes of $6.8 million in the third quarter of 2000 decreased from $9.4 million in the third quarter of 1999 due to the facility closing reserve of $1.5 million and higher interest expense of $1.4 million, partially offset by higher operating income from the higher net sales. Concrete forming systems' income before income taxes was $3.1 million in the third quarter of 2000 in comparison to income of $4.0 million in the third quarter of 1999 due to higher interest expense of $3.0 million, offset by higher operating income from the higher net sales. Income before income taxes from paving products increased to $1.6 million in the third quarter of 2000 from $1.5 million in the third quarter of 1999 due to the increase in net sales and is net of higher interest expense of $0.3 million. Income before income taxes from masonry products decreased to $(0.4) million due to higher interest expense of $0.4 million and lower operating income due to market pricing pressures. Corporate expenses increased slightly to $1.6 million from $1.5 million. Elimination of profit on intersegment sales was $1.7 million in the third quarter of 2000 compared to $0.6 million in the third quarter of 1999. NET INCOME The effective tax rate increased to 50.9% in the third quarter of 2000 from 45.0% in the third quarter of 1999 primarily due to the effect of permanent non-deductible items on lower income before income taxes. Net income for the third quarter of 2000 was $3.9 million compared to $7.5 million in the third quarter of 1999 due to the factors described above. 18 19 COMPARISON OF NINE FISCAL MONTHS ENDED SEPTEMBER 29, 2000 AND OCTOBER 1, 1999 NET SALES Net sales increased $31.7 million, or 12.6%, to $282.2 million in the first nine months of 2000 from $250.6 million in the first nine months of 1999. The following table summarizes our net sales by segment:
Nine fiscal months ended ------------------------------------------------------------- September 29, 2000 October 1, 1999 -------------------------- -------------------------- (In thousands) Net Sales % Net Sales % % Change --------- ------- --------- ------- -------- Concrete accessories $ 130,154 46.1% $ 111,690 44.6% 16.5% Concrete forming systems 102,182 36.2 92,417 36.9 10.6 Paving products 34,970 12.4 30,591 12.2 14.3 Masonry products 26,750 9.5 20,516 8.2 30.4 Intersegment eliminations (11,834) (4.2) (4,653) (1.9) 154.3 --------- ------- --------- ------- Net sales $ 282,222 100.0% $ 250,561 100.0% 12.6% ========= ======= ========= =======
Net sales of concrete accessories increased 16.5% to $130.2 million in the first nine months of 2000 from $111.7 million in the first nine months of 1999, due to the acquisition of Conspec, increases in volume, and the contribution from Southern Construction Products. Net sales of concrete forming systems were $102.2 million for the first nine months of 2000, a 10.6% increase from $92.4 million in the first nine months 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 $4.4 million, or 14.3%, in the first nine months of 2000 compared to the first nine months 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 $6.2 million, or 30.4%, primarily due to the acquisition of Southern Construction Products. GROSS PROFIT Gross profit for the first nine months of 2000 was $109.4 million, a 14.7% increase from $95.4 million in the first nine months of 1999, due primarily to increased net sales. Gross margin was 38.8% in the first nine months of this year, increasing from 38.1% last year due to manufacturing efficiencies in the concrete accessories, concrete forming systems, and paving products segments. OPERATING EXPENSES SG&A expenses increased $10.0 million to $72.0 million in the first nine months of 2000 from $62.0 million in the first nine months of 1999, due to the acquisitions, higher volume, and planned spending to develop customers, markets, new products, and employees. Additionally, the Company recorded a $0.7 million non-recurring pension plan termination gain in the first nine months of 1999. 19 20 A facility closing reserve of $1.5 million was recorded for the consolidation of operations as a result of the acquisition of Conspec. Amortization of goodwill and intangibles was flat at $1.8 million. OTHER EXPENSES Interest expense increased to $14.6 million in the first nine months of 2000 from $8.9 million in the first nine months of 1999 due to increased long-term debt and higher interest rates resulting from the recapitalization. Symons was a defendant 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 $14.0 million 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 $0.1 million and enjoined both parties from engaging in certain conduct. 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. The petition for a rehearing was denied by the court of appeals on September 20, 2000. In October 2000, Symons satisfied the judgment of $14.1 million, post-judgment interest of $1.1 million, and defense costs of $0.1 million, by payment to EFCO from the Company's cash on hand and from the Company's revolving credit facility. Symons has made a claim to its primary and excess insurance carriers for "advertising injury" under its insurance policies to recover its defense costs and for indemnification of the false advertising and the misappropriation of trade secrets portions of the EFCO judgment. Royal Insurance Co., Symons' primary commercial general liability insurance carrier, filed a lawsuit against Symons in the Superior Court in San Francisco, California, on September 11, 2000, seeking a declaration from the court of its rights and obligations under its insurance policies for Symons' claim for defense and indemnification of the EFCO lawsuit. 20 21 INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM Income before income taxes and extraordinary item in the first nine months of 2000 was $3.9 million as compared to income of $22.6 million in the first nine months of 1999 and was comprised of the following:
Nine fiscal months ended -------------------------------------- September 29, October 1, 2000 1999 ------------ ---------- (In thousands) Concrete accessories $ 18,759 $ 18,370 Concrete forming systems (7,504) 7,255 Paving products 3,023 1,912 Masonry products (11) 926 Corporate (4,762) (3,596) Intersegment eliminations (5,588) (2,290) -------- -------- Income before income taxes $ 3,917 $ 22,577 ======== ========
Concrete accessories' income before income taxes of $18.8 million in the first nine months of 2000 increased 2.1% from $18.4 million in the first nine months of 1999 due primarily to the increase in net sales and manufacturing efficiencies, offset by $1.3 million of higher interest expense. Concrete forming systems' income (loss) before income taxes was ($7.5) million in the first nine months of 2000 compared to $7.3 million in the first nine months of 1999 due to the EFCO lawsuit judgment. Without such judgment, concrete forming systems' income before income taxes would have increased 8.0% to $7.8 million, due to higher net sales and manufacturing efficiencies, offset by $3.4 million of higher interest expense. Income before income taxes from paving products increased to $3.0 million in the first nine months of 2000 from $1.9 million in the first nine months of 1999 due to the increase in net sales and manufacturing efficiencies, offset by $0.3 million of higher interest expense. Income before income taxes from masonry products was $0.0 million in the first nine months of 2000 compared to $0.9 million in the first nine months of 1999 due to higher interest expense of $0.6 million and lower operating income from pricing pressures. Corporate expenses increased to $4.8 million from $3.6 million primarily due to the $0.8 million non-recurring pension plan termination gain in 1999. Elimination of profit on intersegment sales was $5.6 million in the first nine months of 2000 as compared to $2.3 million in the first nine months of 1999. NET INCOME The effective tax rate increased to 65.0% in the first nine months of 2000 from 45.0% in the first nine months of 1999 due to the effect of permanent non-deductible items on lower income before income taxes. Income before extraordinary item for the first nine months of 2000 was $1.4 million compared to $12.4 million in the first nine months of 1999 due to the factors described above. 21 22 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 first nine months 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 the 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. 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 nine months of 2000 was $8.3 million and was comprised of the following: - ($3.4) million of net loss, - $7.9 million of non-cash reductions to net income, and - ($11.5) million of normal seasonal working capital growth - $15.3 million for the payable for lawsuit judgment The Company invested in the following: - $8.3 million in net capital expenditures and - $22.7 million of acquisitions. In connection with the recapitalization, the Company incurred substantial new indebtedness and refinanced certain outstanding indebtedness. As of September 29, 2000, the Company had long-term debt of: (a) $170.0 million in principal amount of Senior Subordinated Notes, with a net book value of $157.7 million, (b) $74.8 million outstanding of a $157.0 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 $53.5 million term loan under the tranche B facility, (c) $2.0 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 September 29, 2000, all of the $50.0 million revolving credit facility was available, with no borrowings outstanding. None of the $30.0 million acquisition facility had been drawn, and $21.3 million of the delayed-draw tranche A facility had been drawn. All of the $53.5 million tranche B facility was outstanding. At September 29, 2000, working capital was $55.6 million, compared to $50.5 million at December 31, 1999. The increase in working capital is attributable to an additional $6.1 22 23 million in cash and normal seasonal working capital growth, offset by the payable for lawsuit judgment. For the first nine months of 2000 the Company's average cash gap days were 67, an improvement of 1 day from 68 days in the first nine months 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. 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. 23 24 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; the Company's ability to successfully identify, finance, complete and integrate 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 September 29, 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 $157.7 million, a $133.5 million new credit facility, of which $74.8 million was outstanding and $7.2 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 $170.0 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 $74.8 million face value. The weighted average interest rate at September 29, 2000 was 9.6%. 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.) $2.0 million of debentures previously held by the Dayton Superior Capital Trust, with a fair value of $2.0 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 was a defendant 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 $14.0 million 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 $0.1 million and enjoined both parties from engaging in certain conduct. 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. The petition for a rehearing was denied by the court of appeals on September 20, 2000. In October 2000, Symons satisfied the judgment of $14.1 million, post-judgment interest of $1.1 million, and defense costs of $0.1 million, by payment to EFCO from the Company's cash on hand and from the Company's revolving credit facility. Symons has made a claim to its primary and excess insurance carriers for "advertising injury" under its insurance policies to recover its defense costs and for indemnification of the false advertising and the misappropriation of trade secrets portions of the EFCO judgment. Royal Insurance Co., Symons' primary commercial general liability insurance carrier, filed a lawsuit against Symons in the Superior Court in San Francisco, California, on September 11, 2000, seeking a declaration from the court of its rights and obligations under its insurance policies for Symons' claim for defense and indemnification of the EFCO lawsuit. 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 September 29, 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: November 13, 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 l84492aex27.txt EXHIBIT 27
5 0000854709 DAYTON SUPERIOR CORPORATION 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-29-2000 10,624 0 78,911 (6,434) 45,020 139,822 82,188 (33,698) 351,681 84,212 232,708 0 0 140,763 (126,679) 351,681 282,222 282,222 172,792 172,792 74,058 16,868 14,587 3,917 2,546 1,371 0 (4,812) 0 (3,441) 0 0
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