-----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, Sa3/S2UmCdADnZv1JT5fTflpdcOx9h+nZmNZOrqdAANcVObHMyuX0kOHnGmTCmjN 8Tcxvb11Af5vIM+j1sAqgw== 0000950152-02-002671.txt : 20020415 0000950152-02-002671.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950152-02-002671 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAYTON SUPERIOR CORP CENTRAL INDEX KEY: 0000854709 STANDARD INDUSTRIAL CLASSIFICATION: STEEL PIPE & TUBES [3317] IRS NUMBER: 310676346 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-11781 FILM NUMBER: 02597884 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-K405 1 l93044ae10-k405.txt DAYTON SUPERIOR CORPORATION 10-K405/12-31-2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-11781 DAYTON SUPERIOR CORPORATION (Exact name of registrant as specified in its charter) Ohio 31-0676346 (State of incorporation) (I.R.S. Employer Identification No.) 7777 Washington Village Dr. Suite 130 Dayton, Ohio 45459 (Address of principal executive office) Registrant's telephone number, including area code: (937) 428-6360 Securities registered pursuant to Section 12(g) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check 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 ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] As of April 1, 2002, there were 3,993,614 common shares outstanding, all of which were privately held and not traded on a public market. PART I In this Annual Report on Form 10-K, unless otherwise noted, the terms "Dayton Superior," "we," "us" and "our" refer to Dayton Superior Corporation and its subsidiaries. ITEM 1. BUSINESS. GENERAL 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. In many of our product lines, we believe we are the market leader and lowest cost manufacturer competing primarily in two segments of the construction industry: infrastructure construction, such as highways, bridges, utilities, water and waste treatment facilities and airport runways, and non-residential building, such as schools, stadiums, prisons, retail sites, commercial offices and manufacturing facilities. For the year ended December 31, 2001, our net sales were $393.7 million. We derive our revenue from a mix of sales of consumable products and the sale and rental of engineered equipment. We believe that the breadth of our product offerings and national distribution network allow us to maintain a large customer base that prefers a "one-stop" supplier. We manufacture the substantial majority of our 20,000 products, which we sell under a number of well-established brand names. Our national distribution system, which we believe is the largest in our industry, allows us to efficiently cross-sell and distribute newly developed and acquired product lines on a nationwide basis. Through our network of 60 service/distribution centers, we serve over 8,000 customers, comprised of independent distributors and a broad array of precast concrete manufacturers, general contractors, subcontractors and metal fabricators. This nationwide customer base provides us with a geographically diversified sales. We currently have three principal business units, which are organized around the following product lines: Concrete Accessories (Dayton/Richmond(R)). We believe we are the leading North American manufacturer of concrete accessories, which are used in connecting forms for poured-in-place concrete walls, anchoring or bracing for walls and floors, supporting bridge framework and positioning steel reinforcing bars, as well as masonry products, which are placed between layers of brick and concrete blocks and covered with mortar to provide additional strength to walls. Masonry products also include engineered products used to repair or restore brick and stone buildings. For the year ended December 31, 2001, our concrete accessories business unit had net sales to external customers of $218.4 million, or 56% of our total net sales. 2 Concrete Forming Systems (Symons(R)). We believe we are the leading North American manufacturer of concrete forming systems, which are reusable, engineered forms and related accessories used in the construction of concrete walls, columns and bridge supports to hold concrete in place while it hardens. Sales from concrete forming systems and related accessories represented approximately 65% and rental revenue represented approximately 35% of Symons' total sales in 2001. For the year ended December 31, 2001, our concrete forming systems business unit had net revenues to external customers of $126.5 million, or 32% of our total net sales. Paving Products (American Highway Technology(R)). We believe we are the leading North American manufacturer of welded dowel assemblies and dowel baskets, which are paving products used in the construction and rehabilitation of concrete roads, highways and airport runways to extend the life of the pavement. These consumable products are used to transfer dynamic loads between adjacent slabs of concrete roadway. For the year ended December 31, 2001, our paving products business unit had net sales to external customers of $48.8 million, or 12% of our total net sales. Each of our three principal business units also sells specialty construction chemicals that are used in conjunction with its other products. PRODUCTS Although almost all of our products are used in concrete or masonry construction, the function and nature of the products differ widely. Most of our products are consumable, providing us with a source of recurring revenue. In addition, while our products represent a relatively small portion of a construction project's total cost, our products assist in ensuring the on-time, quality completion of those projects. We continually attempt to increase the number of products we offer by using engineers and product development teams to introduce new products and refine existing products. CONCRETE ACCESSORIES. Our concrete accessories business unit manufactures and sells concrete accessories primarily under the Dayton/Richmond(R) brand name and masonry products under the Dur-O-Wal(R) brand name. For the year ended December 31, 2001, net sales of our concrete accessories business unit to external customers accounted for $218.4 million, or 56% of our total net sales. Concrete accessories include: - WALL-FORMING PRODUCTS. Wall-forming products include shaped metal ties and accessories that are used with modular forms to hold concrete in place when walls are poured at a construction site or are prefabricated off site. These products, which generally are not reusable, are made of wire or plastic or a combination of both materials. We generally manufacture these products on customized high-speed automatic equipment. 3 - BRIDGE DECK PRODUCTS. Bridge deck products are metal assemblies of varying designs used to support the formwork used by contractors in the construction and rehabilitation of bridges. - BAR SUPPORTS. Bar supports are non-structural metal, plastic, or cementious supports used to position rebar within a horizontal slab or form to be filled with concrete. Metal bar supports are often plastic or epoxy coated, galvanized or equipped with plastic tips to prevent creating a conduit for corrosion of the embedded rebar. - SPLICING PRODUCTS. Splicing products are used to join two pieces of rebar together while at a construction site without the need for extensive preparation of the rebar ends. - PRECAST AND PRESTRESSED CONCRETE CONSTRUCTION PRODUCTS. Precast and prestressed concrete construction products are metal assemblies of varying designs used in the manufacture of precast concrete panels and prestressed concrete beams and structural members. Precast concrete panels and prestressed concrete beams are fabricated away from the construction site and transported to the site. Precast concrete panels are used in the construction of prisons, freeway sound barrier walls, external building facades and other similar applications. Prestressed concrete beams use multiple strands of steel cable under tension embedded in concrete beams to provide rigidity and bearing strength, and often are used in the construction of bridges, parking garages and other applications where long, unsupported spans are required. - TILT-UP CONSTRUCTION PRODUCTS. Tilt-up construction products include a complete line of inserts, lifting hardware and adjustable beams used in the tilt-up method of construction, in which the concrete floor slab is used as part of a form for casting the walls of a building. After the cast walls have hardened on the floor slab, a crane is used to "tilt-up" the walls, which then are braced in place until they are secured to the rest of the structure. Tilt-up construction generally is considered to be a faster method of constructing low-rise buildings than conventional poured-in-place concrete construction. Some of our tilt-up construction products can be rented as well as sold. - FORMLINER PRODUCTS. Formliner products include plastic and elastomeric products that adhere to the inside face of forms to provide shape to the surface of the concrete. - CHEMICAL PRODUCTS. Chemical products sold by our concrete accessories business unit include a broad spectrum of chemicals for use in concrete construction, including form release agents, bond breakers, curing compounds, liquid hardeners, sealers, water repellents, bonding agents, grouts and epoxies, and other chemicals used in the pouring and placement of concrete. 4 - MASONRY PRODUCTS. Masonry products are wire products sold under the Dur-O-Wal(R) name that improve the performance and longevity of masonry walls by providing crack control, greater elasticity and higher strength to withstand seismic shocks and better resistance to rain penetration. Our masonry product line consists primarily of masonry wall reinforcement products, masonry anchors, engineered products and other accessories used in masonry construction and restoration to reinforce brick and concrete walls, anchor inner to outer walls and provide avenues for water to escape. We also sell other masonry products which connect one form of masonry to another or masonry to a building structure. We have the in-house ability to produce hot-dipped zinc galvanized finishes on masonry wall reinforcement products. Hot-dipped galvanized finishes are considered to provide superior protection against corrosion compared to alternative finishes. In recent years, model building codes in a number of regions of the country in which masonry construction is used have been amended to require use of hot-dipped galvanized masonry wall reinforcement products. CONCRETE FORMING SYSTEMS. Our concrete forming systems business unit manufactures, sells and rents reusable modular concrete forming systems primarily under the Symons(R) name. These products include standard and specialty concrete forming systems, shoring systems and accessory products. To capitalize on the durability and relatively high unit cost of prefabricated forming equipment, we also rent forming products. For the year ended December 31, 2001, net sales of our concrete forming systems business unit to external customers accounted for $126.5 million, or 32% of our total net sales. Our concrete forming system products include: - CONCRETE FORMING SYSTEMS. Concrete forming systems are reusable, engineered modular forms which hold liquid concrete in place on concrete construction jobs while it hardens. Standard forming systems are made of steel and plywood and are used in the creation of concrete walls and columns. Specialty forming systems consist primarily of steel forms that are designed to meet architects' specific needs for concrete placements. Both standard and specialty forming systems and related accessories are sold and rented for use. - SHORING SYSTEMS. Shoring systems, including aluminum beams and joists, post shores and shoring frames are used to support deck and other raised forms while concrete is being poured. - ARCHITECTURAL PAVING PRODUCTS. Architectural Paving Products are used to apply decorative texture and coloration to concrete surfaces while concrete is being poured. - CONSTRUCTION CHEMICALS. Construction chemicals sold by the concrete forming systems business unit include form release agents, sealers, water repellents, grouts and epoxies and other chemicals used in the pouring, stamping and placement of concrete. 5 PAVING PRODUCTS. Our paving products business unit sells products, primarily consisting of welded dowel assemblies and dowel baskets, used in the construction and rehabilitation of roads, highways and airport runways to extend the life of the pavement. This business unit sells paving products primarily under the American Highway Technology(R) name, but we also offer some paving products under the Dayton/Richmond(R) name. We manufacture welded dowel assemblies primarily using automated and semi-automated equipment. For the year ended December 31, 2001, net sales of paving products accounted for $48.8 million, or 12% of our total net sales. Paving products include: - WELDED DOWEL ASSEMBLIES AND DOWEL BASKETS. Welded dowel assemblies and dowel baskets are used to transfer dynamic loads between two adjacent slabs of concrete roadway. Metal dowels are part of a dowel basket design that is imbedded in two adjacent slabs to transfer the weight of vehicles as they move over a road. - CORROSIVE-PREVENTING EPOXY COATINGS. Corrosive-preventing epoxy coatings are used for infrastructure construction products and a wide range of industrial and construction uses. - CONSTRUCTION CHEMICALS. Construction chemicals sold by our paving products business unit include curing compounds used in concrete road construction. MANUFACTURING We manufacture the substantial majority of the products we sell. Most of our concrete accessories and paving products are manufactured in 18 facilities throughout the United States, although a majority of our service/distribution facilities also can produce smaller lots of some products. Our production volumes enable us to design and build or custom modify much of the equipment we use to manufacture these products, using a team of experienced manufacturing engineers and tool and die makers. By developing our own automatic high-speed manufacturing equipment, we believe we generally have achieved significantly greater productivity, lower capital equipment costs, lower scrap rates, higher product quality, faster changeover times, and lower inventory levels than most of our competitors. In addition, our concrete accessories business unit's ability to "hot-dip" galvanize masonry products provides it with an advantage over many competitors' manufacturing masonry wall reinforcement products, which lack this internal capability. We also have a flexible manufacturing setup and can make the same products at several locations using short and discrete manufacturing lines. We manufacture our concrete forming systems at two facilities in the United States. These facilities incorporate semi-automated and automated production lines, heavy metal presses, forging equipment, stamping equipment, robotic welding machines, drills, punches, and other heavy machinery typical for this type of manufacturing operation. We generally operate our manufacturing facilities on two shifts per day, five days per week (six days per week during peak months and, in some instances, three shifts), with the number of employees increasing or decreasing as necessary to satisfy demand on a seasonal basis. 6 DISTRIBUTION We distribute our products through over 3,000 independent distributors, and our own network of 60 service/distribution centers located in the United States and Canada. Twenty-eight of the service/distribution centers are associated with our manufacturing plants. Distribution centers by segment are as follows: Concrete Accessories 29 Concrete Forming Systems 26 Paving Products 5 Some locations carry more than one of our product lines. We ship most of our products to our service/distribution centers from our manufacturing plants; however, a majority of our centers also are able to produce smaller batches of some products on an as-needed basis to fill rush orders. We have an on-line inventory tracking system for the concrete accessories and paving products businesses, which enables our customer service representatives to identify, reserve and ship inventory quickly from any of our locations in response to telephone orders. Our system provides us with a competitive advantage since our service representatives are able to answer customer questions about availability and shipping dates while still on the telephone. We primarily use third-party common carriers to ship our products. We also use our distribution system to sell products which are manufactured by others. These products usually are sold under our brand names and often are produced for us on an exclusive basis. Sales of these products allow us to utilize our distribution network to increase sales without making significant capital investments. We believe there is an increasing trend among our distributors to consolidate into larger entities, which could result in increased price competition. SALES AND MARKETING We employ approximately 300 sales and marketing personnel, of whom approximately 60% are field sales people and 40% are customer service representatives. Sales and marketing personnel are located in all of our locations. We produce product catalogs and promotional materials that illustrate certain construction techniques in which our products can be used to solve typical construction problems. We promote our products through seminars and other customer education efforts and work directly with architects and engineers to secure the use of our products whenever possible. We consider our engineers to be an integral part of the sales and marketing effort. Our engineers have developed proprietary software applications to conduct extensive pre-testing on both new products and construction projects. 8 CUSTOMERS We have over 8,000 customers, over 50% of which purchase our products for resale. Our customer base is geographically diverse, with no customer accounting for more than 5% of net sales in 2001. Our ten largest customers accounted for less than 15% of our net sales in 2001. Customers who purchase our products for resale generally do not sell our products exclusively. CONCRETE ACCESSORIES. Our concrete accessories business unit has approximately 5,700 customers, consisting of distributors, rebar fabricators, precast and prestressed concrete manufacturers, brick and concrete block manufacturers, general contractors and sub-contractors. We estimate that approximately 70% of the customers of this business unit purchase our products for resale. The largest customer of the business unit accounted for 7% of the business unit's 2001 net sales. The business unit's top ten customers accounted for 30% of its 2001 net sales. Our concrete accessories business unit has instituted a certified dealer program for those dealers who handle our tilt-up construction products. This program was established to educate dealers in the proper use of our tilt-up products and to assist them in providing engineering assistance to their customers. Certified dealers are not permitted to carry other manufacturers' tilt-up products, which we believe are incompatible with ours and, for that reason, could be unsafe if used with our products. The business unit currently has 100 certified tilt-up construction product dealers. CONCRETE FORMING SYSTEMS. Our concrete forming systems business unit has approximately 2,700 customers, consisting of distributors, precast and prestressed concrete manufacturers, general contractors and subcontractors. We estimate that approximately 89% of the customers of this business unit are the end-users of its products, while approximately 11% of those customers purchase its products for resale or re-rent. This business unit's largest customer accounted for 8% of the business unit's 2001 net sales and its ten largest customers accounted for 26% of its 2001 net sales. PAVING PRODUCTS. Our paving products business unit has approximately 200 customers, consisting primarily of distributors of construction supplies and, to a lesser extent, general contractors and subcontractors. This business unit's largest customer accounted for 18% of the business unit's 2001 net sales and its ten largest customers accounted for 65% of its 2001 net sales. RAW MATERIALS Our principal raw materials are steel wire rod, steel hot rolled bar, metal stampings and flat steel, aluminum sheets and extrusions, plywood, cement and cementitious ingredients, liquid chemicals, zinc, plastic resins and injection-molded plastic parts. Steel, in its various forms, constitutes approximately 35% of our cost of sales. We currently purchase materials from over 2000 vendors and are not dependent on any single vendor or small group of vendors for any significant portion of our raw material purchases. The U.S. Government has recently imposed tariffs on certain imported steel. At this point, we are unable to determine the impact that these tariffs will have on our results of operations. 9 COMPETITION Our industry is highly competitive in most product categories and geographic regions. We compete with a limited number of full-line national manufacturers of concrete accessories, concrete forming systems and paving products, and a much larger number of regional manufacturers and manufacturers with limited product lines. We believe competition in our industry is largely based on, among other things, price, quality, breadth of product lines, distribution capabilities (including quick delivery times) and customer service. Due primarily to factors such as freight rates, quick delivery times and customer preference for local suppliers, some local or regional manufacturers and suppliers may have a competitive advantage over us in a given region. We believe the size, breadth and quality of our product lines provide us with advantages of scale in both distribution and production relative to our competitors. TRADEMARKS AND PATENTS We sell most products under the registered trade names Dayton Superior(R), Dayton/Richmond(R), Symons(R), Dur-O-Wal(R) and American Highway Technology(R), which we believe are widely recognized in the construction industry and, therefore, are important to our business. Although some of our products (and components of some products) are protected by patents, we do not believe these patents are material to our business. We have approximately 126 trademarks and 139 patents. EMPLOYEES As of December 31, 2001, we employed approximately 800 salaried and 1,400 hourly personnel, of whom approximately 700 of the hourly personnel and five of the salaried personnel are represented by labor unions. Employees at our Miamisburg, Ohio; Parsons, Kansas; Des Plaines, Illinois; New Braunfels, Texas; Tremont, Pennsylvania; Long Beach, California; and Aurora, Illinois manufacturing/distribution plants and our service/distribution centers in Atlanta, Georgia and Santa Fe Springs, California are covered by collective bargaining agreements. We believe we have good employee and labor relations. SEASONALITY Our operations are seasonal in nature, with approximately 56% of our sales historically occurring in the second and third quarters. Working capital and borrowings fluctuate with sales volume. 10 BACKLOG We typically ship most of our products, other than paving products and most specialty forming systems, within one week and often within 24 hours after we receive the order. Other product lines, including paving products and specialty forming systems, may be shipped up to six months after we receive the order, depending on our customer's needs. Accordingly, we do not maintain significant backlog, and backlog as of any particular date is not representative of our actual sales for any succeeding period. RECENT DEVELOPMENTS Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations, Comparison of Years Ended December 31, 2001 and 2000, Operating Expenses for discussions regarding recent developments. ITEM 2. PROPERTIES. Our corporate headquarters are located in leased facilities in Dayton, Ohio. We believe our facilities provide adequate manufacturing and distribution capacity for our needs. We also believe all of the leases were entered into on market terms. Our other principal facilities are located throughout North America, as follows:
Leased/ Size Location Use Principal Business Unit Owned (Sq. Ft.) - ---------------------- -------------------------------- -------------------------- ----- --------- Concrete Accessories and Birmingham, Alabama Manufacturing/Distribution Paving Products Leased 285,000 Des Plaines, Illinois Manufacturing/Distribution and Symons Headquarters Concrete Forming Systems Owned 171,650 Miamisburg, Ohio Manufacturing/Distribution and Dayton/Richmond Headquarters Concrete Accessories Owned 146,000 Concrete Accessories and Parsons, Kansas Manufacturing/Distribution Paving Products Owned 115,000 Aurora, Illinois Manufacturing/Distribution and Dur-O-Wal Headquarters Concrete Accessories Owned 109,000 Kankakee, Illinois Manufacturing/Distribution and American Highway Technology Headquarters Paving Products Leased 107,900 Tremont, Pennsylvania Manufacturing/Distribution Concrete Accessories Owned 102,650 New Braunfels, Texas Manufacturing/Distribution Concrete Forming Systems Owned 89,600 Fontana, California Manufacturing/Distribution Concrete Accessories Leased 72,000 Parker, Arizona Manufacturing/Distribution Concrete Accessories Leased 60,000 Modesto, California Manufacturing/Distribution Paving Products Leased 55,000 Centralia, Illinois Manufacturing/Distribution Concrete Accessories Owned 53,500 Atlanta, Georgia Service/Distribution Concrete Accessories Leased 49,392 Grand Prairie, Texas Service/Distribution Concrete Accessories Leased 45,000 Seattle, Washington Service/Distribution Concrete Accessories Leased 42,825 Santa Fe Springs, California Service/Distribution Concrete Accessories Leased 40,000 Toronto, Ontario Manufacturing/Distribution Concrete Accessories Leased 40,000 Oregon, Illinois Service/Distribution Concrete Accessories Owned 39,000 Kansas City, Kansas Manufacturing/Distribution Concrete Accessories Owned 33,000 Folcroft, Pennsylvania Service/Distribution Concrete Accessories Owned 32,000
11 ITEM 3. 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. ("Royal"), 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. In 2001, Symons received approximately $1.1 million, net of recovery expenses, from Royal as reimbursement of certain defense costs. Symons is continuing efforts to collect additional defense costs that have not yet been agreed to by Royal. ENVIRONMENTAL MATTERS Our businesses are subject to regulation under various and changing federal, state and local laws and regulations relating to the environment and to employee safety and health. These environmental laws and regulations govern the generation, storage, transportation, disposal and emission of various substances. Permits are required for operation of our businesses (particularly air emission permits), and these permits are subject to renewal, modification and, in certain circumstances, revocation. We believe we are in compliance with these laws and permitting requirements. Our businesses also are subject to regulation under various and changing federal, state and local laws and regulations which allow regulatory authorities to compel (or seek reimbursement for) cleanup of environmental contamination at sites now or formerly owned or operated by our businesses and at facilities where their waste is or has been disposed. 12 We expect to incur ongoing capital and operating costs to maintain compliance with currently applicable environmental laws and regulations; however, we do not expect those costs, in the aggregate, to be material. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS. None. 13 ITEM 6. SELECTED FINANCIAL DATA. (All dollar amounts in thousands, except share data) The earnings statement data and the balance sheet data presented below have been derived from the Company's consolidated financial statements and should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto, included elsewhere herein.
Year Ended December 31, --------------------------------------------------------------------------- 1997 1998 1999 2000 2001 ---- ---- ---- ---- ---- EARNINGS STATEMENT DATA: Net sales $ 167,412 $ 282,849 $ 322,170 $ 367,845 $ 393,700 Cost of sales 112,943 178,499 201,445 229,523 254,430 --------- --------- --------- --------- --------- Gross profit 54,469 104,350 120,725 138,322 139,270 Selling, general and administrative expenses 34,862 72,316 79,819 92,941 97,532 Facility closing and severance expenses -- -- -- 2,517(1) 7,360(4) Amortization of goodwill and intangibles 1,885 2,213 2,369 2,508 3,912 --------- --------- --------- --------- --------- Income from operations 17,722 29,821 38,537 40,356 30,466 Interest expense, net 5,556 11,703 11,661 22,574 35,024 Lawsuit judgment -- -- -- 15,341(2) -- Other expense (income), net (64) (202) 230 293 95 --------- --------- --------- --------- --------- Income (loss) before provision for income taxes and extraordinary item 12,230 18,320 26,646 2,148 (4,653) Provision (benefit) for income taxes 5,277 8,244 11,991 1,471 (1,179) --------- --------- --------- --------- --------- Income (loss) before extraordinary item 6,953 10,076 14,655 677 (3,474) Extraordinary item, net of tax -- -- -- (4,812)(3) -- --------- --------- --------- --------- --------- Net income (loss) 6,953 10,076 14,655 (4,135) (3,474) Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit -- -- 320 583 -- --------- --------- --------- --------- --------- Net income (loss) available to common shareholders $ 6,953 $ 10,076 $ 14,335 $ (4,718) $ (3,474) ========= ========= ========= ========= ========= As of December 31, ---------------------------------------------------------------------------- 1997 1998 1999 2000 2001 ---- ---- ---- ---- ---- BALANCE SHEET: Working capital $ 40,365 $ 39,727 $ 50,469 $ 60,868 $ 56,943 Total assets 226,930 253,620 278,679 335,418 396,843 Long-term debt (including current portion) 120,236 118,205 105,173 245,925 291,946 Company-obligated mandatorily redeemable convertible trust preferred securities -- -- 19,556 -- -- Shareholders' equity 60,529 74,588 88,772 13,196 16,721
14 (1) During 2000, as a result of the acquisition of Conspec, the Company approved and began implementing a plan to consolidate certain of the Company's existing operations. In conjunction with the consolidation, two of the Company's facilities were closed. Accordingly, a facility closing and severance expense of approximately $2.5 million was recorded during 2000, of which approximately $0.4 million related to idle machinery and equipment write-offs, and approximately $2.1 million related to future lease payments and employee severance. Of the amounts accruable at the time of the plan's approval, approximately $0.7 million is included in "Other Accrued Liabilities" in the accompanying consolidated balance sheet. (2) 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. (3) During June 2000, 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 ======
15 (4) During the second quarter of 2001, the Company approved and began implementing plans to exit seven manufacturing and distribution facilities and to reduce overall Company headcount in order to keep its cost structure in alignment with its net sales. The total anticipated cost of the facility closures and severance was approximately $4,700, and was to encompass approximately 200 employee terminations. The estimated cost was increased to approximately $5,700 and the estimated number of employee terminations was increased to approximately 400. The total estimated exit costs are comprised of approximately $2,400 related to employee involuntary termination benefits, approximately $700 related to lease termination costs, approximately $1,100 related to relocation activities and approximately $1,500 related to other post-closing maintenance costs. Accordingly, the Company recorded a facility closing and severance expense of approximately $5,700 in 2001. Of the amounts accruable at the time of the plan's approval, approximately $1,400 is included in "Other Accrued Liabilities" in the accompanying consolidated balance sheet. During the fourth quarter of 2001, the Company approved and began implementing a plan to exit one additional manufacturing facility and further reduce overall Company headcount in order to keep its cost structure in alignment with its net sales. The total anticipated cost of the facility closure and severance was $1,700, and was to encompass approximately 100 employee terminations. The total estimated costs are comprised of approximately $1,300 related to employee involuntary termination benefits, approximately $100 related to lease termination costs and approximately $300 related to other post-closing maintenance costs. Of the amounts accruable at the time of the plan's approval, $800 is included in "Other Accrued Liabilities" in the accompanying consolidated balance sheet. The total expense related to the above activities in 2001 of approximately $7,400 was comprised of approximately $3,700 of employee involuntary termination benefits, approximately $800 of lease termination costs, approximately $1,100 related to relocation activities, and approximately $1,800 of other post-closing maintenance costs. Of these amounts, approximately $2,200 related to 2001 activity and approximately $700 related to 2000 activity has not been paid and is included in "Other Accrued Liabilities" in the accompanying December 31, 2001 consolidated balance sheet. 16 ITEM 7. 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. We have three principal business units, which are organized around the following product lines: - Concrete Accessories (Dayton/Richmond(R)); - Concrete Forming Systems (Symons(R)); and - Paving Products (American Highway Technology(R)). Through our business units, we design, manufacture and distribute metal accessories and forms to independent distributors for resale to contractors, brokers and other manufacturers. In some of our product lines, we also may sell directly to end users and may provide equipment for rental. When our business was started in 1924, it consisted primarily of the concrete accessories business and operated primarily in the eastern United States. In 1982, we acquired Superior Concrete Accessories, Inc., which expanded our geographic reach to include the rest of the continental United States and doubled the size of our company. In 1995, we acquired Dur-O-Wal(R), which we believe is the leading North American manufacturer of masonry wall reinforcement products and other metal masonry accessories. In 1996, we created a separate paving products business unit to operate a business that was previously a part of our concrete accessories business unit. In 1997, we again almost doubled our size when we acquired our concrete forming systems business unit and added to our concrete accessories business unit through the acquisition of Symons Corporation. With the addition of Symons, we also approximately doubled the number of our distribution and manufacturing locations. We believe that Symons is the leading North American manufacturer of concrete forming systems. We also have expanded some of our business units through additional smaller acquisitions. In June 1998, The Transportation Equity Act for the 21st Century, known as "TEA-21" was enacted. TEA-21 authorizes $218 billion in federal spending on highway and infrastructure projects through the year 2003 and represents a 44% increase over the 1991 Intermodal Surface Transportation Act, the previous six-year federal program. At a minimum, $162 billion of the $218 billion has been allocated to highway and bridge programs. Our paving products business unit began to benefit from TEA-21 during the second half of 1999 and we have continued to see these benefits through 2001. Unless otherwise indicated, the discussion of our results of operations that follows includes information for Symons, Dur-O-Wal, Aztec and the other acquisitions only from the dates that we acquired each of those companies. 17 CONCRETE ACCESSORIES (DAYTON/RICHMOND(R)) Our concrete accessories business unit derives its revenues from the sale of products primarily to independent distributors. We also provide some equipment on a rental basis. Our concrete accessories business unit manufactures substantially all of the products it sells, which are shipped to customers based on orders. We design and manufacture or customize most of the machines we use to produce concrete accessories, and these proprietary designs allow for quick changeover of machine set-ups. This flexibility, together with our extensive distribution system, enable this business unit to deliver many of its products within 24 hours of a customer order. Therefore, product inventories are maintained at relatively low levels. Cost of sales for our concrete accessories business unit consists primarily of purchased steel and other raw materials, as well as the costs associated with manufacturing, assembly, testing, inter-facility freight and associated overhead. CONCRETE FORMING SYSTEMS (SYMONS(R)) Our concrete forming systems business unit derives its revenues from the sale and rental of engineered, reusable modular systems and related accessories to independent distributors and contractors. Sales of concrete forming systems and specific consumables generally represent approximately 65% of the revenues of this business unit, and rentals represent the remaining 35%. Sales of concrete forming systems generally are more sensitive to economic cycles than rentals. Rental equipment also can be sold as used equipment. The business unit's products include systems with steel frames and a plywood face, also known as Steel-Ply(R), and systems that use steel in both the frame and face. All-steel forming systems are characterized by larger, project-driven orders, which increases backlog relative to the Steel-Ply(R) forms which are held in inventory for rental and sale. Our concrete forming systems business unit manufactures and assembles Steel-Ply(R) forms and outsources some of the manufacturing involved in all-steel forms. This outsourcing strategy allows us to fulfill larger orders without increased overhead. Cost of sales for our concrete forming systems business unit consists primarily of purchased steel, specialty plywood, and other raw materials; depreciation and maintenance of rental equipment, inter-facility freight and the costs associated with manufacturing, assembly and overhead. PAVING PRODUCTS (AMERICAN HIGHWAY TECHNOLOGY(R)) Our paving products business unit derives its revenues from sales to independent distributors and contractors. Orders from customers are affected by state and local governmental infrastructure expenditures and their related bid processes. This is our business unit most affected by the demand expected to be generated as a consequence of TEA-21. Due to the project-oriented nature of paving jobs, these products generally are made to order. This serves to keep inventories low but increases the importance of backlog in this business unit. Our paving products division manufactures nearly all of its products. Cost of sales for our paving products business unit consists primarily of steel, as well as the costs associated with manufacturing and overhead. 18 ACQUISITIONS We have completed six acquisitions since the beginning of 1999. These are summarized in the following table:
Purchase Price Date Business Acquired Business Unit (in millions) ---- ----------------- ------------- ------------- January 1999 Cempro Concrete Accessories $ 5.4 October 1999 Southern Construction Products Concrete Accessories 8.3 February 2000 Polytite Concrete Accessories 1.6 July 2000 Conspec Concrete Accessories 24.3 January 2001 Aztec Concrete Accessories 32.8 June 2001 BarLock Concrete Accessories 9.9
RESULTS OF OPERATIONS The following table summarizes the Company's results of operations as a percentage of net sales for the periods indicated.
2001 2000 1999 ------- ------- ------- Net sales 100.0% 100.0% 100.0% Cost of goods sold 64.6 62.4 62.5 ------- ------- ------- Gross profit 35.4 37.6 37.5 Selling, general and administrative expenses 24.8 25.2 24.8 Facility closing and severance expenses 1.9 0.7 -- Amortization of goodwill and intangibles 1.0 0.7 0.7 ------- ------- ------- Total operating expenses 27.7 26.6 25.5 ------- ------- ------- Income from operations 7.7 11.0 12.0 Interest expense, net 8.9 6.1 3.6 Lawsuit judgment -- 4.2 -- Other expense (income), net -- 0.1 0.1 ------- ------- ------- Income (loss) before provision (benefit) for income taxes and extraordinary item (1.2) 0.6 8.3 Provision (benefit) for income taxes (0.3) 0.4 3.8 ------- ------- ------- Income (loss) before extraordinary item (0.9) 0.2 4.5 Extraordinary loss, net of income tax benefit -- (1.3) -- ------- ------- ------- Net income (loss) (0.9) (1.1) 4.5 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit -- 0.2 0.1 ------- ------- ------- Net income (loss) available to common shareholders (0.9)% (1.3)% 4.4% ======= ======= =======
19 COMPARISON OF YEARS ENDED DECEMBER 31, 2001 AND 2000 Net Sales Our 2001 net sales reached a record $393.7 million, a 7.0% increase from $367.8 million in 2000. The following table summarizes our net sales by segment for the periods indicated:
YEARS ENDED DECEMBER 31, ----------------------------------------------------- 2001 2000 ------------------------ ------------------------ (IN THOUSANDS) NET SALES % NET SALES % % CHANGE --------- --------- --------- --------- ---------- Concrete accessories $ 223,919 56.9% $ 201,833 54.9% 10.9% Concrete forming systems 133,530 33.9 136,456 37.1 (2.1) Paving products 51,378 13.0 42,985 11.7 19.5 Intersegment eliminations (15,127) (3.8) (13,429) (3.7) 12.6 --------- --------- --------- --------- Net sales $ 393,700 100.0% $ 367,845 100.0% 7.0% ========= ========= ========= =========
Net sales of concrete accessories increased by 10.9% to $223.9 million in 2001 from $201.8 million in 2000. This increase was primarily due to the acquisitions of Aztec, which contributed $18.3 million, and BarLock, which contributed $4.5 million. This was partially offset by decreases in the existing business due to the Company's weaker markets in 2001 compared to 2000. Net sales of concrete forming systems decreased by 2.1% to $133.5 million in 2001 from $136.5 million in 2000 due primarily to a drop off in purchasing of forms resulting from the Company's weaker markets in 2001 compared to 2000. Net sales of paving products increased by 19.5% to $51.4 million in 2001 from $43.0 million in 2000 due to an increase in volume as a result of the Transportation Equity Act for the 21st Century, known as TEA-21, and the increased presence in California following the opening in late 2000 of a new manufacturing facility in Modesto, California. Gross Profit Gross profit for 2001 was $139.3 million, a $1.0 million increase over the $138.3 million reported for 2000. Gross profit increased $3.0 million due to the cost reduction initiative implemented by management. A change in accounting estimate relating to the depreciable lives of a portion of the rental fleet reduced 2001 gross profit by $2.3 million. Gross margin was 35.4% in 2001, decreasing from 37.6% in 2000. The decrease from 2000 was due to a higher mix of lower gross margin paving products, a lower mix of higher gross margin concrete forming systems products, lower margins achieved on masonry products within the Concrete Accessories Division due to price competition, higher freight and energy costs, and lower absorption of fixed costs. 20 Operating Expenses Our selling, general, and administrative expenses ("SG&A expenses") increased $4.6 million to $97.5 million in 2001 from $92.9 million in 2000, as a result of recent acquisitions, which totaled approximately $6.3 million, offset partially by the cost reduction initiatives implemented by management and the receipt of approximately $1.1 million, net of recovery expenses, from Royal Surplus Lines Insurance Co. of certain defense costs related to the EFCO litigation. During the second quarter of 2001, the Company approved and began implementing plans to exit seven manufacturing and distribution facilities and to reduce overall Company headcount in order to keep its cost structure in alignment with its net sales. The total anticipated cost of the facility closures and severance was approximately $4.7 million, and was to encompass approximately 200 employee terminations. The estimated cost was increased to approximately $5.7 million and the estimated number of employee terminations was increased to approximately 400. The total estimated exit costs are comprised of approximately $2.4 million related to employee involuntary termination benefits, approximately $0.7 million related to lease termination costs, approximately $1.1 million related to relocation activities and approximately $1.5 million related to other post-closing maintenance costs. Accordingly, the Company recorded a facility closing and severance expense of approximately $5.7 million in 2001. Of the amounts accruable at the time of the plan's approval, approximately $1.4 million is included in "Other Accrued Liabilities" in the accompanying consolidated balance sheet. During the fourth quarter of 2001, the Company approved and began implementing a plan to exit one additional manufacturing facility and further reduce overall Company headcount in order to keep its cost structure in alignment with its net sales. The total anticipated cost of the facility closure and severance was $1.7 million, and was to encompass approximately 100 employee terminations. The total estimated costs are comprised of approximately $1.3 million related to employee involuntary termination benefits, approximately $0.1 million related to lease termination costs and approximately $0.3 million related to other post-closing maintenance costs. Of the amounts accruable at the time of the plan's approval, $0.8 million is included in "Other Accrued Liabilities" in the accompanying consolidated balance sheet. The total expense related to the above activities in 2001 of approximately $7.4 million was comprised of approximately $3.7 million of employee involuntary termination benefits, approximately $0.8 million of lease termination costs, approximately $1.1 million related to relocation activities, and approximately $1.8 million of other post-closing maintenance costs. Of these amounts, approximately $2.2 million related to 2001 activity and approximately $0.7 million related to 2000 activity has not been paid and is included in "Other Accrued Liabilities" in the accompanying December 31, 2001 consolidated balance sheet. Below is a summary of the amounts charged against the facility closing and severance reserve in 2001: Accrual Charged to Expense Total Balance as Incurred Expense ------- ------------------ ------- Beginning Balance $ 1.9 $ -- $ -- Facility Closing and Severance Expense 4.7 2.7 7.4 Items Charged Against Reserve: Involuntary Termination Benefits (2.4) -- -- Lease Termination Benefits (1.3) -- -- Relocation Activities -- -- -- Other Post-closing Costs -- -- -- ----- ------ ----- Ending Balance $ 2.9 $ -- $ 7.4 ===== ====== ===== Amortization of goodwill and intangibles increased to $3.9 million in 2001 from $2.5 million in 2000, due to the acquisitions of Aztec and BarLock in 2001, as well as the full year impact of goodwill amortization relating to the July 2000 Conspec acquisition. Other Expenses Interest expense increased to $35.0 million in 2001 from $22.6 million in 2000 primarily due to increased long-term debt resulting from the recapitalization and the acquisitions of Aztec and BarLock. 21 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 $14.1 million were awarded against Symons in 1999, and both parties were enjoined from engaging in certain conduct. The Company recorded a $15.3 million charge in 2000 after its unsuccessful appeal. In October 2000, Symons satisfied the judgment of $14.1 million, post-judgment interest of $1.1 million, and reimbursement of EFCO's 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" and other claims 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 Surplus Lines 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. The complaint was amended by Royal in October 2000 by adding the Federal Insurance Company as an additional plaintiff. Symons filed a cross complaint against Royal and Federal in January 2001 and later amended the cross complaint by adding American International Surplus Lines Co., Westchester Fire Insurance Co., International Insurance Co., and Aon Risk Services of California, Inc. The Royal insurance policy, against which defense and indemnification claims have been made, provides $0.5 million of primary insurance (subject to a self-insured retention of $0.5 million) and the payment of defense costs. The excess insurance policies provide an additional $10.0 million of coverage for each policy year. 22 Income (Loss) Before Provision (Benefit) for Income Taxes and Extraordinary Item The loss before income taxes and extraordinary item in 2001 was $(4.7) million as compared to income of $2.1 million in 2000, and was comprised of the following:
YEARS ENDED DECEMBER 31, ------------------------- 2001 2000 -------- -------- (IN THOUSANDS) Concrete accessories ................................................. $ 14,684 $ 18,098 Concrete forming systems ............................................. (5,637) (5,546) Paving products ...................................................... 224 2,363 Intersegment eliminations ............................................ (8,050) (6,970) Corporate ............................................................ (5,874) (5,797) -------- -------- Income (loss) before provision (benefit) for income taxes and extraordinary item .......................................... $ (4,653) $ 2,148 ======== ========
Concrete accessories' income before provision for income taxes of $14.7 million in 2001 decreased from $18.1 million in 2000, due to higher interest expense of $4.5 million, and $3.8 million of facility closing and severance expenses recorded in 2001, partially offset by the contributions from higher net sales and the cost reduction initiatives implemented by management. Concrete forming systems' loss before income taxes was $(5.6) million in 2001 compared to a loss of $(5.5) million in 2000. The 2001 results included a $2.3 million charge for the change in accounting estimate. The 2000 results included a $15.3 million non-recurring lawsuit judgment. Excluding these items, the income (loss) before income taxes from concrete forming systems was $(3.3) million for 2001 versus $9.8 million for 2000, due to the shortfall in sales of forms, higher interest expense of $6.7 million, facility closing and severance expense of $1.2 million and higher operating costs, such as energy and freight. Income before provision for income taxes from paving products decreased to $0.2 million in 2001 from $2.4 million in 2000, due to higher interest expense of $1.6 million and $1.8 million related to facility closing and severance expenses, offset partially by the increased sales volumes as a result of increased TEA-21 spending. Corporate expenses increased slightly to $5.9 million in 2001 from $5.8 million in 2000. Elimination of gross profit on intersegment sales increased to $8.1 million in 2001 from $7.0 million in 2000 due to higher intersegment sales. Net Income (Loss) The effective tax rate in 2001 was 25.3%, which is due to the unfavorable impact of non-deductible goodwill amortization for purposes of determining taxable income (losses). The loss before extraordinary item for 2001 was $(3.5) million compared to income of $0.7 million in 2000 due to the factors described above. As described in footnote 1 to the consolidated financial statements, the Company's recapitalization resulted in an extraordinary loss of $4.8 million in 2000. 23 COMPARISON OF YEARS ENDED DECEMBER 31, 2000 AND 1999 Net Sales Our 2000 net sales reached a record $367.8 million, a 14.2% increase from $322.2 million in 1999. The following table summarizes our net sales by segment for the periods indicated:
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 2000 1999 ------------------------- ------------------------ (IN THOUSANDS) NET SALES % NET SALES % % CHANGE --------- --------- --------- --------- --------- Concrete accessories ................ $ 201,833 54.9% $ 171,451 53.2% 17.7% Concrete forming systems ............ 136,456 37.1 122,720 38.1 11.2 Paving products ..................... 42,985 11.7 36,695 11.4 17.1 Intersegment eliminations ........... (13,429) (3.7) (8,696) (2.7) 54.4 --------- --------- --------- --------- Net sales .................. $ 367,845 100.0% $ 322,170 100.0% 14.2% ========= ========= ========= =========
Net sales of concrete accessories increased by 17.7% to $201.8 million in 2000 from $171.5 million in 1999. Approximately half of the increase was due to the acquisition of Conspec, with the balance due to increases in volume from specific marketing initiatives. Net sales of concrete forming systems increased by 11.2% to $136.5 million in 2000 from $122.7 million in 1999 due to the introduction of two European forming systems through our distribution channels, increased volume in highly engineered forms and increased Steel-Ply(R) rental revenue. Net sales of paving products increased by 17.1% to $43.0 million in 2000 from $36.7 million in 1999 due to an increase in volume as a result of TEA-21, marketing initiatives, and a new facility in California. Gross Profit Gross profit for 2000 was $138.3 million, a 14.6% increase over $120.7 million for 1999. Gross margin was 37.6% in 2000 compared to 37.5% in 1999. Despite the lower mix of rental revenue and the higher mix of lower gross margin businesses - paving products and masonry products - gross margin increased primarily due to improved efficiencies in manufacturing and freight. Operating Expenses Our selling, general, and administrative expenses ("SG&A expenses") increased to $92.9 million in 2000 from $79.8 million in 1999. A non-recurring pension plan termination gain reduced 1999 SG&A expenses by $0.7 million. The remaining increase is due to the effect of 1999 and 2000 acquisitions, higher distribution costs associated with the higher net sales and increases in new product development and sales personnel. SG&A expenses were higher as a percent of sales to 25.3% in 2000 from 24.8% in 1999, due to the non-recurring pension plan termination gain in 1999 and a build in our specialty construction chemicals product line infrastructure. 24 A facility closing reserve of $2.5 million was recorded in 2000 to cover the closing or downsizing of two existing facilities as a result of the acquisition of Conspec. Amortization of goodwill and intangibles increased slightly to $2.5 million in 2000 from $2.4 million in 1999. Other Expenses Interest expense increased to $22.6 million in 2000 from $11.7 million in 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 $14.1 million were awarded against Symons in 1999, and both parties were enjoined from engaging in certain conduct. The Company recorded a $15.0 million charge in the second quarter of 2000 after its unsuccessful appeal. In October 2000, Symons satisfied the judgment of $14.1 million, post-judgment interest of $1.1 million, and reimbursement of EFCO's 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" and other claims 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 Surplus Lines 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. The complaint was amended by Royal in October 2000 by adding the Federal Insurance Company as an additional plaintiff. Symons filed a cross complaint against Royal and Federal in January 2001 and later amended the cross complaint by adding American International Surplus Lines Co., Westchester Fire Insurance Co., International Insurance Co., and Aon Risk Services of California, Inc. The Royal insurance policy, against which defense and indemnification claims have been made, provides $0.5 million of primary insurance (subject to a self-insured retention of $0.5 million) and the payment of defense costs. The excess insurance policies provide an additional $10.0 million of coverage for each policy year. 25 Income Before Provision for Income Taxes and Extraordinary Item Income before provision for income taxes and extraordinary item in 2000 decreased to $2.1 million from $26.6 million in 1999, and was comprised of the following:
YEARS ENDED DECEMBER 31, ------------------------- 2000 1999 -------- -------- (IN THOUSANDS) Concrete accessories .................................................$ 18,098 $ 23,584 Concrete forming systems ............................................. (5,546) 10,876 Paving products ...................................................... 2,363 1,569 Intersegment eliminations ............................................ (6,970) (4,465) Corporate ............................................................ (5,797) (4,918) -------- -------- Income before provision for income taxes and extraordinary item ............................................................$ 2,148 $ 26,646 ======== ========
Concrete accessories' income before provision for income taxes of $18.1 million in 2000 decreased from $23.6 million in 1999, due primarily to higher interest expense of $3.9 million and competitive pricing pressures on our masonry products, offset partially by the contribution of the higher net sales from our other product lines. Concrete forming systems' income (loss) before income taxes of $(5.5) million in 2000 decreased from $10.9 million in 1999, due primarily to the EFCO lawsuit judgment of $15.3 million. Additionally, higher interest expense of $6.2 million was mostly offset by the contribution of higher net sales. Income before provision for income taxes from paving products increased to $2.4 million in 2000 from $1.6 million in 1999, due to the increase in net sales and manufacturing efficiencies and absorption from higher volume that more than offset the $0.8 million in higher interest expense. Corporate expenses increased to $5.8 million from $4.9 million primarily due to the non-recurring pension plan termination gain of $0.7 million in 1999. Elimination of gross profit on intersegment sales increased to $7.0 million in 2000 from $4.5 million in 1999 due to higher intersegment sales. Net Income (Loss) Our effective tax rate increased to 68.5% in 2000 from 45.0% in 1999 due to the effect of permanent non-deductible items on lower income before income taxes. Income before extraordinary item decreased to $0.7 million in 2000 from $14.7 million in 1999 due to the factors described above. As described in footnote 1 to the consolidated financial statements, the Company's recapitalization resulted in an extraordinary loss of $4.8 million in 2000. 26 LIQUIDITY AND CAPITAL RESOURCES Our 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. We define cash gap as the number of days our accounts receivable are outstanding plus the number of days of inventory we have, less the number of days our accounts payable are outstanding. Our capital requirements relate primarily to capital expenditures, debt service and the cost of acquisitions. Historically, our primary sources of financing have been cash generated from operations, borrowings under our revolving credit facility and the issuance of long-term debt and equity. Net cash provided by operating activities for 2001 was $8.2 million and was comprised of: Net loss $ (3.5) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 18.3 Amortization of goodwill and intangibles 3.9 Deferred income taxes (3.0) Amortization of deferred financing costs, debt discount, and issuance costs on Company-obligated mandatorily redeemable convertible trust preferred securities 2.3 Gain on sales of rental equipment and property, plant and equipment (14.2) Change in assets and liabilities, net of effects of acquisitions: Accounts receivable 7.3 Inventories (1.4) Prepaid expenses and other assets (8.5) Prepaid income taxes 2.7 Accounts payable 0.7 Accrued liabilities and other long-term liabilities 3.6 -------- Net cash provided by operating activities $ 8.2 ========
Net cash used in investing activities was comprised of: - net capital expenditures of $12.9 million, and - net acquisitions of $40.7 million. Our capital expenditures in 2001 included additions to the rental equipment fleet of $25.9 million, offset partially by $22.7 million of proceeds from sales of rental equipment, and net property, plant, and equipment additions of $9.7 million. We anticipate that our net capital expenditures in 2002 will be less than the amount in 2001. 27 In May 2001, we increased our borrowings on the Term Loan Tranche B by $45.0 million. The proceeds from this issuance, net of financing costs of approximately $0.8 million, were used to repay the outstanding balance on the acquisition credit facility of $24.0 million. The remaining $20.2 million was used to pay down existing debt on our revolving credit facility. As of December 31, 2001, our long-term debt consisted of the following: Revolving credit facility, weighted average interest rate of 6.5% $ 2.0 Acquisition credit facility, weighted average interest rate of 5.3% 9.2 Term Loan Tranche A, weighted average interest rate of 5.2% 22.2 Term Loan Tranche B, weighted average interest rate of 5.7% 98.5 Senior Subordinated Notes, interest rate of 13.0% 170.0 Debt discount on Senior Subordinated Notes (11.3) Debentures previously held by Dayton Superior Capital Trust, interest rate of 9.1% 1.2 Note payable to one of the former stockholders of Symons Corporation, interest rate of 10.5% -- City of Parsons, Kansas Economic Development Loan, interest rate of 7.0% 0.1 -------- Total long-term debt 291.9 Less current portion (5.0) -------- Long-term portion $ 286.9 ========
At December 31, 2001, of the $50.0 million revolving credit facility that was available to us, $2.0 million of borrowings were outstanding, along with $6.0 million of letters of credit, with the remaining $42.0 million available for borrowing. Approximately $9.2 million of the $30.0 million acquisition facility had been drawn, and $22.2 million of the delayed-draw tranche A facility had been drawn. All of the $98.5 million tranche B facility was outstanding. In December 2001, we repaid our $5.0 million, 10.5% demand note payable to one of the former stockholders of Symons Corporation at the request of the former stockholder. At December 31, 2001, working capital was $56.9 million, compared to $60.9 million at December 31, 2000. The decline in our working capital is due to lower accounts receivable from our enhanced collection activities in the fourth quarter of 2001, lower prepaid income taxes due to collection of refunds of $1.5 million in 2001 along with income taxes payable assumed with the Aztec acquisition of $2.7 million and an increase in taxable income in 2001 when compared to 2000, and increase in accounts payable and other accrued liabilities as a result of recent acquisitions, and the liabilities recorded as a result of the facility and severance expenses incurred, offset partially by increases in inventories and prepaid expenses as a result of recent acquisitions. At December 31, 2001, we had a total of $291.9 million of long-term debt outstanding, of which $5.0 million was current. For 2001, our average net cash gap days were 72, an improvement of 5 days from 77 days in 2000. We define cash gap as the number of days our accounts receivable are outstanding plus the number of days of inventory we have, less the number of days our accounts payable are outstanding. 28 We believe our liquidity, capital resources and cash flows from operations are sufficient, in the absence of additional acquisitions, to fund the capital expenditures we have planned and our working capital and debt service requirements. We intend to fund future acquisitions with cash, securities or a combination of cash and securities. To the extent we use cash for all or part of any future acquisitions, we expect to raise the cash primarily from our business operations, from borrowings under our credit agreement or, if feasible and attractive, by issuing long-term debt or additional common shares. SEASONALITY Our operations are seasonal, with approximately 56% of sales historically occurring in the second and third quarters of the year. Our working capital and borrowings fluctuate with the volume of our sales. INFLATION We do not believe inflation has had a significant impact on our operations over the past three years. In the past, we have been able to pass along to our customers all or a portion of increases in the price of steel (our principal raw material). We may not be able to pass on steel price increases in the future. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board issued Statement of Financials Accounting Standards ("SFAS") No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 revises the accounting for future business combinations to only allow the purchase method of accounting. In addition, the two statements will not require amortization of goodwill for periods beginning after December 15, 2001. Instead, an annual review of the recoverability of the goodwill will be required. Certain other intangible assets will continue to be amortized over their estimated useful lives. This Statement will be adopted effective January 1, 2002 for the Company. The Company has recognized goodwill for several past acquisition transactions. The amount of amortization expense recognized in 2001 that will not recur in 2002 is approximately $3.7 million. The Company is still evaluating the Statements and does not know what impact the Statements will have on the results of operations or financial position. The Company does not believe that there will be any impact on cash flows from adopting these Statements. FORWARD-LOOKING STATEMENTS This Form 10-K includes, and future filings by us on Form 10-K, Form 10-Q, and Form 8-K, and future oral and written statements by us and our 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 us and our management are based on estimates, projections, beliefs and assumptions of our management and are not guarantees of future performance. We disclaim any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information, or otherwise. 29 Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by us and our 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 our control such as weakness in the general economy, a decrease in governmental spending, interest rate increases, and changes in banking and tax laws; our ability to successfully identify, finance, complete and integrate acquisitions; increases in the price of steel (the principal raw material in our products) and our ability to pass along such price increases to our customers; the effects of weather and seasonality on the construction industry; increasing consolidation of our customers; the mix of products we sell; the competitive nature of our industry; and the amount of debt we must service. This list of factors is not intended to be exhaustive, and additional information concerning relative risk factors can be found in our Registration Statement on Form S-4 (Reg. No. 333-41392) filed with the Securities and Exchange Commission. 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 our future business. 30 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As of December 31, 2001, we had financial instruments which were sensitive to changes in interest rates. These financial instruments consist of: - $170.0 million of Senior Subordinated Notes; - $202.0 million credit facility, consisting of: - $50.0 million revolving credit facility, $2.0 million of which was outstanding at December 31, 2001; - $30.0 million acquisition facility, $9.3 million of which was outstanding at December 31, 2001; - $23.5 million term loan tranche A, $22.2 million, of which was outstanding at December 31, 2001; and - $98.5 million term loan tranche B, all of which was outstanding at December 31, 2001; and - $0.1 million in other fixed-rate, long term debt. Our $170.0 million of senior subordinated notes 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 net book value of the notes at December 31, 2001 was $158.7 million. 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. The senior subordinated notes have an interest rate of 13.0%. The estimated fair value of the notes is $173.0 million as of December 31, 2001. Our $202.0 million credit facility has several interest rate options which reprice on a short-term basis. Accordingly, the fair value of the new credit facility approximates its $132.0 million face value. The weighted average interest rates as of December 31, 2001 range from 5.2% to 6.5%. Our other long-term debt at December 31, 2001 consisted of $1.2 million of 9.1% junior subordinated debentures previously held by the Dayton Superior Capital Trust with an estimated fair value of $1.4 million, and a $0.1 million, 7% loan due in annual installments of $31,500 per year with an estimated fair value as of December 31, 2001 of $0.1 million. In the ordinary course of our business, we also are exposed to price changes in raw materials (particularly steel rod and steel bar) and products purchased for resale. The prices of these items can change significantly due to changes in the markets in which our suppliers operate. We generally do not, however, use financial instruments to manage our exposure to changes in commodity prices. 31 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Report Of Independent Public Accountants ---------------------------------------- To Dayton Superior Corporation: We have audited the accompanying consolidated balance sheets of Dayton Superior Corporation (an Ohio corporation) and Subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, shareholders' equity, cash flows and comprehensive income (loss) for each of the three years in the period ended December 31, 2001. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dayton Superior Corporation and Subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed under Part IV, Item 14(a)(2) is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Cincinnati, Ohio January 25, 2002 32 Dayton Superior Corporation And Subsidiaries Consolidated Balance Sheets As of December 31 (Amounts in thousands, except share amounts)
ASSETS (Note 4) 2001 2000 --------- --------- Current assets: Cash $ 4,989 $ 1,782 Accounts receivable, net of allowances for doubtful accounts and sales returns and allowances of $7,423 and $5,331 51,628 55,786 Inventories (Note 3) 47,900 43,316 Prepaid expenses and other current assets 9,637 5,938 Prepaid income taxes 1,225 6,742 Future income tax benefits (Notes 3 and 8) 7,962 5,841 --------- --------- Total current assets 123,341 119,405 --------- --------- Rental equipment, net (Note 3) 71,323 64,453 --------- --------- Property, plant and equipment (Note 3) Land and improvements 5,860 5,962 Building and improvements 26,461 25,418 Machinery and equipment 67,731 54,680 --------- --------- 100,052 86,060 Less accumulated depreciation (39,931) (32,885) --------- --------- Net property, plant and equipment 60,121 53,175 --------- --------- Goodwill and intangible assets, net of accumulated amortization (Notes 2 and 3) 136,626 97,044 Other assets 5,432 1,341 --------- --------- Total assets $ 396,843 $ 335,418 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt (Note 4) $ 5,001 $ 6,246 Accounts payable 27,340 25,497 Accrued compensation and benefits 19,935 14,536 Other accrued liabilities 14,122 12,258 --------- --------- Total current liabilities 66,398 58,537 Long-term debt (Note 4) 286,945 239,679 Deferred income taxes (Notes 3 and 8) 13,365 17,635 Other long-term liabilities (Note 7) 13,414 6,371 --------- --------- Total liabilities 380,122 322,222 ========= ========= Shareholders' equity (Note 6) Class A common shares; no par value; 5,000,000 shares authorized; 4,026,402 and 3,693,990 shares issued and 3,997,114 and 3,693,990 shares outstanding; 1 vote per share 102,044 92,826 Loans to shareholders (3,030) (2,039) Class A treasury shares, at cost, 29,288 shares in 2001 (979) -- Cumulative other comprehensive income (loss) (589) (340) Accumulated deficit (80,725) (77,251) --------- --------- Total shareholders' equity 16,721 13,196 --------- --------- Total liabilities and shareholders' equity $ 396,843 $ 335,418 ========= =========
The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets. 33 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Operations Years Ended December 31 (Amounts in thousands)
2001 2000 1999 --------- --------- --------- Net sales (Note 3) $ 393,700 $ 367,845 $ 322,170 Cost of sales 254,430 229,523 201,445 --------- --------- --------- Gross profit 139,270 138,322 120,725 Selling, general and administrative expenses 97,532 92,941 79,819 Facility closing and severance expenses (Note 11) 7,360 2,517 -- Amortization of goodwill and intangibles 3,912 2,508 2,369 --------- --------- --------- Income from operations 30,466 40,356 38,537 Other expenses Interest expense 35,024 22,574 11,661 Non-recurring item - Lawsuit judgment (Note 10b) -- 15,341 -- Other expense, net 95 293 230 --------- --------- --------- Income (loss) before provision for income taxes and extraordinary item (4,653) 2,148 26,646 Provision (benefit) for income taxes (Note 8) (1,179) 1,471 11,991 --------- --------- --------- Income (loss) before extraordinary item (3,474) 677 14,655 Extraordinary loss, net of income tax benefit (Note 1) -- (4,812) -- --------- --------- --------- Net income (loss) (3,474) (4,135) 14,655 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit -- 583 320 --------- --------- --------- Net income (loss) available to common shareholders $ (3,474) $ (4,718) $ 14,335 ========= ========= =========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 34
Dayton Superior Corporation and Subsidiaries Consolidated Statements of Shareholders' Equity Years Ended December 31, 2001, 2000, and 1999 (Amounts in thousands, except share amounts) Class A Class B Class A Common Shares Common Shares Treasury Shares ------------------------ ------------------------ Loans to ------------------------ Shares Amount Shares Amount Shareholders Shares Amount ---------- ----------- ---------- ---------- ------------ ---------- ---------- Balances at December 31, 1998 5,200,372 $ 42,316 757,569 $ 5,037 -- 7,298 $ (145) Net income Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities Foreign currency translation adjustment Excess pension liability adjustment Issuance of Class A common stock in lieu of directors' fees 7,731 153 Issuance of Class A common shares in conjunction with acquisition (Note 2) (6,456) (117) Exercise of stock options, net 2,984 28 Conversion of Class B common shares into Class A common shares 757,569 5,037 (757,569) (5,037) Purchase of Class A treasury shares 11,719 (242) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balances at December 31, 1999 5,962,200 47,417 -- -- -- 19,017 (387) Net loss Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities Foreign currency translation adjustment Exercise of stock options, net 344,353 5,106 (2,039) Retirement of Class A treasury shares (19,017) (349) (19,017) 387 Issuance of Class A common shares and warrants, net of issuance costs 3,492,205 90,477 Redemption of Class A common shares (6,085,751) (49,825) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balances at December 31, 2000 3,693,990 92,826 -- -- (2,039) -- -- Net loss Foreign currency translation adjustment Issuance of Class A common shares 323,278 8,986 (909) Purchase of Class A treasury shares 51 29,288 (979) Exercise of stock options, net 9,134 232 (133) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balances at December 31, 2001 4,026,402 $ 102,044 -- -- $ (3,030) 29,288 $ (979) ========== ========== ========== ========== ========== ========== ========== Cumulative Foreign Retained Currency Excess Earnings Translation Pension (Accumulated Adjustment Liability Deficit) Total ---------- ---------- ---------- ---------- Balances at December 31, 1998 $ (266) $ (15) $ 27,661 $ 74,588 Net income 14,655 14,655 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities (320) (320) Foreign currency translation adjustment 12 12 Excess pension liability adjustment 15 15 Issuance of Class A common stock in lieu of directors' fees 153 Issuance of Class A common shares in conjunction with acquisition (Note 2) (117) Exercise of stock options, net 28 Conversion of Class B common shares into Class A common shares -- Purchase of Class A treasury shares (242) ---------- ---------- ---------- ---------- Balances at December 31, 1999 (254) -- 41,996 88,772 Net loss (4,135) (4,135) Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities (583) (583) Foreign currency translation adjustment (86) (86) Exercise of stock options, net 3,067 Retirement of Class A treasury shares (38) -- Issuance of Class A common shares and warrants, net of issuance costs 90,477 Redemption of Class A common shares (114,491) (164,316) ---------- ---------- ---------- ---------- Balances at December 31, 2000 (340) -- (77,251) 13,196 Net loss (3,474) (3,474) Foreign currency translation adjustment (249) (249) Issuance of Class A common shares 8,077 Purchase of Class A treasury shares (928) Exercise of stock options, net 99 ---------- ---------- ---------- ---------- Balances at December 31, 2001 $ (589) -- $ (80,725) $ 16,721 ========== ========== ========== ==========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 35
Dayton Superior Corporation and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31 (Amounts in thousands) 2001 2000 1999 --------- --------- --------- Cash Flows From Operating Activities: Net income (loss) $ (3,474) $ (4,135) $ 14,655 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Extraordinary loss -- 4,812 -- Depreciation 18,290 12,613 11,717 Amortization of goodwill and intangibles 3,912 2,508 2,369 Deferred income taxes (2,972) (975) 3,801 Amortization of deferred financing costs, debt discount, and issuance costs on Company-obligated mandatorily redeemable convertible trust preferred securities 2,251 1,349 848 Gain on sales of rental equipment and property, plant and equipment (14,184) (9,846) (6,904) Change in assets and liabilities, net of effects of acquisitions: Accounts receivable 7,348 (7,292) 37 Inventories (1,410) (1,386) (1,701) Prepaid expenses and other assets (8,533) (1,441) (1,449) Prepaid income taxes 2,710 (2,713) (343) Accounts payable 671 1,549 1,435 Accrued liabilities and other long-term liabilities 3,614 2,818 (897) --------- --------- --------- Net cash provided by (used in) operating activities 8,223 (2,139) 23,568 --------- --------- --------- Cash Flows From Investing Activities: Property, plant and equipment additions (9,924) (11,678) (7,728) Proceeds from sale of fixed assets 169 195 259 Rental equipment additions (25,933) (18,110) (16,029) Proceeds from sales of rental equipment 22,742 17,309 11,977 Acquisitions (Note 2) (40,850) (25,054) (13,734) Refund of purchase price on acquisitions 143 2,148 -- Other investing activities -- -- (320) --------- --------- --------- Net cash used in investing activities (53,653) (35,190) (25,575) --------- --------- --------- Cash Flows From Financing Activities: Repayments of long-term debt (48,532) (122,185) (13,032) Issuance of long-term debt 93,751 239,171 -- Prepayment premium on extinguishments of long-term debt and interest rate swap agreements (Note 1) -- (476) -- Financing cost on unused long-term debt commitment -- (750) -- Issuance of Class A common shares 5,334 93,544 28 Redemption of Class A common shares and purchase of treasury shares (928) (164,316) (242) Financing costs incurred (791) (9,761) -- Issuance of Company-obligated mandatorily redeemable convertible -- trust preferred securities, net of issuance costs -- 19,554 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit -- (583) (320) --------- --------- --------- Net cash provided by financing activities 48,834 34,644 5,988 --------- --------- --------- Effect of Exchange Rate Changes on Cash (197) (86) 12 --------- --------- --------- Net increase (decrease) in cash 3,207 (2,771) 3,993 Cash, beginning of year 1,782 4,553 560 --------- --------- --------- Cash, end of year $ 4,989 $ 1,782 $ 4,553 ========= ========= ========= Supplemental Disclosures: Cash paid (refunded) for income taxes $ (1,532) $ 1,494 $ 8,146 Cash paid for interest 32,348 20,501 9,833 Conversion of Company-obligated mandatorily redeemable convertible trust preferred securities into long-term debt -- 23,375 -- Issuance of warrants attached to senior subordinated notes -- 3,166 -- Issuance of Class A common shares in conjunction with acquisitions 2,842 -- (117) Issuance of Class A common shares in lieu of directors' fees -- -- 153 Issuance of Class A common shares and loans to shareholders 909 2,039 --
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 36
Dayton Superior Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) Years Ended December 31 (Amounts in thousands) 2001 2000 1999 -------- -------- -------- Net income (loss) $ (3,474) $ (4,135) $ 14,655 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities -- (583) (320) Other comprehensive income Foreign currency translation adjustment (249) (86) 12 Excess pension liability adjustment -- -- 15 -------- -------- -------- Comprehensive income (loss) $ (3,723) $ (4,804) $ 14,362 ======== ======== ========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 37 Dayton Superior Corporation and Subsidiaries Notes to Consolidated Financial Statements December 31, 2001, 2000 and 1999 (Dollar amounts in thousands, except share and per share amounts) (1) The Company The accompanying consolidated financial statements include the accounts of Dayton Superior Corporation and its wholly owned subsidiaries (collectively referred to as the "Company"). All intercompany transactions have been eliminated. The Company is the largest North American manufacturer and distributor of metal accessories and forms used in concrete construction and of metal accessories used in masonry construction. The Company has a distribution network consisting of 28 manufacturing/distribution plants and 32 service/distribution centers in the United States and Canada. The Company employs approximately 800 salaried and 1,400 hourly personnel, of whom approximately 700 of the hourly personnel and five of the salaried personnel are represented by labor unions. There is one collective bargaining agreement expiring in 2002. This agreement covers hourly employees at the Santa Fe Springs, California facility. On January 19, 2000, the Company signed a definitive merger agreement with an affiliate of Odyssey Investment Partners, LLC ("Odyssey"), 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. Accordingly, the Company has not recorded any goodwill or purchase accounting adjustments, but will remain subject to certain ownership requirements. 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 interest, per preferred security. As a result, the Company recorded an extraordinary loss in 2000 of $4,812 from the early extinguishment of long-term debt, 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 =======
38 (2) Acquisitions (a) ANCONCCL INC. - On June 19, 2001, the Company acquired the stock of AnconCCL Inc., dba BarLock ("BarLock") for approximately $9,900 in cash, including acquisition costs. The payment was funded through the Company's credit facility. 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 Ancon have been included in the accompanying financial statements since the date of acquisition. The purchase price has been allocated based on the estimated fair values of the assets acquired (approximately $10,800, including goodwill of $7,100) and liabilities assumed (approximately $900). Certain appraisals and evaluations are preliminary and may change. Pro forma financial information is not required. (b) AZTEC CONCRETE ACCESSORIES, INC. - On January 4, 2001, the Company acquired the stock of Aztec Concrete Accessories, Inc. ("Aztec") for approximately $32,800, including acquisition costs. The payment of the purchase price consisted of cash of approximately $29,900 and 105,263 common shares valued at approximately $2,900. The cash portion was funded through the issuance of 189,629 common shares valued at approximately $5,100 to Odyssey and an increase of approximately $24,800 to the credit facility. 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 Aztec 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 (approximately $43,700, including goodwill of $35,100) and liabilities assumed (approximately $10,900, including a deferred compensation liability of approximately $7,700, of which $1,800 is included in "Accrued Compensation and Benefits" and $5,900 is included in "Other Long-Term Liabilities" in the accompanying December 31, 2001 consolidated balance sheet). Certain appraisals and evaluations are preliminary and may change. Pro forma financial information is not required. (c) CONSPEC MARKETING AND MANUFACTURING CO., INC. - On July 17, 2000, the Company acquired all of the stock of Conspec Marketing & Manufacturing Co., Inc., and related entities (now known as Dayton Superior Specialty Chemical Corp.), for $24,300 in cash, including acquisitions costs, a payment of approximately $1,000 in 2001 for a tax election, and net of a working capital reduction of approximately $100 received in 2001. The payments were funded through the Company's credit facility. 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 (approximately $29,600, including goodwill of $19,500) and liabilities assumed (approximately $5,300). Pro forma financial information is not required. 39 (d) 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 concrete accessories business. 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 (approximately $2,100, including goodwill of $1,500) and liabilities assumed (approximately $500). Pro forma financial information is not required. (e) SOUTHERN CONSTRUCTION PRODUCTS, INC. - Effective 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 a purchase price reduction of approximately $300 received in 2000. 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 Southern have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the fair values of the assets acquired (approximately $8,900, including goodwill of $5,600) and liabilities assumed (approximately $600). Pro forma financial information is not required. (f) 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, including acquisition costs. 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 fair values of the assets acquired (approximately $5,500, including goodwill of $3,500) and liabilities assumed (approximately $100). Pro forma financial information is not required. (3) Summary of Significant Accounting Policies (a) Inventories - The Company values all inventories at the lower of first-in, first-out ("FIFO") cost or market. The Company provides net realizable value reserves which reflect the Company's best estimate of the excess of the cost of potential obsolete and slow moving inventory over the expected net realizable value. Following is a summary of the components of inventories as of December 31, 2001 and December 31, 2000: 40
December 31, December 31, 2001 2000 -------- -------- Raw materials $ 11,581 $ 9,966 Work in progress 3,624 3,009 Finished goods 34,639 32,494 -------- -------- 49,844 45,469 Net realizable value reserve (1,944) (2,153) -------- -------- $ 47,900 $ 43,316 ======== ========
(b) 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, three to fifteen years, on a straight-line method. The balances as of December 31, 2001 and 2000 are net of accumulated depreciation of $20,002 and $11,527, respectively. Rental revenues and cost of sales associated with rental revenue are as follows:
For the year ending --------------------------------------------- December 31, December 31, December 31, 2001 2000 1999 ---- ---- ---- Rental revenue $54,577 $55,441 $51,079 Cost of sales 12,101 8,889 8,402 ------- ------- ------- Gross profit $42,476 $46,552 $42,677 ======= ======= =======
Effective January 1, 2001, the Company changed its accounting estimates relating to the depreciable life of a portion of its rental fleet. The change was based upon a study performed by the Company that showed that the renovation of the plywood surface of certain products within the rental fleet extended the useful life beyond normal repair and maintenance. Accordingly, the Company began capitalizing rather than expensing these renovation related expenditures. Simultaneously, the useful lives of the plywood surface was reduced from fifteen years to three years to match the useful life of the renovation. As a result of the change, the Company recorded incremental depreciation of $2,272 in 2001, which is reflected in cost of goods sold in the accompanying consolidated statement of operations. (c) Property, Plant and Equipment - Property, plant and equipment are valued at cost and depreciated using straight-line methods over their estimated useful lives of 10-30 years for buildings and improvements and 3-10 years for machinery and equipment. Leasehold improvements are amortized over the lesser of the term of the lease or the estimated useful life of the improvement. Improvements and replacements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. (d) Goodwill and Intangible Assets - Goodwill and intangible assets are recorded at the date of acquisition at their allocated cost. Amortization is provided over the estimated useful lives of 40 years for goodwill, the term of the loan (7 to 9 years) for deferred financing costs and the term of the agreement (5 years) for non-compete agreements. 41 In accordance with Statement of Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), the carrying value of goodwill and other long-lived assets is assessed for recoverability by management when changes in circumstances indicate that the carrying amount may not be recoverable, based on an analysis of undiscounted future expected cash flows from the use and ultimate disposition of the asset. Management believes there has been no impairment of the carrying values of the Company's long-lived assets as of December 31, 2001 and 2000. (e) Income Taxes - Deferred income taxes are determined by applying current statutory tax rates to the cumulative temporary differences between the carrying value of assets and liabilities for financial reporting and tax purposes. (f) Environmental Remediation Liabilities - The Company accounts for environmental remediation liabilities in accordance with the American Institute of Certified Public Accountants issued Statement of Position 96-1, "Environmental Remediation Liabilities," ("SOP 96-1"). The Company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. (g) Foreign Currency Translation Adjustment - The financial statements of foreign subsidiaries and branches are maintained in their functional currency (Canadian dollars) and are then translated into U.S. dollars. The balance sheets are translated at end of year rates while revenues, expenses and cash flows are translated at weighted average rates throughout the year. Translation adjustments, which result from changes in exchange rates from period to period, are accumulated in a separate component of shareholders' equity. Transactions in foreign currencies are translated into U.S. dollars at the rate in effect on the date of the transaction. Changes in foreign exchange rates from the date of the transaction to the date of the settlement of the asset or liability are recorded as income or expense. (h) Revenue Recognition - The Company recognizes revenue on product and rental equipment sales on the date of shipment. Rental revenues are recognized ratably over the terms of the rental agreements. (i) Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. Examples of accounts in which estimates are used include the reserve for excess and obsolete inventory, the allowance for doubtful accounts and sales returns and allowances, the accrual for self-insured employee medical claims, the self-insured product and general liability accrual, the self-insured workers' compensation accrual, accruals for litigation losses, the valuation allowance for deferred tax assets, actuarial assumptions used in determining pension benefits, and actuarial assumptions used in determining other post-retirement benefits. 42 (j) New Accounting Pronouncements - In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 revises the accounting for future business combinations to only allow the purchase method of accounting. In addition, the two statements will not require amortization of goodwill for periods beginning after December 15, 2001. Instead, an annual review of the recoverability of the goodwill will be required. Certain other intangible assets will continue to be amortized over their estimated useful lives. This Statement will be adopted effective January 1, 2002 for the Company. The Company has recognized goodwill for several past acquisition transactions. The amount of amortization expense recognized in 2001 that will not recur in 2002 is approximately $3,700. The Company is still evaluating the Statements and does not know what impact the Statements will have on the results of operations or financial position. The Company does not believe that there will be any impact on cash flows from adopting these Statements. (k) Reclassifications - Certain reclassifications have been made to prior years' amounts to conform to their 2001 classification. (4) Credit Arrangements The Company has a credit facility that 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 $122,000, consisting of a $23,500 delayed-draw tranche A facility maturing June 2006 and a $98,500 tranche B facility maturing June 2008. The 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 in June 2004. The credit facility has several interest rate options, which reprice on a short-term basis. The average borrowings, maximum borrowings, and weighted average interest rate on the revolving credit facility and its predecessors for the periods indicated are as follows:
For the year ended --------------------------------------------- December 31, December 31, December 31, 2001 2000 1999 ------------ ------------ ------------ Average borrowings .................................. $ 8,980 $ 5,965 $22,027 Maximum borrowings .................................. 26,425 16,420 37,140 Weighted average interest rate, including commitment fee for unused portion of revolving credit facility ........................................... 10.4% 10.6% 7.0%
The credit facility contains certain restrictive covenants, which require that, among other things, the Company maintain a minimum interest coverage ratio, not exceed a certain leverage ratio, maintain a minimum EBITDA, as defined, and limit its capital expenditures. The Company was in compliance with its loan covenants as of December 31, 2001. 43 The credit facility is secured by substantially all assets of the Company. The Company has an Economic Development Loan from the city of Parsons, Kansas. The loan is payable in quarterly installment of $8 through July 2005. The loan is secured by real estate in Parsons. Following is a summary of the Company's long-term debt as of December 31, 2001 and 2000:
2001 2000 --------- --------- Revolving credit facility, weighted average interest rate of 6.5% $ 2,000 $ 6,000 Acquisition credit facility, weighted average interest rate of 5.3% 9,250 -- Term Loan Tranche A, weighted average interest rate of 5.2% 22,161 22,161 Term Loan Tranche B, weighted average interest rate of 5.7% 98,500 53,500 Senior Subordinated Notes, interest rate of 13.0% 170,000 170,000 Debt discount on Senior Subordinated Notes (11,297) (12,100) Debentures previously held by Dayton Superior Capital Trust, payable on demand, interest rate of 9.1% 1,214 1,214 Note payable to one of the former stockholders of Symons Corporation, interest rate of 10.5% -- 5,000 City of Parsons, Kansas Economic Development Loan, interest rate of 7.0% 118 150 --------- --------- Total long-term debt 291,946 245,925 Less current portion (5,001) (6,246) --------- --------- Long-term portion $ 286,945 $ 239,679 ========= =========
Scheduled maturities of long-term debt are: Year Amount ------------ ------------- 2002 $ 5,001 2003 5,172 2004 9,640 2005 11,491 2006 23,631 Thereafter 248,308 -------- 303,243 Debt Discount (11,297) --------- $291,946 ======== At December 31, 2001, the Company had outstanding letters of credit of approximately $6,000, and the Company had available borrowings of $42,000 under its revolving credit facility. The fair value of the Senior Subordinated Notes is the last trade price, which was $173.0 at December 31, 2001. The fair market value of the Company's other fixed rate long-term debt is estimated using discounted cash flow analyses based on current incremental borrowing rates for similar types of borrowing arrangements. At December 31, 2001, the estimated fair value of the debentures previously held by Dayton Superior Capital Trust is $1,443. The estimated fair value of the City of Parsons, Kansas Economic Development Loan is $149. The estimated fair value of the credit facility approximates its face value, as this facility has variable interest rates tied to market rates. 44 The Senior Subordinated Notes (the "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. The Company's wholly-owned domestic subsidiaries (AnconCCL; Aztec Concrete Accessories, Inc.; Trevecca Holdings, Inc.; Dayton Superior Specialty Chemical Corp.; Symons Corporation; and Dur-O-Wal, Inc.) have provided a guarantee of the Notes. The wholly-owned foreign subsidiaries of the Company are not guarantors with respect to the Notes and do not have any credit arrangements senior to the Notes. Following are the supplemental consolidated condensed balance sheets as of December 31, 2001 and 2000, the supplemental consolidated condensed statements of operations and cash flows for the years ended December 31, 2001, 2000 and 1999. 45
Dayton Superior Corporation And Subsidiaries Supplemental Consolidating Condensed Balance Sheet As of December 31, 2001 Dayton Superior Guarantor Non Guarantor Corporation Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ------------ ------------ ------------ ASSETS Cash $ 2,714 $ 832 $ 1,443 $ -- $ 4,989 Accounts receivable, net 20,014 30,516 1,098 -- 51,628 Inventories 23,030 23,925 945 -- 47,900 Intercompany 58,692 (58,584) (108) -- -- Other current assets 9,046 9,594 184 -- 18,824 --------- --------- --------- --------- --------- TOTAL CURRENT ASSETS 113,496 6,283 3,562 -- 123,341 Rental equipment, net 6,256 65,009 58 -- 71,323 Property, plant and equipment, net 23,708 36,222 191 -- 60,121 Investment in subsidiaries 122,864 -- -- (122,864) -- Other assets 55,899 86,159 -- -- 142,058 --------- --------- --------- --------- --------- TOTAL ASSETS $ 322,223 $ 193,673 $ 3,811 $(122,864) $ 396,843 ========= ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current maturities of long-term debt $ 5,001 $ -- $ -- $ -- $ 5,001 Accounts payable 12,579 14,548 213 -- 27,340 Accrued liabilities 20,004 13,742 311 -- 34,057 --------- --------- --------- --------- --------- TOTAL CURRENT LIABILITIES 37,584 28,290 524 -- 66,398 Long-term debt 286,945 -- -- -- 286,945 Other long-term liabilities 4,461 22,132 186 -- 26,779 Total shareholders' equity (deficit) (6,767) 143,251 3,101 (122,864) 16,721 --------- --------- --------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 322,223 $ 193,673 $ 3,811 $(122,864) $ 396,843 ========= ========= ========= ========= =========
46
Dayton Superior Corporation And Subsidiaries Supplemental Consolidating Condensed Balance Sheet As of December 31, 2000 Dayton Non Superior Guarantor Guarantor Corporation Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ ASSETS Cash $ 1,603 $ (825) $ 1,004 $ -- $ 1,782 Accounts receivable, net 20,912 33,648 1,226 55,786 Inventories 20,903 21,440 973 -- 43,316 Intercompany 69,643 (70,595) 952 -- -- Other current assets 11,364 6,856 301 -- 18,521 --------- --------- --------- --------- --------- TOTAL CURRENT ASSETS 124,425 (9,476) 4,456 -- 119,405 Rental equipment, net 6,768 57,596 89 -- 64,453 Property, plant and equipment, net 24,169 28,824 182 -- 53,175 Investment in subsidiaries 79,598 -- -- (79,598) -- Other assets 57,653 40,732 -- -- 98,385 --------- --------- --------- --------- --------- TOTAL ASSETS $ 292,613 $ 117,676 $ 4,727 $ (79,598) $ 335,418 ========= ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current maturities of long-term debt $ 6,246 $ -- $ -- $ -- $ 6,246 Accounts payable 13,394 11,733 370 -- 25,497 Accrued liabilities 18,224 8,252 318 -- 26,794 --------- --------- --------- --------- --------- TOTAL CURRENT LIABILITIES 37,864 19,985 688 -- 58,537 Long-term debt 239,679 -- -- -- 239,679 Other long-term liabilities 6,301 17,504 201 -- 24,006 Total shareholders' equity (deficit) 8,769 80,187 3,838 (79,598) 13,196 --------- --------- --------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 292,613 $ 117,676 $ 4,727 $ (79,598) $ 335,418 ========= ========= ========= ========= =========
47
Dayton Superior Corporation And Subsidiaries Supplemental Consolidating Condensed Statement of Operations Year Ended December 31, 2001 Dayton Superior Guarantor Non Guarantor Corporation Subsidiaries Subsidiaries Consolidated ------------- -------------- ------------- ------------ Net sales $ 183,365 $ 200,939 $ 9,396 $ 393,700 Cost of sales 122,039 126,480 5,911 254,430 --------- --------- --------- --------- Gross profit 61,326 74,459 3,485 139,270 Selling, general and administrative expenses 38,006 57,983 1,543 97,532 Facility closing and severance expenses 442 6,918 -- 7,360 Amortization of goodwill and intangibles 1,980 1,932 -- 3,912 Management fees (300) -- 300 -- --------- --------- --------- --------- Income from operations 21,198 7,626 1,642 30,466 Other expenses Interest expense 34,463 561 -- 35,024 Other expense (income), net -- 95 -- 95 --------- --------- --------- --------- Income (loss) before provision for income taxes (13,265) 6,970 1,642 (4,653) Provision (benefit) for income taxes (3,361) 1,766 416 (1,179) --------- --------- --------- --------- Net income (loss) $ (9,904) $ 5,204 $ 1,226 $ (3,474) ========= ========= ========= =========
48
Dayton Superior Corporation And Subsidiaries Supplemental Consolidating Condensed Statement of Operations Year Ended December 31, 2000 Dayton Superior Guarantor Non Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------ ------------ Net sales $ 186,683 $ 171,493 $ 9,669 $ 367,845 Cost of sales 117,708 105,895 5,920 229,523 --------- --------- --------- --------- Gross profit 68,975 65,598 3,749 138,322 Selling, general and administrative expenses 41,653 49,124 2,164 92,941 Facility closing and severance expenses 1,860 657 -- 2,517 Amortization of goodwill and intangibles 1,784 724 -- 2,508 Management fees (850) 689 161 -- --------- --------- --------- --------- Income from operations 24,528 14,404 1,424 40,356 Other expenses Interest expense 22,669 (95) -- 22,574 Non-recurring item - Lawsuit judgement -- 15,341 -- 15,341 Other expense, net 216 77 -- 293 --------- --------- --------- --------- Income (loss) before provision (benefit) for income taxes and extraordinary item 1,643 (919) 1,424 2,148 Provision (benefit) for income taxes 826 (10) 655 1,471 --------- --------- --------- --------- Income (loss) before extraordinary item 817 (909) 769 677 Extraordinary loss, net of income tax benefit (4,812) -- -- (4,812) --------- --------- --------- --------- Net income (loss) (3,995) (909) 769 (4,135) Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit 583 -- -- 583 --------- --------- --------- --------- Net income (loss) available to common shareholders $ (4,578) $ (909) $ 769 $ (4,718) ========= ========= ========= =========
49
Dayton Superior Corporation And Subsidiaries Supplemental Consolidating Condensed Statement of Operations Year Ended December 31, 1999 Dayton Superior Guarantor Non Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------- ------------ Net sales $ 170,009 $ 143,154 $ 9,007 $ 322,170 Cost of sales 106,270 89,481 5,694 201,445 --------- --------- --------- --------- Gross profit 63,739 53,673 3,313 120,725 Selling, general and administrative expenses 37,207 40,958 1,654 79,819 Amortization of goodwill and intangibles 1,686 683 -- 2,369 Management fees (162) (95) 257 -- --------- --------- --------- --------- Income from operations 25,008 12,127 1,402 38,537 Other expenses Interest expense 11,782 (122) 1 11,661 Other expense (income), net 237 (7) -- 230 --------- --------- --------- --------- Income before provision for income taxes 12,989 12,256 1,401 26,646 Provision for income taxes 5,846 5,515 630 11,991 --------- --------- --------- --------- Net Income 7,143 6,741 771 14,655 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit 320 -- -- 320 --------- --------- --------- --------- Net income available to common shareholders $ 6,823 $ 6,741 $ 771 $ 14,335 ========= ========= ========= =========
50
Dayton Superior Corporation And Subsidiaries Supplemental Consolidating Condensed Statement of Cash Flows Year ended December 31, 2001 Dayton Superior Guarantor Non Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (9,904) $ 5,204 $ 1,226 $ (3,474) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 8,483 15,928 42 24,453 Deferred income taxes (2,972) -- -- (2,972) Gain on sales of rental equipment and fixed assets (1,062) (13,039) (83) (14,184) Change in assets and liabilities, net of the effects of acquisitions (9,109) 15,049 (1,540) 4,400 --------- --------- --------- --------- Net cash provided by (used in) operating activities (14,564) 23,142 (355) 8,223 --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment additions (4,065) (5,679) (180) (9,924) Proceeds from sales of fixed assets 34 132 3 169 Rental equipment additions (1,565) (24,317) (51) (25,933) Proceeds from sale of rental equipment 2,193 20,390 159 22,742 Acquisitions (40,707) -- -- (40,707) --------- --------- --------- --------- Net cash used in investing activities (44,110) (9,474) (69) (53,653) --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long-term debt (48,532) -- -- (48,532) Issuance of long-term debt 93,751 -- -- 93,751 Issuance of Class A common shares 5,334 -- -- 5,334 Financing costs incurred (791) -- -- (791) Purchase of treasury shares (928) -- -- (928) Intercompany 10,951 (12,011) 1,060 -- --------- --------- --------- --------- Net cash provided by (used in) financing activities 59,785 (12,011) 1,060 48,834 --------- --------- --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH -- -- (197) (197) --------- --------- --------- --------- Net increase in cash 1,111 1,657 439 3,207 CASH, beginning of year 1,603 (825) 1,004 1,782 --------- --------- --------- --------- CASH, end of year $ 2,714 $ 832 $ 1,443 $ 4,989 ========= ========= ========= =========
51
Dayton Superior Corporation And Subsidiaries Supplemental Consolidating Condensed Statement of Cash Flows Year ended December 31, 2000 Dayton Superior Guarantor Non Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (3,995) $ (909) $ 769 $ (4,135) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Extraordinary loss 4,812 -- -- 4,812 Depreciation and amortization 7,192 9,242 36 16,470 Deferred income taxes (1,150) (104) 279 (975) Gain on sales of rental equipment and fixed assets (1,041) (8,757) (48) (9,846) Change in assets and liabilities, net of the effects of acquisitions (152) (7,500) (813) (8,465) --------- --------- --------- --------- Net cash provided by (used in) operating activities 5,666 (8,028) 223 (2,139) --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment additions (7,063) (4,537) (78) (11,678) Proceeds from sales of fixed assets 32 163 -- 195 Rental equipment additions (1,939) (16,106) (65) (18,110) Proceeds from sale of rental equipment 2,500 14,723 86 17,309 Acquisitions (25,054) -- -- (25,054) Refunds of purchase price on acquisitions 2,148 -- -- 2,148 --------- --------- --------- --------- Net cash used in investing activities (29,376) (5,757) (57) (35,190) --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long-term debt (122,185) -- -- (122,185) Issuance of long-term debt 239,171 -- -- 239,171 Prepayment premium on extinguishments of long-term debt and interest rate swap agreements (476) -- -- (476) Financing cost on unused long-term debt commitment (750) -- -- (750) Issuance of Class A common shares 93,544 -- -- 93,544 Redemption of Class A common shares (164,316) -- -- (164,316) Financing costs incurred (9,761) -- -- (9,761) Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit (583) -- -- (583) Intercompany (12,819) 13,321 (502) -- --------- --------- --------- --------- Net cash provided by (used in) financing activities 21,825 13,321 (502) 34,644 --------- --------- --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH -- -- (86) (86) --------- --------- --------- --------- Net decrease in cash (1,885) (464) (422) (2,771) CASH, beginning of year 3,488 (361) 1,426 4,553 --------- --------- --------- --------- CASH, end of year $ 1,603 $ (825) $ 1,004 $ 1,782 ========= ========= ========= =========
52
Dayton Superior Corporation And Subsidiaries Supplemental Consolidating Condensed Statement of Cash Flows Year Ended December 31, 1999 Dayton Superior Guarantor Non Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 7,143 $ 6,741 $ 771 $ 14,655 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,683 8,196 55 14,934 Deferred income taxes 714 3,100 (13) 3,801 Gain on sales of rental equipment and fixed assets (908) (5,944) (52) (6,904) Change in assets and liabilities, net of the effects of acquisitions (1,028) (2,020) 130 (2,918) --------- --------- --------- --------- Net cash provided by operating activities 12,604 10,073 891 23,568 --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment additions (5,078) (2,610) (40) (7,728) Proceeds from sales of fixed assets 250 9 -- 259 Rental equipment additions (1,457) (14,502) (70) (16,029) Proceeds from sale of rental equipment 1,770 10,111 96 11,977 Acquisitions (5,414) (8,320) -- (13,734) Other investing activities -- (320) -- (320) --------- --------- --------- --------- Net cash used in investing activities (9,929) (15,632) (14) (25,575) --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long-term debt (13,032) -- -- (13,032) Issuance of Class A common shares 28 -- -- 28 Issuance of Company-obligated mandatorily redeemable convertible trust preferred securities 19,554 -- -- 19,554 Purchase of treasury shares (242) -- -- (242) Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit (320) -- -- (320) Intercompany (6,629) 6,653 (24) -- --------- --------- --------- --------- Net cash provided by (used in) financing activities (641) 6,653 (24) 5,988 --------- --------- --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH -- -- 12 12 --------- --------- --------- --------- Net increase in cash 2,034 1,094 865 3,993 CASH, beginning of year 1,454 (1,455) 561 560 --------- --------- --------- --------- CASH, end of year $ 3,488 $ (361) $ 1,426 $ 4,553 ========= ========= ========= =========
53 (5) Company-obligated Mandatorily Redeemable Convertible Trust Preferred Securities In October 1999, the Company completed an underwritten public offering of 1,062,500 Company-obligated mandatorily redeemable convertible trust preferred securities at a price of $20 per security. Net proceeds to the Company after issuance costs were $19,554. The securities were issued by a limited purpose Delaware trust which used the proceeds to purchase from the Company the same principal amount of convertible junior subordinated debentures. The securities were guaranteed by the Company on a subordinated basis. As a result of the recapitalization, the trust was dissolved. The securities converted to debentures having the right to receive cash in the amount of $23,375 ($22.00 per preferred security), plus accrued interest. As of December 31, 2001, $22,161 of the debentures had been redeemed. Interest is payable on the preferred securities at the rate of 9.1%. (6) Common Shares (a) Stock Option Plan - Upon consummation of the recapitalization, the Company adopted the 2000 Stock Option Plan of Dayton Superior Corporation ("Stock Option Plan"). The Stock Option Plan permits the grant of stock options to purchase 483,159 common shares, of which options to purchase 5,506 common shares were granted during 2001 and options to purchase 473,016 common shares were granted during 2000. Options that are cancelled may be reissued. The Stock Option Plan constitutes the amendment and merger into one plan of four previous option plans and governs options that remain outstanding following the recapitalization, as well as new option grants. The terms of the new option grants are as follows: - Options to purchase 22,997 common shares were exercisable when granted. - Options to purchase 22,821 common shares will become exercisable on June 16, 2002. - Options to purchase 22,997 common shares will become exercisable on June 16, 2003. - Options to purchase 14,274 common shares will become exercisable on June 16, 2004. - Options to purchase 14,103 common shares will become exercisable on December 31, 2004. - Options to purchase 176 common shares will become exercisable on each of June 16, 2005 and December 31, 2005. - The remaining options to purchase 354,480 common shares are eligible to become exercisable in installments over one to five years based on the Company's performance, but, in any case, become exercisable no later than June 16, 2009. - These options may be subject to accelerated vesting upon certain change in control events based on Odyssey's return on investment. 54 Under the Stock Option Plan, the option exercise price equals the stock's market price on date of grant. The Company accounts for these plans 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 net income (loss) available to common shareholders would have been reduced to the following pro forma amounts:
2001 2000 1999 ---- ---- ---- Net income (loss) available to common shareholders: As Reported $(3,474) $(4,718) $14,335 Pro Forma (4,107) (5,786) 13,933
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 status of the Company's stock option plans at December 31, 2001, 2000, and 1999, and changes during the years then ended is presented in the table and narrative below:
Weighted Average Number of Exercise Shares Price Per Share ---------- ----------------- Outstanding at December 31, 1998 358,033 $ 6.75 Granted at a weighted average fair value of $8.27 92,600 19.44 Exercised (2,984) 4.80 Cancelled (5,366) 18.04 ---------- ---------- Outstanding at December 31, 1999 442,283 9.28 Granted at a weighted average fair value of $7.65 473,016 27.00 Exercised (344,353) 8.85 ---------- ---------- Outstanding at December 31, 2000 570,946 24.22 Granted at a weighted average fair value of $7.65 5,506 27.50 Exercised (9,134) 21.20 Cancelled (26,060) 27.00 ---------- ---------- Outstanding at December 31, 2001 541,258 $ 24.17 ========== ==========
Price ranges and other information for stock options outstanding at December 31, 2001 are as follows:
Outstanding Exercisable ----------------------------------- ------------------------- Weighted Weighted Weighted Average Average Average Exercise Remaining Exercise Range of Exercise Prices Shares Price Life Shares Price ------------------------ ------ ----- ---- ------ ----- $ 1.96 - $ 4.00 43,937 $ 2.44 2.7 years 43,937 $ 2.44 $12.50 - $12.63 4,929 12.56 5.5 4,929 12.56 $16.81 - $19.91 40,364 18.10 6.6 40,364 18.10 $27.00 - $27.50 452,028 27.00 8.5 74,343 27.00 ------- ------ ------ ------- ------ 541,258 $24.17 7.9 years 163,573 $17.77 ======= ====== ====== ======= ======
55 The fair value of each option grant is estimated on the date of grant using the Black Scholes options pricing model with the following weighted average assumptions used for grants in 2001, 2000, and 1999, respectively:
2001 2000 1999 ---- ---- ---- Risk-free interest rates 5.55% 5.55% 4.68% Expected dividend yield 0% 0% 0% Expected lives 6 years 6 years 6 years Expected volatility 0.00% 0.00% 34.10%
(b) Treasury Shares - During 2001, the Company repurchased Common Shares from former employees in conjunction with the facility closings and severance plans discussed in Note 11. As of December 31, 2001, 29,288 Common Shares had been repurchased for $979 under such agreements. In 1999, the Company agreed to repurchase Class A Common Shares issued to the former shareholders of Symons Concrete Forms. As of December 31, 1999, 19,017 Class A Common Shares had been repurchased for $387 under such agreement. In conjunction with the recapitalization in 2000, all of the 1999 treasury shares were retired. (7) Retirement Plans (a) Company-Sponsored Pension Plans - During 1999, the Company completed its process of merging and terminating certain of its pension plans. As a result, the Company recorded a $797 non-recurring gain related to the termination of its pension plan for salaried employees. During 2000, the Company assumed a second plan in conjunction with the acquisition of Conspec. The Company's pension plans cover virtually all hourly employees not covered by multi-employer pension plans and provide benefits of stated amounts for each year of credited service. The Company funds such plans at a rate that meets or exceeds the minimum amounts required by applicable regulations. The plans' assets are primarily invested in mutual funds comprised primarily of common stocks and corporate and U.S. government obligations. Postretirement Benefits - The Company provides postretirement health care benefits on a contributory basis and life insurance benefits for Symons salaried and hourly employees who retired prior to May 1, 1995.
PENSION PENSION OTHER OTHER BENEFITS BENEFITS BENEFITS BENEFITS 2001 2000 2001 2000 ------- ------- ------- ------- CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $ 6,166 $ 5,469 $ 774 $ 863 Service cost 439 440 -- -- Interest cost 454 386 61 58 Acquisition of Conspec -- 393 -- -- Actuarial loss (gain) 301 (293) 93 (32) Benefits paid (301) (229) (108) (115) ------- ------- ------- ------- Benefit obligation at end of year $ 7,059 $ 6,166 $ 820 $ 774 ======= ======= ======= =======
56 CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year $ 6,247 $ 5,780 $ -- $ -- Actual return on plan assets 206 309 -- -- Employer contribution 564 -- 108 115 Acquisition of Conspec -- 387 -- -- Benefits paid (301) (229) (108) (115) -------- -------- -------- -------- Fair value of plan assets at end of year $ 6,716 $ 6,247 $ -- $ -- ======== ======== ======== ======== FUNDED STATUS $ (343) $ 81 $ (820) $ (774) Unrecognized prior service cost (147) (217) 216 240 Unrecognized net gain (94) (618) (66) (158) -------- -------- -------- -------- Net amount recognized $ (584) $ (754) $ (670) $ (692) ======== ======== ======== ======== AMOUNTS RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION CONSIST OF: Accrued benefit liability $ (584) $ (754) $ (820) $ (774) Intangible asset -- -- 150 82 -------- -------- -------- -------- Net amount recognized $ (584) $ (754) $ (670) $ (692) ======== ======== ======== ======== ASSUMPTIONS AS OF DECEMBER 31 Discount rate 7.25% 7%-7.5% 7.5% 7.5% Expected return on plan assets 8% 3.5% - 8% N/A N/A Rate of compensation increase N/A N/A N/A N/A COMPONENTS OF NET PERIODIC BENEFIT COST Service cost $ 439 $ 440 $ -- $ -- Interest cost 454 397 61 58 Expected return on plan assets (494) (464) -- -- Amortization of prior service cost (6) (3) 24 24 Recognized actuarial gain -- -- -- (4) -------- -------- -------- -------- Recurring net periodic pension cost $ 393 $ 370 $ 85 $ 78 ======== ======== ======== ========
As of December 31, 2001, the projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plan with accumulated benefit obligations in excess of plan assets were $7,059, $7,059, and $6,716. As of December 31, 2000, the projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plan with accumulated benefit obligations in excess of plan assets were $393, $393, and $387, respectively. For purposes of determining the liability for other postretirement health care benefits, the weighted average assumed rate of increase in the per capita cost of covered benefits is 9.0% for 2002 and subsequent years. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one percentage point change in assumed health care cost trend rates would have the following effects:
1 Percentage Point 1 Percentage Increase Point Decrease -------- -------------- Effect on total of service and interest cost components $ 5 $(5) Effect on the postretirement benefit obligation 80 (72)
57 (b) Multi-Employer Pension Plan - Approximately 14% of the Company's employees are currently covered by collectively bargained, multi-employer pension plans. Contributions are determined in accordance with the provisions of negotiated union contracts and generally are based on the number of hours worked. The Company does not have the information available to determine its share of the accumulated plan benefits or net assets available for benefits under the multi-employer pension plans. The aggregate amount charged to expense under these plans was $380, $274, and $330, for the years ended December 31, 2001, 2000, and 1999, respectively. (c) 401(k) Savings Plan - Most employees are eligible to participate in Company sponsored 401(k) savings plans. Company matching contributions vary from 0% to 50% according to terms of the individual plans and collective bargaining agreements. The aggregate amount charged to expense under these plans was $1,000, $918, and $724, for the years ended December 31, 2001, 2000, and 1999, respectively. (d) Retirement Contribution Account - The Company has a defined contribution plan for substantially all salaried employees. No contributions are permitted by employees, and the Company contributes 1.5% to 6.0% of eligible compensation, depending on the age of the employee. The amount expensed for the years ended December 31, 2001, 2000 and 1999 was $1,905, $1,559 and $1,393, respectively. (8) Income Taxes The following is a summary of the components of the Company's income tax provision for the years ended December 31, 2001, 2000, and 1999:
2001 2000 1999 ------- ------- ------- Currently payable (receivable): Federal $ (258) $ 1,782 $ 8,014 State and local 555 475 1,444 Deferred (future tax benefit) (1,476) (786) 2,533 ------- ------- ------- Total provision (benefit) $(1,179) $ 1,471 $11,991 ======= ======= =======
The effective income tax rate differs from the statutory federal income tax rate for the years ended December 31, 2001, 2000, and 1999 for the following reasons:
2001 2000 1999 ------ ------ ------ Statutory income tax rate 34.0% 34.0% 35.0% State income taxes (net of federal tax benefit) 4.0 4.3 3.9 Nondeductible goodwill amortization and other permanent differences (12.7) 30.2 3.7 Other, net -- -- 2.4 ------ ------ ------ Effective income tax rate 25.3% 68.5% 45.0% ====== ====== ======
58 The components of the Company's future income tax benefits and deferred tax liabilities as of December 31, 2001 and 2000 are as follows:
2001 2000 -------- -------- Current deferred taxes: Inventory reserves $ 490 $ 497 Accounts receivable reserves 2,778 1,103 Accrued liabilities 4,678 4,221 Other 16 20 -------- -------- Total 7,962 5,841 ======== ======== Long-term deferred taxes: Accelerated depreciation (18,594) (17,964) Other long-term liabilities 4,271 2,384 Other 958 (2,055) -------- -------- Total (13,365) (17,635) -------- -------- Net deferred taxes $ (5,403) $(11,794) ======== ========
(9) Segment Reporting The Company operates primarily in three segments: concrete accessories (Dayton/Richmond(R) and Dur-O-Wal(R)), concrete forming systems (Symons(R)), and paving products (American Highway Technology(R)). Effective January 1, 2001, the masonry products business was merged into the concrete accessories segment as a product line and all 2000 and 1999 financial data has been restated to conform to the 2001 presentation. 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. Information about the income (loss) of each segment and the reconciliations to the consolidated amounts for the years ended December 31, 2001, 2000, and 1999 is as follows:
2001 2000 1999 -------- -------- -------- Concrete Accessories $218,366 $197,208 $168,109 Concrete Forming Systems 126,478 130,213 117,555 Paving Products 48,856 40,424 36,506 -------- -------- -------- Net sales to external customers $393,700 $367,845 $322,170 ======== ======== ========
59 Concrete Accessories $ 5,553 $ 4,625 $ 3,342 Concrete Forming Systems 7,052 6,243 5,165 Paving Products 2,522 2,561 189 -------- -------- -------- Net sales to other segments $ 15,127 $ 13,429 $ 8,696 ======== ======== ======== Concrete Accessories $ 12,390 $ 8,078 $ 4,133 Concrete Forming Systems 19,793 13,058 6,899 Paving Products 2,841 1,438 629 -------- -------- -------- Interest expense $ 35,024 $ 22,574 $ 11,661 ======== ======== ======== Concrete Accessories $ 14,684 $ 18,098 $ 23,584 Concrete Forming Systems (5,637) (5,546) 10,876 Paving Products 224 2,363 1,569 Intersegment Eliminations (8,050) (6,970) (4,465) Corporate (5,874) (5,797) (4,918) -------- -------- -------- Income (loss) before income taxes $ (4,653) $ 2,148 $ 26,646 ======== ======== ======== Concrete Accessories $ 5,033 $ 4,865 $ 5,088 Concrete Forming Systems 12,105 6,696 5,735 Paving Products 1,133 967 839 Corporate 19 85 55 -------- -------- -------- Depreciation $ 18,290 $ 12,613 $ 11,717 ======== ======== ======== Concrete Accessories $ 3,315 $ 2,207 $ 1,901 Concrete Forming Systems 420 148 298 Paving Products 177 153 170 -------- -------- -------- Amortization of goodwill and intangibles $ 3,912 $ 2,508 $ 2,369 ======== ======== ========
Information regarding each segment's assets and the reconciliation to the consolidated amounts as of December 31, 2001 and 2000 is as follows:
2001 2000 -------- -------- Concrete Accessories $214,412 $161,213 Concrete Forming Systems 135,302 130,555 Paving Products 21,309 19,386 Corporate and Unallocated 25,820 24,264 -------- -------- Total Assets $396,843 $335,418 ======== ========
60 Information regarding capital expenditures by segment and the reconciliation to the consolidated amounts for the years ended December 31, 2001, 2000 and 1999 is as follows:
2001 2000 1999 --------- --------- --------- Concrete Accessories $ 6,088 $ 6,820 $ 3,430 Concrete Forming Systems 2,610 1,951 2,199 Paving Products 881 1,937 2,035 Corporate 345 970 64 --------- --------- --------- Property, Plant, and Equipment Additions $ 9,924 $ 11,678 $ 7,728 ========= ========= ========= Concrete Accessories $ 1,664 $ 2,041 $ 1,580 Concrete Forming Systems 24,269 16,069 14,449 --------- --------- --------- Rental Equipment Additions $ 25,933 $ 18,110 $ 16,029 ========= ========= =========
(10) Commitments and Contingencies (a) Operating Leases - Rental expense for property, plant and equipment (principally office and warehouse facilities and office equipment) was $6,599, $4,731, and $4,608, for the years ended December 31, 2001, 2000 and 1999, respectively. Lease terms generally range from one to ten years and some contain renewal options. Aggregate minimum annual rental commitments under non-cancelable operating leases are as follows: 2002 $ 5,491 2003 4,060 2004 3,152 2005 2,343 2006 1,866 Thereafter 525 ------- Total $17,437 ======= (b) Litigation - 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 $14,100 were awarded against Symons in 1999, and both parties were enjoined from engaging in certain conduct. The Company recorded a $15,000 charge in the second quarter of 2000 after its unsuccessful appeal. In October 2000, Symons satisfied the judgment of $14,100, post-judgment interest of $1,134, and reimbursement of EFCO's defense costs of $107, by payment to EFCO from the Company's cash on hand and from the Company's revolving credit facility. 61 Symons has made a claim to its primary and excess insurance carriers for "advertising injury" and other claims 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 Surplus Lines 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. The complaint was amended by Royal in October 2000 by adding the Federal Insurance Company as an additional plaintiff. Symons filed a cross complaint against Royal and Federal in January 2001 and later amended the cross complaint by adding American International Surplus Lines Co., Westchester Fire Insurance Co., International Insurance Co., and Aon Risk Services of California, Inc. The Royal insurance policy, against which defense and indemnification claims have been made, provides $500 of primary insurance (subject to a self-insured retention of $500) and the payment of defense costs. The excess insurance policies provide an additional $10,000 of coverage for each policy year. In 2001, Symons received approximately $1.1 million, net of recovery expenses, from Royal as reimbursement of certain defense costs. This reimbursement was reflected as a reduction of selling, general and administrative expenses in the accompanying consolidated statement of operations. Symons is continuing efforts to collect additional defense costs that have not yet been agreed to by Royal. From time to time, the Company is involved in various legal proceedings arising out of the ordinary course of business. None of the matters in which the Company is currently involved, either individually, or in the aggregate, is expected to have a material adverse effect on the Company's business or financial condition. (c) Self-Insurance - The Company is self-insured for certain of its group medical, workers' compensation and product and general liability claims. The Company has stop loss insurance coverage at various per occurrence and per annum levels depending on type of claim. The Company consults with third party administrators to estimate the reserves required for these claims. Although no material revisions were made to the estimates for the years ended December 31, 2001, 2000 and 1999, during 2000, the Company changed a significant portion of its workers' compensation exposure to self-insured from a premium-based plan. The Company has reserved $6,911, and $5,705 as of December 31, 2001 and 2000, respectively. (d) Severance Obligations - The Company has employment agreements with its executive management and severance agreements with certain of its key management-level personnel, with annual base compensation ranging in value from $70 to $390. The agreements generally provide for salary continuation in the event of termination without cause for periods of six months to two years. The agreements also contain certain non-competition clauses. As of December 31, 2001, the remaining aggregate commitment under these severance agreements if all individuals were terminated without cause was approximately $4,200. 62 (11) Facility Closing and Severance Expenses During 2000, as a result of the acquisition of Conspec, the Company approved and began implementing a plan to consolidate certain of the Company's existing operations. In conjunction with the consolidation, two of the Company's facilities were closed. Accordingly, a facility closing and severance expense of approximately $2,500 was recorded during 2000, of which approximately $400 related to idle machinery and equipment write-offs, and approximately $2,100 related to future lease payments and employee severance. Of the amounts accruable at the time of the plan's approval, approximately $700 is included in "Other Accrued Liabilities" in the accompanying December 31, 2001 consolidated balance sheet. During the second quarter of 2001, the Company approved and began implementing plans to exit seven manufacturing and distribution facilities and to reduce overall Company headcount in order to keep its cost structure in alignment with its net sales. The total anticipated cost of the facility closures and severance was approximately $4,700, and was to encompass approximately 200 employee terminations. The estimated cost was increased to approximately $5,700 and the estimated number of employee terminations was increased to approximately 400. The total estimated exit costs are comprised of approximately $2,400 related to employee involuntary termination benefits, approximately $700 related to lease termination costs, approximately $1,100 related to relocation activities and approximately $1,500 related to other post-closing maintenance costs. Accordingly, the Company recorded a facility closing and severance expense of approximately $5,700 in 2001. Of the amounts accruable at the time of the plan's approval, approximately $1,400 is included in "Other Accrued Liabilities" in the accompanying consolidated balance sheet. During the fourth quarter of 2001, the Company approved and began implementing a plan to exit one additional manufacturing facility and further reduce overall Company headcount in order to keep its cost structure in alignment with its net sales. The total anticipated cost of the facility closure and severance was $1,700, and was to encompass approximately 100 employee terminations. The total estimated costs are comprised of approximately $1,300 related to employee involuntary termination benefits, approximately $100 related to lease termination costs and approximately $300 related to other post-closing maintenance costs. Of the amounts accruable at the time of the plan's approval, $800 is included in "Other Accrued Liabilities" in the accompanying consolidated balance sheet. The total expense related to the above activities in 2001 of approximately $7,400 was comprised of approximately $3,700 of employee involuntary termination benefits, approximately $800 of lease termination costs, approximately $1,100 related to relocation activities, and approximately $1,800 of other post-closing maintenance costs. Of these amounts, approximately $2,200 related to 2001 activity and approximately $700 related to 2000 activity has not been paid and is included in "Other Accrued Liabilities" in the accompanying December 31, 2001 consolidated balance sheet. Below is a summary of the amounts charged against the facility closing and severance reserve in 2001:
Accrual Charged to Expense Total Balance as Incurred Expense ------- ------------------ ------- Beginning Balance $1,900 $ -- $ -- Facility Closing and Severance Expenses 4,700 2,700 7,400 Items Charge Against Reserve: Involuntary Termination Benefits (2,400) -- -- Lease Termination Costs (1,300) -- -- Relocation Activities -- -- -- Other Post-closing Costs -- -- -- ------ ------ ------ Ending Balance $2,900 $ -- $7,400 ====== ====== ======
(12) Related Party Transactions In conjunction with the acquisition of Aztec Concrete Accessories, Inc. ("Aztec"), the Company paid Odyssey a $350 fee, plus out-of-pocket expenses of $107 during 2001. In conjunction with the recapitalization and the related financing transactions, the Company paid Odyssey a fee of $4,000, plus out-of-pocket expenses of $699 during 2000. 63 (13) Quarterly Financial Information (Unaudited)
2001 ------------------------------------------------------------------------- First Second Third Fourth Full Quarterly Operating Data Quarter Quarter Quarter Quarter Year ------------------------ --------- --------- --------- --------- --------- Net sales $ 83,357 $ 111,064 $ 109,326 $ 89,953 $ 393,700 Gross profit 26,610 40,847 39,357 32,456 139,270 Net income (loss) (4,591) 1,245 2,000 (2,128) (3,474) 2000 ------------------------------------------------------------------------- First Second Third Fourth Full Quarterly Operating Data Quarter Quarter Quarter Quarter Year ------------------------ ------- --------- --------- --------- --------- Net sales $ 76,505 $ 98,000 $ 107,717 $ 85,623 $ 367,845 Gross profit 27,131 37,233 41,970 31,988 138,322 Income (loss) before extraordinary item 473 (2,972) 3,870 (694) 677
64
Dayton Superior Corporation and Subsidiaries Schedule II - Valuation and Qualifying Accounts Years Ended December 31, 2001, 2000 and 1999 (Amounts in thousands) Additions Deductions -------------------------------------- --------------------------------------- Charges for Which Balance at Charged to Reserves Balance Beginning Costs and Were at End of Year Expenses Other Created Other of Year ---------- ---------- ------- ----------- ------- -------- Allowances for Doubtful Accounts and Sales Returns and Allowances For the year ended December 31, 2001 $ 5,331 $ 2,156 $ 102(1) $ (166) $ -- $ 7,423 For the year ended December 31, 2000 5,589 2,740 -- (2,998) -- 5,331 For the year ended December 31, 1999 4,432 3,420 -- (2,263) -- 5,589 Facility Closing and Severance Reserve For the year ended December 31, 2001 $ 1,920 $ 7,360 $ -- $(6,372) $ -- $ 2,908 For the year ended December 31, 2000 -- 2,085 -- (165) -- 1,920
(1) Acquisition of BarLock and Aztec Concrete Accessories, Inc. 65 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 66 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The following table sets forth the name, age and position of our executive officers and directors as of March 29, 2002.
Name Age Position - ----------------------- ------- --------------------------------------------------------------- John A. Ciccarelli 62 Chairman of the Board, President and Chief Executive Officer Raymond E. Bartholomae 55 Vice President and General Manager, Symons Michael C. Deis, Sr. 51 Vice President and General Manager, Dayton/Richmond James W. Fennessy 58 Vice President and General Manager, Dayton Superior Canada Ltd. Mark K. Kaler 44 Vice President and General Manager, American Highway Technology Alan F. McIlroy 51 Vice President and Chief Financial Officer John R. Paine, Jr. 59 Vice President, Sales and Marketing, Dayton/Richmond Thomas W. Roehrig 36 Corporate Controller John M. Rutherford 41 Treasurer and Assistant Secretary James C. Stewart 54 Vice President and General Manager, Dayton Superior Specialty Chemical Corp. Jaime Taronji, Jr. 57 Vice President, General Counsel and Secretary Stephen Berger 62 Director Joshua C. Cascade 29 Director William F. Hopkins 38 Director John W. Paxton, Sr. 65 Director Douglas Rotatori 41 Director
- ----------- John A. Ciccarelli has been President since 1989 and has been Chief Executive Officer and a director since 1994. After the consummation of the recapitalization in 2000, Mr. Ciccarelli became Chairman of our Board of Directors. Raymond E. Bartholomae has been Vice President and General Manager, Symons, since February 1998, and was Executive Vice President and General Manager of Symons from 1986 to February 1998. Michael C. Deis, Sr. has been Vice President and General Manager, Dayton/Richmond since February 1998. From 1987 to February 1998, Mr. Deis was Vice President, Eastern Division of Dayton/Richmond. James W. Fennessy has been Vice President and General Manager, Dayton Superior Canada, Ltd. since 1988. Mark K. Kaler has been Vice President and General Manager, American Highway Technology since April 1996. Alan F. McIlroy has been Vice President and Chief Financial Officer since July 1997. From January 1994 until July 1997, Mr. McIlroy was President of The Greenock Group, a private operational investment company. John R. Paine, Jr. has been Vice President, Sales and Marketing of Dayton/Richmond since 1984. 67 Thomas W. Roehrig has been Corporate Controller since April 1998. From 1987 until March 1998, Mr. Roehrig was employed by Arthur Andersen LLP, an international public accounting firm, most recently as a Manager in the Assurance and Business Advisory division. John M. Rutherford has been Treasurer and Assistant Secretary since February 1998. From January 1993 until January 1998, Mr. Rutherford was Director of Treasury and Risk Management for Gibson Greetings, Inc., a greeting card manufacturer. James C. Stewart has been Vice President and General Manager, Dayton Superior Specialty Chemical Corp., since January 1, 2001. From February 1998 to January 2001, he was Vice President, Corporate Development. From 1984 to February 1998, Mr. Stewart was Vice President, Western Division of Dayton/Richmond. Jaime Taronji, Jr. joined us in August 1999 and was elected Vice President, General Counsel and Secretary in October 1999. From 1996 to 1999, Mr. Taronji was Law Vice President of NCR Corporation. Stephen Berger is currently chairman of Odyssey Investment Partners, LLC. Prior to joining Odyssey Investment Partners, LLC, Mr. Berger was a general partner of Odyssey Partners, LP. Mr. Berger also is a director of Transdigm, Inc., a supplier of highly engineered commercial and military aircraft parts. Joshua C. Cascade has been an associate of Odyssey Investment Partners, LLC since 1998. From 1994 to 1998, Mr. Cascade was employed by The Blackstone Group, LP, most recently as an associate in the restructuring and reorganization group. William F. Hopkins has been a member and Managing Principal of Odyssey Investment Partners, LLC since 1997. From 1994 to 1996, Mr. Hopkins was a principal in the private equity investing group of Odyssey Partners, LP. Mr. Hopkins also is a director of Transdigm, Inc., a supplier of highly engineered commercial and military aircraft parts. Douglas Rotatori has been a principal of Odyssey Investment Partners, LLC since 1998. From 1995 to 1998, Mr. Rotatori was a principal with Wellspring Capital Management, LLC. John W. Paxton, Sr. joined us as a director on October 17, 2001. He has been the President of the Bar Code Business Unit of Zebra Technologies Corporation since February 2002. From December 2000 to February 2002, Mr. Paxton was a private consultant. From March 1999 to December 2000, Mr. Paxton was Chairman of the Board and Chief Executive Officer of Telxon Corporation. From December 1998 until March 1999, Mr. Paxton was Chairman of Odyssey Industrial Technologies, LLC, a joint venture with Odyssey. From March 1997 until November 1998, Mr. Paxton was Executive Vice President of Paxar Corporation and, upon its formation in June 1998, President of Paxar's Printing Solutions Group. Mr. Paxton also is a director of Transdigm, Inc., a supplier of highly engineered commercial and military aircraft parts. We have six directors. Each director is elected to serve until the next annual meeting of shareholders or until a successor is elected. Our executive officers are elected by the directors to serve at the pleasure of the directors. There are no family relationships between any of our directors or executive officers. 68 COMPENSATION OF DIRECTORS Our directors who are employed by us or Odyssey do not receive any compensation for their service as directors. Mr. Paxton, as our only director who is not employed by us or Odyssey, receives for his services as a director an annual retainer of $25,000, payable in our common shares. ITEM 11. EXECUTIVE COMPENSATION. The following table summarizes the 2001, 2000, and 1999 compensation for our chief executive officer and each of the other four most highly compensated executive officers who was serving as an executive officer at December 31, 2001.
SUMMARY COMPENSATION TABLE LONG-TERM COMPENSATION -------------------------- ANNUAL COMPENSATION AWARDS PAYOUTS ----------------------------------- -------------------------- SHARES OTHER ANNUAL UNDERLYING LONG TERM ALL OTHER NAME AND PRINCIPAL SALARY BONUS COMPENSATION OPTIONS INCENTIVE COMPENSATION POSITION YEAR ($) ($) ($) (#)(2) PAYOUTS ($) ($)(1) - ------------------------ ---- -------- ------- ------------ ----------- ----------- ------------ John A. Ciccarelli 2001 $380,769 $91,475 $0 $0 $0 $13,600 President and Chief 2000 347,981 300,000 0 120,072 0 13,000 Executive Officer 1999 310,961 315,000 0 15,000 0 12,800 Alan F. McIlroy 2001 $236,539 $96,406 $0 $0 $0 $11,050 Vice President and 2000 223,577 130,000 0 46,688 0 10,600 Chief Financial Officer 1999 197,423 150,000 10,000(3) 8,000 0 10,400 Michael D. Deis, Sr. 2001 $220,769 $44,926 $0 $0 $0 $11,050 Vice President and 2000 184,904 120,000 0 68,543 0 10,600 General Manager, 1999 151,500 120,000 0 8,000 0 10,400 Dayton/Richmond Raymond E. Bartholomae 2001 $206,750 $90,000 $0 $0 $0 $13,600 Vice President and 2000 197,000 121,404 0 46,688 0 10,600 General Manager, 1999 185,000 120,000 0 6,000 0 10,400 Symons Mark K. Kaler 2001 $149,231 $160,214 $0 $0 $0 $7,650 Vice President and 2000 129,250 110,000 0 44,496 0 7,400 General Manager, 1999 114,846 99,936 0 4,000 0 7,200 American Highway Technology - ------------- (1) Consists of: Matching 401(k) Contributions Contributions to 401(k) Savings Plan ------------------------------------ ------------------------------------ 2001 2000 1999 2001 2000 1999 ---- ---- ---- ---- ---- ---- Mr. Ciccarelli $3,400 $3,400 $3,200 $10,200 $9,600 $9,600 Mr. McIlroy 3,400 3,400 3,200 7,650 7,200 7,200 Mr. Bartholomae 3,400 3,400 3,200 10,200 7,200 7,200 Mr. Kaler 3,400 3,400 3,200 4,250 4,000 4,000 Mr. Deis 3,400 3,400 3,200 7,650 7,200 7,200
69 (2) Options to purchase common shares were granted under our stock option plans at an exercise price of $27.00 per share (in the case of options granted in 2000), $19.44 per share (in the case of options granted in 1999), the average of the high and low prices on the date of the grant. The 2000 options become exercisable based on a combination of service and performance factors. The 1999 options had a term of ten years and become exercisable in three equal annual installments, commencing on the first anniversary of the date of grant; however, the 1999 options became fully exercisable upon completion of our recapitalization. (3) Relocation expense paid by us. EMPLOYMENT AGREEMENTS We have entered into employment agreements with each of the executive officers named in the Summary Compensation Table and three other executive officers which became effective upon the consummation of the recapitalization. Generally, each employment agreement provides: - The initial term of employment is three years and automatically will be extended for additional one-year periods unless either we or the executive notifies the other of termination no later than 90 days before the end of a term. - The annual base salary, which may be increased by our Board of Directors in its discretion, is as follows: John A. Ciccarelli.......................... $390,000 Alan F. McIlroy............................. 240,000 Michael C. Deis, Sr......................... 230,000 Raymond E. Bartholomae...................... 210,000 Mark K. Kaler............................... 155,000 - Each executive officer is entitled to participate in our executive annual bonus plan and in our various other employee benefit plans and arrangements which are applicable to senior officers. - If an executive officer is terminated without cause, he will be entitled to receive a pro rata share of his bonus for the year of termination, to continue to receive his annual base salary for 24 months and to continue coverage under our medical and dental programs for one year on the same basis as he was entitled to participate prior to his termination. - Each executive officer is prohibited from competing with us during the term of his employment and for two years following termination of his employment. Mr. Ciccarelli's employment agreement differs from the other agreements described above in the following respects: - He serves as Chairman of the Board as well as President and Chief Executive Officer. 70 - At the end of the initial three-year term, his employment automatically will be extended for a period of two years unless we or he notifies the other that the agreement will not be extended no later than 60 days before the end of the initial term. - We and he may agree prior to the end of the initial term that, effective at the end of initial term, he will retire as President and Chief Executive Officer but will continue as non-executive Chairman of the Board with compensation commensurate with his duties and responsibilities. - He receives an annual car allowance, payment of annual membership fees for membership in two country, alumni, or social clubs of his choice and payment for reasonable expenses incurred by him for professional assistance with taxes and financial management, consistent with our current practices. - If he elects in the future to purchase common shares pursuant to the exercise of pre-emptive rights, we or one of our affiliates will lend him up to $500,000 to pay for the shares. The loan will be secured by the shares purchased and will be on a recourse basis with interest at the applicable federal rate, although payment of the interest will be deferred until the shares are sold. - If he remains employed by us for the full initial three-year term of his employment agreement, he may during the following two years require us to purchase some of his common shares at their fair market value if our EBITDA reaches specified levels and, if he intends to exercise stock options, we or an affiliate will lend him the amount of the exercise price plus the amount of his income tax liability. This loan generally would be on the same terms as the loan to purchase shares described above. MANAGEMENT STOCKHOLDERS' AGREEMENT In connection with the consummation of the recapitalization, we along with Odyssey and our employee stockholders, including the officers named in the Summary Compensation Table (the "Management Stockholders"), entered into a Management Stockholders' Agreement (the "Management Stockholders' Agreement") which governs our common shares, options to purchase our common shares and shares acquired upon exercise of options. The Management Stockholders' Agreement provides that except for certain transfers to family members and family trusts, no Management Stockholder may transfer common stock except in accordance with the Management Stockholders' Agreement. The Management Stockholders' Agreement also provides that, upon termination of the employment of a Management Stockholder, the Management Stockholder has certain put rights and we have certain call rights regarding his or her common stock. If the provisions of any law, the terms of credit and financing arrangements or our financial circumstances would prevent us from making a repurchase of shares pursuant to the Management Stockholders' Agreement, we will not make the purchase until all such prohibitions lapse, and will then also pay the Management Stockholder a specified rate of interest on the repurchase price. 71 The Management Stockholders' Agreement further provides that in the event of certain transfers of common shares by Odyssey, the Management Stockholders may participate in such transfers and/or Odyssey may require the Management Stockholders to transfer their shares in such transactions, in each case on a pro rata basis. Certain Management Stockholders are entitled to participate on a pro rata basis with, and on the same terms as, Odyssey in any future offering of common shares. FISCAL 2000 STOCK OPTION GRANTS No options or stock appreciation rights were granted during 2001 to any of the executive officers named in the compensation table. FISCAL YEAR-END OPTION VALUES The number and value of options exercised and the number and value of all unexercised options held by each of the executive officers named in the Summary Compensation Table at December 31, 2001 are shown in the following table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT SHARES 12/31/01 (#) 12/31/01 ($)(1) ACQUIRED ON VALUE ------------------------- -------------------------- NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE ---- ------------ ------------ ------------------------- ------------------------- John A. Ciccarelli - - 28,333/91,739 $14,167/$45,870 Alan F. McIlroy - - 25,159/40,458 205,382/20,229 Raymond E. Bartholomae - - 9,435/40,458 34,468/20,229 Michael C. Deis, Sr. - - 19,886/59,213 267,997/29,607 Mark K. Kaler - - 17,721/38,471 293,608/19,236 - ------------
(1) Represents the excess of $27.50, the fair market value as of December 31, 2001 based on an independent appraisal, over the aggregate option exercise price. 72 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL SHAREHOLDERS The following table sets forth the common shares beneficially owned by each director and executive officer named in the Summary Compensation Table and all directors and executive officers as a group as of March 29, 2002:
NUMBER OF COMMON SHARES BENEFICIALLY % OF COMMON NAME OF BENEFICIAL OWNER: OWNED (1) SHARES(1) - ------------------------- ------------------- ------------ Raymond E. Bartholomae(2) 30,512 * Stephen Berger(3) 3,666,650 91.8 Joshua C. Cascade(3) 3,666,650 91.8 John A. Ciccarelli(4) 67,594 1.7 Michael C. Deis, Sr.(5) 42,723 1.1 William F. Hopkins(3) 3,666,650 91.8 Alan F. McIlroy(6) 43,386 1.1 Odyssey (as defined in footnote 3) 3,666,650 91.8 Douglas Rotatori(3) 3,666,650 91.8 John W. Paxton, Sr. 909 * Mark K. Kaler(7) 45,632 1.1 All executive officers and directors as a group (16 persons)(8) 3,983,276 96.7 - ---------------------
* Signifies less than 1%. (1) Beneficial ownership as reported above has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended and generally includes sole or shared voting or investment power with respect to the shares. Includes the number of common shares subject to all outstanding options, including those that will become exercisable as a result of the recapitalization and those that are cashed out in the recapitalization. The percentages of our outstanding common shares are based on 3,993,614 shares outstanding, except for certain parties who hold options that are exercisable into common shares within 60 days. The percentages for those parties who hold options that are exercisable within 60 days are based on the sum of 3,993,614 shares outstanding plus the number of common shares subject to options exercisable within 60 days held by them and no other person, as indicated in the following notes. The number of common shares beneficially owned has been determined by assuming the exercise of options exercisable into common shares within 60 days. Unless otherwise indicated, voting and investment power are exercised solely by each individual and/or a member of his household. (2) Includes 9,435 common shares issuable upon exercise of options exercisable within 60 days. (3) Consists of 3,666,650 common shares owned in the aggregate by Odyssey Investment Partners Fund, LP (the "Fund"), certain of its affiliates and certain co-investors (together with the Fund, "Odyssey"). Odyssey Capital Partners, LLC is the general partner of the Fund. Odyssey Investment Partners, LLC is the manager of the Fund. The principal business address for Odyssey is 280 Park Avenue, West Tower, 38th Floor, New York, New York. Messrs. Berger and 73 Hopkins are managing members of the Odyssey Capital Partners, LLC and Odyssey Investment Partners, LLC and, therefore, may each be deemed to share voting and investment power with respect to the shares deemed to be beneficially owned by Odyssey. Mr. Rotatori is a member and Mr. Cascade is an associate of Odyssey Investment Partners, LLC. Each of Messrs. Berger, Cascade, Hopkins and Rotatori disclaim beneficial ownership of these shares. (4) Includes 28,333 common shares issuable upon exercise of options exercisable within 60 days. (5) Includes 19,886 common shares issuable upon exercise of options exercisable within 60 days. (6) Includes 25,159 common shares issuable upon exercise of options exercisable within 60 days. (7) Includes 17,721 common shares issuable upon exercise of options exercisable within 60 days. (8) As described in note 3, Messrs. Berger and Hopkins may each be deemed to share voting and investment power with respect to the shares beneficially owned by Odyssey and Messrs. Berger, Cascade, Hopkins and Rotatori disclaim beneficial ownership of the shares beneficially owned by Odyssey. Excluding the shares deemed to be owned by Odyssey, all executive officers and directors as a group beneficially own 316,626 common shares. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. EMPLOYMENT AND ROLLOVER AGREEMENTS In connection with the recapitalization, we have entered into employment and other "rollover" agreements with John A. Ciccarelli, Raymond E. Bartholomae, Michael C. Deis, Sr., James W. Fennessy, Mark K. Kaler, Alan F. McIlroy, James C. Stewart, and Jaime Taronji, Jr., each of whom is an executive officer. Generally, the "rollover" agreements required each executive officer to retain common shares and, in most cases, stock options, with a specified aggregate value following the recapitalization. In some cases, the executive officer has agreed to exercise stock options in order to obtain some of the common shares which he has agreed to retain following the recapitalization. These agreements provided that if the executive officer exercised stock options in order to obtain some of the common shares he is required to retain and he so requested, we made a non-interest bearing, recourse loan to him in an amount equal to the exercise price of the options plus the estimated federal and state income tax liability he incurred in connection with the exercise. If the executive officer purchased some of the common shares he is required to retain and he so requested, we made a 6.39% interest deferred recourse loan to him. These loans are secured by a pledge of the shares issued. As of March 29, 2002, the amounts outstanding (which are also the largest amount outstanding for these loans during the period January 1, 2000 through March 30, 2001) was $64,096 for Mr. Ciccarelli, $522,853 for Mr. Bartholomae, $337,773 for Mr. Deis, $72,376 for Mr. Fennessy, $285,121 for Mr. Kaler, $286,492 for Mr. McIlroy, $317,227 for Mr. Stewart, and $114,889 for Mr. Taronji. ODYSSEY FINANCIAL SERVICES In connection with the recapitalization and the related financing transactions, we paid Odyssey a fee of $4.0 million in cash, plus out of pocket expenses of approximately $0.7 million. In connection with the acquisition of Aztec Concrete Accessories, Inc., we paid Odyssey a fee of $350 thousand, plus out-of-pocket expenses of $107 thousand. 74 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) FINANCIAL STATEMENTS The following consolidated financial statements of the Company and subsidiaries are incorporated by reference as part of this Report under Item 8. Report of Independent Public Accountants Consolidated Balance Sheets as of December 31, 2001 and 2000. Consolidated Statements of Operations for the years ended December 31, 2001, 2000, and 1999. Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2000, and 1999. Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000, and 1999. Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2001, 2000, and 1999. Notes to Consolidated Financial Statements. (a)(2) FINANCIAL STATEMENT SCHEDULE Schedule II - Valuation and Qualifying Accounts (at Item 8 of this Report) All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto. (a)(3) EXHIBITS. See Index to Exhibits following the signature pages to this Report for a list of exhibits. (b) REPORTS ON FORM 8-K. During the quarter ended December 31, 2001, the Company did not file any Current Reports on Form 8-K. 75 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Dayton Superior Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DAYTON SUPERIOR CORPORATION April 1, 2002 By /s/John A. Ciccarelli ------------------------ John A. Ciccarelli Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of Dayton Superior Corporation and in the capacities and on the dates indicated.
NAME TITLE DATE /s/John A. Ciccarelli Director, Chairman, President and Chief Executive April 1, 2002 - --------------------- Officer John A. Ciccarelli /s/Alan F. McIlroy Vice President and Chief Financial Officer April 1, 2002 - ------------------ (Principal Financial Officer) Alan F. McIlroy /s/Thomas W. Roehrig Corporate Controller April 1, 2002 - -------------------- (Principal Accounting Officer) Thomas W. Roehrig /s/Stephen Berger Director April 1, 2002 - ----------------- Stephen Berger /s/Joshua C. Cascade Director April 1, 2002 - -------------------- Joshua C. Cascade /s/William F. Hopkins Director April 1, 2002 - --------------------- William F. Hopkins /s/Douglas Rotatori Director April 1, 2002 - ------------------- Douglas Rotatori /s/John W. Paxton, Sr. Director April 1, 2002 - ---------------------- John W. Paxton, Sr.
76 INDEX OF EXHIBITS Exhibit No. Description (3) ARTICLES OF INCORPORATION AND BY-LAWS 3.1 Amended Articles of Incorporation of the Company [Incorporated herein by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-4 (Reg. No. 333-41392)] + 3.2 Code of Regulations of the Company (as amended) [Incorporated herein by reference to Exhibit 3.3 to the Company's Registration Statement on Form S-4 (Reg. No. 333-41392)] + (4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES 4.1 Senior Unsubordinated Redeemable Note of the Company in the principal amount of $5,000,000 [Incorporated herein by reference to Exhibit A to the Agreement set forth as Exhibit 2.1 to the Company's Current Report on Form 8-K dated June 2, 1997] + 4.2 Form of Junior Convertible Subordinated Indenture between Dayton Superior Corporation and Firstar Bank, N.A., as Indenture Trustee [Incorporated herein by reference to Exhibit 4.2.3 to the Company's Registration Statement on Form S-3 (Reg. 333-84613)] + 4.2.1 First Supplemental Indenture dated January 17, 2000, between Dayton Superior Corporation and Firstar Bank, N.A., as Trustee [Incorporated herein by reference to Exhibit 4.6.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999] + 4.3 Form of Junior Convertible Subordinated Debenture [Incorporated herein by reference to Exhibit 4.2.3 to the Company's Registration Statement on Form S-3 (Reg. 333-84613)] + 77 4.4 Credit Agreement, dated June 16, 2000, among the Company, various lending institutions and Bankers Trust Company, as administrative agent, Deutsche Bank Securities, Inc., as lead arranger and book manager, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as syndicating agent and co-arranger. [Incorporated by reference to Exhibit 10.24 to the Company's Registration Statement on Form S-4 (Reg. 333-41392)] + 4.4.1 Consent dated as of May 24, 2001, among Dayton Superior Corporation, the lenders party to the Credit Agreement dated as of June 16, 2000 and Bankers Trust Company, as administrative agent [Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the Quarter ended June 29, 2001] 4.5 Indenture dated June 16, 2000 among the Company, the Guarantors named therein, as guarantors, and United States Trust Company of New York, as trustee, relating to $170,000,000 in aggregate principal amount of 13% Senior Subordinated Notes due 2009 and registered 13% Senior Subordinated Notes due 2009 [Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-4 (Reg. 333-41392)] + 4.5.1 First Supplemental Indenture dated as of August 3, 2000 ** 4.5.2 Second Supplemental Indenture dated as of January 4, 2001 ** 4.5.3 Third Supplemental Indenture dated as of June 19, 2001 ** 4.6 Specimen Certificate of 13% Senior Subordinated Notes due 2009 [Incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-4 (Reg. 333-41392)] + 4.7 Specimen Certificate of the registered 13% Senior Subordinated Notes due 2009 [Incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-4 (Reg. 333-41392)] + (10) MATERIAL CONTRACTS 10.1 Management Incentive Plan [Incorporated herein by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998] +* 78 10.2 Employment Agreement dated January 19, 2000 by and between Dayton Superior Corporation and John A. Ciccarelli [Incorporated herein by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999] +* 10.3 Employment Agreement dated January 19, 2000 by and between Dayton Superior Corporation and Alan F. McIlroy [Incorporated herein by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999] +* 10.4 Employment Agreement dated January 19, 2000 by and between Dayton Superior Corporation and Raymond E. Bartholomae [Incorporated herein by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999] +* 10.5 Employment Agreement dated January 19, 2000 by and between Dayton Superior Corporation and Michael C. Deis, Sr. [Incorporated herein by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999] +* 10.6 Employment Agreement dated January 19, 2000 by and between Dayton Superior Corporation and James C. Stewart [Incorporated herein by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999] +* 10.7 Employment Agreement dated as of January 19, 2000 between the Company and Mark K. Kaler, as amended effective June 16, 2000 [Incorporated by reference to Exhibit 10.20 to the Company's Registration Statement on Form S-4 (Reg. 333-41392)] +* 10.8 Employment Agreement dated as of January 19, 2000 between the Company and James W. Fennessy, as amended effective June 16, 2000 [Incorporated by reference to Exhibit 10.21 to the Company's Registration Statement on Form S-4 (Reg. 333-41392)] +* 10.9 Employment Agreement dated as of January 19, 2000 between the Company and Jaime Taronji, Jr., as amended effective June 16, 2000 [Incorporated by reference to Exhibit 10.22 to the Company's Registration Statement on Form S-4 (Reg. 333-41392)] +* 79 10.10 Form of Option Exercise, Cancellation and Equity Rollover Agreement dated January 19, 2000 by and among Stone Acquisition, Dayton Superior Corporation and each of John A. Ciccarelli, Alan F. McIlroy, Raymond E. Bartholomae, Michael C. Deis, Sr., James C. Stewart, Mark K. Kaler and James W. Fennessy [Incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999] + 10.11 Management Stockholder's Agreement dated June 16,2000 by and among the Company, Odyssey Investment Partners Fund, LP and the Management Stockholders named therein [Incorporated by reference to Exhibit 10.25 to the Company's Registration Statement on Form S-4 (Reg. 333-41392)] + 10.12 Dayton Superior Corporation 2000 Stock Option Plan and form of Stock Option Agreement [Incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 2001] + 10.12.1 First Amendment to 2000 Stock Option Plan of Dayton Superior Corporation (Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 30, 2001] ** (21) SUBSIDIARIES OF THE REGISTRANT 21.1 Subsidiaries of the Company ** (99) ADDITIONAL EXHIBITS 99.1 Letter of Quality Assurance by Arthur Andersen LLP ** - ---------------------------- * Compensatory plan, contract or arrangement in which one or more directors or named executive officers participates. ** Filed herewith + Previously filed 80 EX-4.5.1 3 l93044aex4-5_1.txt EXHIBIT 4.5.1 Exhibit 4.5.1 SUPPLEMENTAL INDENTURE SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of August 3, 2000, among Conspec Marketing and Manufacturing Co., Inc., a Kansas corporation, and Bristol Investments, Inc., a California corporation, (each a "Guaranteeing Subsidiary"), each a subsidiary of Dayton Superior Corporation (or its permitted successor), an Ohio corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and United States Trust Company of New York, as trustee under the indenture referred to below (the "Trustee"). WITNESSETH: WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of June 16, 2000 providing for the issuance of an aggregate principal amount of up to $270.0 million of 13% Senior Subordinated Notes due 2009 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the Obligations of the Company hereunder or thereunder, that: (i) the principal of, premium, if any, and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other 1 Obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The Obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Guarantee shall not be discharged except by complete performance of the Obligations contained in the Notes and the Indenture or pursuant to Section 6 hereof. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby until payment in full of all Obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Obligations 2 as provided in Article 6 of the Indenture, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. (i) Pursuant to Section 11.03 of the Indenture, the Obligations of a Guaranteeing Subsidiary shall be limited to such a maximum amount as after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws (including, without limitation, all Senior Debt of such Guarantor), and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the Obligations of such other Guarantor under Article 11 of the Indenture, shall result in the Obligations of such Guarantor under its Guarantee not constituting a fraudulent transfer or conveyance. 3. SUBORDINATION. The Obligations of the Guaranteeing Subsidiary under its Guarantee pursuant to this Supplemental Indenture shall be junior and subordinated to the Senior Debt of the Guaranteeing Subsidiary on the same basis as the Notes are junior and subordinated to the Senior Debt of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by the Guaranteeing Subsidiary only at such time as they may receive and/or retain payments in respect of the Notes pursuant to the Indenture, including Article 10 thereof. 4. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. 5. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor unless: (i) subject to Section 11.05 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) shall be a corporation organized and validly existing under the laws of the United States or any state thereof or the District of Columbia, and unconditionally assumes all the Obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Guarantee on the terms set forth herein or therein; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and 3 (iii) the Company would be permitted, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.09 of the Indenture. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clause (a)(iii) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 6. RELEASES. In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any Obligations under its Guarantee; provided that the Net Cash Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its Obligations under its Guarantee. Any Guarantor not released from its Obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other Obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture. 4 7. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any Obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 9. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 10. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 11. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. 5 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dayton Superior Corporation, as Issuer By: --------------------------------------------- Name: Title: Conspec Marketing and Manufacturing Co., Inc., as Guaranteeing Subsidiary By: --------------------------------------------- Name: Title: Bristol Investments, Inc., as Guaranteeing Subsidiary By: --------------------------------------------- Name: Title: UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: --------------------------------------------- Name: Cynthia Chaney Title: Assistant Vice President EX-4.5.2 4 l93044aex4-5_2.txt EXHIBIT 4.5.2 Exhibit 4.5.2 SECOND SUPPLEMENTAL INDENTURE SECOND SUPPLEMENTAL INDENTURE (this "Second Supplemental Indenture"), dated as of January 4, 2001, among Trevecca Holdings, Inc., a Delaware corporation, JDC Holdings, Inc., a Delaware corporation, and Aztec Concrete Accessories, Inc., a California corporation (each a "Guaranteeing Subsidiary"), each a subsidiary of Dayton Superior Corporation (or its permitted successor), an Ohio corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and United States Trust Company of New York, as trustee under the indenture referred to below (the "Trustee"). WITNESSETH: ----------- WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture, dated as of June 16, 2000, as amended by a supplemental indenture, dated as of August 3, 2000, among you, as the Trustee, the Company, Conspec Marketing and Manufacturing Co., Inc. and Bristol Investments (the "Indenture"), providing for the issuance of an aggregate principal amount of up to $270.0 million of 13% Senior Subordinated Notes due 2009 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Second Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the Obligations of the Company hereunder or thereunder, that: (i) the principal of, premium, if any, and interest on the Notes will be promptly paid in full when due, whether at maturity, by 1 acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other Obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The Obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Guarantee shall not be discharged except by complete performance of the Obligations contained in the Notes and the Indenture or pursuant to Section 6 hereof. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby until payment in full of all Obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other 2 prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article 6 of the Indenture, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. (i) Pursuant to Section 11.03 of the Indenture, the Obligations of a Guaranteeing Subsidiary shall be limited to such a maximum amount as after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws (including, without limitation, all Senior Debt of such Guarantor), and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the Obligations of such other Guarantor under Article 11 of the Indenture, shall result in the Obligations of such Guarantor under its Guarantee not constituting a fraudulent transfer or conveyance. 3. SUBORDINATION. The Obligations of the Guaranteeing Subsidiary under its Guarantee pursuant to this Second Supplemental Indenture shall be junior and subordinated to the Senior Debt of the Guaranteeing Subsidiary on the same basis as the Notes are junior and subordinated to the Senior Debt of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by the Guaranteeing Subsidiary only at such time as they may receive and/or retain payments in respect of the Notes pursuant to the Indenture, including Article 10 thereof. 4. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. 5. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor unless: (i) subject to Section 11.05 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) shall be a corporation organized and validly existing under the laws of the United States or any state thereof or the District of Columbia, and unconditionally assumes all the Obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Guarantee on the terms set forth herein or therein; 3 (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) the Company would be permitted, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.09 of the Indenture. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clause (a)(iii) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 6. RELEASES. In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any Obligations under its Guarantee; provided that the Net Cash Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its Obligations under its Guarantee. 4 Any Guarantor not released from its Obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other Obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture. 7. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any Obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Guarantees, the Indenture or this Second Supplemental Indenture or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SECOND SUPPLEMENTAL INDENTURE WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 9. COUNTERPARTS. The parties may sign any number of copies of this Second Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 10. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 11. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Second Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. 5 IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed and attested, all as of the date first above written. DAYTON SUPERIOR CORPORATION, as Issuer By: --------------------------------------- Name: Title: TREVECCA HOLDINGS, INC., as a Guaranteeing Subsidiary By: --------------------------------------- Name: Title: JDC HOLDINGS, INC., as a Guaranteeing Subsidiary By: --------------------------------------- Name: Title: AZTEC CONCRETE ACCESSORIES, INC., as a Guaranteeing Subsidiary By: --------------------------------------- Name: Title: UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: --------------------------------------- Name: Cynthia Chaney Title: Assistant Vice President EX-4.5.3 5 l93044aex4-5_3.txt EXHIBIT 4.5.3 Exhibit 4.5.3 THIRD SUPPLEMENTAL INDENTURE THIRD SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of June 19, 2001, among AnconCCL Inc., a Washington corporation ("Ancon"), Symons Corporation, a Delaware corporation ("Symons"), Dur-O-Wal, Inc., a Delaware corporation ("Dur-O-Wal"), Trevecca Holdings, Inc., a Delaware corporation ("Trevecca"), JDC Holdings, Inc., a Delaware corporation ("JDC"), Aztec Concrete Accessories, Inc., a California corporation ("Aztec"), Dayton Superior Specialty Chemical Corporation , a Kansas corporation(formerly known as Conspec Marketing and Manufacturing Co., Inc., "DSSCC") (collectively, the "Guaranteeing Subsidiaries" and, each, a "Guaranteeing Subsidiary"), each a subsidiary of Dayton Superior Corporation (or its permitted successor), an Ohio corporation (the "Company"), the Company and United States Trust Company of New York, as trustee under the indenture referred to below (the "Trustee"). WITNESSETH: WHEREAS, the Company, Symons, as a Guarantor, and Dur-O-Wal, as a Guarantor, have heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of June 16, 2000 providing for the issuance of an aggregate principal amount of up to $270.0 million of 13% Senior Subordinated Notes due 2009 (the "Notes"); WHEREAS, DSSCC has heretofore executed and delivered to the Trustee a supplemental indenture(the "First Supplemental Indenture"), dated as of August 3, 2000, which supplemented the Indenture and added DSSCC as guarantor under the Indenture; WHEREAS, Trevecca, JDC and Aztec have heretofore executed and delivered to the Trustee a supplemental indenture(the "Second Supplemental Indenture"), dated as of January 4, 2001, which supplemented the Indenture and added Trevecca, JDC and Aztec as guarantors under the Indenture; WHEREAS, the Indenture provides that under certain circumstances each Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which each Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, each Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 1 2. RATIFICATION. (a) Each of Symons and Dur-O-Wal hereby ratify the execution and delivery of the First Supplemental Indenture and the Second Supplemental Indenture. (b) DSSCC hereby ratifies the execution and delivery of the Second Supplemental Indenture. 3. AGREEMENT TO GUARANTEE. Each Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the Obligations of the Company hereunder or thereunder, that: (i) the principal of, premium, if any, and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other Obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The Obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. 2 (d) This Guarantee shall not be discharged except by complete performance of the Obligations contained in the Notes and the Indenture or pursuant to Section 6 hereof. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) Each Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby until payment in full of all Obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article 6 of the Indenture, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. (i) Pursuant to Section 11.03 of the Indenture, the Obligations of a Guaranteeing Subsidiary shall be limited to such a maximum amount as after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws (including, without limitation, all Senior Debt of such Guarantor), and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the Obligations of such other Guarantor under Article 11 of the Indenture, shall result in the Obligations of such Guarantor under its Guarantee not constituting a fraudulent transfer or conveyance. 4. SUBORDINATION. The Obligations of each Guaranteeing Subsidiary under its Guarantee pursuant to this Supplemental Indenture shall be junior and subordinated to the Senior Debt of each Guaranteeing Subsidiary on the same basis as the Notes are junior and subordinated to the Senior Debt of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by each Guaranteeing Subsidiary only at such time as they may receive and/or retain payments in respect of the Notes pursuant to the Indenture, including Article 10 thereof. 3 5. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. 6. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) Each Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor unless: (i) subject to Section 11.05 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) shall be a corporation organized and validly existing under the laws of the United States or any state thereof or the District of Columbia, and unconditionally assumes all the Obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Guarantee on the terms set forth herein or therein; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) the Company would be permitted, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.09 of the Indenture. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clause (a)(iii) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 4 7. RELEASES. In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any Obligations under its Guarantee; provided that the Net Cash Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its Obligations under its Guarantee. Any Guarantor not released from its Obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other Obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture. 8. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of each Guaranteeing Subsidiary, as such, shall have any liability for any Obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 9. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 10. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 11. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 12. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by each Guaranteeing Subsidiary and the Company. 5 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. DAYTON SUPERIOR CORPORATION, as Issuer By: ------------------------------------ Name: Alan F. McIlroy Title: Vice President and Chief Financial Officer ANCONCCL INC., as Guaranteeing Subsidiary By: ------------------------------------ Name: Alan F. McIlroy Title: Vice President and Chief Financial Officer SYMONS CORPORATION, as Guaranteeing Subsidiary By: ------------------------------------ Name: Alan F. McIlroy Title: Vice President and Chief Financial Officer DUR-O-WAL, INC., as Guaranteeing Subsidiary By: ------------------------------------- Name: Alan F. McIlroy Title: Vice President and Chief Financial Officer 6 TREVECCA HOLDINGS, INC., as Guaranteeing Subsidiary By: ------------------------------------ Name: Alan F. McIlroy Title: Vice President and Chief Financial Officer JDC HOLDINGS, INC., as Guaranteeing Subsidiary By: ------------------------------------ Name: Alan F. McIlroy Title: Vice President and Chief Financial Officer AZTEC CONCRETE ACCESSORIES, INC., as Guaranteeing Subsidiary By: ------------------------------------ Name: Alan F. McIlroy Title: Vice President and Chief Financial Officer DAYTON SUPERIOR SPECIALTY CHEMICAL CORPORATION (formerly known as Conspec Marketing and Manufacturing Co., Inc.), as Guaranteeing Subsidiary By: ------------------------------------ Name: Alan F. McIlroy Title: Vice President and Chief Financial Officer 7 UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: ------------------------------------ Name: Title: 8 EX-21.1 6 l93044aex21-1.txt EXHIBIT 21.1 Exhibit 21.1 Subsidiaries of Dayton Superior Corporation ------------------------------------------- Jurisdiction of Incorporation Name or Organization - ---- ----------------------------- Aztec Concrete Accessories, Inc. California Dayton Superior Canada Ltd. Ontario Dayton Superior FSC Corp. Barbados Dayton Superior Specialty Chemical Corp. Kansas Dur-O-Wal, Inc. Delaware Symons Corporation Delaware Trevecca Holdings, Inc. Delaware EX-99.1 7 l93044aex99-1.txt EXHIBIT 99.1 Exhibit 99.1 LETTER OF QUALITY ASSURANCE BY ARTHUR ANDERSEN LLP April 1, 2002 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Ladies and Gentlemen, Arthur Andersen LLP ("Andersen"), our independent public accountant, has represented to us that its audit of our consolidated financial statements as of December 31, 2001, was subject to Andersen's quality control system for its U.S. accounting and auditing practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards and that there was appropriate continuity of Andersen personnel working on the audit and appropriate availability of national office consultation. The availability of personnel at foreign affiliates of Andersen was not relevant to our audit, and, thus, we received no assurance from Andersen regarding such availability. Very truly yours, /s/ Alan F. McIlroy Alan F. McIlroy Chief Financial Officer Dayton Superior Corporation -----END PRIVACY-ENHANCED MESSAGE-----