-----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, Lpl8SLx3OBrUmt8WFgcBgPYRqR/Cs3xsM5QzPxuT/eIOwD0VURFD0Mqo7Od+R3zR x0aflihv8CzfOCzJgjl+nA== 0000950152-02-004083.txt : 20020513 0000950152-02-004083.hdr.sgml : 20020513 ACCESSION NUMBER: 0000950152-02-004083 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020329 FILED AS OF DATE: 20020513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAYTON SUPERIOR CORP CENTRAL INDEX KEY: 0000854709 STANDARD INDUSTRIAL CLASSIFICATION: STEEL PIPE & TUBES [3317] IRS NUMBER: 310676346 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11781 FILM NUMBER: 02642847 BUSINESS ADDRESS: STREET 1: 7777 WASHINGTON VILLAGE DRIVE STREET 2: SUITE 130 CITY: DAYTON STATE: OH ZIP: 45459 BUSINESS PHONE: 9374287172 MAIL ADDRESS: STREET 1: 7777 WASHINGTON VILLAGE DRIVE STREET 2: SUITE 130 CITY: DAYTON STATE: OH ZIP: 45459 10-Q 1 l93895ae10-q.txt DAYTON SUPERIOR CORPORATION 10-Q/QTR END 3-29-02 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED COMMISSION FILE NUMBER MARCH 29, 2002 1-11781 DAYTON SUPERIOR CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) OHIO 31-0676346 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 7777 Washington Village Dr., Suite 130 Dayton, Ohio 45459 - --------------------------------------- ---------------------- (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: 937-428-6360 ------------- NOT APPLICABLE - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed from last report) Indicate by mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO ---------- 3,993,614 Common Shares were outstanding as of May 10, 2002 PART I. - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS Dayton Superior Corporation and Subsidiaries Condensed Consolidated Balance Sheets As of March 29, 2002 and December 31, 2001 (Amounts in thousands) (Unaudited)
March 29, December 31, 2001 2002 --------- ------------ ASSETS Current assets: Cash $ 1,792 $ 4,989 Accounts receivable, net of allowances for doubtful accounts and sales returns and allowances of $6,247 and $7,423 54,009 51,628 Inventories (Note 3) 53,735 47,900 Prepaid expenses and other current assets 8,475 9,637 Prepaid income taxes 1,410 1,225 Future income tax benefits 8,266 7,962 --------- --------- Total current assets 127,687 123,341 --------- --------- Rental equipment, net (Note 3) 69,410 71,323 --------- --------- Property, plant and equipment 103,561 100,052 Less accumulated depreciation (41,626) (39,931) --------- --------- Net property, plant and equipment 61,935 60,121 --------- --------- Goodwill and intangible assets, net of accumulated amortization (Note 3) 116,780 136,626 Other assets 4,897 5,432 --------- --------- Total assets $380,709 $396,843 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt (Note 4) $ 5,212 $ 5,001 Accounts payable 25,535 27,340 Accrued compensation 13,910 19,935 Other accrued liabilities 16,375 14,122 --------- --------- Total current liabilities 61,032 66,398 Long-term debt, net (Note 4) 301,406 286,945 Deferred income taxes 8,990 13,365 Other long-term liabilities 12,716 13,414 --------- --------- Total liabilities 384,144 380,122 --------- --------- Shareholders' equity (deficit): Common shares 102,083 102,044 Loans to shareholders (2,934) (3,030) Treasury shares, at cost, 33,697 and 29,288 shares in 2002 and 2001, respectively (1,167) (979) Cumulative other comprehensive loss (542) (589) Accumulated deficit (100,875) (80,725) --------- --------- Total shareholders' equity (deficit) (3,435) 16,721 --------- --------- Total liabilities and shareholders' equity $380,709 $396,843 ========= =========
The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets. 2 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Operations For The Three Fiscal Months Ended March 29, 2002 and March 30, 2001 (Amounts in thousands) (Unaudited)
March 29, March 30, 2002 2001 ---------- --------- Net sales $78,502 $83,357 Cost of sales 51,985 56,340 -------- -------- Gross profit 26,517 27,017 Selling, general and administrative expenses 23,228 26,030 Facility closing and severance expenses (Note 7) 121 -- Amortization of goodwill and intangibles 73 937 -------- -------- Income from operations 3,095 50 Other expenses Interest expense 8,006 8,785 Other expense, net 105 10 -------- -------- Loss before benefit for income taxes (5,016) (8,745) Benefit for income taxes (2,006) (4,154) -------- -------- Net loss before cumulative effect of change in accounting principle (3,010) (4,591) Cumulative effect of change in accounting principle, net of income tax benefit of $2,754 (Note 3) (17,140) -- -------- -------- Net loss $(20,150) $(4,591) ======== ========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 3 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Cash Flows For The Three Fiscal Months Ended March 29, 2002 and March 30, 2001 (Amounts in thousands) (Unaudited)
March 29, March 30, 2002 2001 -------- -------- Cash Flows From Operating Activities: Net loss $(20,150) $(4,591) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 5,020 6,072 Amortization of goodwill and intangibles 73 937 Cumulative effect of change in accounting principle (Note 3) 17,140 -- Deferred income taxes (1,925) (448) Amortization of deferred financing costs and debt discount 567 529 Gain on sales of rental equipment and property, plant and equipment (2,645) (1,949) Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable (2,381) (2,894) Inventories (5,835) (4,994) Accounts payable (1,805) (948) Accrued liabilities and other long-term liabilities (4,899) 2,988 Other, net 1,479 (2,260) -------- -------- Net cash used in operating activities (15,361) (7,558) -------- -------- Cash Flows From Investing Activities: Property, plant and equipment additions (3,847) (1,833) Rental equipment additions (4,258) (5,144) Proceeds from sales of rental equipment 5,829 2,802 Acquisitions (Note 2) -- (29,948) Refunds of purchase price on acquisitions -- 142 -------- -------- Net cash used in investing activities (2,276) (33,981) -------- -------- Cash Flows From Financing Activities: Issuance of long-term debt, net 14,459 36,667 Purchase of treasury shares (188) -- Repayment of loans to shareholders 83 -- Issuance of common shares 39 5,241 -------- -------- Net cash provided by financing activities 14,393 41,908 -------- -------- Effect of Exchange Rate Changes on Cash 47 (115) -------- -------- Net increase (decrease) in cash (3,197) 254 Cash, beginning of period 4,989 1,782 -------- -------- Cash, end of period $1,792 $ 2,036 ======== ======== Supplemental Disclosures: Cash paid (refunded) for income taxes, net $ 94 $(3,384) Cash paid for interest 2,287 2,310 Issuance of common shares in conjunction with acquisition -- 2,842 Issuance of common shares and loans to shareholders -- 309
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 4 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Comprehensive Loss For The Three Fiscal Months Ended March 29, 2002 and March 30, 2001 (Amounts in thousands) (Unaudited) March 29, March 30, 2002 2001 -------- -------- Net loss $(20,150) $(4,591) Other comprehensive income: Foreign currency translation adjustment 47 (115) -------- -------- Comprehensive loss $(20,103) $ (4,706) ======== ======== The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 5 DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 29, 2002 AND MARCH 30, 2001 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED) (1) CONSOLIDATED FINANCIAL STATEMENTS The interim consolidated financial statements included herein have been prepared by the Company, without audit, and include, in the opinion of management, all adjustments necessary to state fairly the information set forth therein. Any such adjustments were of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these unaudited consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's annual financial statements for the year ended December 31, 2001. (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 BarLock 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. 6 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 fair values of the assets acquired (approximately $44,000, including goodwill of approximately $35,400) and liabilities assumed (approximately $11,200, including a deferred compensation liability of approximately $7,800, of which $1,800 is included in "Accrued Compensation and Benefits" and $6,000 is included in "Other Long-term Liabilities" in the accompanying March 29, 2002 consolidated balance sheet). Pro forma financial information is not required. (3) ACCOUNTING POLICIES The interim consolidated financial statements have been prepared in accordance with the accounting policies described in the notes to the Company's consolidated financial statements for the year ended December 31, 2001. While management believes that the procedures followed in the preparation of interim financial information are reasonable, the accuracy of some estimated amounts is dependent upon facts that will exist or calculations that will be made at year end. Examples of such estimates include changes in the deferred tax accounts and management bonuses. Any adjustments pursuant to such estimates during the fiscal quarter were of a normal recurring nature. (a) FISCAL QUARTER --The Company's fiscal year end is December 31. The Company's fiscal quarters are defined as the periods ending on the Friday nearest to the end of March, June and September. (b) INVENTORIES--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 March 29, 2002 and December 31, 2001: March 29, December 31, 2002 2001 --------- ------------ Raw materials $10,531 $11,581 Work in progress 5,313 3,624 Finished goods and work in progress 40,016 34,639 -------- -------- 55,860 49,844 Net realizable value reserve (2,125) (1,944) -------- -------- $53,735 $47,900 ======== ======== (c) RENTAL EQUIPMENT--Rental equipment is manufactured or purchased 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 basis. The balances as of March 29, 2002 and December 31, 2001 are net of accumulated depreciation of $24,047 and $20,002, respectively. Rental revenues and cost of sales associated with rental revenue are as follows: 7 Three fiscal months ended ------------------------- March 29, March 30, 2002 2001 ------- ------- Rental revenue $10,831 $12,205 Cost of sales 3,338 4,476 ------- ------- Gross profit $ 7,493 $ 7,729 ======= ======= Effective January 1, 2002, 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 useful life of certain items within the rental fleet was shorter than the fifteen-year life previously assigned. The study showed that a three-year life was more appropriate based upon the nature of these products. These products include smaller hardware and accessories that accompany steel forms and recently introduced European forming systems. As a result of the change, the Company recorded incremental depreciation of $1,025 in the first quarter of 2002, which is reflected in cost of goods sold in the accompanying March 29, 2002 consolidated statement of operations. 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 March 30, 2001 consolidated statement of operations. (d) 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 do not require amortization of goodwill for periods beginning after December 15, 2001. Instead, an annual review of the recoverability of the goodwill and intangible assets is required. Certain other intangible assets continue to be amortized over their estimated useful lives. The Company adopted these Statements effective January 1, 2002. As a result of adopting SFAS No. 142, the Company recorded a non-cash charge in the first quarter of 2002 of $17,140 ($19,894 of goodwill, less an income tax benefit of $2,754), which is reflected as a cumulative effect of change in accounting principle. This amount does not affect the Company's ongoing operations. The goodwill arose from the acquisitions of Dur-O-Wal in 1995, Southern Construction Products in 1999, and Polytite in 2000, all of which manufacture and sell metal accessories used in masonry construction. The masonry products market has experienced weaker markets and significant price competition, which has had a negative impact on the product line's earnings and fair value. 8 The following is a reconciliation from reported net loss to net loss adjusted for the amortization of goodwill:
March 29, March 30, 2002 2001 --------- --------- Net loss before cumulative effect of change in accounting principle, as reported $(3,010) $(4,591) Amortization of goodwill, net of tax benefit -- 755 ------- ------- Net loss before cumulative effect of change in accounting principle, as adjusted $(3,010) $(3,836) ======= =======
(e) RECLASSIFICATIONS--Certain reclassifications have been made to the 2001 amounts to conform to their 2002 classifications. (4) CREDIT ARRANGEMENTS Following is a summary of the Company's long-term debt as of March 29, 2002 and December 31, 2001:
March 29, December 31, 2002 2001 --------- ------------ Revolving credit facility, weighted average interest rate of 4.9% $17,325 $2,000 Acquisition credit facility, weighted average interest rate of 4.7% 9,250 9,250 Term Loan Tranche A, weighted average interest rate of 4.6% 21,605 22,161 Term Loan Tranche B, weighted average interest rate of 5.1% 98,252 98,500 Senior Subordinated Notes, interest rate of 13.0% 170,000 170,000 Debt discount on Senior Subordinated Notes (11,077) (11,297) Debentures previously held by Dayton Superior Capital Trust, interest rate of 9.1%, due on demand 1,153 1,214 City of Parsons, Kansas Economic Development Loan, interest rate of 7.0% 110 118 --------- --------- Total long-term debt 306,618 291,946 Less current maturities (5,212) (5,001) --------- --------- Long-term portion $301,406 $286,945 ========= =========
As of March 29, 2002, the Company's credit facility consisted of (i) a $50,000 revolving credit facility maturing June 2006, (ii) a $30,000 acquisition facility, converting from revolving loans into term loans three years from the closing and maturing June 2006 and (iii) term loan facilities in an aggregate principal amount of $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. 9 At March 29, 2002, the Company had outstanding letters of credit of $6,795, and the Company had available borrowings of $25,880 under its revolving credit facility. The average borrowings, maximum borrowings, and weighted average interest rates on the revolving credit facility and its predecessor for the periods indicated were as follows: Three fiscal months ended ------------------------- March 29, March 31, 2002 2001 -------------- --------------- Revolving Credit Facility: Average borrowing $ 9,005 $11,386 Maximum borrowing 18,550 19,900 Weighted average interest rate 8.1% 10.4% 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 March 29, 2002. 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 Common Shares for $0.01 per share. The Company's wholly-owned domestic subsidiaries (Aztec Concrete Accessories, Inc.; Trevecca Holdings, Inc.; Dayton Superior Specialty Chemical Corp.; Symons Corporation; and Dur-O-Wal, Inc.) have guaranteed the Notes. The wholly-owned foreign subsidiaries of the Company are not guarantors of the Notes and do not have any credit arrangements senior to the Notes. Following are the supplemental consolidating condensed balance sheets as of March 29, 2002 and December 31, 2001, as well as the supplemental consolidating condensed statements of operations and cash flows for the three fiscal months ended March 29, 2002 and March 30, 2001. 10 Dayton Superior Corporation And Subsidiaries Supplemental Consolidating Condensed Balance Sheet As of March 29, 2002
Dayton Superior Guarantor Non Guarantor Corporation Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ------------ ------------ ------------ ASSETS Cash $1,124 $(700) $1,368 $ -- $1,792 Accounts receivable, net 24,632 28,564 813 -- 54,009 Inventories 26,559 26,365 811 -- 53,735 Intercompany 61,362 (61,274) (88) -- -- Other current assets 9,386 8,595 170 -- 18,151 --------- --------- --------- --------- --------- TOTAL CURRENT ASSETS 123,063 1,550 3,074 -- 127,687 Rental, net 6,184 63,171 55 -- 69,410 Property, plant and equipment, net 26,243 35,514 178 -- 61,935 Investment in subsidiaries 123,041 -- -- (123,041) -- Other assets 55,394 66,283 -- -- 121,677 --------- --------- --------- --------- --------- TOTAL ASSETS $333,925 $166,518 $3,307 $(123,041) $380,709 ========= ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current maturities of long-term debt $5,212 $ -- $ -- $ -- $5,212 Accounts payable 10,798 14,469 268 -- 25,535 Accrued liabilities 20,692 9,425 168 -- 30,285 --------- --------- --------- --------- --------- TOTAL CURRENT LIABILITIES 36,702 23,894 436 -- 61,032 Long-term debt, net 301,406 -- -- -- 301,406 Other long-term liabilities 2,889 18,632 185 -- 21,706 Total shareholders' equity (deficit) (7,072) 123,992 2,686 (123,041) (3,435) --------- --------- --------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $333,925 $166,518 $3,307 $(123,041) $380,709 ========= ========= ========= ========= =========
11 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 (DEFICIT) 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, net 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 ========= ========= ========= ========= =========
12 Dayton Superior Corporation And Subsidiaries Supplemental Consolidating Condensed Statement of Operations Three Fiscal Months Ended March 29, 2002
Dayton Superior Guarantor Non Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------ ------------ Net sales $30,894 $46,590 $1,018 $78,502 Cost of sales 18,521 32,923 541 51,985 -------- -------- -------- -------- Gross profit 12,373 13,667 477 26,517 Selling, general and administrative expenses 10,300 12,523 405 23,228 Facility closing and severance expenses 121 -- -- 121 Amortization of goodwill and intangibles 68 5 -- 73 Management fees (75) -- 75 -- -------- -------- -------- -------- Income (loss) from operations 1,959 1,139 (3) 3,095 Other expenses Interest expense 7,880 126 -- 8,006 Other expense (income), net (78) 90 93 105 -------- -------- -------- -------- Income (loss) before provision (benefit) for income taxes (5,843) 923 (96) (5,016) Provision (benefit) for income taxes (2,337) 369 (38) (2,006) -------- -------- -------- -------- Net income (loss) before cumulative effect of change in accounting principle (3,506) 554 (58) (3,010) Cumulative effect of change in accounting principle, net of income tax benefit of $2,754 -- (17,140) -- (17,140) -------- -------- -------- -------- Net loss $(3,506) $(16,586) $(58) $(20,150) ======== ======== ======== ========
13 Dayton Superior Corporation And Subsidiaries Supplemental Consolidating Condensed Statement of Operations Three Fiscal Months Ended March 30, 2001
Dayton Superior Guarantor Non Guarantor Corporation Subsidiaries Subsidiaries Consolidated -------- -------- -------- -------- Net sales $39,778 $41,913 $1,666 $83,357 Cost of sales 26,579 28,718 1,043 56,340 Gross profit 13,199 13,195 623 27,017 -------- -------- -------- -------- Selling, general and administrative expenses 9,889 15,752 389 26,030 Amortization of goodwill and intangibles 459 478 -- 937 Management fees (40) -- 40 -- -------- -------- -------- -------- Income (loss) from operations 2,891 (3,035) 194 50 Other expenses Interest expense 8,641 144 -- 8,785 Other expense (income), net 6 5 (1) 10 -------- -------- -------- -------- Income (loss) before provision (benefit) for income taxes (5,756) (3,184) 195 (8,745) Provision (benefit) for income taxes (2,731) (1,511) 88 (4,154) -------- -------- -------- -------- Net income (loss) available to common shareholders $(3,025) $(1,673) $107 $(4,591) ======== ======== ======== ========
14 Dayton Superior Corporation And Subsidiaries Supplemental Consolidating Condensed Statement of Cash Flows Three Fiscal Months Ended March 29, 2002
Dayton Superior Guarantor Non Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,506) $(16,586) $ (58) $(20,150) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,782 3,866 12 5,660 Cumulative effect of change in accounting principle -- 17,140 -- 17,140 Deferred income taxes (1,925) -- -- (1,925) Gain on sales of rental equipment and fixed assets (11) (2,634) -- (2,645) Change in assets and liabilities (6,872) (6,521) (48) (13,441) -------- -------- -------- -------- Net used in operating activities (10,532) (4,735) (94) (15,361) -------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment additions (2,657) (1,182) (8) (3,847) Rental equipment additions (223) (4,035) -- (4,258) Proceeds from sales of rental equipment 99 5,730 -- 5,829 -------- -------- -------- -------- Net cash provided by (used in) investing activities (2,781) 513 (8) (2,276) -------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt, net 14,459 -- -- 14,459 Redemption of Class A common shares and purchase of treasury shares (188) -- -- (188) Repayment of loans to shareholders 83 -- -- 83 Issuance of common shares 39 -- -- 39 Intercompany (2,670) 2,690 (20) -- -------- -------- -------- -------- Net cash provided by (used in) financing activities 11,723 2,690 (20) 14,393 -------- -------- -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH -- -- 47 47 -------- -------- -------- -------- Net decrease in cash (1,590) (1,532) (75) (3,197) CASH, beginning of period 2,714 832 1,443 4,989 -------- -------- -------- -------- CASH, end of period $ 1,124 $ (700) $ 1,368 $ 1,792 ======== ======== ======== ========
15 Dayton Superior Corporation And Subsidiaries Supplemental Consolidating Condensed Statement of Cash Flows Three Fiscal Months Ended March 30, 2001
Dayton Superior Guarantor Non Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (3,025) $ (1,673) $ 107 $ (4,591) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 2,076 5,456 6 7,538 Deferred income taxes (448) -- -- (448) Gain on sales of rental equipment and fixed assets (191) (1,718) (40) (1,949) Change in assets and liabilities, net of the effects of acquisitions (6,972) 1,265 (2,401) (8,108) -------- -------- -------- -------- Net cash provided by (used in) operating activities (8,560) 3,330 (2,328) (7,558) -------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment additions (844) (974) (15) (1,833) Rental equipment additions (296) (4,829) (19) (5,144) Proceeds from sale of rental equipment 363 2,355 84 2,802 Acquisitions (29,948) -- -- (29,948) Refunds of purchase price on acquisitions 142 -- -- 142 -------- -------- -------- -------- Net cash provided by (used in) investing activities (30,583) (3,448) 50 (33,981) -------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt, net 36,667 -- -- 36,667 Issuance of Class A common shares 5,241 -- -- 5,241 Intercompany 3,196 947 2,249 -- -------- -------- -------- -------- Net cash provided by financing activities 38,712 947 2,249 41,908 -------- -------- -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH -- -- (115) (115) -------- -------- -------- -------- Net increase (decrease) in cash (431) 829 (144) 254 CASH, beginning of period 1,603 (825) 1,004 1,782 -------- -------- -------- -------- CASH, end of period $ 1,172 $ 4 $ 860 $ 2,036 ======== ======== ======== ========
16 (5) STOCK OPTION PLANS The Company has a stock option plan, which provides for an option exercise price equal to the stock's market price on the date of grant. The options are accounted for under APB Opinion No. 25, under which no compensation costs have been recognized. Had compensation cost for these plans been determined consistent with Statement of Financial Accounting Standards No.123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company's net income (loss) for the three fiscal months ended March 29, 2002 and March 30, 2001 would have been reduced to the following pro forma amounts: Three fiscal months ended ------------------------- March 29, March 30, 2002 2001 --------- --------- Net loss As Reported $(20,150) $ (4,591) Pro Forma (20,201) (4,786) Because the SFAS 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. A summary of the activity of the Company's stock option plans for the three fiscal months ended March 29, 2002 is presented in the table below: Weighted Average Number of Exercise Price Shares Per Share --------- -------------- Outstanding at December 31, 2001 541,258 $24.17 Granted 7,839 27.50 Exercised (3,050) 2.29 Cancelled (4,865) 24.08 ------- ------ Outstanding at March 29, 2002 541,182 $24.34 ======= ====== (6) SEGMENT REPORTING The Company operates in three segments: concrete accessories, concrete forming systems, and paving products. The segments are differentiated by their products and services, all of which serve the construction industry. Sales between segments are recorded at normal selling price by the selling division and at cost for the buying division, with the profit recorded as an intersegment elimination. Segment assets include accounts receivable; inventories; property, plant, and equipment; rental equipment; and an allocation of goodwill. Corporate and unallocated assets include cash, prepaid income taxes, future tax benefits, and financing costs. Export sales and sales by non-U.S. affiliates are not significant. 17 Information about the income (loss) of each segment and the reconciliations to the consolidated amounts for the three fiscal months ended March 29, 2002 and March 30, 2001 follows: Three fiscal months ended ------------------------- March 29, March 30, 2002 2001 -------- -------- Concrete Accessories $ 46,166 $ 48,549 Concrete Forming Systems 24,938 24,961 Paving Products 7,398 9,847 -------- -------- Net sales to external customers $ 78,502 $ 83,357 ======== ======== Concrete Accessories $ 1,158 $ 1,098 Concrete Forming Systems 1,710 1,298 Paving Products 500 417 -------- -------- Net sales to other segments $ 3,368 $ 2,813 ======== ======== Concrete Accessories $ 4,584 $ 4,364 Concrete Forming Systems 1,493 (1,645) Paving Products (47) 279 Corporate (1,461) (1,588) Intersegment Eliminations (1,474) (1,360) -------- -------- Income from operations $ 3,095 $ 50 ======== ======== Concrete Accessories $ 2,784 $ 3,161 Concrete Forming Systems 4,505 5,013 Paving Products 717 611 -------- -------- Interest expense $ 8,006 $ 8,785 ======== ======== Concrete Accessories $ 1,768 $ 1,193 Concrete Forming Systems (3,090) (6,658) Paving Products (759) (332) Corporate (1,461) (1,588) Intersegment Eliminations (1,474) (1,360) -------- -------- Income (loss) before income taxes $ (5,016) $ (8,745) ======== ======== Concrete Accessories $ 1,207 $ 1,282 Concrete Forming Systems 3,415 4,454 Paving Products 343 274 Corporate 55 62 -------- -------- Depreciation $ 5,020 $ 6,072 ======== ======== Concrete Accessories $ 60 $ 826 Concrete Forming Systems -- 62 Paving Products 13 49 -------- -------- Amortization of goodwill and intangibles $ 73 $ 937 ======== ======== 18 Information regarding capital expenditures by segment and the reconciliation to the consolidated amounts for the three fiscal months ended March 29, 2002 and March 30, 2001 is as follows: Three fiscal months ended ------------------------- March 29, March 30, 2002 2001 ------ ------ Concrete Accessories $ 749 $1,021 Concrete Forming Systems 916 610 Paving Products 2,182 202 ------ ------ Property, Plant and Equipment Additions $3,847 $1,833 ====== ====== Concrete Accessories $ 260 $ 329 Concrete Forming Systems 3,998 4,815 ------ ------ Rental Equipment Additions $4,258 $5,144 ====== ====== Information regarding each segment's assets and the reconciliation to the consolidated amounts as of March 29, 2002 and December 31, 2001 is as follows: As of ----------------------- March 29, December 31, 2002 2001 -------- -------- Concrete Accessories $189,776 $212,008 Concrete Forming Systems 132,683 135,302 Paving Products 31,930 24,858 Corporate and Unallocated 26,320 24,675 -------- -------- Total Assets $380,709 $396,843 ======== ======== 19 (7) FACILITY CLOSING AND SEVERANCE EXPENSES During 2001, the Company approved and began implementing two plans to exit certain manufacturing and distribution facilities and to reduce overall Company headcount in order to keep its cost structure in alignment with its net sales. As a result of the continued implementation of the plans, the Company has incurred $121 of facility closing and severance expense in the first quarter of 2002, which is related primarily to facility relocation activities. Below is a summary of the amounts charged against the facility closing and severance reserve in 2002: Charged To Accrual Expense As Total Balance Incurred Expense ------- -------- ------- Beginning Balance $2,900 $ -- $ -- Facility Closing and Severance Expense -- 121 121 Items Charged Against Reserve: Involuntary Termination Costs 454 -- -- Lease Termination Costs 201 -- -- Other Post-Closing Costs 411 -- -- ------ ------ ------ Ending Balance $1,834 $ 121 $ 121 ====== ====== ====== 20 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW We believe we are the largest North American manufacturer and distributor of metal accessories and forms used in concrete construction and of metal accessories used in masonry construction. Although almost all of our products are used in concrete or masonry construction, the function and nature of the products differ widely. As of March 29, 2002, we have three principal operating divisions, which are organized around the following product lines: - Concrete Accessories; - Concrete Forming Systems; and - Paving Products. ACQUISITIONS We have completed and integrated two acquisitions since the beginning of 2001. These acquisitions are summarized in the following table:
Purchase Price Date Business Acquired Division (In millions) ---- ----------------- -------- ------------- January 2001 Aztec Concrete Accessories Concrete Accessories $32.8 June 2001 BarLock Concrete Accessories 9.9
21 RESULTS OF OPERATIONS The following table summarizes our results of operations as a percentage of net sales.
THREE FISCAL MONTHS ENDED ------------------------- March 29, March 30, 2002 2001 --------- --------- Net sales 100.0% 100.0% Cost of sales 66.2 67.6 ----- ----- Gross profit 33.8 32.4 Selling, general and administrative expenses 29.6 31.2 Facility closing and severance expenses 0.2 -- Amortization of goodwill and intangibles 0.1 1.1 ----- ----- Income from operations 3.9 0.1 Interest expense, net 10.2 10.5 Other expense, net 0.1 0.1 ----- ----- Loss before benefit for income taxes (6.4) (10.5) Benefit for income taxes (2.6) (5.0) ----- ----- Net before cumulative effect of change in accounting principle (3.8) (5.5) Cumulative effect of change in accounting principle (25.4) -- ----- ----- Net loss (29.2)% (5.5)% ===== =====
COMPARISON OF THREE FISCAL MONTHS ENDED MARCH 29, 2002 AND MARCH 30, 2001 NET SALES Net sales decreased $4.9 million, or 5.8%, to $78.5 million in the first quarter of 2002 from $83.4 million in the first quarter of 2001. The following table summarizes our net sales by segment:
Three fiscal months ended ------------------------------------------------ March 29, 2002 March 30, 2001 -------------------- -------------------- (In thousands) Net Sales % Net Sales % % Change -------- ----- -------- ----- ----- Concrete accessories $ 47,324 60.3% $ 49,647 59.6% (4.7)% Concrete forming systems 26,648 33.9 26,259 31.5 1.5 Paving products 7,898 10.1 10,264 12.3 (23.1) Intersegment eliminations (3,368) (4.3) (2,813) (3.4) 19.7 -------- ----- -------- ----- Net sales $ 78,502 100.0% $ 83,357 100.0% (5.8)% ======== ===== ======== =====
22 Net sales of concrete accessories decreased $2.3 million, or 4.7%, to $47.3 million in the first quarter of 2002 from $49.6 million in the first quarter of 2001, primarily due to the weaker markets in the first quarter of 2002 compared to 2001. This was partially offset by increased sales as a result of the BarLock acquisition, which contributed $1.8 million. Net sales of concrete forming systems increased 1.5% to $26.6 million for the first quarter of 2002 compared to $26.3 million in the first quarter of 2001, primarily due to increased volumes as a result of new marketing initiatives implemented in the first quarter of 2002. Net sales of paving products decreased $2.4 million, or 23.1%, in the first quarter of 2002 compared to the first quarter of 2001 primarily due to state funding for highway construction projects being down as a result of the recession and continued delays in activity on some larger airport runway projects as a result of the September 11, 2001 terrorist attacks. GROSS PROFIT Gross profit for the first quarter of 2002 was $26.5 million, a slight decrease from $27.0 million in the first quarter of 2001. This was due primarily to the decreased revenues discussed previously, offset partially by $1.0 million less depreciation expense from the change in accounting estimates and the cost savings realized from the implementation of the 2001 facility closing and severance plans. Gross margin was 33.8% in the first quarter of 2002, increasing from 32.4% in the same quarter of 2001. This was due primarily to the $1.0 million lower depreciation expense and the cost savings discussed above. These benefits were partially offset by a combination of unfavorable sales volume, unfavorable pricing and unfavorable mix of products within the segments, all of which are attributable to our markets being weaker in 2002 compared to 2001. OPERATING EXPENSES Selling, general, and administrative expenses ("SG&A expenses") decreased $2.8 million to $23.2 million in the first quarter of 2002, from $26.0 million in the first quarter of 2001, primarily due to the cost savings realized from the implementation of the 2001 facility closing and severance plans, offset partially by the increased SG&A expenses as a result of the BarLock acquisition. During 2001, we approved and began implementing two plans to exit certain manufacturing and distribution facilities and to reduce overall headcount in order to keep our cost structure in alignment with our net sales. As a result of the continued implementation of the plans, we incurred $0.1 million of facility closing and severance expense in the first quarter of 2002, which is related primarily to facility relocation activities. Below is a summary of the amounts charged against the facility closing and severance reserve in 2002: 23 Charged To Accrual Expense As Total Balance Incurred Expense ------- ---------- ------- Beginning Balance $2.9 $-- $-- Facility Closing and Severance Expense -- 0.1 0.1 Items Charged Against Reserve: Involuntary Termination Costs 0.5 -- -- Lease Termination Costs 0.2 -- -- Other Post-Closing Costs 0.4 -- -- ---- ---- ---- Ending Balance $1.8 $0.1 $0.1 ==== ==== ==== Amortization of goodwill and intangibles decreased to $0.1 million in the first quarter of 2002 from $0.9 million in the first quarter of 2001 due to the adoption of Statement of Financial Accounting Standards ("SFAS") No. 142 "Goodwill and Other Intangible Assets." This statement does not require amortization of goodwill for periods beginning after December 15, 2001. Instead, an annual review of the recoverability of the goodwill and intangible assets is required. Certain other intangible assets continue to be amortized over their estimated useful lives. The adoption of the new accounting standards will result in a reduction in annual amortization expense of approximately $3.7 million. The amount of amortization expense recognized in the first quarter of 2001 which was not recognized in the first quarter of 2002 was approximately $0.9 million. OTHER EXPENSES Interest expense decreased to $8.0 million in the first quarter of 2002 from $8.8 million in the first quarter of 2001 due to lower interest rates in the first quarter of 2002 compared to 2001, offset partially by increased long-term debt resulting from the acquisition of BarLock in June 2001. LOSS BEFORE INCOME TAXES Net loss before income taxes in the first quarter of 2002 was ($5.0) million as compared to ($8.7) million in the first quarter of 2001 and was comprised of the following: Three fiscal months ended ------------------------------- March 29, March 30, 2002 2001 ------- ------- (In thousands) Concrete accessories $ 1,768 $ 1,193 Concrete forming systems (3,090) (6,658) Paving products (759) (332) Corporate (1,461) (1,588) Intersegment eliminations (1,474) (1,360) ------- ------- Income before income taxes $(5,016) $(8,745) ======= ======= 24 Concrete accessories' income before income taxes of $1.8 million in the first quarter of 2002 increased from $1.2 million in the first quarter of 2001. This was due to the benefit of the cost reduction initiatives implemented by management, the benefit provided from the acquisition of BarLock, and lower interest expense as a result of lower interest rates, offset partially by decreased sales volume in the existing business due to our markets being weaker in 2002 compared to 2001. Concrete forming systems' loss before income taxes was $3.1 million in the first quarter of 2002 compared to a loss of $6.7 million in the first quarter of 2001. This was due to the benefit of the cost reduction initiatives implemented by management, lower depreciation expense of $1.0, and lower interest expense as a result of lower interest rates. The loss before income taxes from paving products increased to $0.8 million in the first quarter of 2002 from a loss of $0.3 million in the first quarter of 2001 due to the decreased net sales volume in the first quarter of 2002. Corporate expenses decreased slightly to $1.5 million from $1.6 million as a result of the cost reduction initiatives implemented by management. Elimination of profit on intersegment sales was $1.5 million in the first quarter of 2002 compared to $1.4 million in the first quarter of 2001, due to higher intersegment sales volume. NET LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE The effective tax rate decreased to 40.0% in the first quarter of 2002 from 47.5% in the first quarter of 2001. The reduction in the effective tax rate is due to the adoption of SFAS No. 142, which eliminated non-deductible goodwill amortization in the first quarter of 2002. Net loss before cumulative effect of change in accounting principle for the first quarter of 2002 was $3.0 million compared to a loss of $4.6 million in the first quarter of 2001 due to the factors described above. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 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 do not require amortization of goodwill for periods beginning after December 15, 2001. Instead, an annual review of the recoverability of the goodwill and intangible assets is required. Certain other intangible assets continue to be amortized over their estimated useful lives. 25 We adopted these Statements effective January 1, 2002. As a result of adopting SFAS No. 142, we recorded a non-cash charge in the first quarter of 2002 of $17.1 million ($19.9 million of goodwill, less an income tax benefit of $2.8 million), which is reflected as a cumulative effect of change in accounting principle. This amount does not affect our ongoing operations. The goodwill arose from the acquisitions of Dur-O-Wal in 1995, Southern Construction Products in 1999, and Polytite in 2000, all of which manufacture and sell metal accessories used in masonry construction. The masonry products market has experienced weaker markets and significant price competition, which has had a negative impact on the product line's earnings and fair value. The following is a reconciliation from reported net loss to net loss adjusted for the amortization of goodwill:
March 29, March 30, 2002 2001 --------- --------- Net loss before cumulative effect of change in accounting principle, as reported $(3,010) $(4,591) Amortization of goodwill, net of tax benefit -- 755 ------- ------- Net loss before cumulative effect of change in accounting principle, as adjusted $(3,010) $(3,836) ======= =======
NET LOSS The net loss for the first quarter of 2002 was $20.2 million compared to a loss of $4.6 million in the first quarter of 2001 due to the factors described above. 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 the revolving credit facility and cash gap, which is used to control working capital. Cash gap is defined as the number of days of outstanding accounts receivable, plus the number of days of inventory on hand, less the number of days of outstanding accounts payable. Our capital requirements relate primarily to capital expenditures, debt service and the cost of acquisitions. Historically, our primary sources of financing have been cash from operations, borrowings under our revolving line of credit and the issuance of long-term debt and equity. 26 Net cash used in operating activities in the first quarter of 2002 was $15.4 million and was comprised of the following: Net loss $(20.2) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 5.0 Amortization of goodwill and intangibles 0.1 Cumulative effect of change in accounting principle 17.1 Deferred income taxes (1.9) Amortization of deferred financing costs and debt discount 0.5 Gain on sales of rental equipment and property, plant and equipment (2.6) Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable (2.4) Inventories (5.8) Accounts payable (1.8) Accrued liabilities and other long-term liabilities (4.9) Other, net 1.5 ------ Net cash used in operating activities $(15.4) ======
Our investing activities consisted solely of net capital expenditures, which totaled $2.3 million in the first quarter of 2002. As of March 29, 2002, we had long-term debt of $306.6 million, comprised of: (a) $170.0 million in principal amount of Senior Subordinated Notes, with a net book value of $158.9 million, (b) $146.4 million outstanding of a $202.0 million credit facility, which consists of a $50.0 million revolving credit facility, a $30.0 million acquisition facility, a $23.5 million term loan under the delayed-draw tranche A facility and a $98.5 million term loan under the tranche B facility, (c) $1.2 million of debentures previously held by the Dayton Superior Capital Trust, and (d) a $0.1 million note to the City of Parsons, Kansas. At March 29, 2002, we had outstanding letters of credit of $6.8 million, and we had available borrowings of $25.9 million under our revolving credit facility. Approximately $9.3 million of the $30.0 million acquisition facility, $21.6 million of the $23.5 million delayed-draw tranche A facility, and $98.3 million of the $98.5 million tranche B facility were outstanding. At March 29, 2002, working capital was $66.7 million, compared to $56.9 million at December 31, 2001. The increase in working capital is attributable to normal seasonal working capital growth. For the first three months of 2002, our average cash gap days were 76, which is four days unfavorable from the 72 days reported in the first three months of 2001. This is primarily due to increased inventory in the paving products segment because of continued delays in activity on some highway construction projects being down as a result of the recession. We believe our liquidity, capital resources and cash flows from operations are sufficient to fund planned capital expenditures, working capital requirements and debt service in the absence of additional acquisitions. 27 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 acquisitions. We expect to raise such cash from operations or from borrowings under our credit facility or, if feasible and attractive, issuances of long-term debt or additional common shares. SEASONALITY Our operations are seasonal in nature with approximately 55% of sales historically occurring in the second and third quarters. Working capital and borrowings fluctuate with sales volume. INFLATION We do not believe inflation had a significant impact on our operations over the past two years. In the past, we have been able to pass along all or a portion of the effect of increases in the price of steel, our principal raw material. There can be no assurance we will be able to continue to pass on the cost of such increases in the future. 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. FORWARD-LOOKING STATEMENTS This Form 10-Q 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 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. 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 (our principal raw material) 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 is not intended to be exhaustive, and additional information can be found in our annual report on Form 10-K for the year ended December 31, 2001. In addition to these factors, actual 28 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. 29 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. At March 29, 2002, we had financial instruments that were sensitive to changes in interest rates. These financial instruments consist of $170.0 million of principal amount of fixed rate Senior Subordinated Notes, with a book value of $158.9 million, a $202.0 million credit facility, of which $146.4 million was outstanding, and $1.3 million in other fixed-rate, long-term debt. The Senior Subordinated Notes bear interest at 13.0% on the $170.0 million of principal and mature in 2009. The estimated fair value of the notes is $173.4 million. The credit facility has several interest rate options, which re-price on a short-term basis. Accordingly, the fair value of the credit facility approximates its $146.4 million face value. The interest rates at March 29, 2002 range from 4.6% to 5.1%. Other long-term debt consists of a.) $1.2 million of debentures previously held by the Dayton Superior Capital Trust, with a fair value of $1.5 million and b.) a $0.1 million, 7.0% loan due in installments of $32 thousand per year with an estimated fair value of $0.1 million. In the ordinary course of our business, we also are exposed to price changes in raw materials (particularly steel bar and rod and steel flat plate) and products purchased for resale. The prices of these items can change significantly due to changes in the markets in which our suppliers operate. We generally do not use financial instruments to manage our exposure to changes in commodity prices. 30 PART II. - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS. None (b) REPORTS on Form 8-K. During the quarter ended March 29, 2002, the Company did not file any Current Reports on Form 8-K. 31 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DAYTON SUPERIOR CORPORATION --------------------------- DATE: May 13, 2002 BY: /s/ Alan F. McIlroy ------------------- ----------------------- Alan F. McIlroy Vice President and Chief Financial Officer 32 -----END PRIVACY-ENHANCED MESSAGE-----