-----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, E+zKFml3Njp8cWAt1t0Za9uw1V62SU9lHcD/drTnUBuS+37HDTok1O8IxuuI6fRZ r8mlYGp2EO85w3A51geduw== 0000950152-04-006314.txt : 20040816 0000950152-04-006314.hdr.sgml : 20040816 20040816151403 ACCESSION NUMBER: 0000950152-04-006314 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040702 FILED AS OF DATE: 20040816 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: 04978262 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 l08613ae10vq.txt DAYTON SUPERIOR CORPORATION 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 JULY 2, 2004 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 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). YES [ ] NO [X] 4,585,871 Common Shares were outstanding as of August 13, 2004 PART I. - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS Dayton Superior Corporation and Subsidiaries Condensed Consolidated Balance Sheets As of July 2, 2004 and December 31, 2003 (Amounts in thousands) (Unaudited)
July 2, December 31, 2004 2003 --------- ------------ ASSETS Current assets: Cash $ - $ 1,995 Accounts receivable, net of allowances for doubtful accounts and sales returns and allowances of $3,973 and $4,939 76,965 64,849 Inventories 61,316 49,437 Prepaid expenses and other current assets 8,341 4,610 Prepaid income taxes 1,852 956 Deferred income taxes 5,176 5,368 --------- ------------ Total current assets 153,650 127,215 --------- ------------ Rental equipment, net of accumulated depreciation of $33,842 and $27,794 75,415 78,042 --------- ------------ Property, plant and equipment 115,851 113,366 Less accumulated depreciation (55,285) (51,128) --------- ------------ Net property, plant and equipment 60,566 62,238 --------- ------------ Goodwill 110,618 110,308 Intangible assets, net of accumulated amortization 8,431 10,532 Deferred income taxes 34 - Other assets 5,059 5,049 --------- ------------ Total assets $ 413,773 $ 393,384 ========= ============ LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Current maturities of long-term debt $ 2,539 $ 3,067 Accounts payable 27,141 20,526 Accrued compensation and benefits 16,122 19,704 Other accrued liabilities 13,155 12,324 --------- ------------ Total current liabilities 58,957 55,621 Long-term debt, net of current portion 374,055 338,823 Other long-term liabilities 6,753 6,207 --------- ------------ Total liabilities 439,765 400,651 --------- ------------ Shareholders' deficit: Common shares 116,024 115,951 Loans to shareholders (2,748) (2,729) Treasury shares, at cost, 36,747 shares in 2004 and 2003 (1,184) (1,184) Cumulative other comprehensive loss (1,439) (1,209) Accumulated deficit (136,645) (118,096) --------- ------------ Total shareholders' deficit (25,992) (7,267) --------- ------------ Total liabilities and shareholders' deficit $ 413,773 $ 393,384 ========= ============
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 and Six Fiscal Months Ended July 2, 2004 and June 27, 2003 (Amounts in thousands) (Unaudited)
Three Fiscal Months Ended Six Fiscal Months Ended ------------------------------ --------------------------- July 2, 2004 June 27, 2003 July 2, 2004 June 27, 2003 ------------ ------------- ------------ ------------- Product sales $ 101,170 $ 88,420 $ 176,461 $ 143,552 Rental revenue 9,914 6,504 19,343 13,630 Used rental equipment sales 4,122 10,940 8,519 20,988 ------------ ------------- ------------ ------------- Net sales 115,206 105,864 204,323 178,170 ------------ ------------- ------------ ------------- Product cost of sales 75,331 67,258 134,789 110,712 Rental cost of sales 6,740 5,103 14,265 10,287 Used rental equipment cost of sales 1,686 2,884 3,213 5,718 ------------ ------------- ------------ ------------- Cost of sales 83,757 75,245 152,267 126,717 ------------ ------------- ------------ ------------- Product gross profit 25,839 21,162 41,672 32,840 Rental gross profit 3,174 1,401 5,078 3,343 Used rental equipment gross profit 2,436 8,056 5,306 15,270 ------------ ------------- ------------ ------------- Gross profit 31,449 30,619 52,056 51,453 Selling, general and administrative expenses 21,871 19,661 44,537 39,056 Facility closing and severance expenses 492 349 964 744 Loss on disposals of property, plant, and equipment 19 58 78 66 Amortization of intangibles 307 130 555 259 ------------ ------------- ------------ ------------- Income from operations 8,760 10,421 5,922 11,328 Other expenses Interest expense 11,691 9,012 23,584 17,073 Loss on early extinguishment of long-term debt - 2,480 842 2,480 Other expense (income) (250) 38 45 71 ------------ ------------- ------------ ------------- Loss before benefit for income taxes (2,681) (1,109) (18,549) (8,296) Benefit for income taxes - (649) - (2,446) ------------ ------------- ------------ ------------- Net loss $ (2,681) $ (460) $ (18,549) $ (5,850) ============ ============= ============ =============
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 Six Fiscal Months Ended July 2, 2004 and June 27, 2003 (Amounts in thousands) (Unaudited)
Six Fiscal Months Ended ----------------------------- July 2, 2004 June 27, 2003 ------------ ------------- Cash Flows From Operating Activities: Net loss $ (18,549) $ (5,850) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 13,490 11,336 Amortization of intangibles 555 259 Loss on early extinguishment of long-term debt 842 2,480 Deferred income taxes 158 (588) Amortization of deferred financing costs and debt discount 2,565 1,209 Gain on sales of rental equipment (5,306) (15,270) Loss on sales of property, plant and equipment 78 66 Changes in assets and liabilities, net of effects of acquisition: Accounts receivable (12,116) (9,410) Inventories (11,879) (4,400) Accounts payable 6,615 5,153 Accrued liabilities and other long-term liabilities (2,206) (10,013) Prepaid expenses and other assets (4,440) 601 ------------ ------------- Net cash used in operating activities (30,193) (24,427) ------------ ------------- Cash Flows From Investing Activities: Property, plant and equipment additions (2,199) (3,809) Proceeds from sales of property, plant and equipment 4 82 Rental equipment additions (8,143) (16,790) Proceeds from sales of rental equipment 8,519 20,988 Acquisition (245) - ------------ ------------- Net cash provided by (used in) investing activities (2,064) 471 ------------ ------------- Cash Flows From Financing Activities: Repayments of long-term debt (34,011) (160,364) Issuance of long-term debt 66,750 182,070 Financing costs incurred (2,301) (680) Changes in loans to shareholders (19) 37 Issuance of common shares 73 - ------------ ------------- Net cash provided by financing activities 30,492 21,063 ------------ ------------- Effect of Exchange Rate Changes on Cash (230) 489 ------------ ------------- Net decrease in cash (1,995) (2,404) Cash, beginning of period 1,995 2,404 ------------ ------------- Cash, end of period $ - $ - ============ ============= Supplemental Disclosures: Cash paid (refunded) for income taxes $ 697 $ (3,351) Cash paid for interest 20,647 17,324 Purchases of equipment on capital leases 301 2,088
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 and Six Fiscal Months Ended July 2, 2004 and June 27, 2003 (Amounts in thousands) (Unaudited)
Three Fiscal Months Ended Six Fiscal Months Ended ------------------------------------------------------------ July 2, 2004 June 27, 2003 July 2, 2004 June 27, 2003 ------------ ------------- ------------ ------------- Net loss $ (2,681) $ (460) $ (18,549) $ (5,850) Other comprehensive income: Foreign currency translation adjustment (420) 291 (230) 489 ------------ ------------- ------------ ------------- Comprehensive loss $ (3,101) $ (169) $ (18,779) $ (5,361) ============ ============= ============ =============
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 (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, 2003. The interim results may not be indicative of future periods. (2) ACQUISITION On July 29, 2003 we completed the acquisition of substantially all of the fixed assets and rental fleet assets of Safway Formwork Systems, L.L.C. for $20,878, after purchase price adjustments and including acquisition costs of $1,090. The initial purchase price of $19,965 was comprised of $13,000 in cash and a $12,000 non-interest bearing (other than in the case of default) senior unsecured note with a present value of $6,965 payable to the seller. The note was issued at a discount, which is being accreted to the face value using the effective interest method and is reflected as interest expense. For purposes of calculating the net present value of the senior unsecured note, the Company has assumed an interest rate of 14.5%. The $13,000 of cash was funded through the issuance of common shares to the Company's majority shareholder. The first $250 installment payment on the note was paid on September 30, 2003, and an additional $750 installment payment was due on December 31, 2003. The settlement of normal purchase price adjustments resulted in a $417 reduction in the payment made in December to $333. A subsequent purchase price adjustment of $240 was paid in March 2004. Annual payments of $1,000 are due on September 30 of each year from 2004 through 2008, with a final balloon payment of $6,000 due on December 31, 2008. The Company exercised its option to acquire additional rental equipment from Safway. The Company issued a non-interest bearing note, which is being accreted to its face value of $1,987 using the effective interest method with an interest rate of 6% and is reflected as interest expense. The net present value of the note at July 2, 2004 was $1,513. Minimum payments are $99 for the remainder of 2004, $282 in 2005, $398 in 2006, $563 in 2007, and $464 in 2008. Payments may be accelerated if certain revenue targets are met. The acquisition has been accounted for as a purchase, and the results of Safway have been included in the Company's consolidated financial statements from the date of acquisition. The Company received the final valuation of the acquired assets in the first quarter of 2004. As a result, the value of rental equipment and goodwill increased by approximately $1,800 and $300, respectively, and intangible assets decreased by approximately $2,100. The purchase price has been allocated based on the estimated fair value of the assets acquired, as follows: Rental equipment $ 15,837 Property, plant and equipment 798 Goodwill 2,844 Intangible assets 2,970 Accrued liabilities (1,571) ---------- Purchase price, including acquisition costs of $1,090 $ 20,878 ==========
6 Components of the purchase price are as follows: Cash paid at closing $ 13,000 Acquisition costs 1,085 Initial purchase price adjustment (417) ---------- 2003 Cash portion of acquisition 13,668 Present value of seller note 6,965 2004 purchase price adjustment 240 Acquisition costs 5 ---------- Total purchase price $ 20,878 ==========
The following pro forma information sets forth the consolidated results of operations for the three and six fiscal months ended June 27, 2003 as though the acquisition had been completed at the beginning of the period presented:
Pro Forma Pro Forma Three fiscal months Six fiscal months ended ended June 27, 2003 June 27, 2003 ------------------- ----------------- Net sales $ 110,991 $ 189,403 Loss before benefit for income taxes (2,677) (10,466)
In accordance with SEC rules and regulations, pro forma information does not exclude costs that are expected to be eliminated under the company's ownership. (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, 2003. 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, among others. 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 13-week periods ending on a Friday near 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 July 2, 2004 and December 31, 2003:
July 2, 2004 December 31, 2003 ------------ ----------------- Raw materials $ 15,826 $ 9,588 Work in progress 4,073 2,742 Finished goods 41,417 37,107 ------------ ----------------- Total Inventory $ 61,316 $ 49,437 ============ =================
7 (c) New Accounting Pronouncements -- In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150 requires certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity to be classified as liabilities. The provisions of SFAS 150 are effective for financial instruments entered into or modified after May 31, 2003 and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003, except for mandatory redeemable financial instruments of a nonpublic entity, this statement was effective for periods beginning after December 15, 2003. The adoption of this pronouncement did not have a material impact on the Company's consolidated financial position, results of operations or cash flows. In January 2003, the FASB issued Interpretation (FIN) No. 46, "Consolidation of Variable Interest Entities, an Interpretation of APB No. 50." FIN No. 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN No. 46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN No. 46 must be applied for the first interim or annual period beginning after December 15, 2003. The adoption of this pronouncement did not have a material impact on the Company's consolidated financial position, results of operations or cash flows. In December 2003, FASB issued a revised interpretation of FIN No. 46, "FIN No. 46-R." This supercedes Fin No. 46 and clarifies and expands current accounting guidance for variable interest entities. Fin No. 46 and Fin No. 46-R are effective immediately for all variable interest entities created after January 31, 2003, and for variable interest entities created prior to February 1, 2003, no later than the end of the first reporting period after March 15, 2004. We have not utilized such entities and therefore the adoption of Fin No. 46 and FIN No. 46-R had no effect on our consolidated financial statements. In December 2003, the FASB issued SFAS No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other Postretirement Benefits." This statement revises the disclosures required for pension plans and other postretirement benefit plans. The company adopted this revised statement effective December 31, 2003. See Note 6 to the consolidated financial statements for the revised disclosures. 8 (d) Stock Options -- The Company measures compensation cost for stock options issued using the intrinsic value-based method of accounting in accordance with Accounting Principles Board Opinion (APB) No. 25. If compensation cost for the Company's stock options had been determined based on the fair value method of SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net loss and net loss per share would have been increased to the pro forma amounts as follows:
Three fiscal months ended Six fiscal months ended ---------------------------- --------------------------- July 2, 2004 June 27, 2003 July 2, 2004 June 27, 2003 ------------ ------------- --------------------------- Net income (loss) As Reported $ (2,681) $ (460) $ (18,549) $ (5,850) Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effect (62) (65) (124) (131) ------------ ------------- ------------ ------------- Pro Forma $ (2,743) $ (525) $ (18,673) $ (5,981) ============ ============= ============ =============
(e) Reclassifications -- Certain reclassifications have been made to the 2003 amounts to conform to their 2004 classifications. (4) CREDIT ARRANGEMENTS Following is a summary of the Company's long-term debt as of July 2, 2004 and December 31, 2003:
December 31, July 2, 2004 2003 ------------ ------------ Revolving credit facility, weighted average interest rate of 3.82% $ 57,950 $ 24,375 Senior Second Secured Notes, interest rate of 10.75% 165,000 165,000 Debt discount on Senior Second Secured Notes (6,871) (7,454) Senior Subordinated Notes, interest rate of 13.0% 154,729 154,729 Debt discount on Senior Subordinated Notes (7,975) (8,514) Notes payable to seller of Safway, non-interest bearing, accreted at 6.0% to 14.5% 8,382 7,999 Debentures previously held by Dayton Superior Capital Trust, interest rate of 9.1%, due on demand 1,102 1,110 Capital lease obligations 4,245 4,590 City of Parsons, Kansas Economic Development Loan, interest rate of 7.0% 32 55 ------------ ------------ Total long-term debt 376,594 341,890 Less current maturities (2,539) (3,067) ------------ ------------ Long-term portion $ 374,055 $ 338,823 ============ ============
As of July 2, 2004, the senior second secured notes (the "Senior Notes") have a principal amount of $165,000 and mature in June 2008. The Notes were issued in June 2003 at a discount, which is being accreted to the face value using the effective interest method and is reflected as interest expense. The proceeds of the offering of the Senior Notes were $156,895 and were used to repay the Company's acquisition credit facility, certain of the Company's then current debt, and a portion of the revolving credit facility. As a result of the transactions, the Company incurred a loss on the early extinguishment of long-term debt of $2,550 in the second quarter of 2003, due to the expensing of deferred financing costs. The estimated fair value of the notes 9 is $167.5 million as of July 2, 2004. The senior second secured notes are secured by substantially all assets of the Company and its domestic subsidiaries. As of July 2, 2004, the Senior Subordinated Notes (the "Notes") have a principal amount of $154,729 and mature in June 2009. During the second quarter of 2003, the Company repurchased a portion of the Notes. A principal amount of $15,271, with a net book value of $14,381, was repurchased using the revolving credit facility for $14,311, resulting in a gain on the early extinguishment of long-term debt of $70. 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 holders to purchase 117,276 of the Company's Common Shares for $0.01 per share. The estimated fair value of the notes is $134.6 million as of July 2, 2004. During the first quarter of 2004, the Company established an $80,000 senior secured revolving credit facility, which was used to refinance the previous $50,000 facility. The company recorded a loss on the early extinguishment of long-term debt of $842 due to the expensing of deferred financing costs on the previous facility. The new credit facility has no financial covenants. Availability of borrowings is limited to 85% of eligible accounts receivable and 60% of eligible inventories and rental equipment, less $10,000. On July 2, 2004, the Company increased the senior secured revolving credit facility to $95,000. The increase did not affect the terms and conditions of the senior secured revolving credit facility. All $95,000 was available under the calculation at July 2, 2004. At July 2, 2004, the Company had outstanding letters of credit of $11,117 and available borrowings of $25,933 under this revolving credit facility. The credit facility is secured by substantially all assets of the Company and its domestic subsidiaries. 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 Six fiscal months ended --------------------------- --------------------------- July 2, 2004 June 27, 2003 July 2, 2004 June 27, 2003 ------------ ------------- ------------ ------------- Revolving Credit Facility: Average borrowings $ 56,703 $ 26,432 $ 46,107 $ 14,448 Maximum borrowing 63,075 35,225 63,075 29,275 Weighted average interest rate 3.9% 5.3% 4.2% 6.5%
The Company's wholly owned domestic subsidiaries (Aztec Concrete Accessories, Inc.; Trevecca Holdings, Inc.; Dayton Superior Specialty Chemical Corp.; Symons Corporation; Dur-O-Wal, Inc.; and Southern Construction Products, Inc.) have guaranteed the Notes and the Senior Notes on a full, unconditional and joint and several basis. Pursuant to Regulation S-X, Rule 3-10(f), separate financial statements have not been presented for the guarantor subsidiaries. The wholly owned foreign subsidiary of the Company is not a guarantor of the Notes or the Senior Notes and does not have any credit arrangements senior to the Notes or the Senior Notes. The following supplemental consolidating condensed balance sheets as of July 2, 2004 and December 31, 2003 and the supplemental consolidating condensed statements of operations and cash flows for the three fiscal months ended July 2, 2004 and June 27, 2003 depict in separate columns, the parent company, those subsidiaries which are guarantors, those subsidiaries which are non-guarantors, elimination adjustments and the consolidated total. This financial information may not necessarily be indicative of the result of operations or financial position of the subsidiaries had they been operated as independent entities. 10 Dayton Superior Corporation and Subsidiaries Supplemental Consolidating Condensed Balance Sheet As of July 2, 2004
Dayton Superior Guarantor Non-Guarantor Corporation Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ------------ ------------ ------------ ASSETS Cash $ (132) $ (673) $ 805 $ - $ - Accounts receivable, net 48,466 26,333 2,166 - 76,965 Inventories 32,196 28,266 854 - 61,316 Intercompany 62,154 (61,901) (253) - - Other current assets 11,654 3,481 234 - 15,369 --------- ---------- --------- ----------- -------- TOTAL CURRENT ASSETS 154,338 (4,494) 3,806 - 153,650 Rental equipment, net 3,829 71,329 257 - 75,415 Property, plant and equipment, net 24,286 36,092 188 - 60,566 Investment in subsidiaries 123,041 - - (123,041) - Other assets 50,779 73,350 13 - 124,142 --------- ---------- --------- ----------- -------- TOTAL ASSETS $ 356,273 $ 176,277 $ 4,264 $ (123,041) $413,773 ========= ========== ========= =========== ======== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current maturities of long-term debt $ 2,087 $ 452 - $ - $ 2,539 Accounts payable 15,578 11,073 490 - 27,141 Accrued liabilities 18,712 10,315 250 - 29,277 --------- ---------- --------- ----------- -------- TOTAL CURRENT LIABILITIES 36,377 21,840 740 - 58,957 Long-term debt, net 372,423 1,632 - - 374,055 Other long-term liabilities (8,358) 15,111 - - 6,753 Total shareholders' equity (deficit) (44,169) 137,694 3,524 (123,041) (25,992) --------- ---------- --------- ----------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 356,273 $ 176,277 4,264 $ (123,041) $413,773 ========= ========== ========= =========== ========
11 Dayton Superior Corporation and Subsidiaries Supplemental Consolidating Condensed Balance Sheet As of December 31, 2003
Dayton Non Superior Guarantor Guarantor Corporation Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ------------ ------------ ------------ ASSETS Cash $ 860 $ (1,240) $ 2,375 $ - $ 1,995 Accounts receivable, net 37,123 26,500 1,226 - 64,849 Inventories 27,016 21,776 645 - 49,437 Intercompany 61,638 (61,549) (89) - - Other current assets 12,901 (1,432) (535) - 10,934 --------- --------- ------- ---------- -------- TOTAL CURRENT ASSETS 139,538 (15,945) 3,622 - 127,215 Rental equipment, net 3,609 74,342 91 - 78,042 Property, plant and equipment, net 24,919 37,135 184 - 62,238 Investment in subsidiaries 123,041 - - (123,041) - Other assets 50,628 75,261 - 125,889 --------- --------- ------- ---------- -------- TOTAL ASSETS $ 341,735 $ 170,793 $ 3,897 $ (123,041) $393,384 ========= ========= ======= ========== ======== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current maturities of long-term debt $ 2,132 $ 935 $ - $ - $ 3,067 Accounts payable 10,722 9,537 267 - 20,526 Accrued liabilities 20,793 11,019 216 - 32,028 --------- --------- ------- ---------- -------- TOTAL CURRENT LIABILITIES 33,647 21,491 483 - 55,621 Long-term debt, net 337,413 1,410 - - 338,823 Other long-term liabilities (4,341) 10,525 23 - 6,207 Total shareholders' equity (deficit) (24,984) 137,367 3,391 (123,041) (7,267) --------- --------- ------- ---------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 341,735 $ 170,793 $ 3,897 $ (123,041) $393,384 ========= ========= ======= ========== ========
12 Dayton Superior Corporation and Subsidiaries Supplemental Consolidating Condensed Statement of Operations Three Fiscal Months Ended July 2, 2004
Dayton Superior Guarantor Non-Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------ ------------ Net sales $ 53,615 $58,697 $ 2,894 $ 115,206 Cost of sales 38,589 43,595 1,573 83,757 -------- ------- ------- --------- Gross profit 15,026 15,102 1,321 31,449 Selling, general and administrative expenses 8,369 13,035 467 21,871 Facility closing and severance expenses 202 290 - 492 Management fees (94) - 94 - Amortization of intangibles 31 276 - 307 Loss (gain) on disposals on property, plant, and equipment - 19 - 19 -------- ------- ------- --------- Income from operations 6,518 1,482 760 8,760 Other expenses Interest expense 11,641 50 - 11,691 Loss on early extinguishment of long-term debt - - - - Other expense (income) (1) 46 (295) (250) -------- ------- ------- --------- Income (loss) before provision (benefit) for income taxes (5,122) 1,386 1,055 (2,681) Provision (benefit) for income taxes - - - - -------- ------- ------- --------- Net income (loss) available to common shareholders $ (5,122) $ 1,386 $ 1,055 $ (2,681) ======== ======= ======= =========
13 Dayton Superior Corporation and Subsidiaries Supplemental Consolidating Condensed Statement of Operations Three Fiscal Months Ended June 27, 2003
Dayton Non Superior Guarantor Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------ ------------ Net sales $ 44,262 $ 58,740 $2,862 $ 105,864 Cost of sales 36,444 36,951 1,850 75,245 -------- -------- ------ --------- Gross profit 7,818 21,789 1,012 30,619 Selling, general and administrative expenses 8,864 10,326 471 19,661 Facility closing and severance expenses 378 (29) - 349 Amortization of intangibles 73 57 - 130 Management fees (75) - 75 - Loss (gain) on disposals on property, plant, and equipment - 58 - 58 -------- -------- ------ --------- Income from operations (1,422) 11,377 466 10,421 Other expenses Interest expense 8,960 52 - 9,012 Loss on early extinguishment of long-term debt 2,480 - - 2,480 Other expense 49 (36) 25 38 -------- -------- ------ --------- Income (loss) before provision (benefit) for income taxes (12,911) 11,361 441 (1,109) Provision (benefit) for income taxes (7,437) 6,646 142 (649) -------- -------- ------ --------- Net income (loss) available to common shareholders $ (5,474) $ 4,715 $ 299 $ (460) ======== ======== ====== =========
14 Dayton Superior Corporation and Subsidiaries Supplemental Consolidating Condensed Statement of Operations Six Fiscal Months Ended July 2, 2004
Dayton Superior Guarantor Non-Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------ ------------ Net sales $ 86,156 $ 112,925 $5,242 $ 204,323 Cost of sales 61,338 87,970 2,959 152,267 -------- --------- ------ --------- Gross profit 24,818 24,955 2,283 52,056 Selling, general and administrative expenses 16,332 27,260 945 44,537 Facility closing and severance expenses 573 391 - 964 Management fees (188) - 188 - Amortization of intangibles 63 492 - 555 Loss (gain) on disposals on property, plant, and equipment - 78 - 78 -------- --------- ------ --------- Income from operations 8,038 (3,266) 1,150 5,922 Other expenses Interest expense 23,433 151 - 23,584 Loss on early extinguishment of long-term debt 842 - - 842 Other expense (income) (21) 52 14 45 -------- --------- ------ --------- Income (loss) before provision (benefit) for income taxes (16,216) (3,469) 1,136 (18,549) Provision (benefit) for income taxes - - - - -------- --------- ------ --------- Net income (loss) available to common shareholders $(16,216) $ (3,469) $1,136 $ (18,549) ======== ========= ====== =========
15 Dayton Superior Corporation and Subsidiaries Supplemental Consolidating Condensed Statement of Operations Six Fiscal Months Ended June 27, 2003
Dayton Superior Guarantor Non-Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------ ------------ Net sales $ 71,806 $ 101,269 $5,095 $ 178,170 Cost of sales 58,699 64,710 3,308 126,717 -------- --------- ------ --------- Gross profit 13,107 36,559 1,787 51,453 Selling, general and administrative expenses 17,232 20,928 896 39,056 Facility closing and severance expenses 702 42 - 744 Management fees (150) - 150 - Amortization of intangibles 146 113 - 259 Loss (gain) on disposals on property, plant, and equipment - 66 - 66 -------- --------- ------ --------- Income from operations (4,823) 15,410 741 11,328 Other expenses Interest expense 17,013 60 - 17,073 Loss on early extinguishment of long-term debt 2,480 - - 2,480 Other expense (income) 54 (11) 28 71 -------- --------- ------ --------- Income (loss) before provision (benefit) for income taxes (24,370) 15,361 713 (8,296) Provision (benefit) for income taxes (7,184) 4,528 210 (2,446) -------- --------- ------ --------- Net income (loss) available to common shareholders $(17,186) $ 10,833 $ 503 $ (5,850) ======== ========= ====== =========
16 Dayton Superior Corporation and Subsidiaries Supplemental Consolidating Condensed Statement of Cash Flows Six Fiscal Months Ended July 2, 2004
Dayton Superior Guarantor Non-Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(16,216) $ (3,469) $ 1,136 $(18,549) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 3,229 10,785 31 14,045 Loss on early extinguishment of long-term debt 842 - - 842 Deferred income taxes 158 - - 158 Amortization of deferred financing costs and debt discount 2,565 - - 2,565 Gain on sales of rental equipment and property, plant and equipment (241) (4,964) (23) (5,228) Change in assets and liabilities, net of the effects of acquisitions (20,422) (1,105) (2,499) (24,026) -------- -------- ------- -------- Net cash provided by (used in) operating activities (30,085) 1,247 (1,355) (30,193) -------- -------- ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment additions (1,067) (1,128) (4) (2,199) Proceeds from sales of property, plant and equipment - 4 - 4 Rental equipment additions (744) (7,214) (185) (8,143) Proceeds from sales of rental equipment 603 7,876 40 8,519 Acquisition - (245) - (245) -------- -------- ------- -------- Net cash provided by (used in) investing activities (1,208) (707) (149) (2,064) -------- -------- ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long-term debt (33,686) (325) - (34,011) Issuance of long-term debt, net 66,750 - - 66,750 Financing costs incurred (2,301) - - (2,301) Issuance of common shares 73 - - 73 Changes in loans to shareholders (19) - - (19) Intercompany (516) 352 164 - -------- -------- ------- -------- Net cash provided by (used in) financing activities 30,301 27 164 30,492 -------- -------- ------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH - - (230) (230) -------- -------- ------- -------- Net increase (decrease) in cash (992) 567 (1,570) (1,995) CASH, beginning of period 860 (1,240) 2,375 1,995 -------- -------- ------- -------- CASH, end of period $ (132) $ (673) $ 805 $ - ======== ======== ======= ========
17 Dayton Superior Corporation and Subsidiaries Supplemental Consolidating Condensed Statement of Cash Flows Six Fiscal Months Ended June 27, 2003
Dayton Superior Guarantor Non-Guarantor Corporation Subsidiaries Subsidiaries Consolidated ----------- ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (17,186) $ 10,833 $ 503 $ (5,850) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 3,907 8,872 24 12,803 Loss on early extinguishment of long-term debt 2,480 - - 2,480 Deferred income taxes (588) - - (588) Gain on sales of rental equipment and property, plant and equipment (787) (14,399) (17) (15,203) Change in assets and liabilities, net of the effects of acquisitions (22,918) 6,207 (1,358) (18,069) --------- -------- ------- --------- Net cash provided by (used in) operating activities (35,092) 11,513 (848) (24,427) --------- -------- ------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment additions (850) (2,956) (3) (3,809) Proceeds from sales of property, plant and equipment - 82 - 82 Rental equipment additions (347) (16,415) (28) (16,790) Proceeds from sales of rental equipment 841 20,119 28 20,988 --------- -------- ------- --------- Net cash provided by (used in) investing activities (356) 830 (3) 471 --------- -------- ------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long-term debt (160,364) - - (160,364) Issuance of long-term debt, net 182,070 - - 182,070 Financing costs incurred (680) - - (680) Issuance of common shares 37 - - 37 Intercompany 11,722 (11,871) 149 - --------- -------- ------- --------- Net cash provided by (used in) financing activities 32,785 (11,871) 149 21,063 --------- -------- ------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH - - 489 489 --------- -------- ------- --------- Net increase (decrease) in cash (2,663) 472 (213) (2,404) CASH, beginning of period 1,605 (687) 1,486 2,404 --------- -------- ------- --------- CASH, end of period $ (1,058) $ (215) $ 1,273 $ - ========= ======== ======= =========
18 (5) STOCK OPTION PLANS The Company's 2000 Stock Option Plan permits the grant of stock options to purchase common shares. 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 remained outstanding following our recapitalization in 2000, as well as new option grants. The terms of the option grants are ten years from the date of grant. Generally, between 10% and 25% of the options have a fixed vesting period of fewer than three years. The remaining options are eligible to become exercisable in installments over one to five years from the date of grant based on the Company's performance, but, in any case, become exercisable no later than nine years after the grant date. These options may be subject to accelerated vesting upon certain change in control events based on Odyssey Investment Partners, LLC return on investment. Under the Stock Option Plan, the option exercise price equals the stock's market price on date of grant. A summary of the status of the Company's stock option plans at July 2, 2004, as well as changes during the fiscal six months then ended is presented in the table below:
Weighted Average Number of Exercise Price Per Shares Share --------- ------------------ Outstanding at December 31, 2003 643,839 $ 25.03 Granted 79,400 25.85 Exercised (31,044) 1.96 Cancelled (9,217) 27.39 ------- Outstanding at July 2, 2004 682,978 $ 26.13 =======
(6) RETIREMENT PLANS 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. 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. The following are the components of Net Periodic Benefit Cost for the six months ended July 2, 2004 and June 27, 2003:
Symons Symons Pension Pension Postretirement Postretirement Benefits 2004 Benefits 2003 Benefits 2004 Benefits 2003 ------------- ------------- ------------- ------------- Service cost $ 299 $ 242 $ 0 $ 0 Interest cost 298 282 18 23 Expected return on plan assets (299) (268) 0 0 Amortization of prior service cost 3 3 12 12 Amortization of net loss 38 28 0 0 ----- ----- --- --- Net periodic benefit cost $ 339 $ 287 $30 $35 ===== ===== === ===
As of July 2, 2004, $337 of contributions have been made. The Company presently anticipates contributing an additional $408 to fund its pension plan in 2004 for a total of $745. 19 (7) SEGMENT REPORTING Effective January 1, 2004, the Company changed its financial reporting to three segments to monitor gross profit by sales type: product sales, rental revenue, and used rental equipment sales. These types of sales are differentiated by their source and gross margin percentage of sales. Product sales represent sales of new products carried in inventories on the balance sheet. Cost of goods sold for product sales include material, labor, overhead, and freight. Rental revenues are derived from leasing the rental equipment, and are recognized ratably over the term of the lease. Cost of goods sold for rental revenues include depreciation of the rental equipment, maintenance of the rental equipment, and freight. Sales of used rental equipment are sales of rental equipment after a period of generating rental revenue. Cost of goods sold for sales of used rental equipment is the net book value of the equipment. All other expenses, as well as assets and liabilities, are not tracked by sales type. Export sales and sales by non-U.S. affiliates is not significant. Information about the gross profit of each sales type and the reconciliations to the consolidated amounts for the three and six fiscal months ended July 2, 2004 and June 27, 2003 follows. The 2003 amounts have been reclassified to conform to the 2004 classification.
Three Fiscal Months Ended Six Fiscal Months Ended ---------------------------- ---------------------------- July 2, 2004 June 27, 2003 July 2, 2004 June 27, 2003 ------------ ------------- ------------ ------------- Product sales $ 101,170 $ 88,420 $ 176,461 $ 143,552 Rental revenue 9,914 6,504 19,343 13,630 Used rental equipment sales 4,122 10,940 8,519 20,988 ------------ ------------- ------------ ------------- Net sales 115,206 105,864 204,323 178,170 ------------ ------------- ------------ ------------- Product cost of sales 75,331 67,258 134,789 110,712 Rental cost of sales 6,740 5,103 14,265 10,287 Used rental equipment cost of sales 1,686 2,884 3,213 5,718 ------------ ------------- ------------ ------------- Cost of sales 83,757 75,245 152,267 126,717 ------------ ------------- ------------ ------------- Product gross profit 25,839 21,162 41,672 32,840 Rental gross profit 3,174 1,401 5,078 3,343 Used rental equipment gross profit 2,436 8,056 5,306 15,270 ------------ ------------- ------------ ------------- Gross profit 31,449 30,619 52,056 51,453 Depreciation Expense: Product sales (Property, plant, and equipment) $ 1,604 $ 1,484 $ 2,933 $ 3,090 Rental Revenue (rental equipment) 4,464 3,425 9,400 6,846 Corporate 562 694 1,157 1,400 ------------ ------------- ------------ ------------- Total depreciation $ 6,630 $ 5,603 $ 13,490 $ 11,336 ============ ============= ============ =============
20 (8) FACILITY CLOSING AND SEVERANCE EXPENSES During 2001, we approved and began implementing a plan to exit certain of our manufacturing and distribution facilities and to reduce overall headcount in order to keep our cost structure in alignment with net sales. Activity for this plan for the year ended December 31, 2003, and for the six months ended July 2, 2004 was as follows:
Involuntary Lease Relocation Other Post- Termination Termination of Closing Benefits Costs Operations Costs Total ----------- ----------- ---------- ----------- -------- Balance, January 1, 2003 $ - $ 210 $ - $ 311 $ 521 Facility closing and severance expenses - 379 - - 379 Items charged against reserve - (175) - (311) (486) ----------- ----------- ---------- ----------- -------- Balance, December 31, 2003 - 414 - - 414 Facility closing and severance expenses - - - - - Items charged against reserve - (414) - - (414) ----------- ----------- ---------- ----------- -------- Balance, July 2, 2004 $ - $ - $ - $ - $ - =========== =========== ========== =========== ========
During 2002, we approved and began implementing a plan to exit certain of our distribution facilities and to reduce overall headcount in order to keep our cost structure in alignment with net sales. Activity for this plan for the year ended December 31, 2003, and for the six months ended July 2, 2004 was as follows:
Involuntary Lease Relocation Other Post- Termination Termination of Closing Benefits Costs Operations Costs Total ----------- ----------- ---------- ----------- -------- Balance, January 1, 2003 $ 2,412 $ 84 $ - $ - $ 2,496 Facility closing and severance expenses 202 (11) - - 191 Items charged against reserve (2,414) (73) - - (2,487) ----------- ----------- ---------- ----------- -------- Balance, December 31, 2003 200 - - - 200 Facility closing and severance expenses - - - - - Items charged against reserve (146) - - - (146) ----------- ----------- ---------- ----------- -------- Balance, July 2, 2004 $ 54 $ - $ - $ - $ 54 =========== =========== ========== =========== ========
The remaining involuntary termination benefits are expected to be paid in 2004. During 2003, we approved and began implementing a plan to exit certain of our manufacturing and distribution facilities and to reduce overall headcount in order to keep our cost structure in alignment with net sales. Activity for this plan for the year ended December 31, 2003 and the six months ended July 2, 2004 was as follows:
Involuntary Lease Relocation Other Post- Termination Termination of Closing Benefits Costs Operations Costs Total ----------- ----------- ---------- ----------- -------- Facility closing and severance expenses $ 988 $ 27 $ - $ 921 $ 1,936 Items charged against reserve (988) (27) - (921) (1,936) ----------- ----------- ---------- ----------- -------- Balance, December 31, 2003 - - - - - Facility closing and severance expenses 63 1 - 61 125 Items charged against reserve (63) (1) - (61) (125) ----------- ----------- ---------- ----------- -------- Balance, July 2, 2004 $ - $ - $ - $ - $ - =========== =========== ========== =========== ========
21 During 2004, we continued to execute our plan to exit additional distribution facilities. Activity for this plan for the six months ended July 2, 2004 was as follows:
Involuntary Lease Relocation Other Post- Termination Termination of Closing Benefits Costs Operations Costs Total ----------- ----------- ---------- ----------- -------- Facility closing and severance expenses $ 393 $ 27 $ 139 $ 280 $ 839 Items charged against reserve (339) (27) (139) (280) (785) ----------- ----------- ---------- ----------- -------- Balance, July 2, 2004 $ 54 $ - $ - $ - $ 54 =========== =========== ========== =========== ========
The total expected future expense for commitments under this plan is approximately $500,000 and will be expensed in accordance with SFAS No. 146. (9) BENEFIT FOR INCOME TAXES In 2003, we carried back all available federal income tax losses and are now carrying losses forward. Accordingly, tax benefits from operating losses are offset by valuation allowances, resulting in no net tax benefit being recorded until realization is reasonably assured. 22 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 a leading manufacturer of metal accessories used in masonry construction in terms of revenues. We operate in two sectors 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, hotels and manufacturing facilities. We have expanded our business units through acquisitions. On July 29, 2003 we completed the acquisition of substantially all of the fixed assets and rental fleet assets of Safway Formwork Systems, L.L.C. ("Safway Formwork") for $20.9 million. Effective January 1, 2004, the Company changed its financial reporting to three segments to monitor gross profit by sales type: product sales, rental revenue, and used rental equipment sales. These types of sales are differentiated by their source and gross margin percents of sales. - PRODUCT SALES CONSIST OF: - CONCRETE ACCESSORIES, which are used for connecting forms for poured-in-place concrete walls, anchoring or bracing for walls and floors, supporting bridge framework and positioning steel reinforcing bars, and include products which remain in place at the convenience of the contractors. - MASONRY PRODUCTS, which are placed between layers of brick and concrete blocks and covered with mortar to provide additional strength to walls. - PAVING PRODUCTS, which are used in the construction and rehabilitation of concrete roads, highways and airport runways to extend the life of the pavement, and include products which remain in place at the convenience of the contractors. Welded dowel assemblies are a paving product 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. - CHEMICALS, which 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, placement, and stamping of concrete as well as curing compounds used in concrete road construction. - RENTAL EQUIPMENT CONSISTS PRIMARILY OF: - FORMING SYSTEMS, which are reusable engineered modular forms; 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 as used rental equipment and rented. 23 SAFWAY FORMWORK ACQUISITION On July 29, 2003 we completed the acquisition of substantially all of the fixed assets and rental fleet assets of Safway Formwork Systems, L.L.C. ("Safway") for $20.9 million, including acquisition costs of $1.1 million. The initial purchase price was comprised of $13.0 million in cash and a $12.0 million non-interest bearing (other than in the case of default) senior unsecured note with a present value of $7.0 million payable to the seller. The note was issued at a discount, which is being accreted to the face value using the effective interest method and is reflected as interest expense. The first $250,000 installment payment on the note was paid on September 30, 2003, and an additional $750,000 installment payment was due on December 31, 2003. The settlement of normal purchase price adjustments resulted in a $417,000 reduction in the payment made in December to $333,000. A subsequent purchase price adjustment of $240,000 was paid in March 2004. Annual payments of $1.0 million are due on September 30 of each year from 2004 through 2008, with a final balloon payment of $6.0 million due on December 31, 2008. The Company exercised its option to acquire additional rental equipment from Safway. The Company issued a non-interest bearing note, which is being accreted to its face value of $2.0 million using the effective interest method with an interest rate of 6% and is reflected as interest expense. The net present value of the note at July 2, 2004 was $1.5 million. Minimum payments of the note are $99,000 for the remainder of 2004, $282,000 in 2005, $398,000 in 2006, $563,000 in 2007, and $464,000 in 2008. Payments may be accelerated if certain revenue targets are met. Safway sold and rented concrete forming and shoring systems, principally European style products designed and manufactured by its affiliated European concrete forming and shoring business, to a national customer base. For the period from October 1, 2002 through July 25, 2003, Safway Formwork had revenues of $17.0 million. By acquiring the Safway Formwork rental fleet assets, which had a gross book value at July 25, 2003 of approximately $41.8 million, we expect to increase our presence in the concrete forming and shoring systems business and expand our product offerings by advancing our plan to continue augmenting Symons' existing rental fleet with European clamping systems. As part of the asset acquisition we entered into an exclusive manufacturing and distribution agreement with certain of Safway's affiliates under which we were granted the exclusive right to manufacture, design, market, offer, sell and distribute certain European formwork products within the United States, Mexico and Canada. The acquisition has been accounted for as a purchase, and the results of Safway Formwork have been included in our consolidated financial statements from the date of acquisition. The purchase price has been allocated based on the fair value of the assets acquired and liabilities assumed. 24 FACILITY CLOSING AND SEVERANCE EXPENSES During 2001, we approved and began implementing a plan to exit certain of our manufacturing and distribution facilities and to reduce overall headcount in order to keep our cost structure in alignment with net sales. Activity for this plan for the year ended December 31, 2003, and for the six months ended July 2, 2004 was as follows:
Involuntary Lease Relocation Other Post- Termination Termination of Closing Benefits Costs Operations Costs Total ----------- ----------- ---------- ----------- -------- Balance, January 1, 2003 $ - $ 210 $ - $ 311 $ 521 Facility closing and severance expenses - 379 - - 379 Items charged against reserve - (175) - (311) (486) ----------- ----------- ---------- ----------- -------- Balance, December 31, 2003 - 414 - - 414 Facility closing and severance expenses - - - - - Items charged against reserve - (414) - - (414) ----------- ----------- ---------- ----------- -------- Balance, July 2, 2004 $ - $ - $ - $ - $ - =========== =========== ========== =========== ========
During 2002, we approved and began implementing a plan to exit certain of our distribution facilities and to reduce overall headcount in order to keep our cost structure in alignment with net sales. Activity for this plan for the year ended December 31, 2003, and for the six months ended July 2, 2004 was as follows:
Involuntary Lease Relocation Other Post- Termination Termination of Closing Benefits Costs Operations Costs Total ----------- ----------- ---------- ----------- -------- Balance, January 1, 2003 $ 2,412 $ 84 $ - $ - $ 2,496 Facility closing and severance expenses 202 (11) - - 191 Items charged against reserve (2,414) (73) - - (2,487) ----------- ----------- ---------- ----------- -------- Balance, December 31, 2003 200 - - - 200 Facility closing and severance expenses - - - - - Items charged against reserve (146) - - - (146) ----------- ----------- ---------- ----------- -------- Balance, July 2, 2004 $ 54 $ - $ - $ - $ 54 =========== =========== ========== =========== ========
The remaining involuntary termination benefits are expected to be paid in 2004. During 2003, we approved and began implementing a plan to exit certain of our manufacturing and distribution facilities and to reduce overall headcount in order to keep our cost structure in alignment with net sales. Activity for this plan for the year ended December 31, 2003 and the six months ended July 2, 2004 was as follows:
Involuntary Lease Relocation Other Post- Termination Termination of Closing Benefits Costs Operations Costs Total ----------- ----------- ---------- ----------- -------- Facility closing and severance expenses $ 988 $ 27 $ - $ 921 $ 1,936 Items charged against reserve (988) (27) - (921) (1,936) ----------- ----------- ---------- ----------- -------- Balance, December 31, 2003 - - - - - Facility closing and severance expenses 63 1 - 61 125 Items charged against reserve (63) (1) - (61) (125) ----------- ----------- ---------- ----------- -------- Balance, July 2, 2004 $ - $ - $ - $ - $ - =========== =========== ========== =========== ========
25 During 2004, we continued to execute our plan to exit additional distribution facilities. Activity for this plan for the six months ended July 2, 2004 was as follows:
Involuntary Lease Relocation Other Post- Termination Termination of Closing Benefits Costs Operations Costs Total ----------- ----------- ---------- ----------- -------- Facility closing and severance expenses $ 393 $ 27 $ 139 $ 280 $ 839 Items charged against reserve (339) (27) (139) (280) (785) ----------- ----------- ---------- ----------- -------- Balance, July 2, 2004 $ 54 $ - $ - $ - $ 54 =========== =========== ========== =========== ========
The total expected future expense for commitments under this plan is approximately $500,000 and will be expensed in accordance with SFAS No. 146. 26 RESULTS OF OPERATIONS The following table summarizes our results of operations as a percentage of net sales for the periods indicated.
Three Fiscal Months Ended Six Fiscal Months Ended -------------------------------- --------------------------------- July 2, 2004 June 27, 2003 July 2, 2004 June 27, 2003 ------------ ------------- ------------ ------------- Product sales 87.8% 83.6% 86.4% 80.6% Rental revenue 8.6 6.1 9.4 7.6 Used rental equipment sales 3.6 10.3 4.2 11.8 ----- ----- ----- ----- Net sales 100.0 100.0 100.0 100.0 ----- ----- ----- ----- Product cost of sales 74.5 76.1 76.4 77.1 Rental cost of sales 68.0 78.5 73.7 75.5 Used rental equipment cost of sales 40.9 26.4 37.7 27.2 ----- ----- ----- ----- Cost of sales 72.7 71.1 74.5 71.1 ----- ----- ----- ----- Product gross profit 25.5 23.9 23.6 22.9 Rental gross profit 32.0 21.5 26.3 24.5 Used rental equipment gross profit 59.1 73.6 62.3 72.8 ----- ----- ----- ----- Gross profit 27.3 28.9 25.5 28.9 Selling, general and administrative expenses 19.0 18.6 21.8 21.9 Facility closing and severance expenses 0.4 0.3 0.5 0.4 Loss on disposals of property, plant, and equipment - 0.1 - - Amortization of intangibles 0.3 0.1 0.3 0.2 ----- ----- ----- ----- Income from operations 7.6 9.8 2.9 6.4 Interest expense 10.1 8.5 11.5 9.6 Loss on early extinguishment of long-term debt - 2.3 0.4 1.4 Other expense (income) (0.2) 0.0 0.0 0.0 ----- ----- ----- ----- Loss before provision (benefit) for income taxes (2.3) (1.0) (9.0) (4.6) Benefit for income taxes - (0.6) - (1.4) ----- ----- ----- ----- Net loss (2.3%) (0.4%) (9.0%) (3.2%) ===== ===== ===== =====
27 COMPARISON OF THREE FISCAL MONTHS ENDED JULY 2, 2004 AND JUNE 27, 2003 NET SALES Net sales increased $9.3 million, or 8.8%, to $115.2 million in the second quarter of 2004 from $105.9 million in the second quarter of 2003. The following table summarizes our net sales by product type:
Three fiscal months ended ---------------------------------------------------- July 2, 2004 June 27, 2003 ----------------------- ----------------------- (In thousands) Net Sales % Net Sales % % Change --------- ----- --------- ----- -------- Product sales $ 101,170 87.8% $ 88,420 83.5% 14.4% Rental revenue 9,914 8.6 6,504 6.2 52.4 Used rental equipment sales 4,122 3.6 10,940 10.3 (62.3) --------- ----- --------- ----- Net sales $ 115,206 100.0% $ 105,864 100.0% 8.8% ========= ===== ========= =====
Product sales increased $12.8 million, or 14.4%, to $101.2 million in the second quarter of 2004 from $88.4 million in the first quarter of 2003. The majority of the increase in sales was due to price increases initiated in the fourth quarter of 2003 and the first and second quarters of 2004. The remaining increase was due to volume. Rental revenue increased $3.4 million, or 52.4%, to $9.9 million for the second quarter of 2004, compared to $6.5 million in the second quarter of 2003. We estimate that Safway added approximately $2.2 million in rental revenue while the remaining increase was due to volume from existing product lines. Used rental equipment sales decreased to $4.1 million in the second quarter of 2004 from $10.9 million in the second quarter of 2003. The decrease is due to the second quarter of 2003 benefiting from one large sale which was not repeated in the second quarter of 2004. GROSS PROFIT Gross profit on product sales for the second quarter of 2004 was $25.8 million, or 25.5% of sales, an increase of $4.6 million from $21.2 million, or 23.9% of sales, in the second quarter of 2003. The increase in gross profit dollars was primarily due to the increased net sales as discussed above, partially offset by increasing costs, primarily steel. As a percent of revenue, gross profit increased due to productivity gains. We will continue to see higher impacts of steel costs in future quarters, as the second quarter steel costs were approximately 20% higher than the first quarter but still largely remain in inventory. Gross profit on rental revenue for the second quarter of 2004 was $3.2 million, an increase of $1.8 million from the second quarter of 2003, which was $1.4 million. The increase in gross profit dollars was primarily due to the increased net sales as discussed above, which was partially offset by the increase in depreciation expense on rental equipment as a result of the acquisition of Safway. Gross profit on sales of used rental equipment for the second quarter of 2004 was $2.4 million, or 59.1% of sales, compared to $8.1 million, or 73.6% of sales, in the second quarter of 2003. The decrease in gross profit dollars was primarily due to the decreased sales discussed previously. Gross profit as a percentage of sales fluctuates based on the age and type of the specific equipment sold. OPERATING EXPENSES Selling, general and administrative expenses increased $2.2 million to $21.9 million in the second quarter of 2004 from $19.7 million in the second quarter of 2003. Virtually all of the increase was due to the acquisition of Safway. 28 Facility closing and severance expense during the second quarter of 2004 was $0.5 million compared to $0.4 million in the second quarter of 2003. Amortization of intangibles was $0.3 million in the second quarter of 2004, compared to $0.1 million in the second quarter of 2003. OTHER EXPENSES Interest expense increased to $11.7 million in the second quarter of 2004 from $9.0 million in the second quarter of 2003. This was primarily due to the higher interest rate from the new senior second secured notes and higher average borrowings. The Company incurred a loss on the early extinguishment of long-term debt of $2.6 in the second quarter of 2003, due to the expensing of deferred financing costs related to the issuance of the $165.0 million senior second secured notes. INCOME (LOSS) BEFORE INCOME TAXES Loss before income taxes in the second quarter of 2004 was $(2.7) million compared to a loss of $(1.1) million in the second quarter of 2003, due to the factors described above. BENEFIT FOR INCOME TAXES In 2003, we carried back all available federal income tax loses and are now carrying such losses forward. Accordingly, in 2004, tax benefits from operating losses are offset by valuation allowances, resulting in no net tax benefit being recorded until realization is reasonably assured. NET INCOME (LOSS) Loss before income taxes in the second quarter of 2004 was $(2.7) million compared to a loss of $(0.5) million in the second quarter of 2003, due to the factors described above. COMPARISON OF SIX FISCAL MONTHS ENDED JULY 2, 2004 AND JUNE 27, 2003 NET SALES Net sales increased $26.1 million, or 14.7%, to $204.3 million in the first two quarters of 2004 from $178.2 million in the first two quarters of 2003. The following table summarizes our net sales by product type:
Six fiscal months ended -------------------------------------------------------- July 2, 2004 June 27, 2003 ------------------------ -------------------- (In thousands) Net Sales % Net Sales % % Change ---------- ----- --------- ----- -------- Product sales $ 176,461 86.4% $ 143,552 80.6% 22.9% Rental revenue 19,343 9.5 13,630 7.6 41.9 Used rental equipment sales 8,519 4.1 20,988 11.8 (59.4) ---------- ----- --------- ----- Net sales $ 204,323 100.0% $ 178,170 100.0% 14.7% ========== ===== ========= =====
Product sales increased $32.9 million, or 22.9%, to $176.5 million in the first two quarters of 2004 from $143.6 million in the first two quarters of 2003. The majority of the increase in sales was due to an increase in volume while the remaining increase is due to price increases initiated in the fourth quarter of 2003 and the first and second quarters of 2004. Rental revenue increased $5.7 million, or 41.9%, to $19.3 million first two quarters of 2004, compared to $13.6 million in the first two quarters of 2003. We estimate that Safway added approximately $5.3 million in rental revenue, while the remaining increase was due to volume from existing product lines. 29 Used rental equipment sales decreased to $8.5 million in the first two quarters of 2004 from $21.0 million in the first two quarters of 2003. The decrease is due to two large transactions in the first half of 2003 that did not recur in the first half of 2004. GROSS PROFIT Gross profit on product sales for the first two quarters of 2004 was $41.7 million, or 23.6% of sales, an increase of $8.9 million from $32.8 million, or 22.9% of sales, in the first two quarters of 2003. The increase in gross profit dollars was primarily due to the increased net sales as discussed above, partially offset by an increase in material costs, primarily steel. As a percent of revenue, gross profit increased due to productivity gains. We will continue to see higher impacts of steel costs in future quarters, as the second quarter steel costs were approximately 20% higher than the first quarter but still largely remain in inventory. Gross profit on rental revenue for the first two quarters of 2004 was $5.1 million, a $1.8 million an increase over the first two quarters 2003, which was $3.3 million. The increase in gross profit dollars was primarily due to the increased net sales as discussed above. The increase was partially offset by higher cost of sales, primarily depreciation expense due to the acquisition of Safway. Gross profit on sales of used rental equipment for the first two quarters of 2004 was $5.3 million, or 62.3% of sales, compared to $15.3 million, or 72.8% of sales, in the first two quarters of 2003. The decrease in gross profit dollars was primarily due to the decreased sales discussed previously. Gross profit as a percentage of sales, fluctuates based on the age and type of the specific equipment sold. OPERATING EXPENSES Selling, general and administrative expenses increased $5.4 million to $44.5 million in the first two quarters of 2004 from $39.1 million in the first two quarters of 2003. We estimate that approximately 90% of the increase was due to the acquisition of Safway. The remaining increase was due to the increase in net sales. Facility closing and severance expense during the first two quarters of 2004 was $1.0 million compared to $0.7 million in first two quarters of 2003. Amortization of intangibles was $0.6 million in the first two quarters of 2004, compared to $0.3 million in the first two quarters of 2003. OTHER EXPENSES Interest expense increased to $23.6 million in the first two quarters of 2004 from $17.1 million in the first two quarters of 2003. This was primarily due to the higher interest rate from the new senior second secured notes and higher average borrowings. The Company incurred a loss on the early extinguishment of long-term debt of $2.6 in the second quarter of 2003, due to the expensing of deferred financing costs related to the issuance of the $165.0 million senior second secured notes. INCOME (LOSS) BEFORE INCOME TAXES Loss before income taxes for the first two quarters of 2004 was $(18.6) million compared to a loss of $(8.3) million in the first two quarters of 2003, due to the factors described above. BENEFIT FOR INCOME TAXES In 2003, we carried back all available federal income tax loses and are now carrying such losses forward. Accordingly, in 2004, tax benefits from operating losses are offset by valuation allowances, resulting in no net tax benefit being recorded until realization is reasonably assured. 30 NET INCOME (LOSS) Loss before income taxes for the first two quarters of 2004 was $(18.6) million compared to a loss of $(5.9) million in the first two quarters of 2003, 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, and amounts available under our revolving credit facility. 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 used in operating activities in the first six months of 2004 was $(30.1) million, compared to $(24.5) million in the first six months of 2003. This activity is comprised of the following:
2004 2003 ------- ------- (in millions) Net loss $ (18.5) $ (5.9) Non-cash adjustments 12.4 (0.5) ------- ------- Net loss after non-cash adjustments (6.1) (6.4) Changes in assets and liabilities (24.0) (18.1) ------- ------- Net cash used in operating activities $ (30.1) $ (24.5) ======= =======
Net loss after non-cash adjustments was $(6.1) million for the first six months of 2004, compared to the net loss of $(6.4) million in the first six months of 2003. Changes in assets and liabilities resulted in a $(24.0) million use of cash in the first six months of 2004, as compared to $(18.1) million use of cash in the first six months of 2003. This was partially due to the increase in accounts receivable, which was a $(12.1) million use of cash in the first six months of 2004 as compared to a $(9.4) million use of cash in the first six months of 2003. This increase was primarily due to the higher second quarter net sales in 2004. An increase in inventory resulted in a $(11.9) million use of cash in the first six months of 2004 as compared to a $(4.4) million use of cash in the first six months of 2003. The 2004 growth in inventories was due to steel price increases, and to a lesser extent, an increase in sales volume. Cash used for prepaid expense and other assets was a $(4.4) million use of cash in the first six months of 2004, compared to a $0.6 million source of cash in the first six months of 2003. This use of cash in 2004 was primarily due to prepayments for steel raw material. These uses of cash were partially offset by a lower use of cash from accrued liabilities, which was a $(2.2) million use of cash in the first six months of 2004 as compared to a $(10.0) million use of cash in the first six months of 2003. This decrease was due to higher 2003 payments for facility closing and severance accruals, a retirement plan contribution in 2003 that was suspended in 2004, and an increase in accrued liabilities, such as freight, due to increased sales volume. Net cash used in investing activities was $(2.1) million in the first six months of 2004, compared to net cash provided by investing activities of $0.5 million in the first six months of 2003. Rental equipment additions decreased to $8.1 million in the first six months of 2004 from $16.8 million in the first six months of 2003, which is due to the lower sales of rental equipment. Proceeds from sales of rental equipment decreased to $8.5 million in the first six months of 2004 from $21.0 million in the first six months of 2003. The decrease is due to two large transactions in the first half of 2003 that did not recur in the first half of 2004. 31 As of July 2, 2004, our long-term debt consisted of the following:
July 2, 2004 ------------ Revolving credit facility, weighted average interest rate of 3.82% $ 57,950 Senior Second Secured Notes, interest rate of 10.75% 165,000 Debt discount on Senior Second Secured Notes (6,871) Senior Subordinated Notes, interest rate of 13.0% 154,729 Debt discount on Senior Subordinated Notes (7,975) Notes payable to seller of Safway, non-interest bearing, accreted at 6.0% to 14.5% 8,382 Debentures previously held by Dayton Superior Capital Trust, interest rate of 9.1%, due on demand 1,102 Capital lease obligations 4,245 City of Parsons, Kansas Economic Development Loan, interest rate of 7.0% 32 --------- Total long-term debt 376,594 Less current maturities (2,539) --------- Long-term portion $ 374,055 =========
On January 30, 2004, we established an $80.0 million senior secured revolving credit facility, which was used to refinance our previous $50.0 million revolving credit facility. On July 2, 2004, the Company increased the senior secured revolving credit facility to $95.0 million. The new credit facility has no financial covenants and is subject to availability under a borrowing base calculation. Availability of borrowings is limited to 85% of eligible accounts receivable and 60% of eligible inventories and rental equipment, less $10.0 million. As of July 2, 2004, all $95.0 million was available under the facility. The credit facility is secured by substantially all assets of the Company and its domestic subsidiaries. At July 2, 2004, $58.0 million of borrowings were outstanding, along with $11.1 million of letters of credit, with the remaining $25.9 million available for borrowing. Our long-term debt borrowings, net of repayments for the quarters ended July 2, 2004, was $32.7 million. We incurred $2.3 million of financing costs primarily related to the refinancing of the line of credit in January of 2004. The Company may, from time to time, seek to retire its outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, the Company's liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. At July 2, 2004, working capital was $94.7 million, compared to $71.6 million at December 31, 2003. The $23.1 million increase was comprised of the following: - $12.1 million increase in accounts receivable due to the normal seasonal increase in net sales from December to June, - $11.9 million increase in inventories due to the anticipated seasonal higher sales in the third quarter and to higher raw material costs, - $3.7 million increase in prepaid expenses due to prepayments of steel raw materials, - $2.8 million decrease in accrued compensation and other liabilities due to annual customer and employee incentive payments and a contractual deferred compensation payment; partially offset by, - $6.6 million increase in accounts payable due to higher inventories; and - $0.8 million of changes in other items. 32 We intend to pursue additional acquisitions that present opportunities to realize significant synergies, operating expense economies or overhead cost savings or to increase our market position. We regularly engage in discussions with respect to potential acquisitions and investments. There are no definitive agreements with respect to any material acquisitions at this time, and we cannot assure you that we will be able to reach an agreement with respect to any future acquisition. Our acquisition strategy may require substantial capital, and no assurance can be given that we will be able to raise any necessary funds on terms acceptable to us or at all. We intend to fund 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 from our business operations, from borrowings under our revolving credit facility or, if feasible and attractive, by issuing long-term debt or additional common shares. If we incur additional debt to finance acquisitions, our total interest expense will increase. On July 29, 2003 we completed the acquisition of substantially all of the fixed assets and rental fleet assets of Safway Formwork Systems, L.L.C. for $20.9 million, including acquisition costs of $1.1 million. The initial purchase price was comprised of $13.0 million in cash and a $12.0 million, non-interest bearing (other than in the case of default) senior unsecured note, with a present value of $7.0 million payable to the seller. The note was issued at a discount, which is being accreted to the face value using the effective interest method and is reflected as interest expense. The book value of the note at July 2, 2004 was $6.9 million. The first $250,000 installment payment on the note was paid on September 30, 2003, and an additional $750,000 installment payment was due on December 31, 2003. The settlement of normal purchase price adjustments resulted in a $417,000 reduction in the payment made in December to $333,000. A subsequent purchase price adjustment of $240,000 was paid in March 2004. Annual payments of $1.0 million are due on September 30 of each year from 2004 through 2008, with a final balloon payment of $6.0 million due on December 31, 2008. The Company exercised its option to acquire additional rental equipment from Safway. The Company issued a non-interest bearing note, with an initial net present value of $1.6 million, which is being accreted to its face value of $2.0 million using the effective interest method with an interest rate of 6%, and is reflected as interest expense. The net book value of the note at July 2, 2004 was $1.5 million. Minimum payments on the note are $99,000 for the remainder of 2004, $282,000 in 2005, $398,000 in 2006, $563,000 in 2007, and $464,000 in 2008. Payments may be accelerated if certain revenue targets are met. 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. Our ability to make scheduled payments of principal of, or to pay the interest on, or to refinance, our indebtedness, or to fund planned capital expenditures and research and development will depend on our future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations and anticipated operating improvements, management believes that cash flow from operations and available borrowings under our revolving credit facility will be adequate to meet our future liquidity for the foreseeable future. We cannot assure you, however, that our business will generate sufficient cash flow from operations, that operating improvements will be realized on schedule or that future borrowings will be available to us under our revolving credit facility in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may from time to time seek to retire our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, in privately negotiated transactions or otherwise. Any such repurchases or exchanges will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including our revolving credit facility, the senior subordinated notes and the senior second secured notes, on commercially reasonable terms or at all. COMMITMENTS There were no material changes to minimum future payments from December 31, 2003. 33 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 the volume of our sales. INFLATION We may not be able to pass on the cost of commodity price increases to our customers. Steel, in its various forms, is our principal raw material, constituting approximately 20% of our cost of sales in 2003. Historically, steel prices have fluctuated and we are currently facing rising steel prices and a potential impending steel shortage. Any decrease in our volume of steel purchases could affect our ability to secure volume purchase discounts that we have obtained in the past. Additionally, the overall increase in energy costs, including natural gas and petroleum products, has adversely impacted our overall operating costs in the form of higher raw material, utilities, and freight costs. We cannot assure you we will be able to pass these cost increases on to our customers. STOCK COLLATERAL VALUATION - SENIOR SECOND SECURED NOTES Rule 3-16 of the SEC's Regulation S-X requires the presentation of a subsidiary's stand-alone, audited financial statements if the subsidiary's capital stock secures an issuer's notes and the par value, book value or market value ("Applicable Value") of the stock equals or exceeds 20% of the aggregate principal amount of the secured class of securities the ("Collateral Threshold.") The indenture governing our Senior Second Secured Notes and the security documents for the notes provide that the collateral will never include the capital stock of any subsidiary to the extent the Applicable Value of the stock is equal to or greater than the Collateral Threshold. As a result, we will not be required to present separate financial statements of any of our subsidiaries under Rule 3-16. In addition, in the event that Rule 3-16 or Rule 3-10 of Regulation S-X is amended, modified or interpreted by the SEC to require (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would require) the filing with the SEC (or any other governmental agency) of separate financial statements of any of our subsidiaries due to the fact that such subsidiary's capital stock or other securities secure our Senior Second Secured Notes, then the capital stock or other securities of such subsidiary automatically will be deemed not to be part of the collateral for the notes but only to the extent necessary to not be subject to such requirement. In such event, the security documents for the Senior Second Secured Notes may be amended or modified, without the consent of any holder of notes, to the extent necessary to release the liens of the Senior Second Secured Notes on the shares of capital stock or other securities that are so deemed to no longer constitute part of the collateral; however, the excluded collateral will continue to secure our first priority lien obligations such as our senior secured revolving credit facility. As a result of the provisions in the indenture and security documents relating to subsidiary capital stock, holders of our Senior Second Secured Notes may at any time in the future lose all or a portion of their security interest in the capital stock of any of our other subsidiaries if the Applicable Value of that stock were to become equal to or greater than the Collateral Threshold. As of July 2, 2004, all of the capital stock of our subsidiaries Dur-O-Wal, Inc., Southern Construction Products, Inc., and 65% of the voting capital stock and 100% of the non-voting capital stock of our subsidiary Dayton Superior Canada Ltd. constituted collateral for the notes. The capital stock of our subsidiaries Dayton Superior Specialty Chemical Corp., Symons Corporation, Aztec Concrete Accessories, Inc. and Trevecca Holdings Inc. did not constitute collateral for the notes, since the Applicable Value of the capital stock equaled or exceeded the Collateral Threshold. This is a change from the first quarter of 2004 as the capital stock of our subsidiaries, Dayton Superior Specialty Chemical Corp., Aztec Concrete Accessories, Inc. and Trevecca Holdings Inc., did constitute collateral for the notes as of April 2, 2004. We have based our determination of which subsidiary's capital stock currently constitutes collateral upon the book value, par value and estimated market value of the capital stock of each of our subsidiaries as of July 2, 2004. The Applicable Value for the capital stock of each of our subsidiaries is the greater of the book value and estimated market value, as the par value of each subsidiary's capital stock is nominal and therefore has not impacted our calculation of Applicable Value. 34 Set forth in the table below is the Applicable Value of each subsidiary's capital stock as of July 2, 2004:
Subsidiary Applicable Value - ---------------------------------------- ---------------- Symons Corporation $ 64,439 Aztec Concrete Accessories, Inc. 35,255 Dur-O-Wal, Inc. 15,076 Trevecca Holdings, Inc. (1) 35,255 Dayton Superior Specialty Chemical Corp. 33,538 Southern Construction Products, Inc. (2) - Dayton Superior Canada Ltd. 9,730
(1) Trevecca Holdings, Inc. is a holding company, the sole asset of which has remained the capital stock of Aztec Concrete Accessories, Inc. since we acquired Trevecca Holdings and Aztec Concrete Accessories in January 2001. (2) Southern Construction Products, Inc. is currently an inactive corporation with no assets. In respect of Symons Corporation, and Dayton Superior Specialty Chemical Corp. the Applicable Value of their common stock was based upon book value. Book value of a subsidiary's capital stock is calculated as of each preceding period end and represents the original purchase price of the subsidiary's capital stock plus any income earned and less any losses and any transfers of assets. In respect of Aztec Concrete Accessories, Inc., Dur-O-Wal, Inc., Dayton Superior Canada Ltd, and Trevecca Holdings, Inc., the Applicable Value of their common stock was based upon estimated market value. We have calculated the estimated market value of our subsidiaries' capital stock by determining the earnings before interest, taxes, depreciation, and amortization, or EBITDA, of each subsidiary for the twelve months ended July 2, 2004, adjusted in each case to add back facility closing and severance expenses, loss on sale of fixed assets and other expense, and multiplied this adjusted EBITDA by 5.5 times. We retain an independent appraisal firm for purposes of calculating the market value of our common stock on a going concern basis, as required under our Management Stockholders' Agreement and in connection with determining equity-based compensation. The appraisal firm has informed us that a range of 5 to 6 times adjusted EBITDA is reasonable for determining the fair value of the capital stock of smaller, basic manufacturing companies. We determined that using a multiple of 5.5 times, which is the mid-point of the range described above is a reasonable and appropriate means for determining fair value of our subsidiaries' capital stock. Set forth below is the adjusted EBITDA of each of our subsidiaries other than Southern Construction Products, Inc. (which has no adjusted EBITDA) for the twelve months ended July 2, 2004, together with a reconciliation to the net income (loss) of each of these subsidiaries:
Trevecca Dayton Superior Dayton Symons Aztec Concrete Dur-O-Wal, Holdings, Specialty Superior Corporation Accessories, Inc. Inc. Inc. (1) Chemical Corp. Canada Ltd. ----------- ----------------- ---------- -------- -------------- ----------- Net Income $(11,335) $ 4,666 $ 1,878 $ 4,666 $ 1,658 $ 1,395 Provision for Income Taxes (1,462) 1,098 222 1,098 352 162 Other (Income) Expense 352 2 - 2 220 152 Interest Expense 414 - - - - - Income from Operations (12,031) 5,766 2,100 5,766 2,230 1,709 Facility Closing and Severance Expenses 527 - - - 96 - Depreciation Expense 20,965 644 641 644 628 60 Amortization of Intangibles 1,030 - - - - - -------- -------- -------- -------- -------- -------- Adjusted valuation EBITDA 10,491 6,410 2,741 6,410 2,954 1,769 Multiple 5.5 5.5 5.5 5.5 5.5 5.5 -------- -------- -------- -------- -------- -------- Estimated Fair Value $ 57,701 $ 35,255 $ 15,076 $ 35,255 $ 16,247 $ 9,730 ======== ======== ======== ======== ======== ========
(1) Trevecca Holdings, Inc. is a holding company, the sole asset of which has remained the capital stock of Aztec Concrete Accessories, Inc. since we acquired Trevecca Holdings and Aztec Concrete Accessories in January 2001. 35 As described above, we have used EBITDA and adjusted EBITDA of each of our subsidiaries solely for purposes of determining the estimated market value of their capital stock to determine whether that capital stock is included in the collateral. EBITDA and adjusted EBITDA are not recognized financial measures under generally accepted accounting principles and do not purport to be alternatives to operating income as indicators of operating performance or to cash flows from operating activities as measures of liquidity. Additionally, EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our consolidated results as reported under generally accepted accounting principles. Because not all companies use identical calculations, the presentation of adjusted EBITDA also may not be comparable to other similarly titled measures of other companies. You are encouraged to evaluate the adjustments taken and the reasons we consider them appropriate for analysis for determining estimated market value of our subsidiaries' capital stock. A change in the Applicable Value of the capital stock of any of our subsidiaries could result in a subsidiary's capital stock that was previously excluded from collateral becoming part of the collateral or a subsidiary's capital stock that was previously included in collateral to become excluded. The following table reflects the amounts by which the Applicable Value of each subsidiary's capital stock as of July 2, 2004 and the adjusted EBITDA of each subsidiary for the twelve months ended July 2, 2004, in the case of Dur-O-Wal, Inc. and Dayton Superior Canada Ltd., would have to increase in order for that subsidiary's capital stock to no longer constitute collateral or, in the case of Dayton Superior Specialty Chemical Corp., Symons Corporation, Aztec Concrete Accessories, Inc. and Trevecca Holdings Inc., would have to decrease in order for their capital stock to become collateral:
Change in Applicable Change in Adjusted Subsidiary Value EBITDA - ---------------------------------------- -------------------- ------------------ Symons Corporation $(31,439) $ (4,491) Aztec Concrete Accessories, Inc. (2,254) (410) Dur-O-Wal, Inc. 17,924 3,259 Trevecca Holdings, Inc. (1) (2,254) (410) Dayton Superior Specialty Chemical Corp. (538) - Southern Construction Products, Inc. - - Dayton Superior Canada Ltd. 23,269 4,231
(1) Trevecca Holdings, Inc. is a holding company, the sole asset of which has remained the capital stock of Aztec Concrete Accessories, Inc. since we acquired Trevecca Holdings and Aztec Concrete Accessories in January 2001. 36 CRITICAL ACCOUNTING POLICIES In preparing our consolidated financial statements, we follow accounting principles generally accepted in the United States. These principles require us to make certain estimates and apply judgments that affect our financial position and results of operations. We continually review our accounting policies and financial information disclosures. On an on-going basis, we evaluate our estimates, including those related to allowance for doubtful accounts, inventories, investments, long-lived assets, income taxes, insurance reserves, restructuring liabilities, environmental contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. There have been no material changes in our policies or estimates since December 31, 2003. 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 our management and us 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; the amount of debt we must service; the effects of weather and the seasonality of the construction industry; our ability to implement cost savings programs successfully and on a timely basis; our ability to successfully identify, finance, complete and integrate acquisitions; increases in the price of steel (our principal raw material), availability of steel, 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 under "Risks Related to Our Business" in Part I of our most recent Annual Report on Form 10-K. 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. 37 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As of July 2, 2004, we had financial instruments, which were sensitive to changes in interest rates. These financial instruments consist of: - $95.0 million revolving credit facility, $58.0 million of which was outstanding at July 2, 2004; - $165.0 million of Senior Second Secured Notes, with a net book value of $158.2 million; - $154.7 million of Senior Subordinated Notes, with a net book value of $146.8 million; - $8.4 million of notes payable to the seller of Safway; - $4.2 million in capital lease obligations; - $1.1 million in other fixed-rate, long-term debt. Our $95.0 million senior secured revolving credit facility matures on January 30, 2007. The credit facility has no financial covenants. Availability of borrowings is limited to 85% of eligible accounts receivable and 60% of eligible inventories and rental equipment, less $10.0 million. At July 2, 2004, the Company had outstanding letters of credit of $11.1 million and available borrowings of $25.9 million under this revolving credit facility. The credit facility is secured by substantially all assets of the Company and its domestic subsidiaries. Our $165.0 million of senior second secured notes mature in June 2008. 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 proceeds of the offering of the Senior Notes were $156.9 million and were used to repay the Company's acquisition credit facility, certain of the Company's then current debt, and a portion of the revolving credit facility. The estimated fair value of the notes is $167.5 million as of July 2, 2004. The senior second secured notes are secured by substantially all assets of the Company and its domestic subsidiaries. Our $154.7 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 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 $134.6 million as of July 2, 2004. Our $12.0 million non-interest bearing note to the seller of Safway is being accreted to the face value at 14.5% using the effective interest method. Annual payments of $1.0 million are due on September 30 of each year from 2004 through 2008, with a final balloon payment of $6.0 million due on December 31, 2008. The book value of the note at July 2, 2004 was $6.9 million. Our $2.0 million non-interest bearing note payable to the seller of Safway is being accreted to the face value at 6.0% using the effective interest method. Minimum payments on the note are $99,000 for the remainder of 2004, $282,000 in 2005, $398,000 in 2006, $563,000 in 2007, and $464,000 in 2008. Payments may be accelerated if certain revenue targets are met. The book value of the note at July 2, 2004 was $1.5 million. Our other long-term debt at July 2, 2004 consisted of $1.1 million of 9.1% junior subordinated debentures previously held by the Dayton Superior Capital Trust with an estimated fair value of $1.9 million, and a 7% loan due in annual installments of $31,500 per year. In the ordinary course of our business, we also are exposed to price changes in raw materials, particularly steel. 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. 38 ITEM 4. CONTROLS AND PROCEDURES. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level. There has been no change in our internal controls over financial reporting during the most recent quarter that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting. 39 PART II. - OTHER INFORMATION ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. On May 19, and May 31, 2004, the Company sold 31,044 common shares to Company employees for an aggregate purchase price of $31,044 ($1.96 per share) in conjunction with the exercise of stock options. The shares were issued in reliance upon the exemption from registration set forth in Section 4(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. See Index to Exhibits following the signature page to this report for a list of Exhibits. (b) Reports on Form 8-K. During the quarter ended July 2, 2004, we filed the following Current Reports on Form 8-K: Current Report on Form 8-K dated May 18, 2004 reporting under Item 12 (Results of Operations and Financial Condition) and Item 7 (Financial Statements and Exhibits) that the Company had issued a press release announcing its summary financial results for the first quarter of 2004. * - ---------------- *Information in a Current Report on Form 8-K that is furnished pursuant to Item 9 or Item 12 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth in such filing by specific reference to such Current Report on Form 8-K. 40 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DAYTON SUPERIOR CORPORATION DATE: August 16, 2004 BY: /s/ Edward J. Puisis ------------------------------------------ Edward J. Puisis Vice President and Chief Financial Officer 41 INDEX TO EXHIBITS
Exhibit No. Description - ----------- ----------- (10) Material Contracts 10.1 First Amendment to Incentive Stock Option Agreement (31) Rule 13a-14(a)/15d-14(a) Certifications 31.1 Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer 31.2 Rule 13a-14(a)/15d-14(a) Certification of Vice President and Chief Financial Officer (32) Section 1350 Certifications 32.1 Section 1350 Certification of President and Chief Executive Officer 32.2 Section 1350 Certification of Vice President and Chief Financial Officer
42 EX-10.1 2 l08613aexv10w1.txt EX-10.1 1ST AMENDMENT TO INCENTIVE STOCK OPTION AGREEMENT Exhibit 10.1 FIRST AMENDMENT TO INCENTIVE STOCK OPTION AGREEMENT This AGREEMENT dated and effective as of July 1, 2003 is made by and between Dayton Superior Corporation, an Ohio corporation, (the "Company") and _________________ (the "Optionee"). WHEREAS, the Company and the Optionee previously entered into that certain Incentive Stock Option Agreement (the "Option Agreement") dated as of ___________________; and WHEREAS, pursuant to Section 7.2 of the 2000 Stock Option Plan of Dayton Superior Corporation, as amended, (the "Plan"), the terms of which are hereby incorporated by reference and made a part of the Option Agreement, the Company has reserved the right to amend the Option Agreement; and WHEREAS, the Company and the Optionee have mutually agreed that it is in their best interest to amend the Option Agreement as set forth herein; NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree to amend the Option Agreement as follows: 1. Subsection (a) of the definition of "Target Amount" set forth in the Option Agreement shall be amended to change the reference to "three times the amount of such Investment" to "2.25 times the amount of such Investment". 2. All "EBITDA Targets", "Cumulative EBITDA Targets", "Performance EBITDA Targets", "Cumulative Performance EBITDA Targets", "High Performance EBITDA Targets", "Cumulative High Performance EBITDA Targets" or any other similar EBITDA-based targets contained in the Option Agreement with respect to any fiscal year shall be replaced in their entirety with the following:
EBITDA TARGETS CUMULATIVE EBITDA FISCAL YEAR ($ MILLIONS) TARGETS ($ MILLIONS) - ----------- -------------- -------------------- 2003 55.0 55.0 2004 63.0 118.0 2005 78.0 196.0 2006 92.0 288.0 2007 103.0 391.0
3. All Options eligible to become vested each fiscal year if the EBITDA-based targets are met shall be eligible to become vested in installments of 20% of the shares covered by the Options on, or within 90 days following, December 31 of each of 2003, 2004, 2005, 2006 and 2007. 1 4. If the Company's EBITDA as of the end of any of fiscal year 2003 through 2007 is less than the applicable EBITDA Target with respect to such year, that portion of the Option that would have become exercisable had the applicable EBITDA Target been met shall become exercisable on, or within 90 days following, the first December 31 thereafter as of which (a) the EBITDA as of such December 31 equals or exceeds the applicable EBITDA target for such year and (b) the Cumulative EBITDA equals or exceeds the applicable Cumulative EBITDA Target through such December 31. 5. In all other respects, the Option Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed and delivered this First Amendment to the Incentive Stock Option Agreement as of the day and year first above written. DAYTON SUPERIOR CORPORATION By: _______________________________ Steven C. Huston Vice President, General Counsel & Secretary OPTIONEE ___________________________________ 2 EX-31.1 3 l08613aexv31w1.txt EX-31.1 302 CERTIFICATION FOR CEO Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Stephen R. Morrey, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Dayton Superior Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Dayton Superior Corporation as of, and for, the periods presented in this quarterly report; 4. Dayton Superior Corporation's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for Dayton Superior Corporation and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Dayton Superior Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of Dayton Superior Corporation's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) disclosed in this quarterly report any change in Dayton Superior Corporation's internal control over financial reporting that occurred during Dayton Superior Corporation's most recent fiscal year that has materially affected, or is reasonably likely to materially affect, Dayton Superior Corporation's internal control over financial reporting; and 5. Dayton Superior Corporation's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Dayton Superior Corporation's auditors and the audit committee of Dayton Superior Corporation's board of directors: a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Dayton Superior Corporation's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in Dayton Superior Corporation's internal control over financial reporting. August 16, 2004 /s/ Stephen R. Morrey ---------------------- Stephen R. Morrey President and Chief Executive Officer EX-31.2 4 l08613aexv31w2.txt EX-31.2 302 CERTIFICATION FOR CFO Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Edward J. Puisis, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Dayton Superior Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Dayton Superior Corporation as of, and for, the periods presented in this quarterly report; 4. Dayton Superior Corporation's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for Dayton Superior Corporation and we have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Dayton Superior Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of Dayton Superior Corporation's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c. disclosed in this quarterly report any change in Dayton Superior Corporation's internal control over financial reporting that occurred during Dayton Superior Corporation's most recent fiscal year that has materially affected, or is reasonably likely to materially affect, Dayton Superior Corporation's internal control over financial reporting; and 5. Dayton Superior Corporation's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Dayton Superior Corporation's auditors and the audit committee of Dayton Superior Corporation's board of directors: a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Dayton Superior Corporation's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in Dayton Superior Corporation's internal control over financial reporting. August 16, 2004 /s/ Edward J. Puisis -------------------- Edward J. Puisis Vice President and Chief Financial Officer EX-32.1 5 l08613aexv32w1.txt EX-32.1 906 CERTIFICATION FOR CEO Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Stephen R. Morrey, President and Chief Executive Officer of Dayton Superior Corporation (the "Company"), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: The Quarterly Report on Form 10-Q of the Company for the period ending July 2, 2004 (the "Periodic Report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 16, 2004 /s/ Stephen R. Morrey ---------------------- Stephen R. Morrey President and Chief Executive Officer EX-32.2 6 l08613aexv32w2.txt EX-32.2 906 CERTIFICATION FOR CFO Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Edward J. Puisis, Vice President and Chief Financial Officer of Dayton Superior Corporation (the "Company"), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: The Quarterly Report on Form 10-Q of the Company for the period ending July 2, 2004 (the "Periodic Report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 16, 2004 /s/ Edward J. Puisis -------------------- Edward J. Puisis Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----