-----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, PxT3oVeRsGc19Me6kRRiadgLKtkDvk2eU/bVFarSff2Vvd0wLWN2fdECzSXn0DFX HO0tiD0IBehLBHclpeG0eQ== 0000950152-99-004469.txt : 19990517 0000950152-99-004469.hdr.sgml : 19990517 ACCESSION NUMBER: 0000950152-99-004469 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990402 FILED AS OF DATE: 19990514 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: SEC FILE NUMBER: 001-11781 FILM NUMBER: 99623092 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 DAYTON SUPERIOR CORPORATION FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED COMMISSION FILE NUMBER APRIL 2, 1999 1-11781 DAYTON SUPERIOR CORPORATION - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) OHIO 31-0676346 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 7777 Washington Village Dr., Suite 130 Dayton, Ohio 45459 - --------------------------------------- ----------------------- (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: 937-428-6360 ---------------- NOT APPLICABLE - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed from last report) Indicate by mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------- ------- 5,943,446 Class A Common Shares were outstanding as of May 3, 1999 2 PART I. - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS Dayton Superior Corporation and Subsidiaries Consolidated Balance Sheets As of April 2, 1999 and December 31, 1998 (Amounts in thousands) (Unaudited)
April 2, December 31, 1999 1998 ---------- ------------ ASSETS Current assets Cash $ -- $ 560 Accounts receivable, net of allowances for doubtful accounts and sales returns and allowances of $4,608 and $4,432 48,792 42,996 Inventories (Note 3) 38,361 36,058 Prepaid expenses and other current assets 3,199 4,396 Prepaid income taxes 904 828 Future income tax benefits 3,497 3,521 --------- --------- Total current assets 94,753 88,359 --------- --------- Rental equipment, net (Note 3) 56,593 52,586 --------- --------- Property, plant and equipment 66,151 63,850 Less accumulated depreciation (24,004) (22,069) --------- --------- Net property, plant and equipment 42,147 41,781 --------- --------- Goodwill and intangible assets, net of accumulated amortization 73,091 70,130 Other assets 711 764 --------- --------- Total assets $ 267,295 $ 253,620 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current portion of long-term debt (Note 4) $ 32 $ 32 Accounts payable 23,485 20,749 Accrued compensation and benefits 9,602 12,443 Other accrued liabilities 8,622 10,408 --------- --------- Total current liabilities 41,741 43,632 Long-term debt (Note 4) 133,735 118,173 Deferred income taxes 11,090 11,544 Other long-term liabilities 6,599 5,683 --------- --------- Total liabilities 193,165 179,032 --------- --------- Shareholders' equity Class A common shares 47,353 42,316 Class B common shares -- 5,037 Class A treasury shares (266) (145) Cumulative other comprehensive income (263) (281) Retained earnings 27,306 27,661 --------- --------- Total shareholders' equity 74,130 74,588 --------- --------- Total liabilities and shareholders' equity $ 267,295 $ 253,620 ========= =========
The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets. 2 3 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Operations For The Three Fiscal Months Ended April 2, 1999 and April 3, 1998 (Amounts in thousands, except share and per share amounts) (Unaudited)
1999 1998 ----------- ----------- Net sales $ 68,196 $ 59,227 Cost of sales 44,771 39,510 ----------- ----------- Gross profit 23,425 19,717 Selling, general and administrative expenses 20,449 17,965 Amortization of goodwill and intangibles 647 495 ----------- ----------- Income from operations 2,329 1,257 Other expenses Interest expense, net 2,975 2,993 Other expense, net -- 4 ----------- ----------- Loss before benefit for income taxes (646) (1,740) Benefit for income taxes (291) (731) ----------- ----------- Net loss $ (355) $ (1,009) =========== =========== Basic net loss per share $ (0.06) $ (0.18) =========== =========== Basic weighted average common shares outstanding 5,947,516 5,728,996 =========== =========== Diluted net loss per share $ (0.06) $ (0.18) =========== =========== Diluted weighted average common and common equivalents shares outstanding 5,947,516 5,728,996 =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 3 4 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Cash Flows For The Three Fiscal Months Ended April 2, 1999 and April 3, 1998 (Amounts in thousands) (Unaudited)
1999 1998 -------- -------- Cash Flows From Operating Activities: Net loss $ (355) $ (1,009) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation 3,015 2,745 Amortization of goodwill and intangibles 647 495 Deferred income taxes (430) (114) Amortization of debt discount and deferred financing costs 200 182 Gain on sales of rental equipment and property, plant and (2,076) (1,592) equipment Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable (5,111) (4,516) Inventories (1,990) (1,953) Prepaid income taxes (76) 60 Accounts payable 2,630 4,129 Accrued liabilities and other long-term liabilities (3,711) (499) Other, net 1,182 30 -------- -------- Net cash used by operating activities (6,075) (2,042) -------- -------- Cash Flows From Investing Activities: Property, plant and equipment additions (1,607) (1,159) Proceeds from sale of fixed assets 232 -- Rental equipment additions (6,012) (4,034) Proceeds from sales of rental equipment 2,971 2,392 Acquisitions (Note 2) (5,528) -- -------- -------- Net cash used in investing activities (9,944) (2,801) -------- -------- Cash Flows From Financing Activities: Issuance of long-term debt 15,562 4,823 Purchase of treasury shares (121) -- Issuance of common stock -- 14 -------- -------- Net cash provided by financing activities 15,441 4,837 -------- -------- Effect of Exchange Rate Changes on Cash 18 6 -------- -------- Net decrease in cash (560) -- Cash, beginning of period 560 -- -------- -------- Cash, end of period $ -- $ -- ======== ======== Supplemental Disclosures: Cash paid (refunded) for income taxes $ 353 $ (728) Cash paid for interest 2,915 2,640
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 4 5 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Comprehensive Income For The Three Fiscal Months Ended April 2, 1999 and April 3, 1998 (Amounts in thousands) (Unaudited)
1999 1998 ---------- ----------- Net loss $ (355) $ (1,009) Other comprehensive income: Foreign currency translation adjustment 18 6 ---------- ----------- Comprehensive loss $ (337) $ (1,003) ========== ===========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 5 6 DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS APRIL 2, 1999 AND APRIL 3, 1998 (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 generally accepted accounting principles 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, 1998. (2) ACQUISITIONS (a) SYMONS CORPORATION-- On September 29, 1997, the Company purchased the stock of Symons Corporation ("Symons"). The purchase agreement between the Company and the former stockholders of Symons ("the Former Stockholders") relating to the Acquisition ("the Purchase Agreement") provides for an adjustment to the purchase price under certain circumstances. The Company has advised the Former Stockholders that it believes it is entitled to a purchase price adjustment in its favor, and the Former Stockholders similarly advised the Company that they believe they are entitled to a purchase price adjustment in their favor. If the Company and the Former Stockholders are unable to resolve these differences, the dispute will be referred to a mutually satisfactory accounting firm, which is expected to resolve such differences, in accordance with the Purchase Agreement. On June 12, 1998, the Former Stockholders filed a lawsuit in Delaware Chancery Court seeking a determination with respect to a limited number of issues involved in the dispute, which the Company believes can be resolved only through arbitration. On October 28, 1998, the Court granted the Company's motion to dismiss with respect to certain of these issues (as to which the Company intends to proceed with arbitration) and retained jurisdiction with respect to the remainder of the issues. On December 28, 1998, the Court stayed the proceeding with respect to the issues as to which it had retained jurisdiction, pending the outcome of arbitration commenced by the parties with respect to the purchase price adjustment. Either party may seek to reopen the proceedings following the arbitration. At this time, the Company can make no determination as to the amount of the adjustment, if any, that will be made to the purchase price. The Company intends to vigorously pursue its rights under the Purchase Agreement. 6 7 (b) CEMPRO, INC.-- Effective January 1, 1999, the Company acquired substantially all of the assets and assumed certain of the liabilities of Cempro, Inc. ("Cempro") for approximately $5,500 in cash, including acquisition costs of approximately $100. The business is being operated as a part of the Company's concrete accessories business. The acquisition has been accounted for as a purchase, and the results of Cempro have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the estimated fair values of the assets acquired. Certain appraisals and evaluations are preliminary and may change. Pro forma financial information is not required. (c) SECURE, INC.-- In June 1998, the Company purchased substantially all of the assets of Secure, Inc., ("Secure") a subsidiary of The Lofland Company, for approximately $700 in cash, including acquisition costs of approximately $100. This business is being operated as a part of the Company's paving products business. The acquisition has been accounted for as a purchase, and the results of Secure have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the estimated fair values of the assets acquired. Certain appraisals and evaluations are preliminary and may change. Pro forma financial information is not required. (d) SYMONS CONCRETE FORMS -- In May 1998, the Company purchased the business now known as Symons Concrete Forms. The purchase price was approximately $6,700, including acquisition costs of approximately $200, and was paid in cash of approximately $400, assumption of long-term debt of $2,200, and delivery of 222,496 Class A Common Shares valued at approximately $4,100. The business is being operated as a part of the Company's concrete forming systems division. The acquisition has been accounted for as a purchase, and the results of Symons Concrete Forms have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the estimated fair values of the assets acquired and liabilities assumed. Certain appraisals and evaluations are preliminary and may change. Pro forma financial information is not required. (e) NORTHWOODS-- In May 1998, the Company purchased the assets of the Northwoods branches of Concrete Forming, Inc. ("Northwoods") for $750 in cash. The Northwoods branches are being operated as a part of the Company's concrete forming systems division. 7 8 The acquisition has been accounted for as a purchase, and the results of the Northwoods branches have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the estimated fair values of the assets acquired. Certain appraisals and evaluations are preliminary and may change. Pro forma financial information is not required. (3) ACCOUNTING POLICIES The interim consolidated financial statements have been prepared in accordance with the accounting policies described in the notes to the Company's consolidated financial statements for the year ended December 31, 1998. While management believes that the procedures followed in the preparation of interim financial information are reasonable, the accuracy of some estimated amounts is dependent upon facts that will exist or calculations that will be accomplished at year end. Examples of such estimates include changes in the LIFO reserve (based upon the Company's best estimate of inflation to date) and management bonuses. Any adjustments pursuant to such estimates during the fiscal quarter were of a normal recurring nature. (a) FISCAL QUARTER--The Company's fiscal quarters are defined as the periods ending on the Friday nearest to the end of March, June and September. (b) INVENTORIES--Substantially all inventories of the domestic Dayton Superior and Dur-O-Wal operations are stated at the lower of last in, first out (LIFO) cost or market (which approximates current cost). All other inventories are stated at the lower of first-in, first-out (FIFO) cost or market. The Company had no LIFO reserve as of April 2, 1999 and December 31, 1998. Following is a summary of the components of inventories as of April 2, 1999 and December 31, 1998:
April 2, December 31, 1999 1998 ----------------- -------------------- Raw materials $ 8,040 $ 7,659 Finished goods and work in progress 32,353 30,022 ----------------- -------------------- 40,393 37,681 Net realizable value reserve (2,032) (1,623) ----------------- -------------------- $ 38,361 $ 36,058 ================= ====================
(c) RENTAL EQUIPMENT -- Rental equipment is manufactured by the Company for resale and for rent to others on a short-term basis. Rental equipment is recorded at the lower of FIFO cost or market and is depreciated over the estimated useful life of the equipment, twelve to fifteen years, on a straight-line method. The balances as of April 2, 1999 and December 31, 1998 are net of accumulated depreciation of $7,840 and $6,796, respectively. Rental revenues were $10,509 and $9,040 for the three fiscal months ended April 2, 1999 and April 3, 1998, respectively. Cost of sales associated with rental revenues were $1,900 and $1,771 for the three fiscal months ended April 2, 1999 and April 3, 1998, respectively. 8 9 (d) FINANCIAL INSTRUMENTS--The Company uses interest rate swaps to manage interest rate risk associated with its floating rate borrowing. The swap agreements are contracts to exchange floating rate for fixed interest payments periodically over the life of the agreements without the exchange of the underlying amounts. The differential paid or received on the interest rate agreements is recognized as an adjustment to interest expense. The fair value of the interest rate swaps in place at April 2, 1999 is a liability of $981. (e) RECLASSIFICATIONS--Certain reclassifications have been made to the 1998 amounts to conform to their 1999 classifications. (4) CREDIT ARRANGEMENTS Following is a summary of the Company's long-term debt as of April 2, 1999 and December 31, 1998:
April 2, December 31, -------------- --------------- 1999 1998 Revolving lines of credit, weighted average interest rate of 6.4% $ 28,570 $ 13,000 Term Loan, weighted average interest rate of 7.75% 100,000 100,000 Note payable to one of the Former Stockholders, 10.5% 5,000 5,000 City of Parsons, Kansas Economic Development Loan, 7% 197 205 -------- -------- Total long-term debt 133,767 118,205 Less current portion (32) (32) -------- -------- Long-term portion $133,735 $118,173 ======== ========
At April 2, 1999, $40,000 of the $40,000 Revolving Credit Facility was available, of which $28,570 of borrowings was outstanding. Average borrowings under the Revolving Credit Facility were $23,043 and $17,694 during the first quarter of 1999 and 1998, respectively, at an approximate weighted average interest rate of 7.1% and 8.1%, respectively. The maximum borrowings outstanding during the first quarter of 1999 and 1998 were $29,770 and $21,220, respectively. The Credit Agreement contains certain restrictive covenants which, among other things, require that the Company maintain a minimum fixed charge coverage ratio, not exceed a certain leverage ratio and limit the payment of dividends on Common Shares. The Company was in compliance with its loan covenants as of April 2, 1999. (5) STOCK OPTION PLANS The Company has five stock option plans all of which provide for an option exercise price equal to the stock's market price on the date of grant and all of which are accounted for under APB Opinion No. 25, under which no compensation costs have been recognized. Had compensation cost for these plans been determined consistent with Statement of Financial Accounting Standards No.123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company's net income and net income per 9 10 share for the three fiscal months ended April 2, 1999 and April 3, 1998 would have been reduced to the following pro forma amounts:
For the three fiscal months ended ---------------------------------------- April 2, 1999 April 3, 1998 ------------- ------------- Net loss As Reported $ (355) $ (1,009) Pro Forma (438) (1,044) Basic net loss per share As Reported (0.06) (0.18) Pro Forma (0.07) (0.18) Diluted net loss per share As Reported (0.06) (0.18) Pro Forma (0.07) (0.18)
Because the SFAS 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. A summary of the activity of the Company's stock option plans for the three fiscal months ended April 2, 1999 is presented in the table below:
Weighted Average Number of Exercise Price Per Shares Share ------------------ ---------------------- Outstanding at December 31, 1998 358,033 $ 6.75 Granted at a fair value of $8.27 80,100 19.44 ------------------ ---------------------- Outstanding at April 2, 1999 438,133 $ 9.07 ================== ======================
(6) SEGMENT REPORTING The Company operates in four segments, each with a general manager: concrete accessories, concrete forming systems, paving products, and masonry. The segments are differentiated by their products and services, all of which serve the construction industry. Sales between segments are recorded at normal selling price by the selling division and at cost for the buying division, with the profit recorded as an intersegment elimination. Segment assets include accounts receivable; inventories; property, plant, and equipment; rental equipment; and an allocation of goodwill. Corporate and unallocated assets include cash, prepaid income taxes, future tax benefits, and financing costs. Export sales and sales by non-U.S. affiliates are not significant. 10 11 Information about the profit (loss) of each segment and the reconciliations to the consolidated amounts for the three fiscal months ended April 2, 1999 and April 3, 1998 is as follows:
1999 1998 -------- -------- Concrete Accessories $ 30,681 $ 27,723 Concrete Forming Systems 24,876 20,438 Paving Products 6,673 5,971 Masonry Products 5,966 5,095 -------- -------- Net sales to external customers $ 68,196 $ 59,227 ======== ======== Concrete Accessories $ 1,060 $ 1,349 Concrete Forming Systems 1,232 893 Paving Products 97 -- -------- -------- Net sales to other segments $ 2,389 $ 2,242 ======== ======== Concrete Accessories $ 975 $ 1,021 Concrete Forming Systems 1,701 1,648 Paving Products 182 188 Masonry Products 117 136 -------- -------- Interest expense $ 2,975 $ 2,993 ======== ======== Concrete Accessories $ 2,515 $ 1,908 Concrete Forming Systems 303 (640) Paving Products (499) (242) Masonry Products (386) (525) Intersegment Eliminations (1,181) (1,084) Corporate (1,398) (1,157) -------- -------- Income (loss) before income taxes $ (646) $ (1,740) ======== ======== Concrete Accessories $ 753 $ 684 Concrete Forming Systems 1,694 1,512 Paving Products 223 207 Masonry Products 332 328 Corporate 13 14 -------- -------- Depreciation $ 3,015 $ 2,745 ======== ======== Concrete Accessories $ 379 $ 330 Concrete Forming Systems 109 24 Paving Products 63 44 Masonry Products 96 97 -------- -------- Amortization of goodwill and intangibles $ 647 $ 495 ======== ========
11 12 Information regarding capital expenditures by segment and the reconciliation to the consolidated amounts for the three fiscal months ended April 3, 1999 and April 2, 1998 is as follows:
1999 1998 ------ ------ Concrete Accessories $ 746 $ 341 Concrete Forming Systems 385 605 Paving Products 276 181 Masonry Products 155 32 Corporate 45 -- ------ ------ Property, Plant, and Equipment Additions $1,607 $1,159 ====== ====== Concrete Accessories $ 328 $ 543 Concrete Forming Systems 5,684 3,491 ------ ------ Rental Equipment Additions $6,012 $4,034 ====== ======
There has been no material change in the relative assets employed by each segment since December 31, 1998. (7) CONTINGENCIES Symons is currently a defendant involved in a civil suit brought by EFCO Corp., a competitor of Symons in one portion of their business. EFCO Corp. alleged that Symons engaged in false advertising, misappropriation of trade secrets, intentional interference with contractual relations, and certain other activities. After a jury trial, preliminary damages of approximately $14,000 were awarded against Symons in January 1999. In ruling on post-trial motions in April 1999, the Judge dismissed EFCO's claim of intentional interference with contractual relations, but increased the damages awarded to EFCO by $100. The Company believes that Symons has numerous substantial grounds for a successful appeal and remains committed to vigorously pursuing its appellate rights. A successful appeal could result in judgment for Symons or a new trial. Symons' liability, if any, cannot finally be determined until such time as all rights of the parties have been exhausted or have expired by lapse of time. The Company considers the ultimate outcome of this litigation to be not estimable. Accordingly, the Company has not recorded any liability for the resolution of this suit. In the event that Symons is unsuccessful in its post-trial motions and appeals, it may have a material adverse effect on its consolidated financial position, results of operations, or cash flows. 12 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Dayton Superior Corporation (the "Company") achieved record first quarter 1999 net sales of $68.2 million, which were 15.1% higher than net sales in the first quarter of 1998 of $59.2 million. Net sales from the acquisitions of Cempro, the business now known as Symons Concrete Forms, Secure, and Northwoods amounted to $4.8 million, or 54%, of the increase for the quarter. Organic growth was 7% despite flat markets due to volume gains. The Company's first quarter net sales by major product category during the last two years were:
DOLLARS IN MILLIONS THREE FISCAL MONTHS ENDED ----------------------------------------- APRIL 2, 1999 APRIL 3, 1998 ------------------- ------------------ Concrete Accessories $ 31.7 $ 29.1 Concrete Forming Systems 26.1 21.3 Paving Products 6.8 6.0 Masonry Products 5.9 5.1 Intersegment Eliminations (2.3) (2.3) =================== ================== Net Sales $ 68.2 $ 59.2 =================== ==================
- ------------------------------ Loss before income taxes was ($0.6) million in the first quarter of 1999 compared favorably to ($1.7) million in the first quarter of 1998. Net loss for the first quarter of 1999 was ($0.4) million, or ($0.06) per basic and diluted share, compared favorably to ($1.0) million, or ($0.18) per basic and diluted share, in the first quarter of 1998. In June 1998, the Transportation Equity Act for the 21st Century ("TEA-21") was enacted. TEA-21 provides, on average, a 40% increase in federal highway spending over the next six years. The Company's paving products segment is expected to benefit from TEA-21 beginning in the second half of 1999. The Company believes that TEA-21 had no significant impact on its first quarter operations of 1999 or 1998. IMPLEMENTATION OF BUSINESS STRATEGY On September 29, 1997, the Company purchased the stock of Symons. The Purchase Agreement provides for an adjustment to the purchase price under certain circumstances. The Company has advised the Former Stockholders that it believes it is entitled to a purchase price adjustment in its favor, and the Former Stockholders similarly advised the Company that they believe they are entitled to a purchase price adjustment in their favor. If the Company and the Former Stockholders are unable to resolve these differences, the dispute will be referred to a mutually satisfactory accounting firm, which is expected to resolve such differences, in accordance with the Purchase Agreement. On June 12, 1998, the Former Stockholders filed a lawsuit in 13 14 Delaware Chancery Court seeking a determination with respect to a limited number of issues involved in the dispute, which the Company believes can be resolved only through arbitration. On October 28, 1998, the Court granted the Company's motion to dismiss with respect to certain of these issues (as to which the Company intends to proceed with arbitration) and retained jurisdiction with respect to the remainder of the issues. On December 28, 1998, the Court stayed the proceeding with respect to the issues as to which it had retained jurisdiction, pending the outcome of arbitration commenced by the parties with respect to the purchase price adjustment. Either party may seek to reopen the proceedings following the arbitration. At this time, the Company can make no determination as to the amount of the adjustment, if any, that will be made to the purchase price. The Company intends to vigorously pursue its rights under the Purchase Agreement. Effective January 1, 1999, the Company acquired substantially all of the assets and assumed certain of the liabilities of Cempro for approximately $5.5 million in cash, including acquisition costs. Cempro is being operated as a part of the Company's concrete accessories business. In June 1998, the Company purchased substantially all of the assets of Secure for approximately $0.7 million in cash, including acquisition costs. Secure is being operated as a part of the Company's paving products business. In May 1998, the Company purchased all of the stock of the business now known as Symons Concrete Forms. The purchase price was approximately $6.7 million, including acquisition costs, and was paid in cash of approximately $0.4 million, assumption of long-term debt of approximately $2.2 million, and delivery of 222,496 Class A Common Shares valued at approximately $4.1 million. The business is being operated as a part of the Company's concrete forming systems division. In May 1998, the Company purchased Northwoods for approximately $0.8 million in cash, including acquisition costs. Northwoods is being operated as a part of the Company's concrete forming systems division. 14 15 RESULTS OF OPERATIONS The following table summarizes the Company's results of operations as a percentage of net sales.
THREE FISCAL MONTHS ENDED ---------------------------------- APRIL 2, 1999 APRIL 3, 1998 ---------------- -------------- Net sales 100.0% 100.0% Cost of goods sold 65.7 66.7 ---------------- -------------- Gross profit 34.3 33.3 Selling, general and administrative expenses 30.0 30.3 Amortization of goodwill and intangibles 0.9 0.9 ---------------- -------------- Operating income 3.4 2.1 Interest expense, net 4.3 5.0 ---------------- -------------- Loss before income taxes (0.9) (2.9) Benefit for income taxes (0.4) (1.2) ---------------- -------------- Net loss (0.5)% (1.7)% ================ ==============
COMPARISON OF THREE FISCAL MONTHS ENDED APRIL 2, 1999 AND APRIL 3, 1998 NET SALES Net sales increased $9.0 million, or 15.1%, to $68.2 million in the first quarter of 1999 from $59.2 million in the first quarter of 1998. Net sales of concrete accessories increased by 9.2% to $31.7 million in the first quarter of 1999 from $29.1 million in the first quarter of 1998, due to the contribution of Cempro, increases in volume and new product initiatives. Net sales of concrete forming systems were $26.1 million for the first quarter of 1999 compared to $21.3 million in the first quarter of 1998 due to the net sales of the acquired Symons Concrete Forms and Northwoods businesses and, to a lesser extent, increased volume. Net sales of paving products increased $0.8 million, or 13.3%, in the first quarter of 1999 compared to the first quarter of 1998 due to a program to increase winter sales. Net sales of masonry products increased $0.8 million, or 15.7%, to tie a first quarter record of $5.9 million. This is due to strategic pricing initiatives as well as a shift of resources to engineered products. GROSS PROFIT Gross profit for the first quarter of 1999 was $23.4 million, an 18.8% increase from $19.7 million in the first quarter of 1998, due primarily to increased volume. As a percent of net sales, gross margin was 34.3% in the first quarter of this year, increasing from 33.3% last year due to lower raw material costs and higher manufacturing efficiencies. 15 16 OPERATING EXPENSES Selling, general, and administrative expenses, including amortization of goodwill and intangibles ("SG&A expenses"), increased $2.6 million to $21.1 million in the first quarter of 1999, from $18.5 million in the first quarter of 1998, due to the acquisitions and higher volume. SG&A expenses were lower as a percent of net sales from 31.2% in the first quarter of 1998 to 30.9% in the first quarter of 1999 despite investments in the paving products business and new product development. INTEREST EXPENSE Interest expense remained flat at $3.0 million in the first quarter of 1999 compared to the first quarter of 1998 despite the higher debt levels due to lower interest rates. INCOME BEFORE INCOME TAXES Loss before income taxes in the first quarter of 1999 decreased to ($0.6) million from ($1.7) million in the first quarter of 1998. Concrete accessories income before income taxes of $2.5 million in the first quarter of 1999 increased 31.8% from $1.9 million in the first quarter of 1998 due primarily to the increase in concrete accessories net sales. Concrete forming systems income before income taxes was $0.3 million in the first quarter of 1999 compared to a loss before income taxes of ($0.6) million in the first quarter of 1998 due to the contribution of the business now know as Symons Concrete Forms as well as sales growth in the existing business. Loss before income taxes from paving products increased to ($0.5) million in the first quarter of 1999 from ($0.2) million in the first quarter of 1998 due to increases in infrastructure made in anticipation of the growth of the business as a result of TEA-21. Loss before income taxes from masonry products was ($0.4) million in the first quarter of 1999 compared to ($0.5) million in the first quarter of 1998. Corporate expenses increased to $1.4 million from $1.2 million due to the full quarter effect of 1998 additions to strengthen the finance, treasury, tax, purchasing, logistics, and corporate development functions. Elimination of profit on intersegment sales was $1.2 million in the first quarter of 1999 as compared to $1.1 million in the first quarter of 1998. NET INCOME The effective tax rate was 45.0% in the first quarter of 1999 compared to 42.0% in the first quarter of 1998. The difference in effective tax rates from statutory rates is due to nondeductible goodwill amortization and state taxes. Net loss for the first quarter of 1999 was ($0.4) million, or ($0.06) per basic and diluted share, compared to ($1.0) million, or ($0.18) per basic and diluted share, in the first quarter of 1998. LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements relate primarily to capital expenditures, debt service and the cost of acquisitions. Historically, the Company's primary sources of 16 17 financing have been cash from operations, borrowings under its revolving line of credit and the issuance of long-term debt and equity. Net cash used in operating activities in the first quarter of 1999 was $6.1 million as compared to $2.0 million used in the first quarter of 1998 due to increased working capital demands from the growth of the Company. Net loss before non-cash charges of depreciation, amortization, deferred taxes, and gain on sales of rental equipment and property, plant and equipment provided $1.0 million of operating cash flow in the first quarter of 1999 as compared to $0.7 million in the first quarter of 1998. Working capital growth used $7.1 million of operating cash flow as compared to $2.7 million in the first quarter of 1998. Significant working capital uses in 1999 included increases in accounts receivable $5.1 million due to higher sales volume and seasonal inventory increases of $2.0 million. Accounts payable growth provided $2.6 million in the first quarter of 1999 due to normal seasonal expansion. The Company invested $4.4 million in property, plant and equipment and rental equipment additions, net of proceeds on sales, during the first quarter of 1999. Investments were made in growth of the rental fleet of concrete forming systems and, to a lesser extent, concrete accessories. The acquisition of Cempro used $5.5 million in cash. Draws on the line of credit of $15.6 million funded the seasonal increases in working capital, the investments in property, plant and equipment and rental equipment, and the Cempro acquisition. At April 2, 1999, working capital was $53.0 million, compared to $44.7 million at December 31, 1998. The growth in working capital is primarily attributable to seasonal growth as the Company prepares for the spring and summer construction season. At April 2, 1999, all of the $40.0 million Revolving Credit Facility was available, of which $28.6 million of borrowings were outstanding. The Term Loan had an outstanding balance at April 2, 1999 of $100.0 million. Other long-term debt consisted of $5.0 million to one of the Former Stockholders and $0.2 million to the City of Parsons, Kansas. At April 2, 1999, the Company had $133.8 million of long-term debt outstanding, of which $32 thousand was current. The Company's debt to total capitalization ratio increased to 64.3% as of April 2, 1999 from 61.3% as of December 31, 1998 due to the Cempro acquisition and to normal seasonal increase of long-term debt. The Company believes its liquidity, capital resources and cash flows from operations are sufficient to fund planned capital expenditures, working capital requirements and debt service in the absence of additional acquisitions. The Company intends to fund future acquisitions with cash, securities or a combination of cash and securities. To the extent the Company uses cash for all or part of any such acquisitions, it expects to raise such cash primarily from operations, borrowings under the Revolving Credit Facility or, if feasible and attractive, issuances of long-term debt or additional Class A Common Shares. 17 18 SEASONALITY The Company's operations are seasonal in nature with approximately 60% of sales historically occurring in the second and third quarters. Working capital and borrowings fluctuate with sales volume. Historically, more than 50% of cash flow from operations is generated in the fourth quarter. INFLATION The Company does not believe inflation had a significant impact on its operations over the past two years. In the past, the Company has been able to pass along all or a portion of the effects of increases in the price of steel, its principal raw material. There can be no assurance the Company will be able to continue to pass on the cost of such increases in the future. YEAR 2000 Certain software and hardware systems are date sensitive. Older date sensitive systems often use a two digit dating convention ("00" rather than "2000") that could result in system failure and disruption of operations as the year 2000 approaches. This is referred to as the "Year 2000" issue. The Year 2000 issue will impact the Company, its suppliers, customers and other third parties that transact business with the Company. The Company has a Year 2000 compliance team. This team is continuously reviewing substantially all hardware and software systems within the Company, products sold by the Company, and significant suppliers and other third parties that transact business with the Company. Projects have been established to address all significant Year 2000 issues identified in this review. The Year 2000 team reports regularly to senior management on the progress of significant Year 2000 projects. Senior management reports to the Board of Directors on the Company's progress with Year 2000 projects. The compliance review has involved testing of hardware and software systems, including non-information technology systems such as telephones and Computer Numeric Controlled machines. The Company has determined that it needs to replace or modify some of its software and hardware systems. The Company is replacing or upgrading the systems which have been identified as having Year 2000 issues. The Company believes it has no material exposure to contingencies related to the Year 2000 issue for products sold as almost none of the Company's products contain time sensitive hardware or software systems. The Company has initiated communications with significant suppliers, customers and other relevant third parties to identify and minimize disruptions to the Company's operations and to assist in resolving Year 2000 issues. Particular attention has been given to those suppliers who may be the Company's only source for certain products or components. Approximately 80% of the third parties have responded indicating their Year 2000 readiness. The Company is diligently attempting to obtain responses from 18 19 the remaining parties which have not responded and to clarify the readiness of those parties whose responses were not clear. Nevertheless, there can be no certainty that the impacted systems and products of other parties on which the Company relies will be Year 2000 compliant. The Company's estimates of Year 2000 costs are based on numerous assumptions; actual costs could be greater than estimates. Specific factors that might cause such differences include, but are not limited to, the continuing availability of personnel trained in this area and the Company's ability to timely identify and correct all relevant software and hardware systems and the success of third party vendors in addressing their own Year 2000 issues. To date, the Company has incurred approximately $780 thousand, of which $710 thousand was capitalized and $70 thousand was expensed. These costs were to replace existing hardware and third party software and professional fees for external assistance. The estimated future cost for resolving Year 2000 issues is approximately $140 thousand, of which $120 thousand is expected to be capitalized and $20 thousand is expected to be expensed. These costs are to replace or upgrade existing hardware and third party software, including professional fees for external assistance. The Company believes it is diligently addressing the Year 2000 issues and that it will satisfactorily resolve all significant Year 2000 problems. The Company successfully completed a test of its integrated systems in the fourth quarter of 1998 and anticipates completing substantially all of its Year 2000 projects by the end of the second quarter of 1999. In the event the Company falls short of these milestones, additional internal resources will be focused on completing these projects or implementing contingency plans. The Company believes that its most reasonably likely worst case scenario would be related to the lack of success of third party vendors of addressing their Year 2000 issues, particularly suppliers who are the Company's only source, such as local electricity providers. If a facility were to be unable to manufacture products due to a lack of electricity, contingency plans include the transfer of production orders to other facilities. The Company believes the impact would not be significant due to the seasonal capacity that exists in January. FORWARD-LOOKING STATEMENTS This Form 10-Q includes, and future filings by the Company on Form 10-K, Form 10-Q, and Form 8-K, and future oral and written statements by the Company and its management may include, certain forward-looking statements, including (without limitation) statements with respect to anticipated future operating and financial performance, growth opportunities and growth rates, acquisition and divestitive opportunities and other similar forecasts and statements of expectation. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and "should," and variations of these words and similar expressions, are intended to identify these forward-looking statements. Forward-looking statements by the Company and its management are based on estimates, projections, beliefs and assumptions of management and are not guarantees of future performance. The Company disclaims 19 20 any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information, or otherwise. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by the Company and its management as the result of a number of important factors. Representative examples of these factors include (without limitation) the cyclical nature of nonresidential building and infrastructure construction activity, which can be affected by factors outside the Company's control such as the general economy, governmental expenditures, including the continued delay in funding from the TEA-21 legislation, and changes in banking and tax laws; the Company's ability to successfully identify, finance, complete and integrate acquisitions; the mix of products sold by the Company; the Company's ability to successfully develop and introduce new products; increases in the price of steel (the principal raw material in the Company's products) and the Company's ability to pass along such price increases to its customers; and the seasonality of the construction industry. In addition to these factors, actual future performance, outcomes and results may differ materially because of other, more general, factors including (without limitation) general industry and market conditions and growth rates, domestic economic conditions, governmental and public policy changes and the continued availability of financing in the amounts, at the terms and on the conditions necessary to support the Company's future business. 20 21 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As of April 2, 1999, the Company had financial instruments which were sensitive to changes in interest rates. These financial instruments consist of a $40.0 million Revolving Credit Facility, of which $28.6 million was outstanding; a $100.0 million Term Loan; $5.2 million in other fixed-rate, long-term debt; and variable-to-fixed interest rate swaps on $50.0 million of the Term Loan. The Revolving Credit Facility terminates in 2002 and has several interest rate options which re-price on a short-term basis. Accordingly, the fair value of the Revolving Credit Facility approximates its $28.6 million face value. The weighted average interest rate at April 2, 1999 was 6.4%. The $100.0 million Term Loan is due in 2005. The Term Loan permits the Company to choose from various interest rate options which re-price on a short-term basis. Accordingly, the fair value of the Term Loan approximates its face value. The Term Loan has a weighted average interest rate of 7.75% at April 2, 1999. Other long-term debt consists of a.) a $5.0 million, 10.5% note payable due in 2004 with an estimated fair value of $6.0 million and b.) a $0.2 million, 7.0% loan due in installments of $32 thousand per year with an estimated fair value of $0.2 million. The Company has two interest rate swap agreements on a total of $50.0 million that fixed the LIBOR-based component of the interest rate formula as required by the Company's Credit Agreement. The swaps have a fixed ninety-day LIBOR component of 6.30% and 6.33%, and expire on November 1, 2000. The ninety-day LIBOR as of April 2, 1999 was 5.00%. These swaps are contracts to exchange floating rate for fixed rate interest payments without the exchange of underlying amounts. The estimated fair value of the interest rate swaps is a liability of $1.0 million. Management does not believe there will be any significant changes in interest rates in the near future. However, no assurances can be given that economic conditions or interest rates will remain stable for any particular period. In the ordinary course of its business, the Company also is exposed to price changes in raw materials (particularly steel rod) and products purchased for resale. The prices of these items can change significantly due to changes in the markets in which the Company's suppliers operate. The Company generally does not use financial instruments to manage its exposure to changes in commodity prices. 21 22 PART II. - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Symons is currently a defendant involved in a civil suit brought by EFCO Corp., a competitor of Symons in one portion of their business, in 1996 in the United States District Court for the Southern District of Iowa (Case No. 4-96-CV-80552). EFCO Corp. alleged that Symons engaged in false advertising, misappropriation of trade secrets, intentional interference with contractual relations, and certain other activities. After a jury trial, preliminary damages of approximately $14 million were awarded against Symons in January 1999. In ruling on post-trial motions in April 1999, the Judge dismissed EFCO's claim of intentional interference with contractual relations but increased the damages awarded to EFCO by $100,000. The Company believes that Symons has numerous substantial grounds for a successful appeal and remains committed to vigorously pursuing its appellate rights. A successful appeal could result in judgment for Symons or a new trial. Symons' liability, if any, cannot finally be determined until such time as all rights of the parties have been exhausted or have expired by lapse of time. The Company considers the outcome of this litigation to be not estimable. Accordingly, the Company has not recorded any liability for the resolution of this suit. In the event the Company is unsuccessful in its post-trial motions and appeals, it may have a material adverse effect on its consolidated financial position, results of operations, or cash flows. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS. See Index to Exhibit following the signature page to this report for a list of Exhibits. (b) REPORTS on Form 8-K. During the quarter ended April 2, 1999, the Company filed the following Current Reports on Form 8-K: Current Report on Form 8-K dated January 7, 1999, reporting under Item 5 (Other Events) the reduction of a previously reported jury verdict rendered against the Company's Symons Corporation subsidiary. Current Report on For 8-K dated February 17, 1999 reporting under Item 1 (Changes in Control of Registrant) the conversion and sale by Ripplewood Holdings L.L.C. of shares of the Company which represented approximately 12.7% of the Company's outstanding common shares and which, prior to the conversion, had represented approximately 59.3% of the combined voting power of the Company's outstanding common shares. 22 23 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DAYTON SUPERIOR CORPORATION --------------------------- DATE: May 13, 1999 BY: /s/ Alan F. McIlroy -------------------------- -------------------------------- Alan F. McIlroy Chief Financial Officer 23 24 INDEX TO EXHIBITS -----------------
Exhibit No. Description - ----------- ----------- (4) Instruments defining the Rights of Security Holders, Including Indentures 4.1 Second Amendment to Credit Agreement dated as of June 26,1998 (replacing "Third" [sic] Amendment of even date therewith) ** (10) Material Contracts 10.1 Amendment to Nonemployee Directors Compensation Program adopted April 30, 1999 ** (27) Financial Data Schedule 27.1 Financial Data Schedule **
- ------------ ** Filed herewith 24 EX-4.1 2 EXHIBIT 4.1 1 Exhibit 4.1 [EXECUTION COPY] SECOND AMENDMENT TO THE CREDIT AGREEMENT This SECOND AMENDMENT, dated as of June 26, 1998 (this "AMENDATORY AGREEMENT"), to the Existing Credit Agreement (as defined below), is made among DAYTON SUPERIOR CORPORATION, an Ohio corporation (the "BORROWER"), the various financial institutions signatories hereto as Revolving Lenders (the "REVOLVING LENDERS"), DLJ CAPITAL FUNDING, INC., as syndication agent (the "SYNDICATION AGENT"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as documentation agent (the "DOCUMENTATION AGENT"), BANKERS TRUST COMPANY, as administrative agent (the "ADMINISTRATIVE AGENT") and BANK ONE, N.A., as facility agent (the "FACILITY AGENT"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrower, the Lenders, and the Agents are parties to a Credit Agreement, dated as of September 29, 1997, as amended by Amendment No. 1 thereto (as so amended, the "EXISTING CREDIT AGREEMENT"); WHEREAS, the Borrower has requested that the Revolving Lenders amend the Existing Credit Agreement in certain respects; and WHEREAS, the Revolving Lenders have agreed, subject to the terms and conditions hereinafter set forth, to amend the Existing Credit Agreement in certain respects as provided below (the Existing Credit Agreement, as so amended by this Amendatory Agreement, being referred to as the "CREDIT AGREEMENT"); NOW, THEREFORE, in consideration of the agreements herein contained, the parties hereto agree as follows: PART I DEFINITIONS SUBPART I.1. CERTAIN DEFINITIONS. The following terms (whether or not underscored) when used in this Amendatory Agreement shall have the following meanings (such meanings to be equally applicable to the singular and plural form thereof): 2 "ADMINISTRATIVE AGENT" is defined in the PREAMBLE. "AMENDATORY AGREEMENT" is defined in the PREAMBLE. "AMENDMENT NO. 2" is defined in SUBPART 3.1. "BORROWER" is defined in the PREAMBLE. "CREDIT AGREEMENT" is defined in the THIRD RECITAL. "DOCUMENTATION AGENT" is defined in the PREAMBLE. "EXISTING CREDIT AGREEMENT" is defined in the FIRST RECITAL. "FACILITY AGENT" is defined in the PREAMBLE. "SECOND AMENDMENT EFFECTIVE DATE" is defined in SUBPART 3.1. "REVOLVING LENDERS" is defined in the PREAMBLE. "SYNDICATION AGENT" is defined in the PREAMBLE. SUBPART I.2. OTHER DEFINITIONS. Terms for which meanings are provided in the Existing Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Amendatory Agreement with such meanings. PART II AMENDMENTS TO THE EXISTING CREDIT AGREEMENT Effective on (and subject to the occurrence of) the Second Amendment Effective Date, the Existing Credit Agreement is hereby amended in accordance with this Part II. Except as so amended, the Existing Credit Agreement shall continue in full force and effect in accordance with its terms. SUBPART II.1. AMENDMENTS TO SECTION 1.1. Section 1.1 of the Existing Credit Agreement is hereby amended by inserting the following definitions in such Section in the appropriate alphabetical sequence: 3 "AMENDMENT NO. 2" means the Second Amendment to the Credit Agreement, dated as of June 26, 1998, among the Borrower, the Revolving Lenders signatory thereto, and the Agents. "SECOND AMENDMENT EFFECTIVE DATE" is defined in Subpart 3.1 of Amendment No. 3. SUBPART 2.2. Clause (b) of Section 7.2.4 of the Existing Credit Agreement is hereby amended to read in its entirety as follows: (b) FIXED CHARGE COVERAGE RATIO. The Borrower will not permit the Fixed Charge Coverage Ratio as of the end of any Fiscal Quarter to be less than the ratio of 1.30:1; PROVIDED, that for purposes of computing the Fixed Charge Coverage Ratio for any period commencing with the Fiscal Quarter ending June 30, 1998, "CAPITAL EXPENDITURES" shall not include any expenditures for the purchase of Rental Equipment made during such period which, in accordance with GAAP, would be classified as capital expenditures. SUBPART 2.3. Section 7.2.7 of the Existing Credit Agreement is hereby amended to read in its entirety as follows: SECTION 7.2.7. CAPITAL EXPENDITURES, ETC. The Borrower will not, and will not permit any of its Subsidiaries to, make or commit to make Capital Expenditures in any Fiscal Year, except Capital Expenditures which do not aggregate in excess of 8% of the total consolidated revenues of the Borrower and its Subsidiaries for the immediately preceding Fiscal Year (with the revenues of any Subsidiary of the Borrower acquired during such Fiscal Year to include all revenues of such Subsidiary for the portion of such Fiscal Year preceding such acquisition); PROVIDED, HOWEVER, that to the extent the amount of Capital Expenditures permitted to be made in any Fiscal Year pursuant to this Section exceeds the aggregate amount of Capital Expenditures actually made during such Fiscal Year, up to 50% of such excess amount may be carried forward to (but only to) the next succeeding Fiscal Year (any such amount to be certified by the Borrower to the Agents in the Compliance Certificate delivered for the last Fiscal Quarter of such Fiscal Year, and any such amount carried forward to a succeeding Fiscal Year shall to be deemed to be used prior to the Borrower and its Subsidiaries using the amount of Capital Expenditures permitted by this Section without giving effect to such carry-forward). SUBPART 2.4. Clause (c) of Section 7.2.9 of the Existing Credit Agreement is hereby amended to read in its entirety as follows: (c) so long as no Default has occurred and is continuing or would occur after giving effect thereto, the Borrower or any of its Subsidiaries may purchase all or -3- 4 substantially all of the assets of any Person, or acquire such Person by merger, if permitted (without duplication) by SECTION 7.2.5 to be made as an Investment. -4- 5 PART III CONDITIONS TO EFFECTIVENESS SUBPART III.1. SECOND AMENDMENT EFFECTIVE DATE. This Amendatory Agreement (and the amendments and modifications contained herein) shall become effective, and shall thereafter be referred to as "AMENDMENT NO. 2", on the date (the "SECOND AMENDMENT EFFECTIVE DATE") when all of the conditions set forth in this SUBPART 3.1 have been satisfied. SUBPART III.1.1. EXECUTION OF COUNTERPARTS. The Facility Agent shall have received counterparts of this Amendatory Agreement, duly executed and delivered on behalf of the Borrower and each of the Required Revolving Lenders. SUBPART III.1.2. EXECUTION OF LOAN DOCUMENTS, ETC. The Facility Agent shall have received counterparts of a supplement to the Subsidiary Guaranty and a supplement to the Subsidiary Security Agreement, duly executed and delivered by Concrete Accessories, Inc. and the Facility Agent, together with (i) certificates representing all of the issued and outstanding shares of Capital Stock of Concrete Accessories, Inc. owned by the Borrower, along with undated stock powers for such certificates, executed in blank, and (ii) acknowledgment copies of Uniform Commercial Code financing statements executed and delivered by Concrete Accessories, Inc., as debtor, and the Facility Agent, as secured party, filed under the UCC in all jurisdictions necessary or, in the reasonable opinion of the Agents, desirable to perfect the security interest of the Facility Agent pursuant to the Subsidiary Security Agreement. SUBPART III.1.3. LEGAL DETAILS, ETC. All documents executed or submitted pursuant hereto shall be satisfactory in form and substance to the Agents and their counsel. The Agents and their counsel shall have received all information and such counterpart originals or such certified or other copies or such materials, as the Agents or their counsel may reasonably request, and all legal matters incident to the transactions contemplated by this Amendatory Agreement shall be satisfactory to the Agents and their counsel. PART IV MISCELLANEOUS SUBPART IV.1. CROSS-REFERENCES. References in this Amendatory Agreement to any Part or Subpart are, unless otherwise specified or otherwise required by the context, to such Part or Subpart of this Amendatory Agreement. SUBPART IV.2. LOAN DOCUMENT PURSUANT TO EXISTING CREDIT AGREEMENT. This Amendatory Agreement is a Loan Document executed pursuant to the Existing Credit Agreement and shall be construed, administered and applied in accordance with all of the terms and provisions of the Existing Credit Agreement. -5- 6 SUBPART IV.3. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. The Borrower represents and warrants on the Second Amendment Effective Date for its Subsidiaries and itself, both before and after giving effect to this Amendatory Agreement, as follows: (a) the representations and warranties set forth in Article VI of the Credit Agreement (excluding those contained in Section 6.7 thereof) and in each other Loan Document are, in each case, true and correct in all material respects (unless stated to relate solely to an earlier date, in which case such representations and warranties were true and correct in all material respects as of such earlier date); (b) no adverse development has occurred in any litigation, action, proceeding, labor controversy, arbitration or governmental investigation disclosed pursuant to Section 6.7 of the Credit Agreement which could reasonably be expected to have a Material Adverse Effect; (c) the sum of (A) the aggregate outstanding principal amount of all Revolving Loans and (B) the aggregate amount of all Letter of Credit Outstandings does not exceed the lesser of (c) the Revolving Loan Commitment Amount and (y) the Borrowing Base Amount; and (d) no Default has occurred and is continuing, and neither the Borrower, any other Obligor, nor any of its Subsidiaries are in material violation of any law or governmental regulation or court order or decree. SUBPART IV.4. SUCCESSORS AND ASSIGNS. This Amendatory Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. SUBPART IV.5. COUNTERPARTS. This Amendatory Agreement may be executed by the parties hereto in several counterparts, each of which when executed and delivered shall be deemed to be an original and all of which shall constitute together but one and the same agreement. SUBPART IV.6. GOVERNING LAW. THIS AMENDATORY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. -6- 7 IN WITNESS WHEREOF, the parties hereto have caused this Amendatory Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. DAYTON SUPERIOR CORPORATION By: ---------------------------------------- Title: BANK ONE, N.A., as Facility Agent and a Revolving Lender By: ---------------------------------------- Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Documentation Agent and a Revolving Lender By: ---------------------------------------- Title: NATIONAL CITY BANK OF DAYTON, as a Revolving Lender By: ---------------------------------------- Title: 8 DLJ CAPITAL FUNDING, INC., as Syndication Agent By: ---------------------------------------- Title: BANKERS TRUST COMPANY, as Administrative Agent By: ---------------------------------------- Title: EX-10.1 3 EXHIBIT 10.1 1 Exhibit 10.1 AMENDMENT TO NONEMPLOYEE DIRECTOR COMPENSATION PROGRAM --------------------------------- Dayton Superior Corporation's Nonemployee Director Compensation Program, as adopted May 7, 1998 (the "Program"), hereby is amended, effective April 30, 1999, to remove the phrase "or Ripplewood Holdings L.L.C." in each place in the Program in which such phrase appears. Amendment adopted by the Board of Directors of Dayton Superior Corporation on April 30, 1999. EX-27 4 EXHIBIT 27
5 0000854709 DAYTON SUPERIOR CORPORATION 1,000 3-MOS DEC-31-1998 JAN-01-1999 APR-01-1999 0 0 53,400 4,608 38,361 94,753 66,151 24,004 267,295 41,741 133,735 0 0 47,353 26,777 267,295 68,196 68,196 44,771 44,771 21,096 101 2,975 (646) (291) (355) 0 0 0 (355) (0.06) (0.06)
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