<PAGE> 1
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
JUNE 28, 1996 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.)
721 Richard Street
Miamisburg, Ohio 45342
--------------------- -----------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: 513-866-0711
------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since 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
--- ----
5,609,350 Shares of Common Stock were outstanding as of June 28, 1996
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 28,
1995 1996
--------- ---------
(Unaudited)
(Amounts in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 643 $ 638
Accounts Receivable, net of allowance for
doubtful accounts of $708 and $720 11,724 21,413
Inventories (Note 2) 12,392 15,538
Rental equipment, net 1,235 1,587
Prepaid expenses 474 657
Prepaid income taxes 436 427
Future tax benefits 1,393 1,393
--------- ---------
Total current assets 28,297 41,653
--------- ---------
PROPERTY, PLANT & EQUIPMENT: 27,560 30,258
Less accumulated depreciation (10,000) (11,650)
--------- ---------
Net property, plant & equipment 17,560 18,608
--------- ---------
GOODWILL AND INTANGIBLE ASSETS,
net of accumulated amortization (Note 2) 57,734 58,180
OTHER ASSETS 269 --
--------- ---------
Total assets $ 103,860 $ 118,441
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 4) $ 32 $ 3,282
Accounts payable 8,043 13,965
Accrued compensation and benefits 3,889 4,114
Accrued liabilities 3,987 3,391
Due to Ripplewood Holdings LLC (Note 3) -- 611
Accrued interest 2,063 14
--------- ---------
Total current liabilities 18,014 25,377
LONG-TERM DEBT (Note 4) 52,980 37,602
DEFFERED INCOME TAXES 2,781 2,663
OTHER LONG-TERM LIABILITIES 2,600 3,186
--------- ---------
Total liabilities 76,375 68,828
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Class A Common Shares 17,483 31,800
Class B Common Shares 1,942 10,123
Cumulative foreign currency translation adjustment (139) (141)
Excess pension liability (50) (50)
Retained earnings 8,330 7,881
Treasury shares, Class A Common, at cost (81) --
--------- ---------
Total shareholders' equity 27,485 49,613
--------- ---------
Total liabilities and shareholders' equity $ 103,860 $ 118,441
========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
<PAGE> 3
DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Fiscal Months Ended Six Fiscal Months Ended
------------------------- -----------------------
June 30, June 28, June 30, June 28,
1995 1996 1995 1996
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(Amounts in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
NET SALES $ 25,982 $ 36,461 $ 43,959 $ 60,076
COST OF SALES 17,956 24,911 30,511 41,057
----------- ----------- ----------- -----------
Gross profit 8,026 11,550 13,448 19,019
SELLING, GENERAL AND ADMINSTRATIVE EXPENSES 4,414 5,818 8,729 11,447
AMORTIZATION OF GOODWILL AND INTANGIBLES 350 426 699 832
----------- ----------- ----------- -----------
Operating income 3,262 5,306 4,020 6,740
OTHER EXPENSES:
Interest expense, net 980 1,594 1,889 3,179
Other, net -- (24) -- (16)
----------- ----------- ----------- -----------
Income before income taxes and
extraordinary item 2,282 3,736 2,131 3,577
PROVISION FOR INCOME TAXES -- 1,470 -- 1,712
----------- ----------- ----------- -----------
Income before extraordinary item 2,282 2,266 2,131 1,865
EXTRAORDINARY ITEM, Loss on extinguishment of debt,
net of income tax effect of $1,418 (Note 5) -- (2,314) -- (2,314)
----------- ----------- ----------- -----------
Net income (loss) 2,282 (48) 2,131 (449)
Dividends on Redeemable Preferred Shares (150) -- (300) --
Accretion on Redeemable Preferred Shares (61) -- (123) --
----------- ----------- ----------- -----------
Net income (loss) available to common shareholders $ 2,071 ($ 48) $ 1,708 ($ 449)
=========== =========== =========== ===========
Income per share before extraordinary item $ 0.60 $ 0.64 $ 0.49 $ 0.54
Extraordinary item per share $ 0.00 ($ 0.65) $ 0.00 ($ 0.67)
----------- ----------- ----------- -----------
Net income (loss) per share $ 0.60 ($ 0.01) $ 0.49 ($ 0.13)
=========== =========== =========== ===========
Weighted average common and common equivalent
shares outstanding 3,479,461 3,562,794 3,479,461 3,449,278
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
<PAGE> 4
DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Period Ended June 28, 1996
<TABLE>
<CAPTION>
Cumulative
Class A Class B Foreign
Common Shares Common Shares Translation
Shares Amount Shares Amount Adjustment
------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C>
Balances, June 30, 1995 2,040,000 $14,554 873,400 $1,714 ($143)
Net income
Foreign currency translation
adjustment 4
Excess pension liability
adjustment
Dividends on Redeemable
Preferred Class A Shares,
$3.40 per share
Accretion on Redeemable
Preferred Class B Shares
Acquisition of Common Shares (873,400) (1,714)
Redemption of Redeemable
Preferred Shares
Issuance of Common Shares
for cash, net is issuance costs 764,500 2,929 485,500 1,942
---------------------------------------------------------------------------------
Balances, December 31, 1995 2,804,500 17,483 485,500 1,942 (139)
Net income (loss)
Foreign currency translation
adjustment (2)
Conversion of Class B Common
Shares to Class A Common
Shares 485,500 1,942 (485,500) (1,942)
Conversion of Class A Common
Shares to Class B Common
Shares (1,522,550) (10,123) 1,522,550 10,123
Exercise of Warrants 346,600 0
Retirement of Treasury shares (2,000) (81)
Issuance of Common Shares for
cash, net of issuance costs 1,974,750 22,579
---------------------------------------------------------------------------------
Balances, June 28, 1996 4,086,800 $31,800 1,522,550 10,123 ($141)
=================================================================================
<CAPTION>
Excess Treasury
Pension Retained Shares
Liability Earnings Shares Amount Total
--------- -------- ------ ------ -----
<S> <C> <C> <C> <C> <C>
Balances, June 30, 1995 ($295) $13,647 2,000 ($81) $29,396
Net income 1,574 1,574
Foreign currency translation
adjustment 4
Excess pension liability
adjustment 245 245
Dividends on Redeemable
Preferred Class A Shares,
$3.40 per share (170) (170)
Accretion on Redeemable
Preferred Class B Shares (69) (69)
Acquisition of Common Shares (3,680) (5,394)
Redemption of Redeemable
Preferred Shares (2,972) (2,972)
Issuance of Common Shares
for cash, net is issuance costs 4,871
-----------------------------------------------------------------
Balances, December 31, 1995 (50) 8,330 2,000 (81) 27,485
Net income (loss) (449) (449)
Foreign currency translation
adjustment (2)
Conversion of Class B Common
Shares to Class A Common
Shares 0
Conversion of Class A Common
Shares to Class B Common
Shares 0
Exercise of Warrants 0
Retirement of Treasury shares (2,000) 81 0
Issuance of Common Shares for
cash, net of issuance costs 22,579
-----------------------------------------------------------------
Balances, June 28, 1996 ($50) $7,881 0 $0 $49,613
=================================================================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
<PAGE> 5
DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Fiscal Months Ended June 30, 1995 and June 28, 1996
<TABLE>
<CAPTION>
June 30, June 28,
1995 1996
------- --------
(Unaudited) (Unaudited)
(Amounts in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 2,131 ($ 449)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Extraordinary loss on extinguishment of debt -- 2,314
Depreciation 1,183 1,872
Amortization of goodwill and intangibles 699 832
Deferred income taxes -- (118)
Amortization of debt discount and deferred financing costs 148 136
Loss (gain) on sales of assets (3) (6)
Change in assets and liabilities, net of the effects of acquisition:
Accounts receivable (6,021) (7,455)
Inventories (1,031) (2,267)
Rental equipment (552) (539)
Accounts payable 2,083 2,495
Accrued liabilities (274) (47)
Due to Ripplewood Holdings LLC (Note 3) -- 611
Other, net (127) 431
------- --------
Net cash used in operating activities (1,764) (2,190)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment additions (1,048) (1,255)
Proceeds from sales of assets 4 5
Acquisition of the net assets of Steel Structures, Inc. (Note 6) -- (3,800)
------- --------
Net cash used in investing activities (1,044) (5,050)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt, net 2,330 27,293
Repayment of long-term debt -- (40,000)
Prepayment premium on extinguishment of long-term debt -- (2,400)
Financing costs and fees -- (235)
Issuance of common stock -- 22,579
------- --------
Net cash provided by financing activities 2,330 7,237
------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 14 (2)
------- --------
Net decrease in cash (464) (5)
CASH, beginning of period 464 643
------- --------
CASH, end of period $ 0 $ 638
======= ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income taxes $ 346 $ 502
Cash paid for interest 1,642 5,091
SUPPLEMENTAL NONCASH DISCLOSURES:
Accretion of preferred stock 123 --
Accrual of preferred stock dividends 300 --
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
<PAGE> 6
DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND JUNE 28, 1996
(AMOUNTS IN THOUSANDS, EXCEPT FOR 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, 1995.
(2) 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, 1995. 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 last Friday in March, June or
September.
(b) Inventories - Substantially all finished products and raw
materials are stated at the lower of last in, first out (LIFO)
cost or market (which approximates current cost). Following is a
summary of the components of inventories as of December 31, 1995
and June 29, 1996:
<TABLE>
<CAPTION>
December 31, June 28,
1995 1996
------- -------
<S> <C> <C>
Raw materials ........................... $ 2,562 $ 5,095
Finished goods .......................... 9,830 10,443
------- -------
12,392 15,538
LIFO reserve ............................ --- ---
------- -------
$12,392 $15,538
======= =======
</TABLE>
(3) BALANCE DUE TO RIPPLEWOOD HOLDINGS LLC
At June 28, 1996, the Company owed $611 to Ripplewood Holdings LLC. The
<PAGE> 7
balance represents $600 for services associated with the stock offering and $11
in reimbursable expenses.
(4) CREDIT ARRANGEMENTS
On June 17, 1996, the Company entered into an Amended Credit Facility
(as so amended, the "Amended Credit Facility") with Bank One, Dayton, NA and
Bank of America Illinois (collectively, the "Banks"). The Amended Credit
Facility provided for (I) a Term Loan and (ii) a Revolving Credit Facility, each
of which will be secured by substantially all the assets of the Company. At June
28, 1996, $36,730 was available under the Revolving Credit Facility, of which
$27,600 was outstanding at interest rates of 8.35%.
Average borrowings under the Revolving Credit Facility and its
predecessors were $17,637 and $1,744 during the six fiscal months ended June 28,
1996 and June 30, 1995, respectively, at an approximate weighted average
interest rate of 8.3% and 12.3%, respectively. The maximum borrowings
outstanding during the six fiscal months ended June 28, 1996 and June 30, 1995,
was $27,600 and $3,120, respectively.
Following is a summary of the Company's long-term debt as of December
31, 1995 and June 28, 1996:
<TABLE>
<CAPTION>
December 31, June 28,
1995 1996
----------- -----------
<S> <C> <C>
Revolving lines of credit $ 13,280 $ 27,600
Term Loan, bearing interest at 8.35% -- 13,000
City of Parsons, KS Economic Development Loan 307 284
Unsecured Senior Promissory notes, prepaid
during 1996 (Note 5) 40,000 --
Unamortized debt discount (575) --
----------- -----------
Total long-term debt 53,012 40,884
Less current portion (32) (3,282)
----------- -----------
Long-term portion $ 52,980 $ 37,602
=========== ===========
</TABLE>
(5) EXTRAORDINARY LOSS ON DEBT EXTINGUISHMENT
In June 1996, the Company extinguished its $40,000 of unsecured
promissory notes. In conjunction therewith, the Company paid a prepayment
premium of $2,400 and expensed unamortized financing costs and debt discount of
$795 and $537, respectively. The Company recorded an extraordinary loss of
$2,314, net of an income tax effect of $1,418. The Company funded this repayment
with $22,579 in proceeds from its public stock offering, $13,000 in Term Loans
and $6,821 in draws on its Revolving Credit Facility.
(6) ACQUISITION OF THE NET ASSETS OF STEEL STRUCTURES, INC.
On April 29, 1996, the Company purchased, certain of the assets and
assumed certain of the liabilities of Steel Structures, Inc., a privately held
regional concrete paving products manufacturer based in Kankakee, IL. Steel
Structures was an epoxy coater and fabricator of paving products and, prior to
the acquisition, was both a major supplier of epoxy coating to the Company and
competitor in its concrete paving product line. Certain of the Company's
existing paving manufacturing equipment is being relocated from another plant
<PAGE> 8
to the former Steel Structures facility in Kankakee. The acquisition will be
operated by the Company under the name American Highway Technology.
The purchase price, including acquisition related costs, is $5,614,
subject to post closing adjustments. As of June 28, 1996, the Company has paid
$3,800 of the purchase price with the balance due over the next two years. The
acquisition has been accounted for as a purchase. The cost of the acquisition
was funded through draws under the Revolving Credit Facility. This purchase
price has been allocated on the basis of appraised fair value of the assets
acquired and liabilities assumed. Certain appraisals and evaluations are
preliminary estimates and may change. In management's opinion, the preliminary
allocation of the purchase price is not expected to differ materially from the
final allocation.
<TABLE>
<S> <C>
Current assets $3,262
Property, plant and equipment 1,477
Goodwill and intangibles 1,898
------
Total assets acquired 6,637
Liabilities assumed (1,023)
------
Net assets acquired $5,614
======
</TABLE>
(7) PUBLIC OFFERING OF COMPANY SHARES
On June 20 ,1996, the Company completed an initial public offering of
Company 1,974,750 shares of Class A Common Shares and received proceeds of
$22,579, net of expenses.
(8) SUBSEQUENT EVENT - PUBLIC OFFERING OF COMPANY SHARES
On July 16, 1996, the underwriters of the Company's initial public
offering of Class A Common Shares exercised a portion of their over-allotment
option pursuant to which and the Company issued and sold 56,200 shares of Class
A Common Shares and Ripplewood Holdings LLC converted 56,200 shares of its Class
B Common Shares into Class A Common Shares and sold those shares. The Company's
proceeds of $683 from the issuance of those shares were used to reduce the
outstanding balance of the Revolving Credit Facility.
<PAGE> 9
PART I ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company is the largest North American manufacturer and distributor of
specialized metal accessories used in concrete and masonry construction. The
company's products are used primarily in two segments of the construction
industry. Non residential building projects such as institutional buildings,
including schools, hospitals and prisons, retail sites, commercial offices and
manufacturing facilities make up the first segment. The second segment is
infrastructure construction projects such as highways, bridges, utilities, water
and waste treatment facilities and airports.
RESULTS OF OPERATIONS
The following table sets forth, the Company's results of operations as a
percentage of net sales:
<TABLE>
<CAPTION>
Three fiscal months ended Six fiscal months ended
June 30, 1995 June 28, 1996 June 30, 1995 June 28, 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Concrete accessories 100.0% 79.8% 100.0% 79.5%
Masonry accessories -- 20.2 -- 20.5
----- ------ ------- -------
Net sales 100.0 100.0 100.0 100.0
Cost of sales 69.1 68.3 69.4 68.3
----- ------ ------- -------
Gross profit 30.9 31.7 30.6 31.7
Selling, general and
administrative expenses 17.0 16.0 19.9 19.1
Amortization of goodwill
and intangibles 1.3 1.2 1.6 1.4
----- ------ ------- -------
Operating income 12.6 14.5 9.1 11.2
Interest expense, net 3.8 4.4 4.3 5.3
Other, net -- (0.1) -- (0.1)
----- ------ ------- -------
Income before taxes and
extraordinary item 8.8 10.2 4.8 6.0
Provision for income taxes -- 4.0 -- 2.9
----- ------ ------- -------
Income before extraordinary
item 8.8 6.2 4.8 3.1
Extraordinary item -- (6.3) -- (3.8)
----- ------ ------- -------
Net income (loss) 8.8% (0.1)% 4.8% (0.7)%
===== ====== ======= =======
</TABLE>
COMPARISON OF THE THREE FISCAL MONTHS ENDED JUNE 30, 1995 AND JUNE 28, 1996
The Company reported record net sales of $36,461,000 for the second quarter of
1996, a 40.3% increase from $25,982,000 for the second quarter of 1995. The
increase in sales included $7,369,000 from the Company's Dur-O-Wal, Inc.
subsidiary, which was acquired in October 1995. The reminder of the growth in
net sales is attributable to strong levels of activity in the
<PAGE> 10
U.S. heavy construction market and, to a lesser extent, new concrete accessory
product sales. Net sales of masonry accessories in the second quarter of 1996
increased $179,000, or 2.5%, on a pro forma basis over the second quarter of
1995, reflecting a recovery from the effects of severe winter weather
experienced in the first quarter of 1996.
On April 29, 1996, the Company purchased, certain of the assets and assumed
certain of the liabilities of Steel Structures, Inc., a privately held regional
concrete paving products manufacturer based in Kankakee, IL. Steel Structures
was an epoxy coater and fabricator of paving products and, prior to the
acquisition, was both a major supplier of epoxy coating to the Company and
competitor in its concrete paving product line. Certain of the Company's
existing paving manufacturing equipment is being relocated from another plant to
the former Steel Structures facility in Kankakee. The acquisition will be
operated by the Company under the name American Highway Technology. This
combination is excepted to provide synergies in purchasing, freight and handling
costs and cross-sourcing of products. The impact of this acquisition on sales in
the second quarter is estimated by management to have been approximately
$900,000.
Gross profit increased $3,524,000, or 43.9%, from $8,026,000 in the second
quarter of 1995 to $11,550,000 in the second quarter of 1996. The increase is
largely due to gross profit on the sales related to the Company's acquisition of
Dur-O-Wal, but higher gross profits were also realized on the Company's sales
due to improved selling prices, favorable raw material costs and, to a lesser
extent, a shift in sales mix in favor of higher margin products. Major
investments in fixed assets, particularly in the concrete paving products line,
in 1995 are also providing improved margins in 1996. As a percentage of sales,
gross profit increased from 30.9% in 1995 to 31.7% in 1996.
Selling, general and administrative expenses, excluding the amortization of
goodwill and intangibles ("SG&A"), increased $1,404,000, or 31.8%, from
$4,414,000 in the second quarter of 1995 to $5,818,000 in the second quarter of
1996. As a percent of sales, SG&A expenses fell from 17.0% in the second quarter
of 1995 to 16.0% in the second quarter of 1996. On a pro forma basis with
Dur-O-Wal, SG&A expenses would have been $5,337,000, or 16.1% of sales, in the
second quarter of 1995. Additional expenses associated with the new Kankakee
operation acquired in April 1996 and the Westfield, MA service center opened in
July 1995 also contributed to the dollar increase in the second quarter of 1996.
Operating income of $5,306,000 in the second quarter of 1996 was also a record,
up from $3,262,000 in the first six months of 1995, an increase of 62.7%.
Operating income increased due to the factors discussed above. On a pro forma
basis including Dur-O-Wal, 1995 second quarter operating income would have been
$3,996,000.
Net interest expense increased by $614,000, or 62.7%, from $980,000 in the
second quarter of 1995 to $1,594,000 in the second quarter of 1996, due to
higher debt levels resulting from the acquisition of Dur-O-Wal, the redemption
of $10,000,000 of the Company's preferred shares in October 1995 and the
acquisition of the net assets from Steel Structures.
<PAGE> 11
Income before income taxes and extraordinary items was $3,736,000 in the second
quarter of 1996 compared to $2,282,000 for the second quarter of 1995, for the
reasons discussed above. On a pro forma basis with Dur-O-Wal, income before
income taxes and extraordinary item was $4,480,000 for the second quarter of
1996 compared to $3,047,000 for the second quarter of 1995.
The Company did not have a provision for income taxes in the second quarter of
1995 as U.S. net operating carryforward losses were being utilized. The second
quarter provision for income taxes returned to a normal level.
An extraordinary loss on the extinguishment of debt in June 1996 resulted from a
$2,400,000 prepayment premium on the Company's $40 million 11.75% unsecured
senior notes and $1,333,000 in associated unamortized debt discount and
financing costs, net of $1,419,000 in income tax benefits. The proceeds of the
Company's June 1996 stock offering, and bank borrowings were used to repay the
senior notes. (See Liquidity and Capital Resources below).
The net loss of $48,000 in the second quarter of 1996 compares to a net income
of $2,282,000 in the second quarter of 1995. The decrease is attributable to the
factors described above.
COMPARISON OF THE SIX FISCAL MONTHS ENDED JUNE 30, 1995 AND JUNE 28, 1996
For the first six months of 1996, net sales were a record $60,076,000, a 36.7%
increase from $43,959,000 in 1995. Sales by Dur-O-Wal accounted for $12,343,000
of the sales increase. Concrete accessories increased 8.6% from $43,959,000 in
the first six months of 1995 to $47,733,000 in the first six months of 1996, due
to strong heavy construction activity in the U.S., the April 1996 acquisition of
Steel Structures and, to a lesser extent, new concrete accessories product
sales. Net sales of masonry accessories decreased $827,000, to $12,343,000 for
the first half of 1996 from $13,170,000, on a pro forma basis with Dur-O-Wal,
from record volumes in 1995. Masonry accessory sales declined in the first half
due to severe winter weather which adversely affected the sales of hot-dipped
galvanized masonry accessories which are used in exterior building walls. In
addition, a competitor entered the market for hot-dipped masonry accessories in
late 1995 which also adversely affected sales of this product in the first six
months of 1996.
Gross profit for the first six months of 1996 was $19,019,000, a 41.4% increase
over $13,448,000 in the first half of 1995. As a percent of sales, gross margins
were also improved at 31.7%, up from 30.6% in 1995. The increase in gross profit
is attributable to improved selling prices, favorable raw material costs and, to
a lesser extent, a shift in sales mix in favor of higher margin products. Major
investments in fixed assets, particularly in the concrete paving products line,
in 1995 are also providing payback in the form of improved margins in 1996. On a
pro forma basis with Dur-O-Wal, gross profits were up 13.9%, from $16,694,000
for the first half of 1995.
SG&A expenses were down as a percent of sales from 19.9% in the first half of
1995 to 19.1% in the first half of 1996. SG&A expenses increased $2,718,000, or
31.1% from $8,729,000 in the
<PAGE> 12
first half of 1995 compared to $11,447,000 in the first half of 1996. On a pro
forma basis with Dur-O-Wal, SG&A expenses in the first half of 1995 were
$10,473,000, or 18.3% of sales. SG&A expenses were up 8.1% , or $974,000, over
1995 pro forma first half results in part due to new product literature and
promotional costs, the addition of the Kankakee operation in April 1996 and the
addition of a new service center in Westfield, MA in July 1995.
Operating income of $6,740,000 in the first six months of 1996 was also a
record, up from $4,020,000 in the first six months of 1995, an increase of
67.7%. Operating income increased due to the factors discussed above. On a pro
forma basis with Dur-O-Wal, 1995 first half operating income would have been
$5,308,000.
Interest expense increased 68.3% from $1,889,000 in the first half of 1995 to
$3,179,000 in the first half of 1996, due to higher debt resulting from the
acquisition of Dur-O-Wal, the redemption of $10,000,000 of the Company's
preferred shares in October 1995 and the acquisition of the Kankakee operation
in April 1996. On a pro forma basis with Dur-O-Wal and the stock offering,
interest expense would have been $1,767,000 in the first half 1995 compared to
$1,781,000 in the first half of 1996.
Income before income taxes and extraordinary item increased to $3,577,000 in the
first half of 1996 compared to $2,131,000 for the same period in 1995, due to
the reasons discussed above. On a pro forma basis, income before income taxes
and extraordinary item increased to $5,100,000 for the first half of 1996
compared to $3,505,000 in 1995.
The Company did not have a provision for income taxes in the first half of 1995
as U.S. net operating carry forward losses were being utilized. The first half
provision for income taxes returned to a normal level.
An extraordinary loss on the extinguishment of debt in June 1996 resulted from a
$2,400,000 prepayment premium on the extinguishment of the Company's $40 million
11.75% unsecured senior notes and $1,333,000 in associated unamortized debt
discount and financing costs, net of $1,419,000 in income tax benefits. The
proceeds of the June 1996 stock offering, new term notes and additional
borrowing on the line of credit were used to repay the senior notes. (See the
Liquidity and Capital Resources below.)
The Company had a net loss of $449,000 for the first half of 1996. Net income in
1995 was $2,131,000 for the first half. The decrease is attributable to the
factors described above.
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 financing have been cash from operations, borrowings under its
revolving line of credit and, in 1994 and 1995, the issuance of long-term debt
and equity.
Net cash used in operating activities for the first six months of 1996 was
$2,190,000. Uses of
<PAGE> 13
operating cash flow included seasonal increases in accounts receivable and
inventory of $7,455,000 and $2,267,000, respectively. Sources of operating cash
flow for the first six months of 1996 included $1,865,000 in income before the
extraordinary item, $2,704,000 from non-cash charges for depreciation and
amortization and seasonal growth in accounts payable of $2,495,000.
At June 28, 1996, working capital was $16,276,000 compared to $14,142,000 at
June 30, 1995. Deferred tax benefits recognized in the latter part of 1995,
resulted in $1,814,000 of the increase, while $2,185,000 of the increase is
attributable to the acquisition of Dur-O-Wal, Inc. The current portion of the
new borrowings decreased working capital by $3,250,000. Approximately $850,000
of the increase is a result of the acquisition of the net assets of Steel
Structures, Inc. The ratio of current assets to current liabilities was 1.6 to
1.0 at June 28, 1996 and 2.1 to 1.0 at June 30, 1995.
On June 17, 1996, the Company entered into the Amended Credit Facility with Bank
One, Dayton, NA and Bank of America Illinois. The Amended Credit Facility
provides for (i) term loans to the Company and Dur-O-Wal (together, the "Term
Loan") and (ii) revolving credit facilities for the Company and Dur-O-Wal
(together, the "Revolving Credit Facility"), each of which is secured by
substantially all of the assets of the Company and Dur-O-Wal. The Revolving
Credit Facility will terminate in four years and has interest rate options based
on (a) Bank One, Dayton, NA's prime rate or (b) LIBOR plus an amount between
1.00% and 2.75% (LIBOR plus 1.75% at June 28, 1996) depending on the level of
EBITDA and certain other financial ratios. A commitment fee of between 0.125%
and 0.50% per annum (0.25% per annum at June 28, 1996) will be payable on the
average unused amount with the rate dependent on the level of EBITDA and certain
other financial ratios. Amounts available under the Revolving Credit Facility
will be equal to the lessor of (i) $37,000 or (ii) the sum of (x) 85% of
eligible accounts receivable, (y) 60% of eligible inventories and (z) an amount
of up to $10,000,000 at closing, decreasing in steps to zero on October 1, 1997.
At June 28, 1996, $36,730,000 of the Revolving Credit Facility was available, of
which $27,600,000 of borrowings were outstanding. The principal amount of the
Term Loan is $13,000,000 which is due in full in four years with mandatory
quarterly principal payments of $812,500 plus interest beginning on October 1,
1996. The Term Loan permits the Company to choose from various interest rate
options. The Amended Credit Facility contains restrictive covenants, which,
among other things, require the Company to maintain certain specified financial
ratios and limit the Company's ability to incur debt, make acquisitions and
capital expenditures and pay dividends. The Company used $7,056,000 in Revolving
Credit Facility borrowings and $13,000,000 in Term Loan borrowing together with
the net public stock offering proceeds of $22,579,000 to repay $40,000,000 in
long term debt, $2,400,000 in associated prepayment premium and $235,000 in
financing costs on the Amended Credit Facility.
Borrowing levels vary during the course of a year based upon the Company's
seasonal working capital needs. The Company's sales are highly seasonal due to
the impact weather on the heavy construction industry. Beginning at the end of
the first quarter, the Company's sales typically increase sharply, reaching a
peak around the end of the second quarter or beginning of the third quarter. The
Company's accounts receivable normally increase from the beginning of the year
to
<PAGE> 14
the end of the third quarter. Inventory generally begins to buildup during the
middle of the first quarter and remains at a high level until the fourth
quarter. This results in a seasonal need for working capital.
At June 28, 1996, the Company had $40,884,000 of long-term debt outstanding,
$3,282,000 of which was current. The approximate weighted average interest rate
on the outstanding debt was 8.35%.
The Company invested $1,250,000 in property, plant and equipment additions
during the first six months of 1996 and has additional planned capital
expenditures during the remainder of 1996 of approximately $1,100,000.
In addition, the Company has paid $3,800,000 of the $5,614,000 purchase price
for the net assets of Steel Structures, Inc. $1,014,000 of the remaining
purchase price will be paid during the third quarter of 1996 with the balance
payable over the next two years.
The Company believes that its liquidity, capital resources and cash flows from
operations are sufficient to fund planned capital expenditures, working capital
requirements and debt service in 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
cash generated from operations, borrowings under the Amended Credit Facility or,
if feasible and attractive, issuances of long-term debt or additional Class A
Common Shares.
<PAGE> 15
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 9, 1996 BY: /s/Richard L. Braswell
------------------------ -------------------------------------------
Richard L. Braswell
Vice President Finance and Treasurer
(Principal Financial and Accounting Officer)
<PAGE> 16
INDEX TO EXHIBITS
-----------------
<TABLE>
<S> <C> <C>
(11) Statement Re: Computation of Earnings Per Share:
11.1 Computation of Earnings Per Share...................................... *
(27) Financial Data Schedule......................................................... *
<FN>
- -------------------
"*" Indicates the Exhibit is filed with this Report.
</TABLE>
<PAGE> 1
DAYTON SUPERIOR CORPORATION
EXHIBIT 11 - COMPUTATION OF EARNINGS
PER COMMON AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
Three Fiscal Months Ended Six Fiscal Months Ended
------------------------- -----------------------
June 30, June 28, June 30, June 28,
1995 1996 1995 1996
-------------------------- --------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(Amounts in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding during the period 2,911,400 3,517,584 2,911,400 3,404,068
Common equivalent shares outstanding (a) 568,061 45,210 568,061 45,210
Weighted average common and common -------------------------- --------------------------
equivalent shares outstanding 3,479,461 3,562,794 3,479,461 3,449,278
Income before income taxes and extraordinary
item $2,282 $2,266 $2,131 $1,865
Extraordinary item -- (2,314) -- (2,314)
-------------------------- --------------------------
Net income 2,282 (48) 2,131 (449)
Dividends on Redeemable Preferred Shares (150) -- (300) --
Accretion on Redeemable Preferred Shares (61) -- (123) --
-------------------------- --------------------------
Net income available to common shareholders $2,071 ($48) $1,708 ($449)
========================== ==========================
Income per share before extraordinary item $0.60 $0.64 $0.49 $0.54
Extraordinary item -- (0.65) -- (0.67)
-------------------------- --------------------------
Net income per share $0.60 ($0.01) $0.49 ($0.13)
========================== ==========================
Fully diluted earnings per share are not significantly different from primary earnings per share.
========================
<FN>
Notes:
(a) Common equivalent share in periods with a loss are shares issuable upon the
exercise of stock options and warrants granted within 12 months of the
stock offering.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000854709
<NAME> DAYTON SUPERIOR CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-30-1996
<PERIOD-END> JUN-28-1996
<EXCHANGE-RATE> 1
<CASH> 638
<SECURITIES> 0
<RECEIVABLES> 21,413
<ALLOWANCES> 720
<INVENTORY> 15,538
<CURRENT-ASSETS> 41,653
<PP&E> 30,258
<DEPRECIATION> 11,650
<TOTAL-ASSETS> 118,441
<CURRENT-LIABILITIES> 25,377
<BONDS> 37,602
<COMMON> 41,923
0
0
<OTHER-SE> 7,690
<TOTAL-LIABILITY-AND-EQUITY> 118,441
<SALES> 60,076
<TOTAL-REVENUES> 60,076
<CGS> 41,057
<TOTAL-COSTS> 41,057
<OTHER-EXPENSES> 12,263
<LOSS-PROVISION> 53
<INTEREST-EXPENSE> 3,179
<INCOME-PRETAX> 3,577
<INCOME-TAX> 1,712
<INCOME-CONTINUING> 1,865
<DISCONTINUED> 1,865
<EXTRAORDINARY> (2,314)
<CHANGES> 0
<NET-INCOME> (449)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
