<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 27, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-11781
DAYTON SUPERIOR CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 31-0676346
-------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
721 Richard Street
Miamisburg, Ohio 45342
----------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 937-866-0711
--------------
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
----- -----
5,665,550 Shares of Common Stock were outstanding as of October 30, 1996
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, Sept 27,
1995 1996
------------ -----------
(Unaudited)
ASSETS (Amounts in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash $643 $889
Accounts Receivable, net of allowance for
doubtful accounts of $708 and $660 11,724 21,735
Inventories (Note 2) 12,392 15,338
Rental equipment, net 1,235 1,867
Prepaid expenses 474 583
Prepaid income taxes 436 427
Future tax benefits 1,393 1,393
-------- --------
Total current assets 28,297 42,232
-------- --------
PROPERTY, PLANT & EQUIPMENT: 27,560 31,031
Less accumulated depreciation (10,000) (12,455)
-------- --------
Net property, plant & equipment 17,560 18,576
-------- --------
GOODWILL AND INTANGIBLE ASSETS,
net of accumulated amortization (Note 2) 57,734 57,860
OTHER ASSETS 269 --
-------- --------
Total assets $103,860 $118,668
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 4) $32 $3,282
Accounts payable 8,043 12,553
Accrued compensation and benefits 3,889 3,794
Accrued liabilities 3,987 3,200
Income taxes payable -- 655
Accrued interest 2,063 754
-------- --------
Total current liabilities 18,014 24,238
LONG-TERM DEBT (Note 3) 52,980 36,061
DEFFERED INCOME TAXES 2,781 2,558
OTHER LONG-TERM LIABILITIES 2,600 2,877
-------- --------
Total liabilities 76,375 65,734
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Class A Common Shares 17,483 32,932
Class B Common Shares 1,942 9,749
Cumulative foreign currency translation
adjustment (139) (141)
Excess pension liability (50) (50)
Retained earnings 8,330 10,444
Treasury shares, Class A Common, at cost (81) --
-------- --------
Total shareholders' equity 27,485 52,934
-------- --------
Total liabilities and shareholders'
equity $103,860 $118,668
======== ========
</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 Nine Fiscal Months Ended
------------------------- ------------------------
Sept 29, Sept 27, Sept 29, Sept 27,
1995 1996 1995 1996
------------ ---------- ---------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(Amounts in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
NET SALES $25,150 $37,086 $69,109 $97,162
COST OF SALES 17,014 25,486 47,525 66,543
--------- --------- --------- ---------
Gross profit 8,136 11,600 21,584 30,619
SELLING, GENERAL AND ADMINSTRATIVE EXPENSES 4,440 5,940 13,169 17,387
AMORTIZATION OF GOODWILL AND INTANGIBLES 352 435 1,051 1,267
--------- --------- --------- ---------
Operating income 3,344 5,225 7,364 11,965
OTHER EXPENSES:
Interest expense, net 909 823 2,798 4,002
Other, net -- 70 -- 54
--------- --------- --------- ---------
Income before income taxes and
extraordinary item 2,435 4,332 4,566 7,909
PROVISION FOR INCOME TAXES 312 1,769 312 3,481
--------- --------- --------- ---------
Income before extraordinary item 2,123 2,563 4,254 4,428
EXTRAORDINARY ITEM, Loss on extinguishment of debt,
net of income tax effect of $1,418 (Note 4) -- -- -- (2,314)
--------- --------- --------- ---------
Net income (loss) 2,123 2,563 4,254 2,114
Dividends on Redeemable Preferred Shares (150) -- (450) --
Accretion on Redeemable Preferred Shares (61) -- (184) --
--------- --------- --------- ---------
Net income (loss) available to common shareh $1,912 $2,563 $3,620 $2,114
========= ========= ========= =========
Income per share before extraordinary item $0.55 $0.44 $1.04 $0.96
Extraordinary item per share $0.00 $0.00 $0.00 ($0.50)
--------- --------- --------- ---------
Net income (loss) per share $0.55 $0.44 $1.04 $0.46
========= ========= ========= =========
Weighted average common and common equivalent
shares outstanding 3,479,461 5,873,881 3,479,461 4,598,367
========= ========= ========= =========
</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 CASH FLOWS
For the Nine Fiscal Months Ended September 29, 1995 and September 27, 1996
<TABLE>
<CAPTION>
Sept 29, Sept 27,
1995 1996
----------- ----------
(Unaudited) (Unaudited
(Amounts in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $4,254 $2,114
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Extraordinary loss on extinguishment of debt -- 2,314
Depreciation 1,822 2,948
Amortization of goodwill and intangibles 1,051 1,267
Deferred income taxes -- 427
Amortization of debt discount and deferred financing costs 223 176
Loss (gain) on sales of assets -- (5)
Change in assets and liabilities, net of the effects of acquisition:
Accounts receivable (5,282) (7,274)
Inventories (430) (2,570)
Rental equipment (687) (984)
Accounts payable 2,509 4,097
Accrued liabilities (458) (381)
Income tax payable (623) 664
Accrued interest 882 (1,309)
Other, net (115) 81
-------- --------
Net cash provided by/(used in) operating activities 3,146 1,565
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment additions (2,272) (2,137)
Proceeds from sales of assets 7 7
Acquisition of the net assets of Steel Structures, Inc. (Note 5) -- (4,845)
-------- --------
Net cash provided by/(used in) investing actities (2,265) (6,975)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt, net 125 25,838
Repayment of long-term debt -- (40,000)
Prepayment premium on extinguishment of long-term debt -- (2,400)
Financing costs and fees -- (367)
Fees paid to former shareholder -- (750)
Dividend payments (300) --
Issuance of common stock -- 23,337
-------- --------
Net cash provided by/(used in) financing activities (175) 5,658
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 29 (2)
-------- --------
Net increase/(decrease) in cash 735 246
CASH, beginning of period 464 643
-------- --------
CASH, end of period $1,199 $889
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income taxes $880 $1,612
Cash paid for interest 1,617 5,150
SUPPLEMENTAL NONCASH DISCLOSURES:
Accretion of preferred stock 184 --
Accrual of preferred stock dividends 450 --
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
<PAGE> 5
DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND SEPTEMBER 27, 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 September 27, 1996:
<TABLE>
<CAPTION>
December 31, September 27,
1995 1996
------------ -------------
<S> <C> <C>
Raw materials ........................... $ 2,562 $ 4,840
Finished goods .......................... 9,830 10,498
------- -------
12,392 15,338
LIFO reserve ............................ --- ---
------- -------
$12,392 $15,338
======= =======
</TABLE>
<PAGE> 6
(3) 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
September 27, 1996, $33,744 was available under the Revolving Credit Facility,
of which $26,059 was outstanding at a weighted average interest rate of 7.5%.
Average borrowings under the Revolving Credit Facility and its
predecessors were $20,377 and $1,567 during the nine fiscal months ended
September 27, 1996 and September 29, 1995, respectively, at an approximate
weighted average interest rate of 8.4% and 12.9%, respectively. The maximum
borrowings outstanding during the nine fiscal months ended September 27, 1996
and September 29, 1995, was $28,180 and $3,240, respectively.
Following is a summary of the Company's long-term debt as of December
31, 1995 and September 27, 1996:
<TABLE>
<CAPTION>
December 31, September 27,
1995 1996
------------- -------------
<S> <C> <C>
Revolving lines of credit $13,280 $26,059
Term Loan, bearing a weighted average -- 13,000
interest rate of 7.97%
City of Parsons, KS Economic Development Loan 307 284
Unsecured Senior Promissory notes, prepaid
during 1996 (Note 4) 40,000 --
Unamortized debt discount (575) --
------- ------
Total long-term debt 53,012 39,343
Less current portion (32) (3,282)
-------- -------
Long-term portion $52,980 $36,061
======= =======
</TABLE>
(4) 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 $538, respectively. The Company recorded an extraordinary loss of
$2,314, net of an income tax effect of $1,419. The Company funded this repayment
with $22,654 in proceeds from its public stock offering, $13,000 in Term Loans
and $6,746 in draws on its Revolving Credit Facility.
(5) 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 has been relocated from another plant to
the former Steel Structures facility in Kankakee. The acquisition will be
<PAGE> 7
operated by the Company under the name American Highway Technology.
The purchase price, including acquisition related costs of $130, is
$5,644, subject to post closing adjustments. As of September 27, 1996, the
Company has paid $4,845 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 evaluations are preliminary
estimates and may change. In the opinion of management, the preliminary
allocation of the purchase price is not expected to differ materially from the
final allocation.
<TABLE>
<S> <C>
Current assets $3,197
Property, plant and equipment 1,477
Goodwill and intangibles 1,478
------
Total assets acquired 6,152
Liabilities assumed ( 508)
Net assets acquired $5,644
======
</TABLE>
(6) 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
$22,654, net of expenses.
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 the Company issued 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> 8
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 tables set forth, the Company's results of operations as a
percentage of net sales:
<TABLE>
<CAPTION>
Three fiscal months ended
Actual Pro Forma (1) Actual
Sept 29, 1995 Sept 29, 1995 Sept 27, 1996
------------- ------------- --------------
<S> <C> <C> <C>
Concrete accessories 100.0% 79.1% 79.4%
Masonry accessories -- 20.9 20.6
-------- ------ ------
Net sales 100.0 100.0 100.0
Cost of sales 67.6 69.6 68.7
-------- ------ ------
Gross profit 32.4 30.4 31.3
Selling, general and
administrative expenses 17.7 16.7 16.0
Amortization of goodwill
and intangibles 1.4 1.4 1.2
-------- ------ -----
Operating income 13.3 12.3 14.1
Interest expense, net 3.6 2.7 2.2
Other, net -- -- 0.2
-------- ------ -----
Income before taxes and
extraordinary item 9.7 9.6 11.7
Provision for income taxes 1.3 1.8 4.8
-------- ------ -----
Net income (loss) 8.4% 7.8% 6.9%
======== ====== =====
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
Nine fiscal months ended
Actual Pro Forma (1) Actual
Sept 29, 1995 Sept 29, 1995 Sept 27, 1996
------------- ------------- --------------
<S> <C> <C> <C>
Concrete accessories 100.0% 77.7% 79.4%
Masonry accessories -- 22.3 20.6
------ ------ ------
Net sales 100.0 100.0 100.0
Cost of sales 68.8 70.4 68.5
------ ------ ------
Gross profit 31.2 29.6 31.5
Selling, general and
administrative expenses 19.0 17.7 17.9
Amortization of goodwill
and intangibles 1.5 1.6 1.3
------ ------ -------
Operating income 10.7 10.3 12.3
Interest expense, net 4.1 2.9 4.1
Other, net -- -- 0.1
------ ------ -------
Income before taxes and
extraordinary item 6.6 7.4 8.1
Provision for income taxes 0.4 1.3 3.5
------ ------ -------
Income before extraordinary
item 6.2 6.1 4.6
Extraordinary item -- -- (2.4)
------ -------
Net income (loss) 6.2% 6.1% 2.2%
====== ====== =======
</TABLE>
(1) This column gives effect to the acquisition of Dur-O-Wal, Inc. and the
public offering of Company shares as if they had occurred on January 1, 1995.
The pro forma information does not purport to represent the Company's results of
operations had such transactions, in fact, occurred on that date, or the results
that can be expected in the future.
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 have been relocated from another plant
to the former Steel Structures facility in Kankakee. The acquisition is being
operated by the Company under the name American Highway Technology. This
combination is expected to provide synergies in purchasing, freight and handling
costs and cross-sourcing of products.
<PAGE> 10
COMPARISON OF THE THREE FISCAL MONTHS ENDED SEPTEMBER 29, 1995 AND SEPTEMBER 27,
1996
The Company reported record net sales of $37,086,000 for the third quarter of
1996, a 47.5% increase from $25,150,000 for the third quarter of 1995. The
increase in net sales included $7,622,000 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 U.S. heavy
construction market, the addition of the American Highway Technology
acquisition, which management estimates the net sales impact to be $1,100,000,
and, to a lesser extent, new concrete accessory product sales. Net sales of
masonry accessories in the third quarter of 1996 increased $975,000, or 14.7%,
on a pro forma basis over the record third quarter of 1995. The record quarter
for masonry accessories reflects improved market share and the management belief
that the poor first quarter weather delayed a number of masonry construction
projects, thus increasing sales in both the second and third quarters. Wet
weather in the east and southeast from hurricanes and heavy rains in the Gulf
states hampered sales in all product lines in the latter part of the third
quarter.
Gross profit increased $3,464,000, or 42.6%, from $8,136,000 in the third
quarter of 1995 to $11,600,000 in the third 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 concrete
accessories products due to improved selling prices and a shift in sales mix in
favor of higher margin products. In addition, favorable raw material costs in
all product categories contributed to the improvement in gross profits for the
quarter. 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 decreased from 32.4% in 1995 to 31.3% in 1996,
but increased from to 30.4% on a pro forma basis for the third quarter of 1995.
Selling, general and administrative expenses, excluding the amortization of
goodwill and intangibles ("SG&A"), increased $1,500,000, or 33.8%, from
$4,440,000 in the third quarter of 1995 to $5,940,000 in the third quarter of
1996. As a percent of sales, SG&A expenses fell from 17.7% in the third quarter
of 1995 to 16.0% in the third quarter of 1996. Additional expenses associated
with the new American Highway Technology operation acquired in April 1996 and
new public company related charges contributed to the dollar increase in SG&A
over the 1995 pro forma results. On a pro forma basis with Dur-O-Wal, SG&A
expenses would have been $5,305,000, or 16.7% of sales, in the third quarter of
1995.
Operating income of $5,225,000 in the third quarter of 1996 was up from
$3,344,000 in the third quarter of 1995, an increase of 56.3%. Operating income
increased due to the factors discussed above. On a pro forma basis including
Dur-O-Wal, 1995 third quarter operating income would have been $3,898,000.
Net interest expense decreased by $86,000, or 9.5%, from $909,000 in the third
quarter of 1995 to $823,000 in the third quarter of 1996, in spite of higher
borrowing levels, due to favorable interest rates obtained in the June 1996 debt
restructuring.
<PAGE> 11
Income before income taxes and extraordinary items was $4,332,000 in the third
quarter of 1996 compared to $2,435,000 for the third quarter of 1995, for the
reasons discussed above. On a pro forma basis with Dur-O-Wal, income before
income taxes and extraordinary item would have been $3,064,000 for the third
quarter of 1995.
The Company had only a $312,000 provision for income taxes in the third quarter
of 1995 as U.S. net operating carryforward losses were being utilized. The 1996
third quarter provision for income taxes returned to a normal level.
The net income of $2,563,000 in the third quarter of 1996 compares to a net
income of $2,123,000 in the third quarter of 1995. The increase is attributable
to the factors described above.
COMPARISON OF THE NINE FISCAL MONTHS ENDED SEPTEMBER 29, 1995 AND SEPTEMBER 27,
1996
For the first nine months of 1996, net sales were a record $97,162,000, a 40.6%
increase from $69,109,000 in 1995. Sales by Dur-O-Wal accounted for $19,965,000
of the sales increase. Concrete accessories increased 11.7% from $69,109,000 in
the first nine months of 1995 to $77,197,000 in the first nine months of 1996,
due to strong heavy construction activity in the U.S., the April 1996 American
Highway Technology acquisition and, to a lesser extent, new concrete accessories
product sales. Net sales of masonry accessories increased $148,000, to a record
$19,965,000 for the first nine months of 1996 from $19,817,000, on a pro forma
basis with Dur-O-Wal. Masonry accessory sales are recovering from severe winter
weather which adversely affected the sales of hot-dipped galvanized masonry
accessories which are used in exterior building walls. The Company believes that
it has increased overall market share despite the presence of a competitor in
the market for hot-dipped masonry accessories. Management estimates that
American Highway Technology added $2,000,000 in incremental sales since April
1996 and that the outlook for 1997 is higher as extensive improvements to the
Kankakee operations have slowed the shipment of concrete paving products in
1996.
Gross profit for the first nine months of 1996 was $30,619,000, a 41.9% increase
over $21,584,000 for the first nine months of 1995. As a percent of sales, gross
margin was also improved at 31.5%, up from 31.2% in 1995. The increase in gross
profit is attributable to improved selling prices and a shift in sales mix in
favor of higher margin products on the Company's concrete accessory products. In
addition, favorable raw material costs contributed to the improvement in 1996
gross profits. 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 profit was up 16.2%,
from $26,357,000 for the first nine months of 1995.
SG&A expenses were down as a percent of sales from 19.0% in the first nine
months of 1995 to 17.9% in the first nine months of 1996. SG&A expenses
increased $4,218,000, or 32.0% from $13,169,000 in the first nine months of 1995
compared to $17,387,000 in the first nine months of 1996. On a pro forma basis
with Dur-O-Wal, SG&A expenses in the first nine months of 1995 were $15,778,000,
or 17.7% of sales. SG&A expenses were up 9.4% , or $1,484,000, over 1995
<PAGE> 12
pro forma first nine months results in part due to new product literature and
promotional costs, the addition of the Kankakee operation in April 1996, the
addition of a new service center in Westfield, MA in July 1995 and new public
company related charges.
Operating income of $11,965,000 in the first nine months of 1996 was also a
record, up from $7,364,000 in the first nine months of 1995, an increase of
62.5%. Operating income increased due to the factors discussed above. On a pro
forma basis with Dur-O-Wal, 1995 first nine months operating income would have
been $9,206,000.
Interest expense increased 43.0% from $2,798,000 in the first nine months of
1995 to $4,002,000 in the first nine months 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
American Highway Technology Kankakee operation in April 1996. Favorable interest
rates obtained in the June 1996 debt restructuring reduced the weighted average
interest rate from 12.9% in 1995 to 8.4% in 1996 on the revolving credit
facility and from 11.8% in 1995 to 8.0% in 1996 on term borrowings. On a pro
forma basis with Dur-O-Wal and the stock offering, interest expense would have
been $2,600,000 in the first nine months 1995 compared to $2,604,000 in the
first nine months of 1996.
Income before income taxes and extraordinary item increased $3,343,000 to
$7,909,000 in the first nine months of 1996 compared to $4,566,000 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 $9,432,000 for the first
nine months of 1996 compared to $6,579,000 in 1995.
The Company had only a $312,000 provision for income taxes in the first nine
months of 1995 as U.S. net operating carryforward losses were being utilized.
The 1996 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 net income of $2,114,000 for the first nine months of 1996. Net
income in 1995 was $4,254,000 for the first nine months. 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.
<PAGE> 13
Net cash provided by operating activities for the first nine months of 1996 was
$1,565,000. Sources of operating cash flow for the first nine months of 1996
included $4,428,000 in income before the extraordinary item, $4,215,000 from
non-cash charges for depreciation and amortization, $664,000 increase in income
taxes payable and seasonal growth in accounts payable of $4,097,000. Uses of
operating cash flow included seasonal increases in accounts receivable and
inventory of $7,274,000 and $2,570,000, respectively. Other uses of cash from
operations included $1,309,000 in reduction of accrued interest and $984,000 in
increases to the rental equipment fleet.
At September 27, 1996, working capital was $17,994,000 compared to $13,616,000
at September 29, 1995. Deferred tax benefits first recognized in the fourth
quarter of 1995, resulted in $1,814,000 of the increase, while $1,535,000 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 1.7 to 1.0 at September 27, 1996 and 2.0 to 1.0 at September 29,
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 September 27, 1996, decreasing to LIBOR
plus 1.50% effective December 1, 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 September 27, 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) $37,000,000 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, ($7,500,000 at September 27, 1996), decreasing in steps to zero on
October 1, 1997. At September 27, 1996, $33,744,000 of the Revolving Credit
Facility was available, of which $26,059,000 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
$6,746,000 in Revolving Credit Facility borrowings and $13,000,000 in Term Loan
borrowing together with the net public stock offering proceeds of $22,654,000 to
repay $40,000,000 in long term debt, $2,400,000 in associated prepayment premium
on the Amended Credit Facility. In addition, the Company funded $235,000 in
financing costs with borrowings from the Amended Credit Facility.
<PAGE> 14
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 of 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 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 September 27, 1996, the Company had $39,343,000 of long-term debt
outstanding, $3,282,000 of which was current. The approximate weighted average
interest rate on the outstanding debt was 7.65%.
The Company invested $2,137,000 in property, plant and equipment additions
during the first nine months of 1996 and has additional planned capital
expenditures during the remainder of 1996 of approximately $520,000.
In addition, the Company has paid $4,845,000 of the $5,644,000 purchase price
for the net assets of Steel Structures, Inc. $25,000 of the remaining purchase
price will be paid during the fourth 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: October 30, 1996 BY: /s/Richard L. Braswell
--------------------- ------------------------
Richard L. Braswell
Vice President Finance and Treasurer
(Principal Financial and Accounting Officer)
<PAGE> 16
<TABLE>
INDEX TO EXHIBITS
-----------------
<S> <C> <C>
(11) Statement Re: Computation of Earnings Per Share:
11.1 Computation of Earnings Per Share................... *
(27) Financial Data Schedule...................................... *
</TABLE>
- -------------------
"*" Indicates the Exhibit is filed with this Report.
<PAGE> 1
<TABLE>
DAYTON SUPERIOR CORPORATION
EXHIBIT 11 - COMPUTATION OF EARNINGS
PER COMMON AND COMMON EQUIVALENT SHARE
<CAPTION>
Three Fiscal Months Ended Nine Fiscal Months Ended
--------------------------------- ----------------------------
Sept 29, Sept 27, Sept 29, Sept 27,
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 5,653,943 2,911,400 4,159,725
Common equivalent shares outstanding (a) 568,061 219,938 568,061 438,642
Weighted average common and common -------------------------- --------------------------
equivalent shares outstanding 3,479,461 5,873,881 3,479,461 4,598,367
Income before extraordinary item $ 2,123 $ 2,563 $ 4,254 $ 4,428
Extraordinary item -- -- -- (2,314)
-------------------------- --------------------------
Net income 2,123 2,563 4,254 2,114
Dividends on Redeemable Preferred Shares (150) -- (450) --
Accretion on Redeemable Preferred Shares (61) -- (184) --
-------------------------- --------------------------
Net income available to common shareholders $ 1,912 $ 2,563 $ 3,620 $ 2,114
========================== ==========================
Income per share before extraordinary item $ 0.55 $ 0.44 $ 1.04 $ 0.96
Extraordinary item 0.00 0.00 0.00 (0.50)
-------------------------- --------------------------
Net income per share $ 0.55 $ 0.44 $ 1.04 $ 0.46
========================== ==========================
</TABLE>
Fully diluted earnings per share are not significantly different from primary
earnings per share
==========================
Notes:
(a) Common equivalent shares are shares issuable upon the exercise of stock
options and warrants, less the shares that could be purchased with the
proceeds from the exercise of the options and warrants, based on the
company's initial public offering price of $13.00 for 1995 and the
average of the company's trading price for 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-27-1996
<CASH> 889
<SECURITIES> 0
<RECEIVABLES> 21,735
<ALLOWANCES> 660
<INVENTORY> 15,338
<CURRENT-ASSETS> 42,232
<PP&E> 31,031
<DEPRECIATION> 12,455
<TOTAL-ASSETS> 118,668
<CURRENT-LIABILITIES> 24,238
<BONDS> 36,061
<COMMON> 42,681
0
0
<OTHER-SE> 10,253
<TOTAL-LIABILITY-AND-EQUITY> 118,668
<SALES> 97,162
<TOTAL-REVENUES> 97,162
<CGS> 66,543
<TOTAL-COSTS> 66,543
<OTHER-EXPENSES> 18,708
<LOSS-PROVISION> (43)
<INTEREST-EXPENSE> 4,002
<INCOME-PRETAX> 7,909
<INCOME-TAX> 3,481
<INCOME-CONTINUING> 4,428
<DISCONTINUED> 4,428
<EXTRAORDINARY> (2,314)
<CHANGES> 0
<NET-INCOME> 2,114
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
</TABLE>
