<PAGE> 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
JULY 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
------ ------
5,943,183 Class A Common Shares were outstanding as of August 9, 1999
<PAGE> 2
PART I. - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Dayton Superior Corporation and Subsidiaries
Consolidated Balance Sheets
As of July 2, 1999 and December 31, 1998
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
July 2, December 31,
1999 1999
---- ----
ASSETS
Current assets
<S> <C> <C>
Cash $ 1,647 $ 560
Accounts receivable, net of allowances for doubtful accounts and
sales returns and allowances of $5,408 and $4,432 56,304 42,996
Inventories (Note 3) 38,341 36,058
Prepaid expenses and other current assets 2,851 4,396
Prepaid income taxes 1,181 828
Future income tax benefits 3,458 3,521
------- ------
Total current assets 103,782 88,359
------- ------
Rental equipment, net (Note 3) 58,028 52,586
------- ------
Property, plant and equipment 67,432 63,850
Less accumulated depreciation (25,683) (22,069)
------- ------
Net property, plant and equipment 41,749 41,781
------- ------
Goodwill and intangible assets, net of accumulated amortization 71,824 70,130
Other assets 394 764
------- ------
Total assets $ 275,777 $ 253,620
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt (Note 4) $ 32 $ 32
Accounts payable 23,550 20,749
Accrued compensation and benefits 10,444 12,443
Other accrued liabilities 7,547 10,408
------- ------
Total current liabilities 41,573 43,632
Long-term debt (Note 4) 137,717 118,173
Deferred income taxes 11,585 11,544
Other long-term liabilities 5,514 5,683
------- ------
Total liabilities 196,389 179,032
------- ------
Shareholders' equity
Class A common shares 47,417 42,316
Class B common shares -- 5,037
Class A treasury shares (387) (145)
Cumulative other comprehensive income (219) (281)
Retained earnings 32,577 27,661
------- ------
Total shareholders' equity 79,388 74,588
------- ------
Total liabilities and shareholders' equity $ 275,777 $ 253,620
======= =======
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these
consolidated balance sheets.
2
<PAGE> 3
Dayton Superior Corporation and Subsidiaries
Consolidated Statements of Income
For The Three and Six Fiscal Months Ended July 2, 1999 and July 3, 1998
(Amounts in thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Fiscal Months Ended Six Fiscal Months Ended
----------------------------- -------------------------
July 2, July 3, July 2, July 3,
1998 1998 1999 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 88,636 $ 76,754 $ 156,832 $ 135,981
Cost of sales 55,753 48,971 100,524 88,481
------- ------- ------- -------
Gross profit 32,883 27,783 56,308 47,500
Selling, general and administrative expenses 19,628 17,741 40,077 35,706
Amortization of goodwill and intangibles 536 537 1,183 1,032
------- ------- ------- -------
Income from operations 12,719 9,505 15,048 10,762
Other expenses
Interest expense, net 3,049 2,821 6,024 5,814
Other expense, net 85 (5) 85 (1)
------- ------- ------- -------
Income before provision for income taxes 9,585 6,689 8,939 4,949
Provision for income taxes 4,314 2,958 4,023 2,227
------- ------- ------- -------
Net income $ 5,271 $ 3,731 $ 4,916 $ 2,722
======= ======= ======= =======
Basic net income per share $ 0.89 $ 0.64 $ 0.83 $ 0.47
======= ======= ======= =======
Basic weighted average common shares outstanding 5,944,756 5,873,779 5,946,144 5,782,528
========= ========= ========= =========
Diluted net income per share $ 0.85 0.61 0.79 0.45
========= ========= ========= =========
Diluted weighted average common and common
equivalents shares outstanding 6,170,337 6,070,936 6,185,426 6,011,089
========= ========= ========= =========
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these
consolidated statements.
3
<PAGE> 4
Dayton Superior Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For The Six Fiscal Months Ended July 2, 1999 and July 3, 1998
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
July 2, July 3,
---------- ---------
1999 1998
Cash Flows From Operating Activities:
<S> <C> <C>
Net income $ 4,916 $ 2,722
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 5,948 5,055
Amortization of goodwill and intangibles 1,183 1,032
Deferred income taxes (640) 201
Amortization of debt discount and deferred financing costs 419 388
Gain on sales of rental equipment and property, plant
and equipment (3,345) (3,509)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable (12,740) (13,081)
Inventories (1,869) (1,036)
Prepaid income taxes (353) (1,135)
Accounts payable 2,695 6,651
Accrued liabilities and other long-term liabilities (3,538) 745
Other, net 1,558 1,071
------ ------
Net cash used in operating activities (5,766) (896)
------ ------
Cash Flows From Investing Activities:
Property, plant and equipment additions (3,057) (3,130)
Proceeds from sales of fixed assets 232 759
Rental equipment additions (9,469) (8,176)
Proceeds from sales of rental equipment 5,177 4,929
Acquisitions (Note 2) (5,575) (1,267)
------ ------
Net cash used in investing activities (12,692) (6,885)
------ ------
Cash Flows From Financing Activities:
Issuance of long-term debt 19,544 7,990
Purchase of treasury shares (242) --
Issuance of common stock 181 126
------ ------
Net cash provided by financing activities 19,483 8,116
------ ------
Effect of Exchange Rate Changes on Cash 62 (26)
------ ------
Net increase in cash 1,087 309
Cash, beginning of period 560 --
------ ------
Cash, end of period $ 1,647 $ 309
====== ======
Supplemental Disclosures:
Cash paid for income taxes $ 5,139 $ 3,043
Cash paid for interest 5,822 5,430
Issuance of common stock in conjunction with acquisition (Note 2) (117) 4,000
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these
consolidated statements.
4
<PAGE> 5
Dayton Superior Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
For The Three and Six Fiscal Months Ended July 2, 1999 and July 3, 1998
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Fiscal Months Ended Six Fiscal Months Ended
------------------------- -----------------------
July 2, July 3, July 2, July 3,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 5,271 $ 3,731 $ 4,916 $ 2,722
Other comprehensive income:
Foreign currency translation adjustment 44 (32) 62 (26)
------- ------- ------- -------
Comprehensive income
$ 5,315 $ 3,699 $ 4,978 $ 2,696
======= ======= ======= =======
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these
consolidated statements.
5
<PAGE> 6
DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 2, 1999 AND JULY 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. The dispute has been 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.
6
<PAGE> 7
At this time, the Company can make no determination as to the amount of
the adjustment, if any, which will be made to the purchase price. The
Company intends to vigorously pursue its rights under the Purchase
Agreement.
(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 $5,400 in cash, including
acquisition costs of approximately $100 and a purchase price reduction
of approximately $100 received in July 1999. 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 and
liabilities assumed. 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.
Pro forma financial information is not required.
(d) SYMONS CONCRETE FORMS, INC.-- In May 1998, the Company purchased the
stock of Symons Concrete Forms, Inc. (formerly known as CAI). The
purchase price was approximately $6,600, 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 216,040 Class A
Common Shares valued at approximately $4,000, including a purchase
price reduction of approximately $100 (6,456 Class A Common Shares) in
the second quarter related to uncollected accounts receivable. 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. 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
7
<PAGE> 8
approximately $800 in cash. The Northwoods branches are 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 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. 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 July 2, 1999 and
December 31, 1998. Following is a summary of the components of
inventories as of July 2, 1999 and December 31, 1998:
<TABLE>
<CAPTION>
July 2, December 31,
1999 1998
----------------- -----------------
<S> <C> <C>
Raw materials $ 6,684 $ 7,659
Finished goods and work in progress 34,574 30,022
------- -------
41,258 37,681
Net realizable value reserve (2,917) (1,623)
------- -------
$ 38,341 $ 36,058
======= =======
</TABLE>
(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 July 2, 1999 and December
31, 1998 are net of accumulated depreciation of $8,676 and $6,796,
respectively. Rental revenues and cost of sales associated with rental
revenue are as follows:
8
<PAGE> 9
<TABLE>
<CAPTION>
Three fiscal months Six Fiscal months
ended ended
-------------------- --------------------
July 2, July 3, July 2, July 3,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Rental revenue $12,309 $9,442 $22,818 $18,462
Cost of sales 2,093 1,781 3,993 3,552
</TABLE>
(d) FINANCIAL INSTRUMENTS--The Company uses interest rate swaps to manage
interest rate risk associated with its floating rate borrowings. 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 July 2, 1999 is a liability of $535.
(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 July 2, 1999 and
December 31, 1998:
<TABLE>
<CAPTION>
July 2, December 31,
1999 1999
---------- ----------
<S> <C> <C>
Revolving line of credit, weighted average interest rate of 6.6% $ 32,560 $ 13,000
Term Loan, weighted average interest rate of 8.4% 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, 7.0% 189 205
---------- ----------
Total long-term debt 137,749 118,205
Less current portion (32) (32)
---------- ----------
Long-term portion $137,717 $118,173
========== ==========
</TABLE>
During May 1999, the Revolving Credit Facility was increased from $40,000 to
$50,000. At July 2, 1999, $50,000 of the $50,000 Revolving Credit Facility was
available, of which $32,560 of borrowings was outstanding. The average
borrowing, maximum borrowing, and weighted average interest rate for the periods
indicated are as follows:
<TABLE>
<CAPTION>
Three fiscal months Six fiscal months
ended ended
---------------------- ----------------------
July 2, July 3, July 2, July 3,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average borrowing $32,356 $22,004 $27,674 $19,825
Maximum borrowing 37,140 26,620 37,140 26,620
Weighted average interest rate 6.6% 7.5% 6.8% 7.8%
</TABLE>
9
<PAGE> 10
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 prohibit the payment of dividends on
Common Shares. The Company was in compliance with its loan covenants as of July
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 share for the three and six fiscal months ended July 2, 1999
and July 3, 1998 would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
Three fiscal months Six fiscal months
ended ended
-------------------------- --------------------------
July 2, July 3, July 2, July 3,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net income As Reported $5,271 $3,731 $4,916 $2,722
Pro Forma 5,191 3,631 4,836 2,588
Basic net income per share As Reported 0.89 0.64 0.83 0.47
Pro Forma 0.87 0.62 0.81 0.45
Diluted net income per share As Reported 0.85 0.61 0.79 0.45
Pro Forma 0.85 0.60 0.79 0.43
</TABLE>
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 six fiscal
months ended July 2, 1999 is
presented in the table below:
<TABLE>
<CAPTION>
Weighted Average
Number of Exercise Price
Shares Per Share
------------------ ----------------------
<S> <C> <C>
Outstanding at December 31, 1998 358,033 $ 6.75
Granted at a weighed average fair value of $8.27 92,600 19.44
Exercised (2,984) 8.38
Cancelled (866) 16.81
------------------ ----------------------
Outstanding at July 2, 1999 446,783 $ 9.35
================== ======================
</TABLE>
10
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(6) RETIREMENT PLANS
The Company terminated and merged various defined benefit
plans. As a result, the company recorded a $0.7 million non-recurring pension
plan termination gain which is included in the selling, general, and
administrative expenses.
(7) 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.
Information about the profit (loss) of each segment and the reconciliations to
the consolidated amounts for the six fiscal months ended July 2, 1999 and July
3, 1998 is as follows:
<TABLE>
<CAPTION>
Three fiscal months Six fiscal months
ended ended
----------------------------- ---------------------------
July 2, July 3, July 2, July 3,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Concrete Accessories $ 39,730 $ 34,148 $ 70,411 $ 61,871
Concrete Forming Systems 30,665 26,495 55,541 46,933
Paving Products 11,065 10,224 17,738 16,195
Masonry Products 7,176 5,887 13,142 10,982
------- ------- ------- -------
Net sales to external customers $ 88,636 $ 76,754 $156,832 $135,981
======= ======= ======= =======
Concrete Accessories $ 970 $ 916 $ 2,127 $ 2,265
Concrete Forming Systems 1,395 1,490 2,627 2,383
------- ------- ------- -------
Net sales to other segments $ 2,365 $ 2,406 $ 4,754 $ 4,648
======= ======= ======= =======
Concrete Accessories $ 918 $ 962 $ 1,893 $ 1,983
Concrete Forming Systems 1,806 1,553 3,507 3,201
Paving Products 181 178 363 366
Masonry Products 144 128 261 264
------- ------- ------- -------
Interest expense $ 3,049 $ 2,821 $ 6,024 $ 5,814
======= ======= ======= =======
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Concrete Accessories $ 7,093 $ 5,410 $ 9,608 $ 7,320
Concrete Forming Systems 2,965 2,583 3,268 1,943
Paving Products 950 1,135 451 893
Masonry Products 526 57 140 (469)
Intersegment Eliminations (1,217) (1,164) (2,398) (2,248)
Corporate (732) (1,332) (2,130) (2,490)
------- ------- ------- -------
Income before income taxes $ 9,585 $ 6,689 $ 8,939 $ 4,949
======= ======= ======= =======
Concrete Accessories $ 1,027 $ 741 $ 2,148 $ 1,569
Concrete Forming Systems 1,364 1,030 2,690 2,409
Paving Products 200 192 423 388
Masonry Products 330 331 662 659
Corporate 12 16 25 30
------- ------- ------- -------
Depreciation $ 2,933 $ 2,310 $ 5,948 $ 5,055
======= ======= ======= =======
Concrete Accessories $ 353 $ 322 $ 720 $ 641
Concrete Forming Systems 21 64 130 88
Paving Products 54 44 118 88
Masonry Products 108 107 215 215
------- ------- ------- -------
Amortization of goodwill and intangibles $ 536 $ 537 $ 1,183 $ 1,032
======= ======= ======= =======
</TABLE>
Information regarding capital expenditures by segment and the reconciliation to
the consolidated amounts for the six fiscal months ended July 2, 1999 and July
3, 1998 is as follows:
<TABLE>
<CAPTION>
Three fiscal months Six fiscal months
ended ended
------------------------ ------------------------
July 2, July 3, July 2, July 3,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Concrete Accessories $ 569 $ 804 $1,316 $1,145
Concrete Forming Systems 303 784 688 1,389
Paving Products 186 288 461 469
Masonry Products 358 61 513 93
Corporate 34 34 79 34
----- ----- ----- -----
Property, Plant, and Equipment Additions $1,450 $1,971 $3,057 $3,130
===== ===== ===== =====
Concrete Accessories $ 615 $ 721 $ 943 $1,264
Concrete Forming Systems 2,842 3,421 8,526 6,912
----- ----- ----- -----
Rental Equipment Additions $3,457 $4,142 $9,469 $8,176
===== ===== ===== =====
</TABLE>
There has been no material change in the relative assets employed by each
segment since December 31, 1998.
12
<PAGE> 13
(8) 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 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.
(9) SUBSEQUENT EVENT
The Company has filed a registration statement with the Securities and Exchange
Commission for an underwritten public offering of covertible trust preferred
securities. The securities would be issued by a limited purpose Delaware trust
which would use the proceeds to purchase from the Company the same principal
amount of the Company's covertible junior subordinated debentures. The net
proceeds would be used by the Company to pay some or all of its borrowings under
its Revolving credit Facility and for general corporate purposes.
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Dayton Superior Corporation ("the Company") believes it is the largest North
American manufacturer and distributor of metal accessories and forms used in
concrete construction and of metal accessories used in masonry construction.
Although almost all of the Company's products are used in concrete or masonry
construction, the function and nature of the products differ widely. The Company
has four principal operating divisions, which are organized around the following
product lines:
- Concrete Accessories;
- Concrete Forming Systems;
- Paving Products; and
- Masonry Products.
ACQUISITIONS
The Company has completed and integrated four acquisitions since the beginning
of 1998. These acquisitions were small add-on acquisitions, and are summarized
in the following table:
<TABLE>
<CAPTION>
Purchase Price
Date Business Acquired Division (In millions)
---- ----------------- -------- ---------------
<S> <C> <C> <C>
May 1998 Symons Concrete Forms Concrete Forming Systems $6.6
May 1998 Northwoods Concrete Forming Systems 0.8
June 1998 Secure Paving Products 0.6
January 1999 Cempro Concrete Accessories 5.4
</TABLE>
RESULTS OF OPERATIONS
The following table summarizes the Company's results of operations as a
percentage of net sales.
<TABLE>
<CAPTION>
THREE FISCAL MONTHS ENDED SIX FISCAL MONTHS ENDED
--------------------------- ---------------------------
JULY 2, JULY 3, JULY 2, JULY 3,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 62.9 63.8 64.1 65.1
----- ----- ----- -----
Gross profit 37.1 36.2 35.9 34.9
----- ----- ----- -----
Selling, general and administrative expenses 22.1 23.1 25.6 26.3
Amortization of goodwill and intangibles 0.7 0.7 0.7 0.7
----- ----- ----- -----
Total selling, general and administrative expenses 22.8 23.8 26.3 27.0
----- ----- ----- -----
Operating income 14.3 12.4 9.6 7.9
Interest expense, net 3.5 3.7 3.9 4.3
----- ----- ----- -----
Income before income taxes 10.8 8.7 5.7 3.6
Provision for income taxes 4.9 3.8 2.6 1.6
===== ===== ===== =====
Net income 5.9% 4.9% 3.1% 2.0%
===== ===== ===== =====
</TABLE>
14
<PAGE> 15
COMPARISON OF THREE FISCAL MONTHS ENDED JULY 2, 1999 AND JULY 3, 1998
NET SALES
Net sales increased $11.9 million, or 15.5%, to $88.6 million in the second
quarter of 1999 from $76.8 million in the second quarter of 1998. The following
table summarizes our net sales by segment:
<TABLE>
<CAPTION>
Three fiscal months ended
-----------------------------------------------------------------------
July 2, 1999 July 3, 1998
-----------------------------------------------------------------------
(In thousands)
Net Sales % Net Sales % % Change
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Concrete accessories $ 40,700 45.9% $ 35,064 45.7% 16.1%
Concrete forming systems 32,060 36.2 27,985 36.5 14.6
Paving products 11,065 12.5 10,224 13.3 8.2
Masonry products 7,176 8.1 5,887 7.7 21.9
Intersegment eliminations (2,365) (2.7) (2,406) (3.2) (1.7)
-------- -------- -------- --------
Net sales $ 88,636 100.0% $ 76,754 100.0% 15.5%
======== ======== ======== ========
</TABLE>
Net sales of concrete accessories increased by 16.1% to $40.7 million in the
second quarter of 1999 from $35.1 million in the second quarter of 1998, due to
the contribution of Cempro, increases in volume, and new product initiatives.
Net sales of concrete forming systems increased 14.6% to $32.1 million for the
second quarter of 1999 compared to $28.0 million in the second quarter of 1998,
due to the net sales of the acquired Symons Concrete Forms and Northwoods
businesses and, to a lesser extent, volume gains. Net sales of paving products
increased $0.8 million, or 8.2%, in the second quarter of 1999 compared to the
second quarter of 1998 due to an increase in volume. Net sales of masonry
products increased $1.3 million, or 21.9%, due to volume gains, strategic
pricing initiatives, and a shift of resources to engineered products, which have
higher gross margins.
GROSS PROFIT
Gross profit for the second quarter of 1999 was $32.9 million, an 18.4% increase
from $27.8 million in the second quarter of 1998, due primarily to the increased
net sales. Gross margin was 37.1% in the second quarter of 1999, increasing from
36.2% in 1998 due primarily to higher manufacturing efficiencies in the concrete
accessories division and the shift to higher margin engineered products in the
masonry products division.
OPERATING EXPENSES
Selling, general, and administrative expenses, including amortization of
goodwill and intangibles ("SG&A expenses"), increased $1.9 to $20.2 million in
the second quarter of 1999, from $18.3 million in the second quarter of 1998,
due to the acquisitions and higher volume. Additionally, the Company recorded a
$0.7 million non-recurring pension plan termination gain. SG&A expenses were
lower as a percent of net sales from 23.8% in the second quarter of 1998 to
22.8% in the second quarter of 1999
15
<PAGE> 16
(23.5% without the pension gain), due to increased net sales, partially offset
by increases in new product development and sales personnel.
INTEREST EXPENSE
Interest expense increased from $2.8 million in the second quarter of 1998 to
$3.1 million in the second quarter of 1999 due to increased long-term debt
resulting from the acquisition of Cempro and working capital growth partially
offset by lower interest rates.
INCOME BEFORE INCOME TAXES
Income before income taxes in the second quarter of 1999 increased 43.3% to $9.6
million from $6.7 million in the second quarter of 1998 and was comprised of the
following:
<TABLE>
<CAPTION>
Three fiscal months ended
----------------------------
July 2, 1999 July 3, 1998
------------ ------------
(In thousands)
<S> <C> <C>
Concrete accessories $ 7,093 $ 5,410
Concrete forming systems 2,965 2,583
Paving products 950 1,135
Masonry products 526 57
Intersegment eliminations (1,217) (1,164)
Corporate (732) (1,332)
---------- ----------
Income before income taxes $ 9,585 $ 6,689
========== ==========
</TABLE>
Concrete accessories' income before income taxes of $7.1 million in the second
quarter of 1999 increased 31.1% from $5.4 million in the second quarter of 1998
due primarily to the increase in net sales and manufacturing efficiencies.
Concrete forming systems' income before income taxes was $3.0 million in the
second quarter of 1999 in comparison to $2.6 million in the second quarter of
1998 due to the increase in net sales. Income before income taxes from paving
products decreased to $0.9 million in the second quarter of 1999 from $1.1
million in the second quarter of 1998 due to increases in personnel made in
anticipation of the growth of the business as a result of TEA-21. Income before
income taxes from masonry products was $0.5 million in the second quarter of
1999 compared to $0.1 million in the second quarter of 1998 due to the increase
in net sales and the shift to higher margin engineered products. Corporate
expenses decreased to $0.7 million from $1.3 million primarily due to the one
time pension gain of $0.7 million. Elimination of profit on intersegment sales
was $1.2 million in the second quarter of 1999, which remained about the same as
the second quarter of 1998.
16
<PAGE> 17
NET INCOME
The effective tax rate was 45.0% in the second quarter of 1999 compared to 44.2%
in the second quarter of 1998. The difference in effective tax rates from
statutory rates is due to increased state filings due to the higher revenue
base. Net income for the second quarter of 1999 was $5.3 million, or $0.89 per
basic share and $0.85 per diluted share, compared to $3.7 million, or $0.64 per
basic share and $0.61 per diluted share, in the second quarter of 1998. Without
the pension gain, net income per diluted share in the second quarter of 1999 was
$0.78, a 27.9% increase from the second quarter of 1998.
COMPARISON OF SIX FISCAL MONTHS ENDED JULY 2, 1999 AND JULY 3, 1998
NET SALES
Net sales increased $20.9 million, or 15.3%, to $156.8 million in the first half
of 1999 from $136.0 million in the first half of 1998. The following table
summarizes our net sales by segment:
<TABLE>
<CAPTION>
Six fiscal months ended
--------------------------------------------------------
July 2, 1999 July 3, 1998
--------------------------- ---------------------------
(In thousands)
Net Sales % Net Sales % % Change
<S> <C> <C> <C> <C> <C>
Concrete accessories $ 72,538 46.3% $ 64,136 47.2% 13.1%
Concrete forming systems 58,168 37.1 49,316 36.2 17.9
Paving products 17,738 11.3 16,195 11.9 9.5
Masonry products 13,142 8.4 10,982 8.1 19.7
Intersegment eliminations (4,754) (3.1) (4,648) (3.4) 2.3
------- ------- ------- ------- -------
Net sales $ 156,832 100.0% $ 135,981 100.0% 15.3%
======= ======= ======= ======= =======
</TABLE>
Net sales of concrete accessories increased by 13.1% to $72.5 million in the
first half of 1999 from $64.1 million in the first half of 1998, due to the
contribution of Cempro, increases in volume, and new product initiatives. Net
sales of concrete forming systems were $58.2 million for the first half of 1999
compared to $49.3 million in the first half 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 $1.5 million,
or 9.5%, in the first half of 1999 compared to the first half of 1998 due to an
increase in volume. Net sales of masonry products increased $2.2 million, or
19.7%. This is due to strategic pricing initiatives as well as a shift of
resources to higher margin engineered products.
GROSS PROFIT
Gross profit for the first half of 1999 was $56.3 million, an 18.5% increase
from $47.5 million in the first half of 1998, due primarily to increased net
sales. Gross margin was 35.9% in the first half of this year, increasing from
34.9% last year due primarily to higher manufacturing efficiencies in concrete
accessories, the shift to higher margin
17
<PAGE> 18
engineered products in the masonry products division, and higher growth in
concrete forming systems and masonry products than paving products.
OPERATING EXPENSES
SG&A expenses increased $4.5 million to $41.3 million in the first half of 1999
from $36.7 million in the first half of 1998, due to the acquisitions and higher
volume. Additionally, the Company recorded a $0.7 million non-recurring pension
plan termination gain. SG&A expenses were lower as a percent of net sales from
27.0% in the first half of 1998 to 26.3% (26.7% without the pension gain) in the
first half of 1999, due to increased net sales, partially offset by increases in
new product development and sales personnel.
INTEREST EXPENSE
Interest expense increased from $5.8 million in the first half of 1998 to $6.0
million in the first half of 1999 due to increased long-term debt resulting from
the acquisition of Cempro and working capital growth, partially offset by lower
interest rates.
INCOME BEFORE INCOME TAXES
Income before income taxes in the first half of 1999 increased to $8.9 million
from $4.9 million in the first half of 1998 and was comprised of the following:
<TABLE>
<CAPTION>
Six fiscal months ended
---------------------------
July 2, 1999 July 3, 1998
------------ ------------
(In thousands)
<S> <C> <C>
Concrete accessories $ 9,608 $ 7,320
Concrete forming systems 3,268 1,943
Paving products 451 893
Masonry products 140 (469)
Intersegment eliminations (2,398) (2,248)
Corporate (2,130) (2,490)
------- -------
Income before income taxes $ 8,939 $ 4,949
======= =======
</TABLE>
Concrete accessories' income before income taxes of $9.6 million in the first
half of 1999 increased 31.3% from $7.3 million in the first half of 1998 due
primarily to the increase in net sales and manufacturing efficiencies. Concrete
forming systems' income before income taxes was $3.3 million in the first half
of 1999 compared to $1.9 million in the first half of 1998 due to the increased
net sales. Income before income taxes from paving products decreased to $0.5
million in the first half of 1999 from $0.9 million in the first half of 1998
due to increases in personnel made in anticipation of the growth of the business
as a result of TEA-21. Income before income taxes from masonry products was $0.1
million in the first half of 1999 compared to a loss before income taxes of $0.5
million in the first half of 1998 due to higher net sales and the shift to
higher gross margin engineered products. Corporate expenses decreased to $2.1
million from $2.5 million due to the non-recurring pension gain, partially
offset by the
18
<PAGE> 19
full six month effect of 1998 personnel additions. Elimination of profit on
intersegment sales was $2.4 million in the first half of 1999 as compared to
$2.2 million in the first half of 1998.
NET INCOME
The effective tax rate remained flat at 45.0% in the first half of 1999 compared
to the first half of 1998. Net income for the first half of 1999 was $4.9
million, or $0.83 per basic and $0.79 per diluted share, compared to $2.7
million, or $0.47 per basic share and $0.45 per diluted share, in the first half
of 1998. Without the pension gain, net income per diluted share in the first
half of 1999 was $0.72, a 60.0% increase from the first half of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's key statistics for measuring liquidity and capital resources are
net cash provided by operating activities, capital expenditures, debt to total
capitalization ratio, amounts available under our revolving credit facility and
cash gap. Cash gap is defined as the number of days of outstanding accounts
receivable, plus the number of days of inventory on hand, less the number of
days of outstanding accounts payable.
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 the issuance of long-term debt and equity.
Net cash used in operating activities in the first half of 1999 was $5.8 million
and was comprised of the following:
- $4.9 million of net income,
- $3.6 million of non-cash reductions to net income, and
- ($14.3) million of normal seasonal working capital growth.
The Company invested in the following:
- $7.1 million in net capital expenditures and
- $5.6 million of acquisitions.
These uses of cash were funded by draws on the Revolving Credit Facility of
$19.5 million, resulting in a net increase in cash of $1.1 million.
At July 2, 1999, working capital was $62.2 million, compared to $44.7 million at
December 31, 1998. The growth in working capital is primarily attributable to
seasonal growth as the summer construction season begins.
At July 2, 1999, all of the $50.0 million Revolving Credit Facility was
available, of which $32.6 million of borrowings were outstanding. The Term Loan
had an outstanding balance at July 2, 1999 of $100.0 million. Other long-term
debt consisted of $5.0
19
<PAGE> 20
million to one of the former stockholders of Symons Corporation and $0.2 million
to the City of Parsons, Kansas. At July 2, 1999, the Company had $137.7 million
of long-term debt outstanding, of which $32 thousand was current. The Company's
debt to total capitalization ratio increased to 63.2% as of July 2, 1999 from
61.2% as of December 31, 1998 due to the Cempro acquisition and to normal
seasonal increase of long-term debt. The Company's debt to total capitalization
ratio decreased from 65.9% as of July 3, 1998, primarily due to the net income
generated in the last twelve months.
For the first half of 1999 the Company's average cash gap days were 68, an
improvement of 8 days from 76 days in the first half of 1998 due to the
Company's continued focus on working capital management.
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.
The Company has filed a registration statement with the Securities and Exchange
Commission for an underwritten public offering of convertible trust preferred
securities. The securities would be issued by a limited purpose Delaware trust
which would use the proceeds to purchase from the Company the same principal
amount of the Company's convertible junior subordinated debentures. The net
proceeds would be used by the Company to pay some or all of its borrowings under
its Revolving Credit Facility and for general corporate purposes.
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.
20
<PAGE> 21
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
Numerically 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 that 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 85% of the third parties have
responded indicating their Year 2000 readiness. The Company is diligently
attempting to obtain responses from the remaining parties that 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 has also given particular attention to customers and
their ability to communicate orders and pay for goods received.
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 $862,000 of which $782,000 was capitalized and $80,000 was expensed.
These costs were to replace existing hardware and third party software and
professional fees for external
21
<PAGE> 22
assistance. The estimated future cost for resolving Year 2000 issues is
approximately $58,000, of which $48,000 is expected to be capitalized and
$10,000 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 the second quarter of 1999. The Company completed substantially all of
its Year 2000 projects by the end of the second quarter of 1999. The Company
will continue to focus internal resources on ongoing contingency planning
throughout the balance of 1999.
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 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 weakness in the general economy, a
decrease in governmental spending, interest rate increases, changes in banking
and tax laws, and the continued delay by the states in initiating construction
projects under TEA-21 program; an unsuccessful outcome in the Company's legal
proceedings and disputes; the Company's ability to successfully identify,
finance, complete and integrate acquisitions; 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
22
<PAGE> 23
customers; and the effects of weather and seasonality on the construction
industry; increasing consolidation of the Company's customers; the mix of
products the Company sells; and the failure of the Company's supplies or
customers to address their Year 2000 issues. 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.
23
<PAGE> 24
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As of July 2, 1999, the Company had financial instruments that were sensitive to
changes in interest rates. These financial instruments consist of a $50.0
million Revolving Credit Facility, of which $32.6 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 $32.6 million face value. The
weighted average interest rate at July 2, 1999 was 6.6%.
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 had a weighted average interest rate of 8.4% at July 2, 1999.
The Company has two interest rate swap agreements on a total of $50.0 million of
the Term Loan 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 6.3% and expire on November 1, 2000. The ninety-day LIBOR as
of July 2, 1999 was 5.3%. 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 $0.5 million.
Other long-term debt consists of a.) a $5.0 million, 10.5% note payable due in
2004 with an estimated fair value of $5.5 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.
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 bar and rod and steel flat plate)
and products purchased for resale. The prices of these items can change
significantly due to changes in the markets in which the Company's suppliers
operate. The Company generally does not use financial instruments to manage its
exposure to changes in commodity prices.
24
<PAGE> 25
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Symons is currently a defendant 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 $0.1 million.
The Company believes that Symons has 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on May 12, 1999. The
only matter voted on at such Annual Meeting of Shareholders was the election of
directors. The following is the number of votes cast for or withheld from each
nominee for election as a director.
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- --------
<S> <C> <C>
William F. Andrews 4,477,538 1,515
John A. Ciccarelli 4,477,538 1,515
Timothy C. Collins 4,477,538 1,515
Matthew O. Diggs, Jr. 4,477,538 1,515
Matthew M. Guerreiro 4,477,538 1,515
Robert B. Holmes 4,477,538 1,515
</TABLE>
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 July 2, 1999, the Company did
not file any Current Reports on Form 8-K.
25
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DAYTON SUPERIOR CORPORATION
---------------------------
DATE: August 16, 1999 BY: /s/ Alan F. McIlroy
------------------------------ ------------------------------
Alan F. McIlroy
Chief Financial Officer
26
<PAGE> 27
INDEX TO EXHIBITS
Exhibit No. Description
(27) Financial Data Schedule
27.1 Financial Data Schedule
- ------------
** Filed herewith
27
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000854709
<NAME> DAYTON SUPERIOR CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUL-02-1999
<EXCHANGE-RATE> 1
<CASH> 1,647
<SECURITIES> 0
<RECEIVABLES> 61,712
<ALLOWANCES> (5,408)
<INVENTORY> 38,341
<CURRENT-ASSETS> 103,782
<PP&E> 67,432
<DEPRECIATION> 5,948
<TOTAL-ASSETS> 275,777
<CURRENT-LIABILITIES> 41,573
<BONDS> 137,717
0
0
<COMMON> 47,030
<OTHER-SE> 32,358
<TOTAL-LIABILITY-AND-EQUITY> 275,777
<SALES> 156,832
<TOTAL-REVENUES> 156,832
<CGS> 100,524
<TOTAL-COSTS> 100,524
<OTHER-EXPENSES> 41,345
<LOSS-PROVISION> 207
<INTEREST-EXPENSE> 6,024
<INCOME-PRETAX> 8,939
<INCOME-TAX> 4,023
<INCOME-CONTINUING> 4,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,916
<EPS-BASIC> .83
<EPS-DILUTED> .79
</TABLE>
