<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 1998
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 of incorporation) (I.R.S. Employer Identification No.)
7777 Washington Village Dr.
Suite 130
Dayton, Ohio 45459
(Address of principal executive office)
Registrant's telephone number, including area code: (937) 428-6360
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Class A Common Shares, without par value New York Stock Exchange
Indicate by check 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of the close of business on March 18, 1999, the aggregate market value of
voting shares held by non-affiliates of the registrant (determined by
multiplying the highest selling price of a Class A Common Share on the New York
Stock Exchange on such date by the total number of Class A Common Shares
outstanding not beneficially owned by directors or officers of the registrant)
was $106,712,229.
Number of Class A Common Shares, outstanding on March 18, 1999 5,945,130
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held on May 12, 1999 (definitive copies of which
will be filed with the Securities and Exchange Commission within 120 days after
December 31, 1998) are incorporated by reference in Part III of this Report.
<PAGE> 2
PART I
ITEM 1. BUSINESS.
GENERAL
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. The Company's products are used primarily in two segments of the
construction industry: non-residential building projects such as institutional
buildings, retail sites, commercial offices and manufacturing facilities; and
infrastructure projects such as highways, bridges, utilities, water and waste
treatment facilities and airport runways.
The Company's distribution system consists of a network of ten
manufacturing/distribution plants and 47 service/distribution centers in the
United States and Canada and over 4,000 dealers across North America. The
Company also rents forming systems and tilt-up bracing to contractors through
rental centers and distributors nationwide. The Company's customers include
stocking dealers, brokers, rebar fabricators, precast concrete manufacturers,
brick and concrete block manufacturers, general contractors, subcontractors,
distributors of construction supplies and metal fabricators.
The Company manufactures most of its products at ten
manufacturing facilities in the United States, using, in many cases,
high-volume, automated equipment designed and built or custom modified by
in-house personnel. The Company sells products in four principal product lines:
concrete accessories, concrete forming systems, paving products, and masonry
products.
Since 1990, the Company has completed thirteen acquisitions, the
largest of which was its 1997 acquisition of Symons Corporation ("Symons").
The Company was incorporated in 1959. The Company's principal
executive offices are located at 7777 Washington Village Dr., Suite 130, Dayton,
OH 45459, and its telephone number is (937) 428-6360.
PRODUCTS
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 currently offers more than 18,000 different items and
believes its brand names, such as Dayton Superior(R), Dayton/Richmond(R),
Symons(R), Richmond Screw Anchor(R), Dur-O-Wal(R), and American Highway
Technology(R), are widely recognized in the construction industry. The Company
continually attempts to increase the number of products it offers by using
engineers and product development teams to introduce new products and refine
existing products.
Concrete Accessories. The Company manufacturers and sells
concrete accessories primarily under the Dayton/Richmond(R) brand name. The
Company's concrete accessories products comprise wall-forming products, bridge
deck products, bar supports, precast and prestressed concrete construction
products, tilt-up construction products, plastic and
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elastomeric formliner products, and chemicals used in concrete construction. Net
sales of concrete accessories before intercompany eliminations accounted for
approximately $128.1 million, or 45%, of the net sales of the Company in 1998.
Wall-forming products, such as snap ties, coil ties, she bolts
and he bolts, are used in the fabrication of job-built and prefabricated modular
forms for poured-in-place concrete walls. The products, which generally are not
reusable, are made of wire or plastic (or a combination of both materials) and
generally are manufactured by the Company on customized high-speed automatic
equipment.
Bridge deck products (used to support the formwork of bridges)
include hangers and sidewalk overhang brackets (used to support the formwork
used by contractors in the construction and rehabilitation of bridges), coil
nuts and bolts, haunch carriers, screed supports and cast wing nuts.
Bar supports are non-structural metal or plastic accessories used
to position rebar within a horizontal slab or form to be filled with concrete.
Bar supports are often plastic or epoxy coated, galvanized or equipped with
plastic tips to prevent creating a conduit for corrosion of the embedded rebar.
The Company sells more than 100 basic types of bar supports in a wide variety of
standard and custom sizes and finishes.
Precast and prestressed concrete construction products, such as
anchors, inserts, holddowns and pushdowns, are used in the manufacture of
precast concrete panels and prestressed concrete beams and structural members.
Precast concrete panels and prestressed concrete beams are fabricated away from
the construction site and transported to the site for erection. Precast concrete
panels are used in the construction of prisons, freeway sound barrier walls,
external building facades and other similar applications. Prestressed concrete
beams use multiple strands of steel under tension embedded in concrete beams to
provide rigidity and bearing strength, and often are used in the construction of
bridges, parking garages and other applications where long, unsupported spans
are required.
Tilt-up construction products include a complete line of inserts,
lifting hardware and adjustable beams used in the tilt-up method of
construction, in which the concrete floor slab is used as part of a form for
casting the walls of a building. After the cast walls have hardened on the floor
slab, a crane is used to "tilt-up" the walls, which then are braced in place
until they are secured to the rest of the structure. Tilt-up construction
generally is considered to be a faster method of constructing low-rise buildings
than conventional poured-in-place concrete construction. Certain tilt-up
construction products can be rented as well as sold.
Formliner products include plastic and elastomeric products sold
for use in the forming of textured surfaces and in architectural work.
Dayton/Richmond(R) also provides a broad spectrum of liquid
chemicals and cementitious products used in concrete construction.
Concrete Forming Systems. The Company's Symons(R) subsidiary
manufactures, sells, and rents concrete forming systems. The Company's concrete
forming systems products
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include standard and specialty concrete forming systems, shoring systems and
accessory products. In addition to the sale of prefabricated forming equipment,
the Company also rents forming products to benefit from their durability and
relatively high unit cost. Net revenues before intercompany eliminations
relating to concrete forming systems accounted for $99.5 million, or 35%, of the
Company's 1998 net sales.
Concrete forming systems are reusable modular molds which hold
liquid concrete in place on concrete construction jobs. Standard forming systems
are sold or rented for use in the creation of concrete walls and columns.
Specialty forming systems consist primarily of steel forms that are designed to
meet architects' specific needs for concrete placements.
Shoring systems include aluminum beams and joists, post shores
and shoring frames used to support deck forms and other false work while
concrete is being poured.
Construction chemicals sold by Symons(R) include form release
agents, curing compounds, grouts and epoxies and other chemicals used in the
pouring, stamping and placement of concrete.
Paving Products. The Company's paving products consist primarily
of welded dowel assemblies and dowel baskets used to transfer dynamic loads
between two adjacent slabs of concrete roadway. Paving products are used in the
construction and rehabilitation of roads, highways and airport runways to extend
the life of the pavement. The Company sells paving products primarily under the
American Highway Technology(R) name but also offers some products under the
Dayton/Richmond(R) name. The Company manufactures welded dowel assemblies
primarily using automated and semi-automatic equipment. Sales of paving products
were approximately $31.0 million, or 11%, of the Company's net sales in 1998.
American Highway Technology(R) also sells epoxy services and
ancillary products such as joint sealant projects and transverse bar assemblies
that tie the roadbed and berm together. In addition, the division distributes
chemicals specific to concrete road construction.
Masonry Products. The Company's Dur-O-Wal(R) subsidiary
manufactures and sells masonry products. The Company's masonry product line
consists primarily of masonry wall reinforcement ("MWR") products, masonry
anchors and other accessories used in masonry construction and restoration.
Sales of masonry products accounted for approximately $24.3 million, or 9%, of
the net sales of the Company in 1998.
Dur-O-Wal(R) believes that it is the largest manufacturer of MWR
products in North America. MWR products are wire products that are placed
between courses of masonry and covered with mortar to add tensile and structural
strength to masonry walls in order to control shrinkage and cracking, to provide
the principal horizontal reinforcement in engineered masonry walls, to bond
masonry wythes (single thicknesses of brick) in composite and cavity walls, to
reinforce stack bond masonry and to bond intersecting walls. The products
improve the performance and longevity of masonry walls by providing crack
control, greater elasticity and higher ductility to withstand seismic shocks and
better resistance to rain penetration.
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Dur-O-Wal(R) has the in-house ability to produce hot-dipped zinc
galvanized finishes on MWR products. "Hot-dip" galvanizing occurs after products
are fabricated and requires skilled personnel and special systems to prevent the
products from adhering to one another. Hot-dipped galvanized finishes are
considered to provide superior protection against corrosion compared to
mill-galvanized finishes. In recent years, model building codes in a number of
regions of the country in which masonry construction is used have been amended
to require use of hot-dipped galvanized MWR products. The Company also
manufactures MWR products with mill-galvanized finishes by applying zinc
finishes to wire prior to fabrication.
Dur-O-Wal(R) sells other masonry products such as wall ties,
which connect masonry to masonry; masonry anchors, which connect masonry to the
building structure; stone anchors, which attach building stone (generally
ornamental) to the structural frame of a building; restoration products, which
are anchors and ties used in the restoration of existing masonry construction
and for seismic retrofitting of existing brick veneer surfaces; and moisture
control products, such as flashing and vents, which control the flow of moisture
in cavity walls.
Construction Chemicals. In addition to the other chemical
products mentioned above, the Company's construction chemical products include
form coatings, bond breakers, curing agents, liquid hardeners, sealers, water
repellents, bonding agents, epoxy grouts, and formliners. The Company
manufactures approximately 80% of the construction chemicals it sells, with the
rest being purchased for resale. Chemical sales made through the concrete
accessories, concrete forming systems, and paving products divisions are
included in the total sales for those divisions.
DISTRIBUTION
The Company distributes its products through a network of 10
manufacturing/distribution plants and 47 service/distribution centers located in
the continental United States and four Canadian provinces. Of these 57
locations, 19 are dedicated principally to the distribution of concrete
accessories, 31 are dedicated principally to the distribution of forming
systems, three are dedicated primarily to the distribution of paving products,
four are dedicated principally to the distribution of masonry products and some
locations carry several of the Company's product lines. Most of the Company's
products are shipped to the service/distribution centers from the Company's ten
principal manufacturing plants; however, a majority of the centers also are able
to produce smaller batches of some products on an as-needed basis to fill rush
orders.
The Company has an on-line inventory tracking system for concrete
accessories, paving products, and construction chemicals, which enables the
Company's customer service representatives to identify, reserve and ship
inventory quickly from any Company location in response to telephone orders. The
system provides the Company with a competitive advantage since its service
representatives are able to answer customer questions about availability and
shipping dates while still on the telephone. The Company primarily uses
third-party common carriers to ship its products.
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In addition, the Company uses its distribution system to sell
products which are manufactured by third parties. These products usually are
sold under the Company's brand names, and often are produced for it on an
exclusive basis. Sales of third-party products allow the Company to utilize its
distribution network to increase sales without making significant capital
investments.
CUSTOMERS
The Company has over 4,000 customers, over 75% of which purchase
its products for resale. The Company's customer base is geographically diverse,
with no customer accounting for more than 5% of net sales in 1998 and with its
ten largest customers accounting for less than 17% of net sales. Customers who
purchase the Company's products for resale generally do not sell the Company's
products exclusively.
Concrete Accessories. Dayton/Richmond(R) has approximately 2,350
customers, consisting of stocking dealers, rebar fabricators, precast and
prestressed concrete manufacturers, and distributors of construction supplies.
The Company estimates that approximately 90% of Dayton/Richmond's(R) customers
purchase its products for resale. Dayton/Richmond's(R) largest customer accounts
for approximately 3% of its 1998 net sales and its top ten customers account for
less than 20% of its 1998 net sales.
Dayton/Richmond(R) has instituted a certified dealer program for
dealers who handle its tilt-up construction products. This program was
established to educate dealers in the proper use of the Company's tilt-up
products and to assist them in providing engineering assistance to customers.
Certified dealers are not permitted to carry other manufacturers' tilt-up
products, which the Company believes are incompatible with those sold by the
Company and, for that reason, could be unsafe if used with the Company's
products. Dayton/Richmond(R) currently has 77 certified dealers of tilt-up
construction products.
Concrete Forming Systems. Symons(R) has approximately 2,500
customers, consisting of stocking dealers, precast and prestressed concrete
manufacturers, general contractors, subcontractors, and distributors of
construction supplies. The Company estimates that approximately 90% of
Symons'(R) customers are the end-users of its products while approximately 10%
of Symons'(R) customers purchase its products for resale or rerent. Symons'(R)
largest customer accounts for approximately 6% of its 1998 net sales and its ten
largest customers account for approximately 25% of its 1998 net sales.
Paving Products. American Highway Technology(R) has approximately
150 customers, consisting primarily of distributors of construction supplies,
and, to a lesser extent, stocking dealers, general contractors and
subcontractors. American Highway Technology's(R) largest customer accounts for
approximately 15% of its 1998 net sales and its ten largest customers account
for approximately 80% of its 1998 net sales.
Masonry Products. Dur-O-Wal(R) has approximately 1,600 customers
consisting of stocking dealers, brick and concrete block manufacturers, general
contractors, sub-contractors, distributors of construction supplies, and metal
fabricators. The Company estimates that approximately 90% of Dur-O-Wal's(R)
customers purchase its products for
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resale. Dur-O-Wal's(R) largest customer accounts for approximately 5% of its
1998 net sales and its ten largest customers account for approximately 23% of
its 1998 net sales.
SALES AND MARKETING
The Company employs approximately 400 sales and marketing
personnel, of whom approximately one-half are salesmen and one-half are customer
service representatives. Sales and marketing personnel are located in all of the
Company's locations. The Company produces product catalogs and promotional
materials that illustrate certain construction techniques in which the Company's
products can be used to solve typical construction problems. The Company also
promotes its products through seminars and other customer education efforts and
works directly with architects and engineers to secure the use of the Company's
products whenever possible.
The Company considers its engineers to be an integral part of the
sales and marketing effort. The Company's engineers have developed proprietary
software applications to conduct extensive pre-testing on both new products and
construction projects. During 1998, Dayton/Richmond(R)'s engineers designed and
consulted on the construction of the largest and heaviest tilt-up wall
constructed to date in the United States, which was 100-feet high and weighing
150 tons.
MANUFACTURING
The Company manufactures the majority of the products it sells.
In the case of the Company's concrete accessories, paving products, and masonry
products, most products are manufactured at eight principal facilities in the
United States, although a majority of the Company's service/distribution
facilities can produce smaller lots of some products. The Company's production
volumes enable it to design and build or custom modify much of the equipment it
uses to manufacture these products, using a team of experienced manufacturing
engineers and tool and die makers.
By developing its own automatic high-speed manufacturing
equipment, the Company believes that it generally has achieved significantly
greater productivity, lower capital equipment costs, lower scrap rates, higher
product quality, faster changeover times and lower inventory levels than most of
its competitors. In addition, Dur-O-Wal's ability to "hot-dip" galvanize
products at its Aurora, Illinois manufacturing facility provides it with an
advantage over many competitors manufacturing MWR products, who lack this
internal capability. Also, the Company has a flexible manufacturing setup and
can make the same products at several locations using short and discrete
manufacturing lines.
The Company's concrete forming systems are manufactured at two
facilities in the United States. These facilities incorporate semi-automated and
automated production lines, heavy metal presses, forging equipment, stamping
equipment, robotic welding machines, drills, punches, and other heavy machinery
typical for this type of manufacturing operation.
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The Company generally operates its manufacturing facilities two
shifts per day, five days per week (six days per week during peak months and, in
some instances, three shifts), with the number of employees increasing or
decreasing as necessary to satisfy demand.
RAW MATERIALS
The Company's principal raw materials are steel wire rod, steel
hot rolled bar, metal stampings and flat steel, aluminum sheets and extrusions,
plywood, cement and cementitious ingredients, liquid chemicals, zinc and
injection-molded plastic parts. The Company currently purchases products from
over 300 vendors and is not dependent on any single vendor or small group of
vendors for any material portion of its purchases.
COMPETITION
Although 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, the industry
in which the Company competes is highly competitive in most product categories
and geographic regions. The Company competes with a relatively small number of
full-line national manufacturers of concrete accessories, concrete forming
systems, masonry products and paving products, and a much larger number of
regional manufacturers and/or manufacturers with limited product lines. The
Company believes that competition is largely based on, among other things,
price, quality, breadth of product lines, distribution capabilities (including
quick delivery times) and customer service. In certain circumstances, due
primarily to factors such as freight rates, quick delivery times and customer
preference for local suppliers, certain manufacturers and suppliers may have a
competitive advantage over the Company in a given region. The Company believes
that its size and breadth of product lines provide it with certain advantages of
scale in both distribution and production relative to its competitors.
PATENTS AND TRADEMARKS
The Company sells most products under the registered trade names
Dayton Superior(R), Dayton/Richmond(R), Symons(R), Richmond Screw Anchor(R),
Dur-O-Wal(R) and American Highway Technology(R), which the Company believes are
widely recognized in the construction industry and, therefore, are important to
its business. Although certain of the Company's products (and components
thereof) are protected by patents, the Company does not believe these patents
are material to its business. The Company has 120 trademarks and 90 patents.
EMPLOYEES
As of December 31, 1998, the Company employed approximately 750
salaried and 1,330 hourly personnel, of whom approximately 1,000 of the hourly
personnel and six of the salaried personnel are represented by labor unions.
Employees at the Company's Miamisburg, Ohio; Parsons, Kansas; Des Plaines,
Illinois; New Braunfels, Texas; Tremont, Pennsylvania; St. Joseph, Missouri and
Aurora, Illinois manufacturing/distribution plant and its service/distribution
centers in Baltimore, Maryland; Atlanta, Georgia and Santa Fe Springs,
California are covered by collective bargaining agreements. In 1998, hourly
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employees at the Company's Kankakee, Illinois manufacturing/distribution plant
voted to be represented by a labor union, although a collective bargaining
agreement has not yet been executed. The collective bargaining agreement
covering the Des Plaines, Illinois facility expires in 1999. The Company
believes that it has good employee and labor relations.
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.
BACKLOG
The Company typically ships most of its products, except paving
products and certain specialty forming systems, within one week after receipt of
an order and often within 24 hours. Certain product lines, including paving
products and specialty forming systems, may be shipped up to six months after
receipt of an order, depending on the needs of the customer. Accordingly, the
Company does not maintain significant backlog, and backlog as of any particular
date is not representative of actual sales for any succeeding period.
ITEM 2. PROPERTIES.
The Company's corporate headquarters are located in leased
facilities in Dayton, Ohio. The Company's principal facilities are located
throughout North America, as follows:
<TABLE>
<CAPTION>
LEASED/
------- SIZE
LOCATION USE PRODUCT LINE OWNED (SQ. FT.)
-------- --- ------------ ----- ---------
<S> <C> <C> <C> <C>
Des Plaines, Illinois Manufacturing/Distribution Concrete Forming Systems Owned 171,650
and Symons(R) Headquarters
Miamisburg, Ohio Manufacturing/Distribution and Concrete Accessories Owned 126,000
Dayton/Richmond(R)Headquarters
Aurora, Illinois Manufacturing/Distribution and Masonry Products Owned
Dur-O-Wal(R)Headquarters 109,000
Kankakee, Illinois Manufacturing/Distribution and Paving Products Leased 107,900
American Highway Technology(R)
Headquarters
Tremont, Pennsylvania Manufacturing/Distribution Concrete Accessories Owned 102,650
Parsons, Kansas Manufacturing/Distribution Paving Products Owned 98,250
New Braunfels, Texas Manufacturing/Distribution Concrete Forming Systems Owned 89,600
Atlanta, Georgia Service/Distribution Concrete Accessories Leased 74,090
Parker, Arizona Manufacturing/Distribution Concrete Accessories Leased 60,000
Birmingham, Alabama Service/Distribution Concrete Accessories Leased 55,000
Centralia, Illinois Service/Distribution Concrete Forming Systems Owned 53,500
St. Joseph, Missouri Manufacturing/Distribution Concrete Accessories Owned 53,342
Grand Prairie, Texas Service/Distribution Concrete Accessories Leased 45,000
Seattle, Washington Service/Distribution Concrete Accessories Leased 42,825
Santa Fe Springs, California Service/Distribution Concrete Accessories Leased 40,000
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Toronto, Ontario Service/Distribution Concrete Accessories Leased 40,000
Oregon, Illinois Service/Distribution Concrete Accessories Owned 39,000
Helena, Alabama Manufacturing/Distribution Paving Products Leased 32,000
Folcroft, Pennsylvania Service/Distribution Concrete Accessories Owned 32,000
Baltimore, Maryland Service/Distribution Masonry Products Owned 30,000
</TABLE>
The Company believes that its facilities provide adequate
manufacturing and distribution capacity for its needs. The Company also believes
that all of the leases were entered into on market terms.
ITEM 3. LEGAL PROCEEDINGS.
Symons is currently a defendant involved in a civil suit brought
by EFCO Corp., a competitor of Symons in one portion of their business in 1996
in the United States District Court for the Southern District of Iowa (Case No.
4-96-CV-80552). EFCO Corp. alleged that Symons engaged in false advertising,
misappropriation of trade secrets, intentional interference with contractual
relations, and certain other activities. After a jury trial, preliminary damages
of approximately $14 million were awarded against Symons in January 1999. The
Company believes that there is no merit to these allegations, remains committed
to vigorously pursuing post-trial motions and appeals, and is seeking to vacate
the judgments in their entirety. The Company believes that, in the event the
judgments against it are not completely set aside, it has numerous substantial
grounds for a successful appeal and intends to vigorously pursue 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.
The Company is subject to regulation under various and changing
federal, state and local laws and regulations relating to the environment and to
employee safety and health. These environmental laws and regulations govern the
generation, storage, transportation, disposal and emission of various
substances. Permits are required for operation of the Company's business
(particularly air emission permits), and these permits are subject to renewal,
modification and, in certain circumstances, revocation. The Company believes
that it is in substantial compliance with such laws and permitting requirements.
The Company is also subject to regulation under various and changing federal,
state and local laws and regulations which allow regulatory authorities to
compel (or seek reimbursement for) cleanup of environmental contamination at its
own sites and at facilities where its waste is or has been disposed.
The Company expects to incur on-going capital and operating costs
to maintain compliance with currently applicable environmental laws and
regulations. The Company does not expect such costs, in the aggregate, to be
material to its financial condition, results of operations or liquidity.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of March 20, 1999 and
their ages, positions with the Company and their principal occupation during the
past five years (unless otherwise stated, positions with the Company) are as
follows:
Name Age Position
- ---- --- --------
John A. Ciccarelli 59 President, Chief Executive Officer and
Director
Raymond E. Bartholomae 52 Vice President and General Manager, Symons
Mario J. Catani 66 Vice President, Engineering
Michael C. Deis, Sr. 48 Vice President and General Manager,
Dayton/Richmond
James W. Fennessy 55 Vice President and General Manager,
Superior Canada Ltd.
Mark K. Kaler 41 Vice President and General Manager,
American Highway Technology
Alan F. McIlroy 48 Vice President and Chief Financial Officer
John R. Paine, Jr. 56 Vice President, Sales and Marketing,
Dayton/Richmond
Thomas W. Roehrig 33 Corporate Controller
John M. Rutherford 38 Treasure and Assistant Secretary
James C. Stewart 51 Vice President, Corporate Development
Mr. Ciccarelli has been President of the Company since 1989 and
has been Chief Executive Officer and a Director of the Company since 1994.
Mr. Bartholomae has been Vice President and General Manager,
Symons, since February 1998, and was Executive Vice President and General
Manager of Symons from 1986 to February 1998. Symons was acquired by the Company
in September 1997.
Mr. Catani has been Vice President, Engineering since May 1997,
and was President of Dur-O-Wal from 1984 to May 1997.
Mr. Deis has been Vice President and General Manager,
Dayton/Richmond since February 1998. From 1987 to February 1998, Mr. Deis was
the Company's Vice President, Eastern Division of Dayton/Richmond (formerly,
Concrete Accessories).
Mr. Fennessy has been Vice President and General Manager, Dayton
Superior Canada, Ltd. since 1988.
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Mr. Kaler has been Vice President and General Manager, American
Highway Technology since April 1996. From 1990 to April 1996, Mr. Kaler was Vice
President, Engineering and Product Manager, Paving Division.
Mr. McIlroy has been Vice President and Chief Financial Officer
since July 1997. From January 1994 until July 1997, Mr. McIlroy was President of
The Greenock Group, a private operational investment company.
Mr. Paine has been Vice President, Sales and Marketing of
Dayton/Richmond (formerly, Concrete Accessories) since 1984.
Mr. Roehrig has been Corporate Controller of the Company since
April 1998. From 1987 until March 1998, Mr. Roehrig was employed by Arthur
Andersen LLP, an international public accounting firm, most recently as an
Experienced Manager in the Assurance and Business Advisory division.
Mr. Rutherford has been Treasurer and Assistant Secretary of the
Company since February 1998. From January 1993 until January 1998, Mr.
Rutherford was Director of Treasury and Risk Management for Gibson Greetings,
Inc., a greeting card manufacturer.
Mr. Stewart has been Vice President, Corporate Development of the
Company since February 1998. From 1984 to February 1998, Mr. Stewart was the
Company's Vice President, Western Division of Dayton/Richmond (formerly Concrete
Accessories).
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Class A Common Shares (which is the only class of
shares outstanding as of February 17, 1999) are traded on the New York Stock
Exchange under the symbol "DSD". The prices presented in the following table are
the high and low sales prices for the Class A Common Shares for the periods
presented as reported by the New York Stock Exchange.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1998
1st Quarter $20.375 $15.875
2nd Quarter 22.125 16.500
3rd Quarter 21.375 16.625
4th Quarter 20.875 14.375
High Low
---- ---
1997
1st Quarter $13.500 $11.250
2nd Quarter 13.250 9.750
3rd Quarter 19.438 12.500
4th Quarter 19.000 14.813
</TABLE>
As of March 18, 1999, the Company had 58 shareholders of record.
Based on requests from brokers and other nominees, the Company estimates there
are 950 additional beneficial owners of its shares.
The Company has paid no dividends on its Common Shares. The
Company currently intends to retain its future earnings, if any, to fund the
development and growth of its business and, therefore, does not anticipate
declaring or paying cash dividends on the common shares in the near term. The
decision whether to apply legally available funds to the payment of dividends on
common shares will be made by the Board of Directors of the Company from time to
time in the exercise of its business judgment, taking into account, among other
things, the Company's results of operations and financial condition, any then
existing or proposed commitments for the use by the Company of available funds
and the Company's obligations with respect to any then outstanding class or
series of its preferred shares.
The Company is restricted by the terms of its credit agreements
from paying cash dividends on the Common Shares and may in the future enter into
loan or other agreements or issue debt securities or preferred shares that
restrict the payment of cash dividends on the Common Shares. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
On November 24, 1998, the Company issued an additional 4,238 of
its Class A Common Shares to the former shareholders of Concrete Accessories,
Inc. ("CAI"), a privately-held corporation acquired by the Company in May 1998,
as a result of an adjustment to the
13
<PAGE> 14
aggregate number of Class A Common Shares to be issued in the acquisition, based
upon a closing audit of CAI. The additional Class A Common Shares were issued in
reliance upon the exemption from registration set forth in Section 4(2) of the
Securities Act of 1933, as amended, for transactions not involving a public
offering. The former shareholders of CAI have certain registration rights with
respect to such shares.
ITEM 6. SELECTED FINANCIAL DATA.
(All dollar amounts in thousands, except share data)
The earnings statement data and the balance sheet data presented
below have been derived from the company's consolidated financial statements and
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Consolidated Financial
Statements and Notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
1994 1995 1996 1997 1998
------------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA:
Net sales $82,341 $92,802 $124,486 $167,412 $282,849
Cost of sales 58,011 63,990 86,021 110,528 174,423
------------- ----------- ------------- ------------ ------------
Gross profit 24,330 28,812 38,465 56,884 108,426
Selling, general, and
administrative expenses 16,722 18,698 23,637 37,277 76,392
Amortization of goodwill and
intangibles 1,305 1,491 1,749 1,885 2,213
------------- ----------- ------------- ------------ ------------
Income from operations 6,303 8,623 13,079 17,722 29,821
Interest expense, net 6,017 4,231 4,829 5,556 11,703
Other expense (income), net 873 (3) 96 (64) (202)
Provision for income taxes(2) 95 690 3,538 5,277 8,244
------------- ----------- ------------- ------------ ------------
Income (loss) before extraordinary
item (682) 3,705 4,616 6,953 10,076
Extraordinary item, net of tax 31,354(1) - (2,314)(3) - -
------------- ----------- ------------- ------------ ------------
Net income $30,672 $3,705 $2,302 $6,953 $10,076
============= =========== ============= ============ ============
Net income available to common
shareholders $30,175 $71 $2,302 $6,953 $10,076
============= =========== ============= ============ ============
Basic income (loss) per share
before extraordinary item $ (0.67) $ 0.02 $1.02 $1.22 $1.72
Basic net income per share $ 17.08 $ 0.02 $0.51 $1.22 $1.72
Basic weighted average common
shares outstanding(4) 1,766,700 2,990,847 4,547,527 5,703,601 5,867,338
Diluted income (loss) per share
before extraordinary item $ (0.58) $ 0.02 $0.94 $1.17 $1.65
Diluted net income per share $ 14.93 $ 0.02 $0.47 $1.17 $1.65
Diluted weighted average common and
common share equivalents
outstanding(4) 2,020,717 3,558,908 4,925,464 5,933,244 6,098,205
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET:
Total assets $72,371 $103,860 $107,835 $226,930 $253,620
Long-term debt (including current 24,448 53,012 34,769 120,236 118,205
portion)
Shareholders' equity 27,674 27,485 52,872 60,529 74,588
</TABLE>
14
<PAGE> 15
(1) In December 1992, the Company defaulted on certain financial covenants in
its senior debt and was unable to make payments of principal and interest
as they came due. From December 1992 to May 1994, the Company accrued
additional penalty interest on its senior debt. In May 1994, the Company
reached an agreement with its lenders to restructure its debt, resulting
in an extraordinary gain of $31,354, net of an income tax effect of $92.
(2) In 1994, the provision for income taxes related to alternative minimum
taxes. In 1995, the provision for income taxes was reduced to reflect the
utilization of net operating losses.
(3) During June 1996, the Company prepaid its $40,000 unsecured senior
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 $22,358 in proceeds from its
public stock offering and $20,042 from its credit facility.
(4) Basic net income per share is computed by dividing net income available
to common shareholders by the weighted average number of common shares
outstanding during the year. Diluted net income per share is computed by
dividing net income available to common shareholders by the weighted
average number of common and common share equivalents outstanding during
the year. Common share equivalents include the number of shares issuable
upon the exercise of outstanding 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 average trading price for
1998, 1997, and 1996 and the initial public offering price of $13.00 per
share for 1995 and 1994. For the purposes of calculating net income
(loss) per common and equivalent share, equivalent shares issued less
than 12 months prior to the initial public offering are included for all
periods presented. Common equivalent shares issued more than 12 months
prior to the Offering are excluded in periods with a net loss available
to common shareholders. See Note 3(h) to the consolidated financial
statements of the Company.
15
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
Dayton Superior's record net sales of $282.8 million in 1998 were
68.9% higher than 1997 and 127.1% higher than 1996. The Company's net sales for
its four major product categories during the last three years were:
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS 1998 1997 1996
- ------------------- ---- ---- ----
<S> <C> <C> <C>
Concrete Accessories $131.4 $ 92.2 $ 76.7
Concrete Forming Systems 104.7 21.1 -
Paving Products 31.0 29.2 21.9
Masonry Products 24.3 24.9 25.9
Intersegment Eliminations (8.6) - -
------ ------ ------
Net sales $282.8 $167.4 $124.5
====== ====== ======
</TABLE>
The acquisition of Symons, a leading manufacturer of
prefabricated concrete forming systems, on September 29, 1997 contributed
approximately 80% of the net sales growth in 1998 from 1997 and approximately
60% of the net sales growth in 1997 from 1996.
Income before income taxes and extraordinary item was a record
$18.3 million in 1998 versus $12.2 million in 1997 and $8.2 million in 1996. In
June 1996, after the completion of its initial public offering, the Company
prepaid its $40.0 million of unsecured senior promissory notes and recorded an
extraordinary loss on the extinguishment of debt of $2.3 million, net of income
tax effect.
Net income in 1998 was $10.1 million ($1.65 per diluted share and
$1.72 per basic share) compared to $7.0 million ($1.17 per diluted share and
$1.22 per basic share) in 1997 and $2.3 million ($0.47 per diluted share and
$0.51 basic share) in 1996. Excluding the extraordinary item, 1996 net income
was $4.6 million ($0.94 per diluted share and $1.02 per basic share).
In June 1998, the Transportation Equity Act for the 21st Century
("TEA-21") was enacted. TEA-21 provides, on average, a 40% increase in federal
highway spending over the next six years. The Company's paving products segment
is expected to benefit from TEA-21 beginning in the second half of 1999. The
Company believes that TEA-21 had no significant impact on its 1998 operations.
IMPLEMENTATION OF BUSINESS STRATEGY
On September 29, 1997, the Company purchased the stock of Symons
Corporation ("Symons"). Symons was a private company, which owned two
businesses. The first business, the Symons division, is a leading manufacturer
of prefabricated concrete forming systems. The second business, Richmond Screw
Anchor, manufactured and sold concrete accessories. The addition of these two
businesses provides the Company with both
16
<PAGE> 17
a complementary fourth business platform, concrete forming systems, and
expansion in the concrete accessories market. The Symons division is being
operated on a stand alone basis while the Richmond Screw Anchor business has
been blended with the Company's existing concrete accessories division. The
Company paid $34.0 million (plus acquisition costs of $3.3 million) for the
Common Stock of Symons, of which $32.3 million was paid in cash and $5.0 million
was paid by delivery of a seven year unsecured note. The Company also assumed
$47.7 million of long-term debt. 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
Purchase Agreement provides that, if the Company and the Former Stockholders are
unable to resolve these differences, the dispute will be referred to a mutually
satisfactory accounting firm, which is expected to resolve such differences, in
accordance with the terms of the Purchase Agreement. On June 12, 1998, the
Former Stockholders filed a lawsuit in Delaware Chancery Court ("the
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. 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. The Company intends to vigorously pursue
its rights under the Purchase Agreement.
In January 1999, the Company purchased substantially all of the
assets and assumed certain of the liabilities of Cempro, Inc., ("Cempro") for
$5.4 million in cash. Cempro was a manufacturer of construction chemicals and is
being operated as a part of the Company's construction chemicals business, which
was established in early 1999.
In June 1998, the Company purchased substantially all of the
assets of Secure, Inc., ("Secure") a subsidiary of The Lofland Company, for $0.6
million in cash. Secure was a manufacturer of construction chemicals whose
products are sold primarily through the Company's paving products business.
In May 1998, the Company purchased the stock of CAI for $6.7
million, payable in cash of $0.4 million, delivery of 222,496 Class A Common
Shares totaling $4.1 million, and assumed long-term debt of $2.2 million. CAI
was a distributor of concrete forming systems.
In May 1998, the Company purchased the assets of the two
Northwoods branches of Concrete Forming, Inc. for $0.8 million in cash. The
Northwoods branches were distributors of concrete forming systems.
In February 1997, the Company acquired the principal assets of
Ironco Manufacturing Co., Inc. and Birmingham Bar Coating, Inc. ("Ironco") for
$1.5 million, of
17
<PAGE> 18
which $1.1 million was cash and the remainder was paid by delivery of 26,254
shares of Class A Common Shares. Ironco was a manufacturer of paving products.
In June 1996, the Company completed an initial public offering of
2,030,950 shares of Class A Common Shares and received proceeds of $23.0
million, net of expenses. The proceeds from the offering were used, in
combination with new borrowings, to prepay its $40.0 million of unsecured senior
promissory notes.
In April 1996, the Company purchased certain assets of Steel
Structures, Inc. ("SSI") for cash of $5.6 million. SSI was a manufacturer of
paving products.
RESULTS OF OPERATIONS
The following table summarizes the Company's results of
operations as a percentage of net sales for the years 1996 through 1998 ending
December 31.
<TABLE>
<CAPTION>
1998 1997 1996
------------- --------- -------------
<S> <C> <C> <C>
Net sales 100.0 100.0 100.0
Cost of goods sold 61.7 66.0 69.1
------------- --------- -------------
Gross profit 38.3 34.0 30.9
Selling, general and administrative expenses 27.0 22.3 19.0
Amortization of goodwill and intangibles 0.8 1.1 1.4
------------- --------- -------------
Income from operations 10.5 10.6 10.5
Interest expense, net 4.1 3.3 3.9
Other expense (income), net (0.1) - -
------------- --------- -------------
Income before income taxes and extraordinary item 6.5 7.3 6.6
Provision for income taxes 2.9 3.1 2.9
------------- --------- -------------
Income before extraordinary item 3.6 4.2 3.7
Extraordinary item, net of tax - - (1.9)(1)
------------- --------- -------------
Net income 3.6 4.2 1.8
============= ========= =============
</TABLE>
- ------------------------------
(1) In June 1996, the Company extinguished debt creating an extraordinary loss
of $2.3 million, net of tax effects.
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997
Net Sales - The 1998 net sales reached a record $282.8
million, a 68.9% increase from $167.4 million in 1997 and a 12.1% increase from
pro forma 1997 sales of $252.3 million as if Symons had been acquired on January
1, 1997. Concrete accessories net sales increased by 42.5% from $92.2 million in
1997 to $131.4 million in 1998, due to a full year's net sales resulting from
the Richmond Screw Anchor division of Symons. Concrete accessories net sales
increased 13.0% from pro forma 1997 net sales of $116.3 million due to strong
heavy construction activity in the U.S. and new product sales. Concrete forming
systems net sales increased from $21.1 million in 1997 to $104.7 million in 1998
due to a full year's net sales resulting from the acquisition of Symons.
Concrete forming systems net sales increased 20.0% from 1997 pro forma net sales
of $87.3 million due to the net sales of CAI and
18
<PAGE> 19
Northwoods after their acquisitions, as well as strong heavy construction
activity in the U.S. Net sales of paving products increased by 6.2% to $31.0
million in 1998 from $29.2 million in 1997 due to increased market gains. Net
sales of masonry accessories were $24.3 million for 1998 versus $24.9 million in
1997, due to a high level of competition in the hot dipped and mill galvanized
masonry wall reinforcement product markets, which was somewhat offset by a shift
to higher margin, lower volume engineered products.
Gross Profit - Gross profit for 1998 was $108.4 million, a
90.5% increase over $56.9 million for 1997. As a percent of net sales, gross
margin was 38.3% in 1998 compared to 34.0% in 1997. The gross margin increased
primarily due to the inclusion of the Symons division for a full year as
concrete forming systems have higher gross margins, primarily due to rental
revenues, than the Company's other product lines. The 1998 gross margin of 38.3%
also increased from the 1997 pro forma gross margin of 36.1% due to better
product mix with higher net sales of concrete forming systems and less net sales
of paving products and masonry products as a percent of consolidated net sales,
as well as cost savings in the concrete accessories business.
Operating Expenses - Selling, general, and administrative
expenses, including the amortization of goodwill and intangibles ("SG&A
expenses"), increased from $39.2 million in 1997 to $78.6 million in 1998. The
increase is due to a full year of expenses resulting from the acquisition of
Symons. SG&A expenses were up as a percent of sales from 23.4% in 1997 to 27.8%
in 1998, due to concrete forming systems having a higher percentage of SG&A
expenses to net sales than the Company's other operating segments. This reflects
the additional distribution and maintenance costs associated with the management
of the rental equipment fleet. SG&A expenses as a percent of sales also
increased from pro forma 1997 of 26.7%, primarily due to product mix of higher
concrete forming systems, including CAI, and less paving products and masonry
products as a percent of total net sales.
Interest and Other Expenses - Interest expense increased to
$11.7 million in 1998 from $5.6 million in 1997 due primarily to the full year
effect of higher debt resulting from the Symons acquisition, and to a lesser
extent, higher capital expenditures.
Income Before Income Taxes - Income before income taxes in
1998 increased 50.0% to a record $18.3 million from $12.2 million in 1997.
Concrete accessories income before income taxes of $19.4 million in 1998
increased 41.6% from $13.7 million due primarily to the increase in concrete
accessories net sales. Concrete forming systems income before income taxes of
$6.1 million in 1998 increased from $0.4 million in 1997 due primarily to the
full year effect of the acquisition of Symons. Income before income taxes from
paving products increased to $1.7 million, or 5.5% of net sales, in 1998 from
$1.4 million, or 4.8% of net sales in 1997. Income before income taxes from
masonry products was $0.5 million in 1998 compared to virtually breakeven in
1997, despite the decrease in net sales, due to a shift to higher margin, lower
volume engineered products. Corporate expenses increased to $5.2 million from
$3.2 million due to strengthening the finance, treasury, tax, purchasing,
logistics, and corporate development functions. Elimination of profit on
intersegment sales was $4.2 million in 1998.
Net Income - The effective tax rate in 1998 was 45.0%, or $8.2
million, compared to a rate of 43.1%, or $5.3 million, in 1997. Nondeductible
goodwill amortization
19
<PAGE> 20
and state and local taxes caused the Company's effective tax rate to exceed
federal statutory levels.
Net income increased $3.2 million to $10.1 million in 1998 from
$6.9 million in 1997 due to the factors described above.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
Net Sales - The 1997 net sales reached a record $167.4 million, a
34.5% increase from $124.5 million in 1996. Concrete accessories net sales
increased by 20.2% from $76.7 million in 1996 to $92.2 million in 1997, due to
the addition of the Richmond Screw Anchor division of Symons for three months,
which contributed 38.0% of the increase. Additionally, strong heavy construction
activity in the U.S. and new product sales of concrete accessories also
contributed to the increased net sales. Net sales of paving products increased
by 33.3% to $29.2 million in 1997 from $21.9 million in 1996 due to the
acquisition of Ironco, a full year's net sales resulting from the acquisition of
SSI, and an increased presence in the market place. Net sales of masonry
accessories were $24.9 million for 1997 versus $25.9 million in 1996.
Competition continued at a high level in the hot dipped and mill galvanized
masonry wall reinforcement product markets. Concrete forming systems net sales
were $21.1 million for the fourth quarter as a result of the acquisition of
Symons.
Gross Profit - Gross profit for 1997 was $56.9 million, a 47.9%
increase over $38.5 million for 1996. As a percent of net sales, gross margin
was 34.0% in 1997 compared to 30.9% in 1996. The gross margin increased
primarily as a result of the inclusion of the sales of Symons in the fourth
quarter, as concrete forming systems have higher gross margins, primarily due to
rental revenues, than the Company's other product lines. The increase in gross
profit dollars is attributable to the fourth quarter contribution of Symons,
and, to a lesser extent, improved selling prices and a shift in sales mix in
favor of higher margin products in the Company's concrete accessories business.
Continued investments in fixed assets also added to margin in 1997 by allowing
the Company to reduce its manufacturing costs. The Company also continued its
focus on cost improvement programs.
Operating Expenses - SG&A expenses increased $13.7 million, or
57.7%, from $23.6 million in 1996 to $37.3 million in 1997. Approximately 70% of
the increase resulted from the acquisition of Symons. SG&A expenses also were up
due to the addition of Ironco, management personnel relocations, and integration
costs from the Symons acquisition. SG&A expenses were up as a percent of sales
from 19.0% in 1996 to 22.3% in 1997, due to concrete forming systems having a
higher percentage of SG&A expenses to net sales than the Company's existing
businesses.
Interest and Other Expenses - Interest expense increased 15.1% to
$5.6 million in 1997 from $4.8 million in 1996 due to higher debt resulting from
the Symons acquisition. Additionally, deferred financing costs of $0.3 million
related to the previous credit facility were expensed. The lower average debt
outstanding in the first three quarters of 1997 and the lower interest rates
obtained in the June 1996 debt restructuring were offset by the increased
financing for the Symons acquisition.
20
<PAGE> 21
Income Before Income Taxes - Income before income taxes in
1997 increased 48.8% to $12.2 million from $8.2 million in 1996. Concrete
accessories income before income taxes of $13.7 million in 1997 increased 44.2%
from $9.5 million due primarily to the increase in concrete accessories net
sales. Concrete forming systems income before income taxes was $0.4 million for
the three months following the acquisition of Symons. Income before income taxes
in 1997 from paving products increased to $1.4 million, or 4.8% of net sales,
from $0.9 million, or 4.1% of net sales, in 1996. Income before income taxes
from masonry products was virtually breakeven in 1997 compared to income before
income taxes of $0.6 million in 1996 due to the decrease in net sales. Corporate
expenses increased to $3.2 million from $2.8 million due to the hiring of an
additional financial officer in December 1996 and the full year effect of
directors and officers insurance and other expenses related to being a public
company.
Net Income - The effective tax rate in 1997 was 43.1%, or $5.3
million, compared to a rate of 43.4%, or $3.5 million, in 1996. Nondeductible
goodwill amortization and state and local taxes caused the Company's effective
tax rate to exceed federal statutory levels.
As described in Note 4 to the consolidated financial statements,
the Company prepaid certain indebtedness in June 1996 that resulted in an
extraordinary charge of $2.3 million.
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 its Revolving Credit
Facility, and cash gap. The Company defines cash gap as accounts receivable days
outstanding plus inventory future days cost of sales less accounts payable days
to pay.
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 generated from operations,
borrowings under its revolving line of credit and the issuance of long-term debt
and equity.
Net cash provided by operating activities for 1998 was $19.6
million. Sources of operating cash flow for 1998 included $10.1 million in net
income and $13.1 million from non-cash charges for depreciation and amortization
and was reduced by $8.2 million in gains on sales of rental equipment and
property, plant, and equipment. Working capital changes, net of acquisitions,
generated $2.9 million. Net cash generated by operations was used for capital
expenditures, to fund strategic acquisitions of $1.8 million as described in
Note 2 of the consolidated financial statements, and to repay long-term debt of
$4.3 million, including long-term debt assumed in acquisitions of $2.2 million.
Capital expenditures included net additions to the rental equipment fleet of
$6.8 million to support the growth in concrete forming systems and, to a lesser
extent, concrete accessories, as well as property, plant, and equipment
additions of $7.2 million as the Company continues to focus on cost improvement
21
<PAGE> 22
programs. Proceeds from sales of property, plant, and equipment of $1.1 million
related to the sale of duplicate facilities as a result of the acquisition of
Symons.
At December 31, 1998, working capital was $44.7 million, compared
to $45.4 million at December 31, 1997. Despite the 12.1% pro forma growth in
sales volume, working capital decreased as the Company continues to manage its
working capital through its cash gap program.
At December 31, 1998, $40.0 million of the $40.0 million
Revolving Credit Facility was available, of which $13.0 million of borrowings
were outstanding. The Term Loan had an outstanding balance at December 31, 1998
of $100.0 million. Other long-term debt consisted of $5.0 million to one of the
Former Stockholders and $0.2 million to the City of Parsons, Kansas. At December
31, 1998, the Company had $118.2 million of long-term debt outstanding, of which
$32 thousand was current. The Company's debt to total capitalization ratio
decreased from 66.5% in 1997 to 61.3% in 1998 primarily due to increased equity
from net income.
To manage its interest rate risk, the Company entered into two
interest rate swap agreements on a total of $50.0 million of long-term debt that
fixed the LIBOR-based component of the interest rate formula. The swaps have a
fixed ninety-day LIBOR component of 6.30% and 6.33%, and expire on November 1,
2000. The ninety-day LIBOR as of December 31, 1998 was 5.07%. All fluctuations
in rates resulting from the swaps are accounted for as interest expense. These
swaps are required by the Company's Credit Agreement and are contracts to
exchange floating rate for fixed rate interest payments over three years without
the exchange of underlying amounts. The estimated fair value of the interest
rate swap agreements is a liability of $1.2 million.
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
million were awarded against Symons in January 1999. The Company believes that
there is no merit to these allegations, remains committed to vigorously pursuing
post-trial motions and appeals, and is seeking to vacate the judgments in their
entirety. The Company believes that, in the event the judgments against it are
not completely set aside, it has numerous substantial grounds for a successful
appeal and intends to vigorously pursue 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.
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.
22
<PAGE> 23
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 Credit
Facility or, if feasible and attractive, issuances of long-term debt or
additional Class A Common Shares.
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 three years. In the past, the Company has
been able to pass along all or a portion of the effects of steel price
increases. There can be no assurance the Company will be able to continue to
pass on the cost of such increases in the future.
YEAR 2000
Certain software and hardware systems are date sensitive.
Older date sensitive systems often use a two digit dating convention ("00"
rather than "2000") that could result in system failure and disruption of
operations as the year 2000 approaches. This is referred to as the "Year 2000"
issue. The Year 2000 issue will impact the Company, its suppliers, customers and
other third parties that transact business with the Company.
The Company has a Year 2000 compliance team. This team is
reviewing substantially all hardware and software systems within the Company,
products sold by the Company, and significant suppliers and other third parties
that transact business with the Company. Projects have been established to
address all significant Year 2000 issues identified in this review. The Year
2000 team reports regularly to senior management on the progress of significant
Year 2000 projects. Senior management reports to the Board of Directors on the
Company's progress with Year 2000 projects.
The compliance review has involved testing of hardware and
software systems, including non-information technology systems such as
telephones and Computer Numeric Controlled machines. The Company has determined
that it needs to replace or modify some of its software and hardware systems.
The Company is replacing or upgrading most of the systems which have been
identified as having Year 2000 issues.
The Company believes it has no material exposure to
contingencies related to the Year 2000 issue for products sold as almost none of
the Company's products contain time sensitive hardware or software systems.
The Company has initiated communications with significant
suppliers, customers and other relevant third parties to identify and minimize
disruptions to the Company's operations and to assist in resolving Year 2000
issues. Particular attention has
23
<PAGE> 24
been given to those suppliers who may be the Company's only source for certain
products or components. However, there can be no certainty that the impacted
systems and products of other parties on which the Company relies will be Year
2000 compliant.
The Company's estimates of Year 2000 costs are based on
numerous assumptions; actual costs could be greater than estimates. Specific
factors that might cause such differences include, but are not limited to, the
continuing availability of personnel trained in this area and the Company's
ability to timely identify and correct all relevant software and hardware
systems and the success of third party vendors in addressing their own Year 2000
issues. To date, the Company has incurred approximately $680 thousand, of which
$650 thousand was capitalized and $30 thousand was expensed. These costs were to
replace existing hardware and third party software and professional fees for
external assistance. The estimated future cost for resolving Year 2000 issues is
approximately $240 thousand, of which $180 thousand is expected to be
capitalized and $60 thousand is expected to be expensed. These costs are to
replace or upgrade existing hardware and third party software, including
professional fees for external assistance.
The Company believes it is diligently addressing the Year 2000
issues and that it will satisfactorily resolve all significant Year 2000
problems. The Company successfully completed a test of its integrated systems in
the fourth quarter of 1998 and anticipates completing substantially all of its
Year 2000 projects by the end of the second quarter of 1999. In the event the
Company falls short of these milestones, additional internal resources will be
focused on completing these projects or implementing contingency plans.
The Company believes that its most reasonably likely worst
case scenario would be related to the lack of success of third party vendors of
addressing their Year 2000 issues, particularly suppliers who are the Company's
only source, such as local electricity providers. If a facility were to be
unable to manufacture products due to a lack of electricity, contingency plans
include the transfer of production orders to other facilities. The Company
believes the impact would not be significant due to the seasonal capacity that
exists in January.
RECENTLY ISSUED ACCOUNTING STANDARDS
In July 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 130,
"Reporting Comprehensive Income". SFAS 130 establishes standards for reporting
and display of comprehensive income and its components in a full set of
financial statements. The objective of the Statement is to report a measure of
all changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with owners
("comprehensive income"). Comprehensive income is the total of net income and
all other nonowner changes in equity. The Company has adopted SFAS 130.
In July 1997, the FASB issued SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information." SFAS 131 introduces a
new model for segment reporting, called the "management approach." The
management approach is based on the way that the chief operating decision maker
organizes segments within a company for making operating decisions and assessing
performance. Reportable segments are based on
24
<PAGE> 25
products and services, geography, legal structure, management structure - any
manner in which management disaggregates a company. The management approach
replaces the notion of industry and geographic segments in current FASB
standards. The Company has adopted SFAS 131 for its 1998 annual report. See Note
9 to the consolidated financial statements.
In February 1998, the FASB issued SFAS No. 132 "Employers'
Disclosures about Pensions and Other Postretirement Benefits." SFAS 132 amends
the disclosures required for pensions and other postretirement benefits. The
Company has adopted SFAS No. 132; see Note 7 to the consolidated financial
statements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
FORWARD-LOOKING STATEMENTS
This annual report 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 divestiture 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 the general economy, governmental expenditures and changes in banking and tax
laws; the Company's ability to successfully identify, finance, complete and
integrate acquisitions; the mix of products sold by the Company; the Company's
ability to successfully develop and introduce new products; increases in the
price of steel (the principal raw material in the Company's products) and the
Company's ability to pass along such price increases to its customers; and the
seasonality of the construction industry. In addition to these factors, actual
future performance, outcomes and results may differ materially because of other,
more general, factors including (without limitation) general industry and market
conditions and growth rates, domestic economic conditions, governmental and
public policy changes and the continued availability of financing in the
amounts, at the terms and on the conditions necessary to support the Company's
future business.
25
<PAGE> 26
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As of December 31, 1998, the Company had financial instruments which were
sensitive to changes in interest rates. These financial instruments consist of a
$40.0 million Revolving Credit Facility, of which $13.0 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 $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 $13.0 million face value. The
weighted average interest rate at December 31, 1998 was 7.3%.
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 Revolving Credit Facility
approximates its face value. The Term Loan has a weighted average interest rate
of 8.15% at December 31, 1998.
Other long-term debt consists of a.) a $5.0 million, 10.5% note payable due in
2004 with an estimated fair value of $5.8 million and b.) a $0.2 million, 7.0%
loan due in installments of $32 thousand per year with an estimated fair value
of $0.2 million.
The Company has two interest rate swap agreements on a total of $50.0 million
that fixed the LIBOR-based component of the interest rate formula as required
by the Company's Credit Agreement. The swaps have a fixed ninety-day LIBOR
component of 6.30% and 6.33%, and expire on November 1, 2000. The ninety-day
LIBOR as of December 31, 1998 was 5.07%. These swaps are contracts to exchange
floating rate for fixed rate interest payments without the exchange of
underlying amounts. The estimated fair value of the interest rate swaps is a
liability of $1.2 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 rod) and products purchased
for resale. The prices of these items can change significantly due to changes
in the markets in which the Company's suppliers operate. The Company generally
does not use finanical instruments to manage its exposure to changes in
commodity prices.
26
<PAGE> 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Report Of Independent Public Accountants
To Dayton Superior Corporation:
We have audited the accompanying consolidated balance sheets of Dayton Superior
Corporation (an Ohio corporation) and Subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of income, shareholders' equity,
cash flows, and comprehensive income for each of the three years in the period
ended December 31, 1998. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dayton Superior Corporation and
Subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed under Part IV, Item
14(a)(2) is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states, in all material respects, the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Dayton, Ohio
January 26, 1999 (except with respect to the matter discussed in Note 12, as
to which the date is February 17, 1999)
27
<PAGE> 28
Dayton Superior Corporation And Subsidiaries
Consolidated Balance Sheets
As of December 31
(Amounts in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
ASSETS (Note 5) 1998 1997
--------- ---------
<S> <C> <C>
Current assets
Cash $ 560 $ --
Accounts receivable, net of allowances for doubtful accounts and
sales returns and allowances of $4,432 and $5,015 42,996 35,054
Inventories (Note 3) 36,058 32,873
Prepaid expenses and other current assets 4,396 3,047
Prepaid income taxes 828 2,087
Future income tax benefits (Notes 3 and 8) 3,521 3,657
--------- ---------
Total current assets 88,359 76,718
--------- ---------
Rental equipment, net (Note 3) 52,586 38,327
--------- ---------
Property, plant and equipment (Note 3)
Land and improvements 5,481 5,577
Building and improvements 20,030 19,330
Machinery and equipment 38,339 33,156
--------- ---------
63,850 58,063
--------- ---------
Less accumulated depreciation (22,069) (16,711)
--------- ---------
Net property, plant and equipment 41,781 41,352
--------- ---------
Goodwill and intangible assets, net of accumulated amortization (Note 3) 70,130 68,590
Other assets 764 1,943
--------- ---------
Total assets $ 253,620 $ 226,930
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt (Note 5) $ 32 $ 32
Accounts payable 20,749 15,753
Accrued compensation and benefits 12,443 7,480
Other accrued liabilities 10,408 8,088
--------- ---------
Total current liabilities 43,632 31,353
Long-term debt (Note 5) 118,173 120,204
Deferred income taxes (Notes 3 and 8) 11,544 8,079
Other long-term liabilities (Note 7) 5,683 6,765
--------- ---------
Total liabilities 179,032 166,401
--------- ---------
Shareholders' equity (Note 6)
Class A common shares; no par value; 20,539,500 shares authorized;
5,200,472 and 4,261,806 shares issued and 5,193,174 and 4,261,806
shares outstanding; 1 vote per share 42,316 33,386
Class B common shares; no par value; 757,569 and 1,466,350 shares
authorized, issued, and outstanding; 10 votes per share 5,037 9,749
Class A treasury shares, at cost, 7,298 and 0 shares (145) -
Cumulative foreign currency translation adjustment (266) (191)
Excess pension liability (15) -
Retained earnings 27,661 17,585
--------- ---------
Total shareholders' equity 74,588 60,529
--------- ---------
Total liabilities and shareholders' equity $ 253,620 $ 226,930
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
28
<PAGE> 29
Dayton Superior Corporation and Subsidiaries
Consolidated Statements of Income
Years Ended December 31
(Amounts in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C> <C>
Net sales (Note 3) $282,849 $167,412 $124,486
Cost of sales 174,423 110,528 86,021
--------- --------- ---------
Gross profit 108,426 56,884 38,465
Selling, general and administrative expenses 76,392 37,277 23,637
Amortization of goodwill and intangibles 2,213 1,885 1,749
--------- --------- ---------
Income from operations 29,821 17,722 13,079
Other expenses
Interest expense, net 11,703 5,556 4,829
Other expense (income), net (202) (64) 96
--------- --------- ---------
Income before income taxes and extraordinary item 18,320 12,230 8,154
Provision for income taxes (Note 8) 8,244 5,277 3,538
--------- --------- ---------
Income before extraordinary item 10,076 6,953 4,616
Extraordinary item (Note 4)
Loss on extinguishment of debt, net of income tax effect of
1,419 - - (2,314)
--------- --------- ---------
Net income $10,076 $6,953 $2,302
========= ========= =========
Basic income per share before extraordinary item $1.72 $1.22 $1.02
Basic extraordinary item per share - - (0.51)
--------- --------- ---------
Basic net income per share $1.72 $1.22 $0.51
========= ========= =========
Weighted average common shares outstanding 5,867,338 5,703,601 4,547,527
========= ========= =========
Diluted income per share before extraordinary item $1.65 $1.17 $0.94
Diluted extraordinary item per share - - (0.47)
--------- --------- ---------
Diluted net income per share $1.65 $1.17 $0.47
========= ========= =========
Weighted average common and common share equivalents
outstanding 6,098,205 5,933,244 4,925,464
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
29
<PAGE> 30
Dayton Superior Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1998, 1997 and 1996
(Amounts in thousands, except share amounts)
<TABLE>
<CAPTION>
Class A Class B Class A
Common Shares Common Shares Treasury Shares
----------------- -------------- ---------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 2,804,500 $ 17,483 485,500 $ 1,942 2,000 $ (81)
Net income
Foreign currency translation adjustment
Excess pension liability adjustment
Exercise of warrants 346,600 -
Conversion of Class B common shares
into Class A common shares 541,700 2,316 (541,700) (2,316)
Conversion of Class A common shares
into Class B common shares (1,522,550) (10,123) 1,522,550 10,123
Retirement of Class A treasury shares (2,000) (81) (2,000) 81
Issuance of common shares for cash, net
of issuance costs (Note 6b) 2,030,950 23,041
--------- ------- --------- ------ ----- -----
Balances at December 31, 1996 4,199,200 32,636 1,466,350 9,749 - -
Net income
Foreign currency translation adjustment
Issuance of common stock in lieu of
directors' fees 8,258 104
Issuance of common shares in
conjunction with acquisition (Note 2) 26,254 346
Exercise of stock options, net 28,094 300
--------- ------- --------- ------ ----- -----
Balances at December 31, 1997 4,261,806 33,386 1,466,350 9,749 - -
Net income
Foreign currency translation adjustment
Excess pension liability adjustment
Issuance of common stock in lieu of
directors' fees 6,363 124
Issuance of common shares in
conjunction with acquisition (Note 2) 222,496 4,078
Exercise of stock options, net 1,026 16
Conversion of Class B common shares
into Class A common shares 708,781 4,712 (708,781) (4,712)
Purchase of Class A treasury shares 7,298 (145)
--------- ------- --------- ------ ----- -----
Balances at December 31, 1998 5,200,472 $42,316 757,569 $5,037 7,298 $(145)
========= ======= ========= ====== ===== =====
<CAPTION>
Cumulative
Foreign
Currency Excess
Translation Pension Retained
Adjustment Liability Earnings Total
---------- --------- -------- -----
<S> <C> <C> <C> <C>
Balances at December 31, 1995 $ (139) $ (50) $ 8,330 $ 27,485
Net income 2,302 2,302
Foreign currency translation adjustment (6) (6)
Excess pension liability adjustment 50 50
Exercise of warrants -
Conversion of Class B common shares
into Class A common shares -
Conversion of Class A common shares
into Class B common shares -
Retirement of Class A treasury shares -
Issuance of common shares for cash, net
of issuance costs (Note 6b) 23,041
----- -------- ------- -------
Balances at December 31, 1996 (145) - 10,632 52,872
Net income 6,953 6,953
Foreign currency translation adjustment (46) (46)
Issuance of common stock in lieu of
directors' fees 104
Issuance of common shares in
conjunction with acquisition (Note 2) 346
Exercise of stock options, net 300
----- -------- ------- -------
Balances at December 31, 1997 (191) - 17,585 60,529
Net income 10,076 10,076
Foreign currency translation adjustment (75) (75)
Excess pension liability adjustment (15) (15)
Issuance of common stock in lieu of
directors' fees 124
Issuance of common shares in
conjunction with acquisition (Note 2) 4,078
Exercise of stock options, net 16
Conversion of Class B common shares
into Class A common shares -
Purchase of Class A treasury shares (145)
----- -------- ------- -------
Balances at December 31, 1998 $(266) $ (15) $27,661 $74,588
===== ======== ======= =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
30
<PAGE> 31
Dayton Superior Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31
(Amounts in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $10,076 $6,953 $2,302
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary loss - - 2,314
Depreciation 10,076 5,131 4,304
Amortization of goodwill and intangibles 2,213 1,885 1,749
Deferred income taxes 1,792 1,017 320
Amortization of debt discount and deferred financing costs 821 565 235
Gain on sales of rental equipment and property, plant and
equipment (8,236) (2,871) (1,095)
Change in assets and liabilities, net of effects of acquisitions:
Accounts receivable (4,830) 3,111 1,610
Inventories (2,110) 527 (884)
Prepaid income taxes 1,259 (865) 633
Accounts payable 3,991 (2,136) (740)
Accrued liabilities and other long-term liabilities 5,487 (2,690) (2,368)
Other, net (938) (260) (614)
------- ------- ------
Net cash provided by operating activities 19,601 10,367 7,766
------- ------- ------
Cash Flows From Investing Activities:
Property, plant and equipment additions (7,215) (4,410) (3,198)
Proceeds from sale of fixed assets 1,097 - -
Rental equipment additions (18,081) (4,875) (1,632)
Proceeds from sales of rental equipment 11,298 3,628 1,098
Acquisitions, net of cash acquired (Note 2) (1,784) (33,467) (4,845)
Other investing activities - (15) (69)
------- ------- ------
Net cash used in investing activities (14,685) (39,139) (8,646)
------- ------- ------
Cash Flows From Financing Activities:
Repayments of long-term debt (4,276) (67,203) (41,656)
Issuance of long-term debt - 100,000 22,819
Prepayment premium on extinguishment of long-term debt - - (2,400)
Issuance of common shares 140 404 23,041
Financing costs and fees - (4,586) (358)
Purchase of treasury shares (145) - -
Payments to former shareholder for acquisition of common shares - - (1,000)
------ ------ ------
Net cash provided by (used in) financing activities (4,281) 28,615 446
------ ------ ------
Effect of Exchange Rate Changes on Cash (75) (46) (6)
------ ------ ------
Net increase (decrease) in cash 560 (203) (440)
Cash, beginning of year - 203 643
------ ------ ------
Cash, end of year $560 $ - $203
====== ====== ======
Supplemental Disclosures:
Cash paid for income taxes $5,055 $4,919 $2,345
Cash paid for interest 10,763 4,736 6,582
Issuance of long-term debt to seller in conjunction with acquisition - 5,000 -
Issuance of Class A common shares in conjunction with acquisition 4,078 346 -
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
31
<PAGE> 32
Dayton Superior Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
Years, Ended December 31
(Amounts in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Net income $10,076 $6,953 $2,302
Other comprehensive income
Foreign currency translation adjustment (75) (46) (6)
Excess pension liability adjustment (15) - 50
------ ------ ------
Comprehensive income $9,986 $6,907 $2,346
====== ====== ======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
32
<PAGE> 33
Dayton Superior Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(Dollar amounts in thousands, except share and per share amounts)
(1) The Company
The accompanying consolidated financial statements include the accounts
of Dayton Superior Corporation and its wholly owned subsidiaries,
Dayton Superior Canada Ltd., Dur-O-Wal, Inc., Dur-O-Wal, Ltd., and
commencing September 29, 1997, Symons Corporation ("Symons")
(collectively referred to as the "Company"). All significant
intercompany transactions have been eliminated.
The Company 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. As of December 31,
1998, the Company has a distribution system consisting of a network of
10 manufacturing/distribution plants and 47 service/distribution
centers in the United States and Canada and over 4,000 dealers. The
Company employs 749 salaried and 1,326 hourly personnel, of whom
approximately 1,000 of the hourly personnel and six of the salaried
personnel are represented by labor unions. One collective bargaining
agreement expiring in 1999 covers 25 hourly employees at the Company's
Des Plaines, IL facility. In 1998, hourly employees (45 as of December
31, 1998) at the Company's Kankakee, IL facility voted to be
represented by a labor union. As of December 31, 1998, no collective
bargaining agreement was in place.
The only significant difference between the Company's Class A Common
Shares (1 vote per share) and its Class B Common Shares (10 votes per
share) are the number of votes per share. The Company's Class B Common
Shares are owned by Ripplewood Holdings L.L.C. ("Ripplewood").
Ripplewood holds 13% of the Common Shares of the Company, which
represents 59% of the voting rights as of December 31, 1998. See Note
12 for subsequent event.
(2) Acquisitions
(a) Symons Corporation- On September 29, 1997, the Company
purchased the stock of Symons. Symons was a private company,
which owned two businesses. The first business, the Symons
division, is a leading manufacturer of prefabricated concrete
forming systems. The second business, Richmond Screw Anchor,
manufactures and sells concrete accessories. The addition of
these two businesses provides the Company with both a
complementary fourth business platform, concrete forming
systems, and expansion in the concrete accessories market. The
Symons division is being operated on a stand alone basis while
the Richmond Screw Anchor business has been blended with the
Company's existing concrete accessories division. The Company
paid $34,000 (plus acquisition costs of $3,349) for the Common
Stock of Symons, of which $32,349 was paid in cash and $5,000
was paid by delivery of a seven year unsecured note. The
Company also assumed $47,670 of long-term debt. 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
33
<PAGE> 34
purchase price under certain circumstances. The Company has
advised the Former Stockholders that it believes it is
entitled to a purchase price adjustment in its favor, and the
Former Stockholders similarly advised the Company that they
believe they are entitled to a purchase price adjustment in
their favor. If the Company and the Former Stockholders are
unable to resolve these differences, the dispute will be
referred to a mutually satisfactory accounting firm, which is
expected to resolve such differences, in accordance with the
terms of 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. 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. The Company intends to
vigorously pursue its rights under the Purchase Agreement.
The cash portion of the purchase price was paid from the
proceeds of the Company's credit agreement (Note 5). The
allocation of the purchase price to the net assets acquired is
as follows:
<TABLE>
<S> <C>
Current assets $49,758
Rental equipment and property, plant
and equipment 55,283
Goodwill and intangible assets 8,607
Other non-current assets 1,597
Current liabilities (26,548)
Long-term debt (47,670)
Other long-term liabilities (3,678)
-------
$37,349
=======
</TABLE>
The unaudited pro forma statements of income as though Symons
had been acquired as of the beginning of 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Net sales $252,326 $228,974
Gross profit 91,167 76,450
Income before extraordinary item 6,867 5,406
Basic income per share before
extraordinary item 1.20 0.95
Diluted income per share before
extraordinary item 1.16 0.92
</TABLE>
The pro forma financial information is presented for
informational purposes only and is not necessarily indicative
of the operating results that would have occurred had the
Symons acquisition been consummated as of the above date, nor
are they necessarily indicative of future operating results.
34
<PAGE> 35
(b) Cempro, Inc.- Effective January 1, 1999, the Company acquired
substantially all of the assets and assumed certain of the
liabilities of Cempro, Inc. for $5,400 in cash. The business
is being operated as a part of the Company's construction
chemicals business, which was established in early 1999.
(c) Secure, Inc.- In June 1998, the Company purchased
substantially all of the assets of Secure, Inc., a subsidiary
of The Lofland Company, for $654 in cash, including
acquisition costs of $50. This business is being operated as a
part of the Company's paving products division.
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 including goodwill of
$50. Certain appraisals and evaluations are preliminary and
may change. Pro forma financial information is not required.
(d) Concrete Accessories, Inc.- In May 1998, the Company purchased
all of the stock of Concrete Accessories, Inc. (CAI). The
purchase price was $6,744, including acquisition costs of
$240, and was paid in cash of $421, assumption of long-term
debt of $2,245, and delivery of 222,496 Class A Common Shares
valued at $4,078. CAI 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 CAI 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 of $8,080,
including goodwill of $2,155, and assumed liabilities other
than long-term debt of $1,336. Certain appraisals and
evaluations are preliminary and may change. Pro forma
financial information is not required.
(e) Northwoods- In May 1998, the Company purchased the assets of
the Northwoods branches of Concrete Forming, Inc. for $750 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 including
goodwill of $450. Certain appraisals and evaluations are
preliminary and may change. Pro forma financial information is
not required.
(f) Ironco Manufacturing Co., Inc.- In February 1997, the Company
acquired certain of the assets and assumed certain of the
liabilities of Ironco Manufacturing Co., Inc. and Birmingham
Bar Coating, Inc. The purchase price, including acquisition
costs, was $1,493 and was paid in cash of $1,147 and 26,254
Class A Common Shares.
The acquisition was accounted for as a purchase and the
results of the companies have been included in the
accompanying consolidated financial statements since the date
of acquisition. This purchase price has been allocated based
on the fair value of the assets
35
<PAGE> 36
acquired of $1,705, including goodwill of $504, and
liabilities assumed of $212. Pro forma financial information
is not required.
(g) Steel Structures, Inc.- In April 1996, the Company purchased
certain of the assets and assumed certain of the liabilities
of Steel Structures, Inc., for $5,601 in cash. The business is
being operated as a part of the Company's paving products
business.
The acquisition was accounted for as a purchase and the
results have been included in the accompanying consolidated
financial statements since the date of acquisition. This
purchase price has been allocated on the basis of the
appraised fair value of the assets acquired of $6,113,
including goodwill of $1,374, and liabilities assumed of $512.
Pro forma financial information is not required.
(3) Summary of Significant Accounting Policies
(a) Inventories- Substantially all inventories of the domestic
concrete accessories, paving products and masonry products
operations are stated at the lower of last-in, first-out
("LIFO") cost (which approximates current cost) or market. All
other inventories of the Company are stated at the lower of
first-in, first-out ("FIFO") cost or market. The Company
provides net realizable value reserves which reflect the
Company's best estimate of the excess of the cost of potential
obsolete and slow moving inventory over the expected net
realizable value. The Company's inventories consist of raw
materials of $7,659 and $6,957, and finished goods of $30,022
and $26,792 as of December 31, 1998 and 1997, net of net
realizable value reserves of $1,623 and $876, respectively.
The Company has no LIFO reserve as of December 31, 1998 and
1997.
(b) 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 December 31, 1998 and 1997 are net
of accumulated depreciation of $6,796 and $2,496,
respectively. Rental revenues were $44,242, $11,336 and $3,095
for the years ended December 31, 1998, 1997, and 1996,
respectively. Cost of sales associated with rental revenues
were $4,443, $1,475, and $1,175 for 1998, 1997, and 1996,
respectively.
(c) Property, Plant and Equipment- Property, plant and equipment
are valued at cost and depreciated using straight-line and
accelerated methods over their estimated useful lives of 10-30
years for buildings and improvements and 3-10 years for
machinery and equipment.
Leasehold improvements are amortized over the lesser of the
term of the lease or the estimated useful life of the
improvement. Improvements and replacements are capitalized,
while expenditures for maintenance and repairs are charged to
expense as incurred.
(d) Goodwill and Intangible Assets- Goodwill and intangible assets
are recorded at the date of acquisition at their allocated
cost. Amortization is provided over the estimated useful
36
<PAGE> 37
lives of 40 years for goodwill, the term of the loan (5 to 8
years) for deferred financing costs and the term of the
agreement (1 to 5 years) for license agreements. Accumulated
amortization as of December 31, 1998 and 1997 was $16,867 and
$14,087, respectively.
In accordance with Statement of Financial Accounting Standard
No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), the
carrying value of goodwill and other long-lived assets is
assessed for recoverability by management when changes in
circumstances indicate that the carrying amount may not be
recoverable, based on an analysis of undiscounted future
expected cash flows from the use and ultimate disposition of
the asset.
(e) Income Taxes- Deferred income taxes are determined by applying
current statutory tax rates to the cumulative temporary
differences between the carrying value of assets and
liabilities for financial reporting and tax purposes.
(f) Environmental Remediation Liabilities- Effective January 1,
1997, the Company accounts for environmental remediation
liabilities in accordance with the American Institute of
Certified Public Accountants issued Statement of Position
96-1, "Environmental Remediation Liabilities," ("SOP 96-1").
Adoption of SOP 96-1 did not have a material impact on the
Company's consolidated financial statements.
(g) Foreign Currency Translation Adjustment- The financial
statements of foreign subsidiaries and branches are maintained
in their functional currency (Canadian dollars) and are then
translated into U.S. dollars. The balance sheets are
translated at end of year rates while revenues, expenses and
cash flows are translated at weighted average rates throughout
the year. Translation adjustments, which result from changes
in exchange rates from period to period, are accumulated in a
separate component of shareholders' equity. Transactions in
foreign currencies are translated into U.S. dollars at the
rate in effect on the date of the transaction. Changes in
foreign exchange rates from the date of the transaction to the
date of the settlement of the asset or liability is recorded
as income or expense.
(h) Net Income Per Share- Basic net income per share is computed
by dividing net income available to common shareholders by the
weighted average number of common shares outstanding (adjusted
for the stock split discussed in Note 6a) during the year.
Diluted net income per share is computed by dividing net
income available to common shareholders by the weighted
average number of common and common share equivalents
outstanding (adjusted for the stock split discussed in Note
6a) during the year. Common share equivalents include the
number of shares issuable upon the exercise of outstanding
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 average trading price.
37
<PAGE> 38
<TABLE>
1998
-----------------------------------------------------
Income Shares Per Share
------------- ----------------- ---------------
<S> <C> <C> <C>
Basic net income per share $10,076 5,867,338 $1.72
Effect of stock options (Note 6c) - 230,867
------------- ----------------- ---------------
Diluted net income per share $10,076 6,098,205 $1.65
============= ================= ===============
<CAPTION>
1997
-----------------------------------------------------
Income Shares Per Share
------------- ----------------- ---------------
<S> <C> <C> <C>
Basic net income per share $6,953 5,703,601 $1.22
Effect of stock options (Note 6c) - 229,643
------------- ----------------- ---------------
Diluted net income per share $6,953 5,933,244 $1.17
============= ================= ===============
<CAPTION>
1996
-----------------------------------------------------
Income Shares Per Share
------------- ----------------- ---------------
<S> <C> <C> <C>
Basic net income per share $2,302 4,547,527 $0.51
Effect of stock options and warrants (Notes
6b and 6c) - 377,937
------------- ----------------- ---------------
Diluted net income per share $2,302 4,925,464 $0.47
============= ================= ===============
</TABLE>
(i) 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 rate 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 swap agreements is recognized as an adjustment
to interest expense.
(j) Revenue Recognition- The Company recognizes revenue on product
and rental equipment sales on the date of shipment. Rental
revenues are recognized ratably over the terms of the rental
agreements.
(k) Use of Estimates- The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the
balance sheet date and the reported amounts of revenues and
expenses during the year. Actual results could differ from
those estimates. Examples of accounts in which estimates are
used include the reserve for excess and obsolete inventory,
the allowance for doubtful accounts and sales returns and
allowances, the accrual for self-insured employee medical
claims, the self-insured product and general liability
accrual, the self-insured workers' compensation accrual,
accruals for litigation losses, the valuation allowance for
deferred tax assets, actuarial assumptions used in determining
pension benefits, and actuarial assumptions used in
determining other post-retirement benefits.
(l) Reclassifications- Certain reclassifications have been made to
prior years' amounts to conform to their 1998 classification.
38
<PAGE> 39
(4) Extraordinary Item
During June 1996, the Company prepaid its $40,000 unsecured senior
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 $22,358 in proceeds from its
public stock offering (Note 6b) and $20,042 from its 1996 credit
facility.
(5) Credit Arrangements
The Company has a Credit Agreement to provide for a term loan and
revolving credit facility, each of which is secured by substantially
all of the assets of the Company. The Company used the proceeds of the
Credit Agreement to fund the acquisition of all outstanding shares of
Symons and to repay all amounts outstanding on the existing term and
revolving loans of both the Company and Symons. As a result, deferred
financing costs of $255 related to the Company's term and revolving
loans were expensed and reflected as interest expense in the
accompanying 1997 statement of income.
The $100,000 Term Loan requires quarterly interest payments, with
principal amount due in 2005. The Term Loan permits the Company to
choose from various interest rate options and has a weighted average
interest rate of 8.15% at December 31, 1998.
Amounts available under the Revolving Credit Facility are equal to the
lesser of (i) $40,000 or (ii) the sum of (x) 85% of eligible accounts
receivable, and (y) 60% of eligible inventories. The amount available
under the Revolving Credit Facility was $40,000 at December 31, 1998.
The Revolving Credit Facility will terminate in 2002, and has interest
options based on (a) Bank One, Dayton, NA's prime rate (7.75% at
December 31, 1998) plus an amount between 0% and 1% depending on the
level of certain financial ratios (0.5% at December 31, 1998), or (b)
LIBOR plus an amount between 0.75% and 2.00% depending on the level of
certain financial ratios (1.50% at December 31, 1998). The weighted
average interest rate at December 31, 1998 was 7.3%. A commitment fee
of between 0.125% and 0.400% per annum will be payable on the average
unused amount depending on the level of certain financial ratios (0.25%
at December 31, 1998).
Average borrowings under the Revolving Credit Facility and its
predecessors were $19,679, $25,266, and $21,400, during 1998, 1997, and
1996, respectively, at an approximate weighted average interest rate of
7.7%, 7.6%, and 8.2%, respectively. The maximum borrowings outstanding
during 1998, 1997, and 1996 were $26,620, $32,403, and $28,180,
respectively.
To manage its interest rate risk, the Company entered into two interest
rate swap agreements on a total of $50,000 of long-term debt that fixed
the LIBOR-based component of the interest rate formula. The swaps have
a fixed ninety-day LIBOR component of 6.30% and 6.33%, and expire on
November 1, 2000. The ninety-day LIBOR as of December 31, 1998 was
5.07%. All fluctuations in rate resulting from the swaps are accounted
for as interest expense. These swaps are required by the Company's
Credit Agreement and are contracts to exchange floating rate for fixed
rate interest payments without the exchange of underlying amounts.
39
<PAGE> 40
The Credit Agreement contains certain restrictive covenants, which
require that, among other things, the Company maintain a minimum
leverage ratio, a minimum fixed charge coverage ratio and limit its
ability to pay dividends on Common Shares. The Company was in
compliance with its loan covenants as of December 31, 1998.
In conjunction with the acquisition of Symons, the Company issued a
$5,000, seven-year unsecured note to one of the Former Stockholders.
The note requires monthly interest payments, with principal due in
September 2004. The note bears interest at a fixed rate of 10.5%.
The Company has an Economic Development Loan from the city of Parsons,
Kansas. The loan bears interest at 7.0% and is payable in quarterly
installments of $8 through July 2005. The loan is secured by real
estate in Parsons.
Following is a summary of the Company's long-term debt as of December
31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Revolving lines of credit $ 13,000 $ 15,000
1997 Term Loan 100,000 100,000
Note payable to one of the Former Shareholders 5,000 5,000
City of Parsons, Kansas Economic Development Loan 205 236
-------- --------
Total long-term debt 118,205 120,236
Less current portion (32) (32)
-------- --------
Long-term portion $118,173 $120,204
======== ========
</TABLE>
Scheduled maturities of long-term debt are $32, $32, $32, $13,032, $32
and $105,045 for 1999, 2000, 2001, 2002, 2003, and thereafter,
respectively.
The fair market value of the Company's fixed rate long-term debt is
estimated using discounted cash flow analyses based on current
incremental borrowing rates for similar types of borrowing
arrangements. At December 31, 1998, the estimated fair value of the
Note payable to Former Shareholder of Symons is $5,782. The estimated
fair value of the City of Parsons, Kansas Economic Development Loan is
$203. The estimated fair values of the Term Loan and Revolving Credit
Facility approximate their face values, as these facilities have
variable interest rates tied to market rates. The estimated fair value
of the interest rate swap agreements is a liability of $1,242.
(6) Common and Redeemable Preferred Shares
(a) Stock Split- In June 1996, the Company authorized a 50-for-1
stock split for Class A and B Common Shares. All references in
the financial statements to number of shares or share prices
have been restated to reflect the split.
(b) Public Offering of Company Shares- In June 1996, the Company
completed an initial public offering of 1,974,750 shares of
Class A Common Shares and received proceeds of $22,358, net of
expenses. The proceeds from the offering were used to prepay
long-term debt.
40
<PAGE> 41
In July 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
L.L.C. 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 existing
revolving line of credit.
If the offering, the amendment of the Company's credit
facility and the prepayment of the long-term debt had occurred
on January 1, 1996, income before extraordinary item for the
year ended December 31, 1996, would have been $5,561 and
income per share before extraordinary item would have been
$0.94.
(c) Stock Option Plans- The Company has five stock option plans,
the 1994 Stock Option Plan ("the 1994 Plan"), the 1995 Stock
Option Plan ("the 1995 Plan"), the 1996 Stock Option Plan
("the 1996 Plan"), the 1997 Stock Option and Restricted Stock
Plan ("the 1997 Restricted Plan") and the 1997 Non-employee
Director Stock Option Plan ("the 1997 Director Plan"). Under
all Plans, the option exercise price equals the stock's market
price on date of grant. The Company accounts for these plans
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
earnings per share would have been reduced to the following
pro forma amounts:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income before extraordinary item available to
common shareholders: As Reported $10,076 $6,953 $4,616
Pro Forma 9,835 6,857 4,561
Basic income per share before extraordinary
item: As Reported 1.72 1.22 1.02
Pro Forma 1.68 1.20 1.00
Diluted income per share before
extraordinary item: As Reported 1.65 1.17 0.94
Pro Forma 1.62 1.16 0.92
</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.
As of December 31, 1998, the Company may grant options for up
to 228,000 and 24,667 shares under the 1997 Restricted Plan
and the 1997 Director Plan, respectively. No further options
may be granted under the 1994, 1995 and 1996 Plans. The
Company granted 83,833 options during 1998, of which, 9,333
vested immediately, and the other 74,500 vest ratably over
three years. All options expire ten years after the date of
grant.
41
<PAGE> 42
A summary of the status of the Company's stock option plans at
December 31, 1998, 1997, 1996 and 1995 and changes during the
years then ended is presented in the table and narrative
below:
<TABLE>
<CAPTION>
Number of Weighted Average Exercise
Shares Price Per Share
------------- --------------------------
<S> <C> <C>
Outstanding at December 31, 1995 272,750 $ 2.44
Granted at a fair value of $4.26 25,000 10.38
------- ------
Outstanding at December 31, 1996 297,750 3.11
Granted at a weighted average fair value of $5.25 31,000 12.52
Exercised (40,000) 4.17
Canceled (12,500) 10.38
------- ------
Outstanding at December 31, 1997 276,250 3.57
Granted at a weighted average fair value of $6.83 83,833 17.11
Exercised (2,050) 2.46
------- ------
Outstanding at December 31, 1998 358,033 $ 6.75
======= ======
</TABLE>
Price ranges and other information for stock options outstanding at
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Outstanding Exercisable
-------------------------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercise Remaining Exercise
Range of Exercise Prices Shares Price Life Shares Price
------------------------ ------ ---------- ----------- ------ -------
<S> <C> <C> <C> <C> <C>
$ 1.96 - $ 4.00 243,200 $ 2.44 5.6 years 243,200 $ 2.44
$12.50 - $12.63 31,000 12.52 8.5 24,750 12.53
$16.81 - $19.91 83,833 17.11 9.2 9,333 19.46
------- ------- --------- ------- -------
358,033 $ 6.75 6.7 years 277,283 $ 3.92
======= ======= ========= ======= =======
</TABLE>
The fair value of each option grant is estimated on the date
of grant using the Black Scholes options pricing model with
the following weighted average assumptions used for grants in
1998, 1997, and 1996, respectively: risk-free interest rates
of 5.67% to 5.70%, 6.17% to 6.56%, and 6.11%; expected
dividend yield of 0%; expected lives of 6 years; and expected
volatility of 27.87%, 28.50%, and 27.96%.
(d) Treasury Shares- The Company has agreed to repurchase Class A
Common Shares issued to the former shareholders of CAI. Under
certain circumstances, the former shareholders may require the
Company to purchase Class A Common Shares at the previous
day's closing price per share. The aggregate value of the
purchases is limited to $250 during each three-month period
beginning December 1, 1998 and ending May 22, 1999. As of
December 31, 1998, 7,298 Class A Common Shares had been
repurchased for $145 under such agreement.
(7) Retirement Plans
(a) Company-Sponsored Pension Plans- The pension plans cover
virtually all salaried and hourly employees not covered by
multi-employer pension plans and provide benefits of
42
<PAGE> 43
stated amounts for each year of credited service. The Company
funds such plans at a rate that meets or exceeds the minimum
amounts required by applicable regulations. The plans' assets
are primarily invested in mutual funds comprised primarily of
common stocks and corporate and U.S. government obligations.
Postretirement Benefits- The Company provides postretirement
health care benefits on a contributory basis and life
insurance benefits for Symons salaried and hourly employees
that retired prior to May 1, 1995.
<TABLE>
<CAPTION>
PENSION PENSION OTHER OTHER
BENEFITS BENEFITS BENEFITS BENEFITS
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 29,169 $ 6,796 $ 681 $ -
Service cost 619 794 - -
Interest cost 1,630 845 71 -
Acquisition - 21,194 - 694
Amendments (360) - 312 -
Actuarial loss (gain) 135 (1) (128) -
Benefits paid (712) (459) (61) (13)
-------- -------- -------- ----------
Benefit obligation at end of year $ 30,481 $ 29,169 $ 875 $ 681
======== ======== ======== ==========
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning
of year $ 27,249 $ 6,219 $ - $ -
Actual return on plan assets 2,402 1,085 - -
Acquisition - 19,707 - -
Employer contribution 216 697 61 13
Benefits paid (712) (459) (61) (13)
-------- -------- -------- ----------
Fair value of plan assets at end of year $ 29,155 $ 27,249 $ - $ -
======== ======== ======== ==========
FUNDED STATUS $ (1,326) $ (1,920) $(875) $(681)
Unrecognized prior service cost (155) 202 288 -
Unrecognized net gain (759) (150) (124) -
-------- -------- -------- ----------
Net amount recognized $ (2,240) $ (1,868) $(711) $(681)
======== ======== ======== ==========
AMOUNTS RECOGNIZED IN THE STATEMENT OF
FINANCIAL POSITION CONSIST OF:
Accrued benefit liability $ (2,440) $ (1,868) $(875) $(681)
Intangible asset 185 - 163 -
Accumulated other comprehensive income 15 - - -
-------- -------- -------- ----------
Net amount recognized $ (2,240) $ (1,868) $(712) $(681)
======== ======== ======== ==========
ASSUMPTIONS AS OF DECEMBER 31
Discount rate 6.75% 7% 6.75% 8.25%
Expected return on plan assets 8% 8% N/A N/A
Rate of compensation increase 4% 4% N/A N/A
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost $ 619 $ 794 $ - $ -
Interest cost 1,630 845 70 -
Expected return on plan assets (1,655) (898) (4) -
Amortization of prior service cost (3) 17 24 -
Recognized actuarial gain (3) - - -
-------- -------- -------- ----------
Net periodic cost $ 588 $ 758 $ 90 $ -
======== ======== ======== ==========
</TABLE>
43
<PAGE> 44
The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for the pension
plans with accumulated benefit obligations in excess of plan
assets were $2,893, $2,855, and $2,692, respectively, as of
December 31, 1998 and $1,200, $1,200, and $1,060, respectively
as of December 31, 1997.
Assumed health care cost trend rates have a significant effect
on the amounts reported for the health care plan. A one
percentage point change in assumed health care cost trend
rates would have the following effects:
<TABLE>
<CAPTION>
1 Percentage 1 Percentage
Point Increase Point Decrease
-------------- --------------
<S> <C> <C>
Effect on total of service and interest cost components $ 3 $ (3)
Effect on the postretirement benefit obligation 46 (43)
</TABLE>
(b) Multi-Employer Pension Plan- Approximately 12% of the
Company's employees are currently covered by collectively
bargained, multi-employer pension plans. Contributions are
determined in accordance with the provisions of negotiated
union contracts and generally are based on the number of hours
worked. The Company does not have the information available to
determine its share of the accumulated plan benefits or net
assets available for benefits under the multi-employer pension
plans. The aggregate amount charged to expense under these
plans was $287, $157, and $89, for the years ended December
31, 1998, 1997, and 1996, respectively.
(c) 401(k) Savings Plan- Most employees are eligible to
participate in Company sponsored 401(k) savings plans. Company
matching contributions vary from 0% to 50% (on the first 2%)
according to terms of the individual plans and collective
bargaining agreements. The aggregate amount charged to expense
under these plans was $531, $345, and $295, for the years
ended December 31, 1998, 1997, and 1996, respectively.
(d) Retirement Contribution Account- During 1998, the Company
implemented a defined contribution plan for substantially all
salaried employees. No contributions are permitted by the
employees, and the Company contributes 1.5% to 6.0% of
eligible compensation, depending on the age of the employee.
The amount expensed for the year ended December 31, 1998 was
$1,167.
(8) Income Taxes
The following is a summary of the components of the Company's income
tax provision for the years ended December 31, 1998, 1997, and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Currently payable:
Federal $5,312 $3,521 $2,201
State and local 1,398 704 420
Deferred 1,534 1,052 917
------ ------ ------
Total provision $8,244 $5,277 $3,538
====== ====== ======
</TABLE>
44
<PAGE> 45
The effective income tax rate differs from the statutory federal income
tax rate for the years ended December 31, 1998, 1997, and 1996 for the
following reasons:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory income tax rate 35.0% 34.0% 34.0%
State income taxes (net of federal
tax benefit) 4.8 4.0 2.6
Nondeductible goodwill
amortization and other
permanent differences 5.2 5.1 7.0
Other, net - - (0.2)
---- ---- ----
Effective income tax rate 45.0% 43.1% 43.4%
==== ==== ====
</TABLE>
The components of the Company's future income tax benefits and deferred
tax liabilities as of December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Current deferred taxes:
Inventory reserves $ 50 $ (657)
Accounts receivable reserves 1,712 1,623
Alternative minimum tax credit
carryforwards - 549
Accrued liabilities 2,280 2,218
Other (521) (76)
------- -------
Total 3,521 3,657
------- -------
Long-term deferred taxes:
Accelerated depreciation (13,034) (10,922)
Other long-term liabilities 2,428 2,855
Other (938) (12)
------- -------
Total (11,544) (8,079)
------- -------
Net deferred taxes $(8,023) $(4,422)
======= =======
</TABLE>
(9) Segment Reporting
The Company operates in four segments, each with a general manager:
concrete accessories (Dayton/Richmond(R)), concrete forming systems
(Symons(R)), paving products (American Highway Technology(R)) and
masonry products (Dur-O-Wal(R)). The segments are differentiated by
their products and services, all of which serve the construction
industry.
Sales between segments for the year ended December 31, 1998 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. For the years ended December 31, 1997 and 1996,
intersegment sales were not significant. 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.
45
<PAGE> 46
Information about the profit (loss) of each segment and the
reconciliations to the consolidated amounts for the years ended
December 31, 1998, 1997, and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Concrete Accessories $ 128,119 $ 92,251 $ 76,637
Concrete Forming Systems 99,471 21,066 -
Paving Products 30,967 29,177 21,930
Masonry Products 24,292 24,918 25,919
--------- --------- ---------
Net sales to external customers $ 282,849 $ 167,412 $ 124,486
========= ========= =========
Concrete Accessories $ 3,348 $ - $ -
Concrete Forming Systems $ 5,240 $ - $ -
--------- --------- ---------
Net sales to other segments $ 8,588 $ - $ -
========= ========= =========
Concrete Accessories $ 4,053 $ 2,744 $ 3,735
Concrete Forming Systems 6,543 1,903 -
Paving Products 567 466 415
Masonry Products 540 443 679
--------- --------- ---------
Interest expense $ 11,703 $ 5,556 $ 4,829
========= ========= =========
Concrete Accessories $ 19,387 $ 13,723 $ 9,477
Concrete Forming Systems 6,133 364 -
Paving Products 1,677 1,377 906
Masonry Products 487 5 601
Intersegment Eliminations (4,153) - -
Corporate (5,211) (3,239) (2,830)
--------- --------- ---------
Income before income taxes $ 18,320 $ 12,230 $ 8,154
========= ========= =========
Concrete Accessories $ 3,383 $ 2,618 $ 2,892
Concrete Forming Systems 4,992 891 -
Paving Products 379 311 142
Masonry Products 1,279 1,264 1,216
Corporate 43 47 54
--------- --------- ---------
Depreciation $ 10,076 $ 5,131 $ 4,304
========= ========= =========
Concrete Accessories $ 1,265 $ 1,225 $ 1,188
Concrete Forming Systems 341 24 -
Paving Products 177 206 131
Masonry Products 430 430 430
--------- --------- ---------
Amortization of goodwill and intangibles $ 2,213 $ 1,885 $ 1,749
========= ========= =========
</TABLE>
46
<PAGE> 47
Information regarding each segment's assets and the reconciliation to
the consolidated amounts as of December 31, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Concrete Accessories $ 93,898 $ 91,952
Concrete Forming Systems 116,064 90,796
Paving Products 9,445 9,134
Masonry Products 26,115 25,316
Corporate and Unallocated 8,098 9,732
--------- ---------
Total Assets $ 253,620 $ 226,930
========= =========
</TABLE>
Information regarding capital expenditures by segment and the
reconciliation to the consolidated amounts for the years ended December
31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
Concrete Accessories $ 3,348 $2,449 $2,335
Concrete Forming Systems 2,044 1,231 -
Paving Products 1,200 401 379
Masonry Products 439 320 480
Corporate 184 9 4
------- ------ ------
Property, Plant, and Equipment Additions $ 7,215 $4,410 $3,198
======= ====== ======
Concrete Accessories $ 2,860 $1,966 $1,632
Concrete Forming Systems $15,221 $2,909 $ -
------- ------ ------
Rental Equipment Additions $18,081 $4,875 $1,632
======= ====== ======
</TABLE>
(10) Commitments and Contingencies
(a) Operating Leases- Rental expense for property, plant and
equipment (principally office and warehouse facilities and
office equipment) was $4,233, $2,758, and $1,899, for the
years ended December 31, 1998, 1997 and 1996, respectively.
Terms generally range from one to ten years and some contain
renewal options. The approximate aggregate minimum annual
rental commitments under non-cancelable operating leases are
$4,117, $3,321, $1,951, $1,637, $910, and $1,547 for 1999,
2000, 2001, 2002, 2003, and thereafter, respectively.
(b) Litigation- 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. The Company believes that there is no merit
to these allegations, remains committed to vigorously pursuing
post-trial motions and appeals, and is seeking to vacate the
judgments in their entirety. The Company believes that, in the
event the judgments against it are not completely set aside,
it has numerous substantial grounds for a successful appeal
and intends to vigorously pursue its appellate rights. A
successful appeal could result in judgment for Symons or a new
trial. Symons' liability,
47
<PAGE> 48
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 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.
Additionally, the Company is a defendant in other various
legal proceedings arising out of the conduct of its business.
While the ultimate outcome of these lawsuits cannot be
determined at this time, management is of the opinion that any
liability, notwithstanding recoveries from insurance, would
not have a material adverse effect on the Company's
consolidated financial position, results of operations, or
cash flows.
(c) Self-Insurance- The Company is self-insured for certain of its
group medical, workers' compensation and product and general
liability claims. The Company has stop loss insurance coverage
at various per occurrence and per annum levels depending on
type of claim. The Company consults with third party
administrators to estimate the reserves required for these
claims. No material revisions were made to the estimates for
the years ended December 31, 1998, 1997 and 1996. The Company
has reserved $4,737 and $4,578 as of December 31, 1998 and
1997, respectively.
(11) Related Party Transactions
During 1997, the Company paid Ripplewood a fee of $400 for financial
advisory services in connection with the acquisition of Symons
Corporation and related financing transactions.
During 1996, the Company paid Ripplewood a management fee of $125. This
fee was not charged after the initial public offering. The Company paid
Ripplewood a fee of $600 at the time the initial public offering was
completed for additional services provided in connection with the
offering and related transactions. In addition, prior to 1997, the
Company reimbursed Ripplewood for the allocable costs of certain
insurance policies purchased by Ripplewood which covered both the
Company and Ripplewood.
(12) Subsequent Event (Unaudited)
On February 17, 1999, Ripplewood informed the Company that it was
converting all 757,569 Class B Common Shares held by it into an equal
number of Class A Common Shares and sold those Class A Common Shares.
As a result of the conversion, no Class B Common Shares remain
outstanding.
48
<PAGE> 49
(13) Quarterly Financial Information (Unaudited)
<TABLE>
1998
---------------------------------------------------------------
First Second Third Fourth Full
Quarterly Operating Data Quarter Quarter Quarter Quarter Year
------------------------ ------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 59,227 $76,754 $82,809 $64,059 $282,849
Gross profit 20,254 28,441 34,174 25,557 108,426
Net income (loss) (1,009) 3,731 6,226 1,128 10,076
Basic net income (loss) per share(a) $ (0.18) $ 0.64 $ 1.05 $ 0.19 $ 1.72
Diluted net income (loss) per share(a) $ (0.18) $ 0.61 $ 1.01 $ 0.18 $ 1.65
Stock Price:
High $20.375 $22.125 $21.375 $20.875 $ 22.125
Low $15.875 $16.500 $16.625 $14.375 $ 14.375
<CAPTION>
1997
---------------------------------------------------------------
First Second Third Fourth Full
Quarterly Operating Data Quarter Quarter Quarter Quarter Year
------------------------ ------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Net sales $25,980 $39,839 $42,592 $59,001 $167,412
Gross profit 7,708 12,933 14,381 21,862 56,884
Net income 160 2,951 3,393 449 6,953
Basic net income per share(a) $ 0.03 $ 0.52 $ 0.60 $ 0.08 $ 1.22
Diluted net income per share(a) $0.03 $ 0.51 $ 0.58 $ 0.08 $ 1.17
Stock Price:
High $13.500 $13.250 $19.438 $19.000 $ 19.438
Low $11.250 $ 9.750 $12.500 $14.813 $ 9.750
</TABLE>
(a) The total of the quarterly income (loss) per share before extraordinary
item does not equal the annual income per share before extraordinary
item due to the timing of the issuance of the Company's Common Shares
and the omission of common share equivalents in quarters with net
losses for 1998 and due to rounding and to fluctuations in the
Company's stock price for 1997.
49
<PAGE> 50
Dayton Superior Corporation and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
Years Ended December 31, 1998, 1997 and 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
Additions Deductions
------------------------- --------------------
Charges for
Charged Which
Balance at (Credited) Reserves Balance
Beginning to Costs and Other Were at End
of Year Expenses Additions Created Other of Year
---------- ------------ --------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Allowances for Doubtful Accounts and
Sales Returns and Allowances
For the year ended December 31, 1998 $5,015 3,086 - (2,422) (1,247)(2) $4,432
For the year ended December 31, 1997 $ 449 27 4,788(1) (249) - $5,015
For the year ended December 31, 1996 $ 708 (191) - (68) - $ 449
</TABLE>
(1) Acquisition of Symons Corporation
(2) Reduction of amount from acquisition of Symons Corporation
50
<PAGE> 51
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item 10 is incorporated herein
by reference to the information under the headings "Nominees" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement for
the Annual Meeting of Shareholders scheduled to be held on May 12, 1999, except
for certain information concerning the executive officers of the Company, which
is set forth at the end of Part I of this Annual Report.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item 11 is incorporated by
reference to the information under the headings "Compensation Committee
Interlocks and Insider Participation in Compensation Decisions," "Executive
Compensation," "Report of Compensation and Benefits Committee on Executive
Compensation" and "Performance Graph" in the Company's Proxy Statement for the
Annual Meeting of Shareholders scheduled to be held on May 12, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item 12 is incorporated herein
by reference to the information under the heading "Ownership of Common Shares"
in the Company's Proxy Statement for the Annual Meeting of Shareholders
scheduled to be held on May 12, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
51
<PAGE> 52
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS The following consolidated financial
statements of the Company and subsidiaries are incorporated by reference as part
of this Report under Item 8.
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1998 and 1997.
Consolidated Statements of Income for the years ended December
31, 1998, 1997, and 1996.
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1998, 1997, and 1996.
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997, and 1996.
Consolidated Statements of Comprehensive Income for the years
ended December 31, 1998, 1997, and 1996.
Notes to Consolidated Financial Statements.
(a)(2) FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying Accounts (at Item 8 of
this Report)
All other schedules are omitted because they are not applicable,
or not required, or because the required information is included in the
consolidated financial statements or notes thereto.
(a)(3) EXHIBITS. See Index to Exhibits following the signature
pages to this Report for a list of exhibits.
(b) Reports on Form 8-K. During the quarter ended December 31,
1998, the Company filed the following Current Reports on Form
8-K:
CURRENT REPORT ON FORM 8-K. dated December 31, 1998 reporting
under Item 5 (Other Events) a jury verdict rendered against
Symons Corporation.
52
<PAGE> 53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Dayton Superior Corporation has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DAYTON SUPERIOR CORPORATION
March 30, 1999
By /s/ John A. Ciccarelli
----------------------
John A. Ciccarelli
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf of
Dayton Superior Corporation and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
/s/ John A. Ciccarelli Director, President and Chief Executive March 30, 1999
- ---------------------------- Officer
John A. Ciccarelli
/s/ Alan F. McIlroy Vice President and Chief Financial Officer March 30, 1999
- ---------------------------- (Principal Financial Officer)
Alan F. McIlroy
/s/ Thomas W. Roehrig Corporate Controller March 30, 1999
- ---------------------------- (Principal Accounting Officer)
Thomas W. Roehrig
/s/ Matthew O. Diggs, Jr. Non-Executive Chairman of the Board March 30, 1999
- ----------------------------
Matthew O. Diggs, Jr.
/s/ William F. Andrews Director March 30, 1999
- ----------------------------
William F. Andrews
/s/ Timothy C. Collins Director March 29, 1999
- ----------------------------
Timothy C. Collins
/s/ Matthew M. Guerreiro Director March 23, 1999
- ----------------------------
Matthew M. Guerreiro
/s/ Robert B. Holmes Director March 30, 1999
- ----------------------------
Robert B. Holmes
</TABLE>
53
<PAGE> 54
INDEX OF EXHIBITS
-----------------
Exhibit No. Description
(3) ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Amended Articles of Incorporation of the Company
[Incorporated herein by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1 (Reg. No.
333-2974).] +
3.2 Code of Regulations of the Company (as amended)
[Incorporated herein by reference to Exhibit 3.3 to the
Company's Registration Statement on Form S-1 (Reg. No.
333-2974).] +
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
4.1 Senior Unsubordinated Redeemable Note of the Company in
the principal amount of $5,000,000. [Incorporated herein
by reference to Exhibit A to the Agreement set forth as
Exhibit 2.1 to the Company's Current Report on Form 8-K
dated June 2, 1997.] +
4.2 Credit Agreement dated as of September 29, 1997 among
the Company and the other parties thereto. [Incorporated
herein by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K dated October 13, 1997.] +
4.2.1 First Amendment to Credit Agreement dated as of October
23, 1997 **
4.2.2 Third (sic) Amendment to Credit Agreement dated as of
June 26, 1998 [Incorporated herein by reference to
Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q for the Quarter ended July 3, 1998]. +
(10) MATERIAL CONTRACTS
10.1 1994 Stock Option Plan [Incorporated herein by reference
to Exhibit 10.9 to the Company's Registration Statement
on Form S-1 (Reg. No. 333-2974).] +*
10.1.1 First Amendment to 1994 Stock Option Plan [Incorporated
herein by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the Quarter ended
September 26, 1997.] +*
10.2 1995 Stock Option Plan [Incorporated herein by reference
to Exhibit 10.10 to the Company's Registration Statement
on Form S-1 (Reg. No. 333-2974).] +*
54
<PAGE> 55
10.2.1 First Amendment to 1995 Stock Option Plan [Incorporated
herein reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the Quarter ended
September 26, 1997.] +*
10.3 1996 Stock Option Plan [Incorporated herein by reference
to Exhibit 10.12 to the Company's Registration Statement
on Form S-1 (Reg. No. 333-2974).] +*
10.4 1997 Stock Option and Restricted Stock Plan [Incorporated
herein by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the Quarter ended
June 27, 1997.] +*
10.5 1997 Nonemployee Director Stock Option Plan
[Incorporated herein by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the Quarter
ended June 27, 1997.] +*
10.6 Nonemployee Directors Compensation Program [Incorporated
herein by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the Quarter ended July
3, 1998.] +*
10.7 Management Incentive Plan *
10.8 Agreement dated as of May 9, 1997 by and among Symons
Corporation, the stockholders of Symons Corporation and
the Company. [Incorporated herein by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K
dated June 2, 1997.] +
(21) SUBSIDIARIES OF THE REGISTRANT
21.1 Subsidiaries of the Company **
(23) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS **
(99) FINANCIAL DATA SCHEDULE
99.1 Financial Data Schedule **
- ----------------------------
* Compensatory plan, contract or arrangement in which one or more directors or
named executive officers participates.
** Filed herewith
+ Previously filed
55
<PAGE> 1
Exhibit 4.2.1
FIRST AMENDMENT TO
THE CREDIT AGREEMENT
This FIRST AMENDMENT, dated as of October 23, 1997 (this "AMENDATORY
AGREEMENT"), to the Existing Credit Agreement (as defined below), is made among
DAYTON SUPERIOR CORPORATION, an Ohio corporation (the "BORROWER"), the various
financial institutions signatories hereto (the "LENDERS"), DLJ CAPITAL FUNDING,
INC., as syndication agent (the "SYNDICATION AGENT") for the Lenders, BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as documentation agent (the
"DOCUMENTATION AGENT") for the Lenders, BANKERS TRUST COMPANY, as administrative
agent (the "ADMINISTRATIVE AGENT") for the Lenders and BANK ONE, N.A., as
facility agent (the "FACILITY AGENT") for the Lenders.
WITNESSETH:
-----------
WHEREAS, the Borrower, the Lenders, and the Agents are parties to a
Credit Agreement, dated as of September 29, 1997 (the "EXISTING CREDIT
AGREEMENT")
WHEREAS, the Borrower has requested that the Lenders amend the Existing
Credit Agreement in certain respects; and
WHEREAS, the Lenders have agreed, subject to the terms and conditions
hereinafter set forth, to amend the Existing Credit Agreement in certain
respects as provided below (the Existing Credit Agreement, as so amended by this
Amendatory Agreement, being referred to as the "CREDIT AGREEMENT")
NOW, THEREFORE, in consideration of the agreements herein contained, the
parties hereto agree as follows:
PART I
DEFINITIONS
SUBPART 1.1. CERTAIN DEFINITIONS. The following terms (whether or not
underscored) when used in this Amendatory Agreement shall have the following
meanings (such meanings to be equally applicable to the singular and plural form
thereof):
"ADMINISTRATIVE AGENT" is defined in the PREAMBLE.
"AMENDATORY AGREEMENT" is defined in the PREAMBLE.
<PAGE> 2
AMENDMENT NO. 1 " is defined in SUBPART 3.1.
"BORROWER" is defined in the PREAMBLE.
"CREDIT AGREEMENT" is defined in the THIRD RECITAL.
"DOCUMENTATION AGENT" is defined in the PREAMBLE.
"EXISTING CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"FACILITY AGENT" is defined in the PREAMBLE.
"FIRST AMENDMENT EFFECTIVE DATE" is defined in SUBPART 3.1.
"LENDERS" is defined in the PREAMBLE.
"SYNDICATION AGENT" is defined in the PREAMBLE.
SUBPART 1.2. OTHER DEFINITIONS. Terms for which meanings are provided in
the Existing Credit Agreement are, unless otherwise defined herein or the
context otherwise requires, used in this Amendatory Agreement with such
meanings.
PART II
AMENDMENTS TO THE
EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the First Amendment
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this Part II. Except as so amended, the Existing Credit Agreement shall
continue in full force and effect in accordance with its terms.
SUBPART 2.1. AMENDMENTS TO SECTION 1.1. Section 1.1 of the Existing
Credit Agreement is hereby amended by inserting the following definitions in
such Section in the appropriate alphabetical sequence:
"AMENDMENT NO. 1" means the First Amendment to the Credit
Agreement, dated as of October 23, 1997, among the Borrower, the Lenders
signatory thereto, and the Agents.
"APPROVED FUND" means, with respect to any Lender that is a fund
that invests in commercial loans, any other fund that invests in
commercial loans and is managed or advised by the same investment
advisor as such Lender or by an Affiliate of such investment advisor.
-2-
<PAGE> 3
"FIRST AMENDMENT EFFECTIVE DATE" is defined in Subpart 3.1 of
Amendment No. 1.
"NON-U.S. LENDER" means any Lender (including each Assignee Lender) that
is not (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any state thereof, or (iii) an estate or trust that is subject
to U.S. Federal income taxation regardless of the source of its income.
"REGISTER" is defined in CLAUSE (b) of SECTION 2.8.
"REGISTERED NOTE" means a promissory note of the Borrower payable to any
Registered Noteholder, in the form of EXHIBIT B-1 hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the Borrower to such Lender resulting
from outstanding Revolving Loans or Term Loans, and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.
"REGISTERED NOTEHOLDER" means any Lender that has been issued a
Registered Note.
SUBPART 2.2. The Existing Credit Agreement is hereby amended by adding a
new Section 2.8 thereof to read as follows:
SECTION 2.8 REGISTERED NOTES. (a) Any Lender may request the
Borrower (through the Facility Agent), and the Borrower agrees (i) to
exchange for any Notes held by such Lender, or (ii) to issue to such
Lender on the date it becomes a Lender, promissory notes(s) registered
as provided in CLAUSE (b) of this SECTION 2.8 (each, a "REGISTERED
NOTE", to be in substantially the form of EXHIBIT B-1 hereto).
Registered Notes may not be exchanged for Notes that are not Registered
Notes.
(b) The Borrower shall maintain, or cause to be maintained, a
register (the "REGISTER") (which, at the request of the Borrower, shall
be kept by the Facility Agent on behalf of the Borrower at no extra
charge to the Borrower at the address to which notices to the Facility
Agent are to be sent under this Agreement) on which it enters the name
of the registered owner of the Lender's Obligation(s) evidenced by a
Registered Note and the amount of such Obligations(s).
(c) The Register shall be available for inspection by the
Borrower and any Lender at any reasonable time upon reasonable prior
notice.
-3-
<PAGE> 4
SUBPART 2.3. Section 4.6 of the Existing Credit Agreement is hereby
amended by adding a new clause (c) thereof to read as follows:
(c) Each Non-U.S. Lender shall, (i) on or prior to the date it becomes a
Lender, execute and deliver to the Borrower and the Facility Agent, two or more
(as the Borrower or the Agents may reasonably request) United States Internal
Revenue Service Forms 4224 or Forms 1001 or, solely if such Lender is claiming
exemption from United States withholding tax under Section 871(h) or 881(c) of
the Code with respect to payments of "portfolio interest", United States
Internal Revenue Service Forms W-8 and a certificate signed by a duly authorized
officer of such Lender representing that such Lender is not a "bank" within the
meaning of Section 881 (c)(3)(A) of the Code, or such other forms or documents
(or successor forms or documents), appropriately completed, establishing that
payments to such Lender are exempt from withholding or deduction of Taxes; and
(ii) deliver to the Borrower and the Facility Agent two further copies of any
such form or documents on or before the date that any such form or document
expires or becomes obsolete and after the occurrence of any event requiring a
change in the most recent such form or document previously delivered by it to
the Borrower.
SUBPART 2.4. Clause (b) of Section 10.11.1 of the Existing Credit
Agreement is hereby amended to read as follows:
(b) with notice to the Borrower, the Facility Agent and (in the
case of any assignment of participations in Letters of Credit or
Revolving Loan Commitments) the Issuer, but without the consent of the
Borrower, the Facility Agent or the Issuer, may assign and delegate to
any of its Affiliates, to any other Lender or to an Approved Fund of any
Lender
SUBPART 2.5. The Existing Credit Agreement is hereby amended by adding a
new Section 10.11.3 thereof to read as follows:
SECTION 10.11.3. ASSIGNMENT OF REGISTERED NOTES. A Registered Note and
the Obligations evidenced thereby may be assigned or otherwise transferred in
whole or in part pursuant to the terms of SECTION 10.11.1 and only by
registration of such assignment or transfer of such Registered Note and the
Obligations evidenced thereby on the Register (and each Registered Note shall
expressly so provide). Any assignment or transfer of all or part of such
Obligations and the Registered Note(s) evidencing the same shall be registered
on the Register only upon surrender for registration of assignment or transfer
of the Registered Note(s) evidencing such Obligations, duly endorsed by (or
accompanied by a written instrument of assignment or transfer duly executed by)
the Registered Noteholder thereof, and thereupon one or more new Registered
Note(s) in the same aggregate principal amount shall be issued to the designated
Assignee Lender, and the old Registered Note(s) shall be returned by the
Facility Agent to the Borrower marked "canceled." Prior to the due presentment
for registration of assignment or transfer of any Registered Note, the Borrower
and the Agents shall treat the Person in whose name such Obligations and the
Registered Note(s) evidencing the same is
-4-
<PAGE> 5
registered as the owner thereof for the purpose of receiving all payments
thereon and for all other purposes, notwithstanding any notice to the contrary.
SUBPART 2.6. The existing Credit Agreement is hereby amended by adding a
new Exhibit B-1 thereto (Form of Registered Note) as set forth on Annex I
attached hereto.
PART III
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1. FIRST AMENDMENT EFFECTIVE DATE. This Amendatory Agreement
(and the amendments and modifications contained herein) shall become effective,
and shall thereafter be referred to as "Amendment No. 1", on the date (the
"FIRST AMENDMENT EFFECTIVE DATE") when all of the conditions set forth in this
SUBPART 3.1 have been satisfied.
SUBPART 3.1.1. EXECUTION OF COUNTERPARTS. The Syndication Agent shall
have received counterparts of this Amendatory Agreement, duly executed and
delivered on behalf of the Borrower and each of the Required Lenders.
SUBPART 3.1.2. LEGAL DETAILS, ETC. All documents executed or submitted
pursuant hereto shall be satisfactory in form and substance to the Agents and
their counsel. The Agents and their counsel shall have received all information
and such counterpart originals or such certified or other copies or such
materials, as the Agents or their counsel may reasonably request, and all legal
matters incident to the transactions contemplated by this Amendatory Agreement
shall be satisfactory to the Agents and their counsel.
PART IV
MISCELLANEOUS
SUBPART 4.1. CROSS-REFERENCES. References in this Amendatory Agreement
to any Part or Subpart are, unless otherwise specified or otherwise required by
the context, to such Part or Subpart of this Amendatory Agreement.
SUBPART 4.2. LOAN DOCUMENT PURSUANT TO EXISTING CREDIT AGREEMENT. This
Amendatory Agreement is a Loan Document executed pursuant to the Existing Credit
Agreement and shall be construed, administered and applied in accordance with
all of the terms and provisions of the Existing Credit Agreement.
SUBPART 4.3. COMPLIANCE WITH WARRANTIES. NO DEFAULT. ETC. The Borrower
represents and warrants on the First Amendment Effective Date for its
Subsidiaries and itself, both before and after giving effect to this Amendatory
Agreement, as follows:
-5-
<PAGE> 6
(a) the representations and warranties set forth in Article VI
of the Credit Agreement (excluding those contained in Section 6.7
thereof) and in each other Loan Document are, in each case, true and
correct in all material respects (unless stated to relate solely to an
earlier date, in which case such representations and warranties were
true and correct in all material respects as of such earlier date);
(b) no adverse development has occurred in any litigation,
action, proceeding, labor controversy, arbitration or governmental
investigation disclosed pursuant to Section 6.7 of the Credit Agreement
which could reasonably be expected to have a Material Adverse Effect;
(c) the sum of (A) the aggregate outstanding principal amount of
all Revolving Loans and (B) the aggregate amount of all Letter of Credit
Outstandings does not exceed the lesser of(c) the Revolving Loan
Commitment Amount and (y) the Borrowing Base Amount; and
(d) no Default has occurred and is continuing, and neither the
Borrower, any other Obligor, nor any of its Subsidiaries are in material
violation of any law or governmental regulation or court order or
decree.
SUBPART 4.4. SUCCESSORS AND ASSIGNS. This Amendatory Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
SUBPART 4.5. COUNTERPARTS. This Amendatory Agreement may be executed by
the parties hereto in several counterparts, each of which when executed and
delivered shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SUBPART 4.6. GOVERNING LAW. THIS AMENDATORY AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendatory
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
DAYTON SUPERIOR CORPORATION
BANK ONE, N.A., as
Facility Agent, the Issuer and a Lender
DUJ CAPITAL FUNDING, INC., as
Syndication Agent and a Lender
BANKERS TRUST COMPANY, as
Administrative Agent and a Lender
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Documentation Agent and a Lender
<PAGE> 8
NATIONAL CITY BANK OF DAYTON, as
a Lender
<PAGE> 9
ANNEX I
EXHIBIT B-1
REGISTERED NOTE
THIS REGISTERED NOTE MAY NOT BE TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT
AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS
REGISTERED NOTE MUST BE RECORDED IN THE REGISTER
MAINTAINED BY THE FACILITY AGENT PURSUANT TO THE TERMS OF
SUCH CREDIT AGREEMENT.
$___________________ ______________ ___, ____
FOR VALUE RECEIVED, the undersigned, DAYTON SUPERIOR CORPORATION, an
Ohio corporation (the "BORROWER") , promises to pay to the order of
__________________ (the "LENDER") the principal sum of _________________ DOLLARS
($ ________) or, if less, the aggregate unpaid principal amount of all the [Term
and Revolving] Loans shown on the schedule attached hereto (and any continuation
thereof) made by the Lender pursuant to that certain Credit Agreement, dated as
of September 29, 1997 (as amended, supplemented, amended and restated or
otherwise modified from time to time, the "CREDIT AGREEMENT") , among the
Borrower, the various financial institutions as are or may become parties
thereto, DLJ Capital Funding, Inc., as the Syndication Agent, Bankers Trust
Company, as the Administrative Agent, Bank of America National Trust and Savings
Association, as the Documentation Agent and Bank One, N.A., as the Facility
Agent for the Lenders, payable as set forth in the Credit Agreement and on the
Stated Maturity Date for all [Term and Revolving] Loans. Unless otherwise
defined, terms used herein have the meanings provided in the Credit Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money
of the United States of America in same day or immediately available funds to
the account designated by the Facility Agent pursuant to the Credit Agreement.
This Registered Note is one of the Notes referred to in, and evidences
Indebtedness incurred under, the Credit Agreement, to which reference is made
for a description of the security for this Registered Note and for a statement
of the terms and
<PAGE> 10
conditions on which the Borrower is permitted and required to make prepayments
and repayments of principal of the Indebtedness evidenced by this Registered
Note and on which such Indebtedness may be declared to be immediately due and
payable.
As provided in Section 10.11.3 of the Credit Agreement, this Registered
Note and the Obligation(s) evidenced hereby may be assigned or otherwise
transferred in whole or in part only by registration of such assignment or
transfer of this Registered Note and the Obligation(s) evidenced hereby on the
Register described in clause (b) of Section 2.8 of the Credit Agreement. Any
assignment or transfer of all or part of such Obligations(s) and this Registered
Note evidencing the same shall be registered on the Register only upon surrender
for registration of assignment or transfer of this Registered Note evidencing
such Obligations(s), duly endorsed by (or accompanied by a written instrument of
assignment or transfer duly executed by) the Registered Noteholder hereof, and
thereupon one or more new Registered Note(s) in the same aggregate principal
amount shall be issued to the designated Assignee Lender, and this Registered
Note shall be returned by the Facility Agent to the Borrower marked "canceled".
Prior to the due presentment for registration of assignment or transfer of this
Registered Note, the Borrower and the Facility Agent shall treat the Person in
whose name such Obligation(s) and this Registered Note(s) evidencing the same is
registered as the owner thereof for the purpose of receiving all payments
thereon and for all other purposes, notwithstanding any notice to the contrary.
This Registered Note may not be exchanged for promissory notes that are not
Registered Notes.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
2
<PAGE> 11
THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL
BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
DAYTON SUPERIOR CORPORATION
By___________________________
Title:
3
<PAGE> 1
EXHIBIT 10.7
DAYTON SUPERIOR CORPORATION
MANAGER INCENTIVE PLAN
----------------------
PURPOSE: To provide an annual incentive bonus opportunity
- ------- for selected managers.
PARTICIPANTS: Managers of Dayton Superior Corporation and its
- ------------ subsidiaries (collectively, the "COMPANY")
selected by the President with the approval of the
Compensation and Benefits Committee of the Board
of Directors ("COMPENSATION COMMITTEE").
DETERMINATION OF
BONUS OPPORTUNITY: Targeted incentive bonus opportunity will be a
- ----------------- percentage of base salary (varying by position and
reflecting the level of responsibility and
industry compensation levels), as recommended by
the President and approved by the Compensation
Committee. The targeted percentage of base salary
will be the midpoint between no bonus and the
maximum bonus payable under the Plan.
PERFORMANCE MEASURE
COMPONENTS: A bonus is earned by a participating manager based
- ---------- on performance in one, two or three (depending on
the manager's position) of the following areas:
(i) corporate performance, (ii) divisional
performance, and (iii) individual performance. The
percentage of each manager's bonus, if any, which
is based on a particular component varies based on
the manager's position. The measures of
performance for each of the components are as
follows: (i) corporate performance is measured by
the Company's consolidated earnings before
interest, taxes, depreciation and amortization
("EBITDA") (with 70% of budgeted EBITDA being
minimum performance, 100% of budgeted EBITDA being
targeted performance and 120% of budgeted EBITDA
being maximum performance); (ii) divisional
performance is measured by divisional EBITDA,
improvement in controlling divisional working
capital and success in achieving other approved
divisional financial goals; and (iii) individual
performance is measured by the manager's
achievement of individual goals approved by the
President.
PAYMENT: Incentive bonuses generally will be paid by March
- ------- 15 of the year following the year with respect to
which they are earned. Unless otherwise approved,
a bonus will be paid only if the manager remains
employed by the Company through the date the
bonuses are paid.
EFFECTIVE DATE: 1998
- --------------
<PAGE> 2
EXHIBIT 10.7
DAYTON SUPERIOR CORPORATION
MANAGER INCENTIVE PLAN
----------------------
PURPOSE: To provide an annual incentive bonus opportunity
- ------- for selected managers.
PARTICIPANTS: Managers of Dayton Superior Corporation and its
- ------------ subsidiaries (collectively, the "COMPANY")
selected by the President with the approval of the
Compensation and Benefits Committee of the Board
of Directors ("COMPENSATION COMMITTEE").
DETERMINATION OF
BONUS OPPORTUNITY: Targeted incentive bonus opportunity will be a
- ----------------- percentage of base salary (varying by position and
reflecting the level of responsibility and
industry compensation levels), as recommended by
the President and approved by the Compensation
Committee. The targeted percentage of base salary
will be the midpoint between no bonus and the
maximum bonus payable under the Plan.
PERFORMANCE MEASURE
COMPONENTS: A bonus is earned by a participating manager based
- ---------- on performance in one, two or three (depending on
the manager's position) of the following areas:
(i) corporate performance, (ii) divisional
performance, and (iii) individual performance. The
percentage of each manager's bonus, if any, which
is based on a particular component varies based on
the manager's position. The measures of
performance for each of the components are as
follows: (i) corporate performance is measured by
the Company's consolidated earnings before
interest, taxes, depreciation and amortization
("EBITDA") (with 70% of budgeted EBITDA being
minimum performance, 100% of budgeted EBITDA being
targeted performance and 120% of budgeted EBITDA
being maximum performance); (ii) divisional
performance is measured by divisional EBITDA,
improvement in controlling divisional working
capital and success in achieving other approved
divisional financial goals; and (iii) individual
performance is measured by the manager's
achievement of individual goals approved by the
President.
PAYMENT: Incentive bonuses generally will be paid by March
- ------- 15 of the year following the year with respect to
which they are earned. Unless otherwise approved,
a bonus will be paid only if the manager remains
employed by the Company through the date the
bonuses are paid.
EFFECTIVE DATE: 1998
- --------------
<PAGE> 1
Exhibit 21.1
Subsidiaries of Dayton Superior Corporation
-------------------------------------------
Name Jurisdiction of Incorporation
---- -----------------------------
Concrete Accessories, Inc. North Carolina
Dayton Superior Canada Ltd. Ontario
Dur-O-Wal, Inc. Delaware
Symons Corporation Delaware
All subsidiaries are wholly-owned, directly or indirectly, by Dayton Superior
Corporation.
56
<PAGE> 1
Exhibit 23
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of our
report, included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 333-25155, File No. 333-28057, File No.
333-28059 and File No. 333-28061.
ARTHUR ANDERSEN LLP
Dayton, Ohio
March 31, 1999
57
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<NAME> DAYTON SUPERIOR CORPORATION
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
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0
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