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