<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
JUNE 30, 2000 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
------- -------
3,693,990 Class A Common Shares were outstanding as of August 9, 2000
<PAGE> 2
PART I. - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Dayton Superior Corporation and Subsidiaries
Consolidated Balance Sheets
As of June 30, 2000 and December 31, 1999
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
ASSETS --------- ------------
<S> <C> <C>
Current assets
Cash $ 391 $ 4,553
Accounts receivable, net of allowances for doubtful accounts and
sales returns and allowances of $6,918 and $5,589 67,112 45,085
Inventories (Note 4) 41,266 39,340
Prepaid expenses and other current assets 3,969 5,551
Prepaid income taxes 5,655 1,038
Future income tax benefits 3,921 3,998
--------- ---------
Total current assets 122,314 99,565
--------- ---------
Rental equipment, net (Note 4) 63,815 58,748
--------- ---------
Property, plant and equipment 76,697 73,651
Less accumulated depreciation (31,991) (29,741)
--------- ---------
Net property, plant and equipment 44,706 43,910
--------- ---------
Goodwill and intangible assets, net of accumulated amortization 80,690 75,522
Other assets 940 934
--------- ---------
Total assets $ 312,465 $ 278,679
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt (Note 5) $ 7,590 $ 5,032
Accounts payable 29,973 22,802
Accrued compensation 10,287 11,302
Other accrued liabilities 9,247 9,960
Payable for lawsuit judgment (Note 9) 15,000 --
--------- ---------
Total current liabilities 72,097 49,096
Long-term debt (Note 5) 212,590 100,141
Deferred income taxes 15,005 16,566
Other long-term liabilities 4,662 4,548
--------- ---------
Total liabilities 304,354 170,351
--------- ---------
Company-obligated mandatorily redeemable convertible trust preferred securities of
Dayton Superior Capital Trust which holds solely debentures -- 19,556
--------- ---------
Shareholders' equity
Class A common shares 138,623 47,417
Class A treasury shares -- (387)
Cumulative other comprehensive income (294) (254)
Retained earnings (accumulated deficit) (130,218) 41,996
--------- ---------
Total shareholders' equity 8,111 88,772
--------- ---------
Total liabilities and shareholders' equity $ 312,465 $ 278,679
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
2
<PAGE> 3
Dayton Superior Corporation and Subsidiaries
Consolidated Statements of Income
For The Three and Six Fiscal Months Ended June 30, 2000 and July 2, 1999
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Fiscal Months Ended Six Fiscal Months Ended
------------------------- -------------------------
June 30, July 2, June 30, July 2,
2000 1999 2000 1999
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $98,000 $88,636 $174,505 $156,832
Cost of sales 59,717 55,895 108,261 99,793
------- ------- -------- --------
Gross profit 38,283 32,741 66,244 57,039
Selling, general and administrative expenses 23,791 19,486 47,528 40,808
Amortization of goodwill and intangibles 452 536 1,076 1,183
------- ------- -------- --------
Income from operations 14,040 12,719 17,640 15,048
Other expenses
Interest expense, net 3,728 3,049 6,456 6,024
Non-recurring item - Lawsuit judgment (Note 9) 15,000 -- 15,000 --
Other expense, net 134 85 153 85
------- ------- -------- --------
Income (loss) before provision for income taxes and
extraordinary item (4,822) 9,585 (3,969) 8,939
Provision (benefit) for income taxes (1,850) 4,314 (1,470) 4,023
------- ------- -------- --------
Income (loss) before extraordinary item (2,972) 5,271 (2,499) 4,916
Extraordinary loss, net of income tax benefit (Note 2) (4,812) -- (4,812) --
------- ------- -------- --------
Net income (loss) (7,784) 5,271 (7,311) 4,916
Dividends on Company-obligated mandatorily redeemable
convertible trust preferred securities, net of income tax
benefit (267) -- (583) --
------- ------- -------- --------
Net income (loss) available to common shareholders $(8,051) $ 5,271 $ (7,894) $ 4,916
======= ======= ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these consolidated statements.
3
<PAGE> 4
Dayton Superior Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For The Six Fiscal Months Ended June 30, 2000 and July 2, 1999
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Fiscal Months Ended
--------------------------
June 30, July 2,
2000 1999
--------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ (7,311) $ 4,916
Adjustments to reconcile net income to net cash used in operating activities:
Extraordinary loss 4,812 --
Lawsuit judgment (Note 9) 15,000 --
Depreciation 6,175 5,948
Amortization of goodwill and intangibles 1,076 1,183
Deferred income taxes (1,484) (640)
Amortization of deferring financing costs and debt discount 492 419
Gain on sales of rental equipment and property, plant and equipment (3,458) (3,345)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable (21,885) (12,740)
Inventories (1,720) (1,869)
Prepaid income taxes (1,668) (486)
Accounts payable 7,005 2,695
Accrued liabilities and other long-term liabilities (1,665) (3,538)
Other, net 941 1,691
--------- --------
Net cash used in operating activities (3,690) (5,766)
--------- --------
Cash Flows From Investing Activities:
Property, plant and equipment additions (4,210) (3,057)
Proceeds from sales of fixed assets 30 232
Rental equipment additions (10,182) (9,469)
Proceeds from sales of rental equipment 5,832 5,177
Acquisitions (Note 3) (1,472) (5,575)
Refunds of purchase price on acquisitions (Note 3) 2,115 --
--------- --------
Net cash used in investing activities (7,887) (12,692)
--------- --------
Cash Flows From Financing Activities:
Repayments of long-term debt (120,825) --
Issuance of long-term debt 212,427 19,544
Prepayment premium on extinguishments of long-term debt and interest rate swap
agreements (Note 2) (476) --
Financing cost on unused long-term debt commitment (Note 2) (750) --
Financing costs incurred (9,616) --
Purchase of treasury shares -- (242)
Redemption of Class A common shares (164,315) --
Issuance of Class A common shares, net of issuance costs 91,593 181
Dividends on Company-obligated mandatorily redeemable convertible trust
preferred securities, net of income tax benefit (583) --
--------- --------
Net cash provided by financing activities 7,455 19,483
--------- --------
Effect of Exchange Rate Changes on Cash (40) 62
--------- --------
Net increase (decrease) in cash (4,162) 1,087
Cash, beginning of period 4,553 560
--------- --------
Cash, end of period $ 391 $ 1,647
========= ========
Supplemental Disclosures:
Cash paid for income taxes $ 532 $ 5,139
Cash paid for interest 5,099 5,822
Conversion of Company-obligated mandatorily redeemable convertible trust
preferred securities into long-term debt 23,375 --
Redemption of Class A common shares in conjunction with acquisition (Note 3) -- (117)
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
4
<PAGE> 5
Dayton Superior Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
For The Three and Six Fiscal Months Ended June 30, 2000 and July 2, 1999
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Fiscal Months Ended Six Fiscal Months Ended
------------------------- -----------------------
June 30, July 2, June 30, July 2,
2000 1999 2000 1999
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) $(2,972) $5,271 $(2,499) $4,916
Dividends on Company-obligated mandatorily redeemable
convertible trust preferred securities, net of income
tax benefit (267) -- (583) --
Other comprehensive income:
Foreign currency translation adjustment (48) 44 (40) 62
------- ------ ------- ------
Comprehensive income (loss) $(3,287) $5,315 $(3,122) $4,978
======= ====== ======= ======
</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
JUNE 30, 2000 AND JULY 2, 1999
(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 accounting principles generally
accepted in the United States 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, 1999.
(2) RECAPITALIZATION
On January 19, 2000, the Company signed a definitive merger agreement with
an affiliate of Odyssey Investment Partners, LLC, the manager of a New York
based private equity investment fund, for $27.00 per share in cash. The
transaction was completed on June 16, 2000 and was recorded as a
recapitalization.
In connection with the recapitalization, the Company refinanced its
existing bank indebtedness. Additionally, the Dayton Superior Capital
Trust, which held solely debentures, was dissolved. The Company-obligated
mandatorily redeemable convertible trust preferred securities converted to
debentures having the right to receive cash in the amount of $22.00, plus
accrued dividends, per preferred security.
As a result, the Company recorded an extraordinary loss of $4,812,
comprised of the following:
<TABLE>
<CAPTION>
<S> <C>
Expense deferred financing costs on previous long-term debt $ 2,719
Prepayment premium on extinguishments of long-term debt and interest rate swap agreements 476
Expense issuance costs on Company-obligated mandatorily redeemable convertible trust
preferred securities 1,691
Prepayment premium on conversion of Company-obligated mandatorily redeemable convertible
trust preferred securities into debentures 2,125
Financing cost for unused long-term debt commitment 750
-------
7,761
Income tax benefit (2,949)
-------
Extraordinary loss $ 4,812
=======
</TABLE>
6
<PAGE> 7
(3) 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 provides for an adjustment
to the purchase price under certain circumstances. In the second
quarter of 2000, the Company received a purchase price reduction of
approximately $1,800, net of professional fees, which was recorded as a
reduction of goodwill.
(b) Cempro, Inc.--Effective January 1, 1999, the Company acquired
substantially all of the assets and assumed certain of the liabilities
of Cempro, Inc. ("Cempro") for approximately $5,400 in cash. The
business is being operated as a part of the Company's concrete
accessories business.
The acquisition has been accounted for as a purchase, and the results
of Cempro have been included in the accompanying consolidated financial
statements since the date of acquisition. The purchase price has been
allocated based on the estimated fair values of the assets acquired and
liabilities assumed. Certain appraisals and evaluations are preliminary
and may change. Pro forma financial information is not required.
(c) Symons Concrete Forms, Inc.--In May 1998, the Company purchased the
stock of Symons Concrete Forms, Inc. (formerly known as CAI). A
purchase price reduction of approximately $100 (6,456 Class A Common
Shares) in 1999 related to uncollected accounts receivable.
(d) Southern Construction Products, Inc.--On October 4, 1999, the Company
acquired substantially all of the assets and assumed certain of the
liabilities of Southern Construction Products, Inc. ("Southern") for
approximately $8,300 in cash, including acquisition costs, and net of a
purchase price reduction of approximately $300 received in January
2000. The business is being operated as part of the Company's masonry
products and concrete accessories businesses.
The acquisition has been accounted for as a purchase, and the results
of Southern 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) Polytite Manufacturing Corp.--On February 9, 2000, the Company acquired
substantially all of the assets and assumed certain of the liabilities
of Polytite Manufacturing Corp. ("Polytite") for approximately $1,500
in cash, including acquisition costs and is subject to a working
capital adjustment. The business is
7
<PAGE> 8
being operated as part of the Company's masonry products and concrete
accessories businesses.
The acquisition has been accounted for as a purchase, and the results
of Polytite 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.
(4) 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, 1999. 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 year end is December 31. 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 June 30, 2000 and
December 31, 1999. Following is a summary of the components of
inventories as of June 30, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
<S> <C> <C>
Raw materials $ 9,748 $ 8,787
Finished goods and work in progress 34,617 32,920
-------- --------
44,365 41,707
Net realizable value reserve (3,099) (2,367)
-------- --------
$ 41,266 $ 39,340
======== ========
</TABLE>
8
<PAGE> 9
(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 basis. The balances as of June 30, 2000 and December
31, 1999 are net of accumulated depreciation of $12,333 and $9,855,
respectively. Rental revenues and cost of sales associated with rental
revenue are as follows:
<TABLE>
<CAPTION>
Three fiscal months ended Six fiscal months ended
------------------------- ------------------------
June 30, July 2, June 30, July 2,
2000 1999 2000 1999
---------- ------- -------- -------
<S> <C> <C> <C> <C>
Rental revenue $13,385 $12,309 $24,665 $22,818
Cost of sales 2,391 2,093 4,566 3,993
</TABLE>
(d) Financial Instruments--Prior to the recapitalization, the Company used
interest rate swaps to manage interest rate risk associated with its
floating rate borrowings. The swap agreements were 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 was recognized as an adjustment to interest expense. The
interest rate swaps were terminated as a result of the
recapitalization.
(e) Reclassifications--Certain reclassifications have been made to the 1999
amounts to conform to their 2000 classifications.
(5) CREDIT ARRANGEMENTS
As of June 30, 2000, the new credit facility consists of (i) a $50,000 revolving
credit facility maturing June 2006, (ii) a $30,000 acquisition facility,
converting from revolving loans into term loans three years from the closing and
maturing June 2006 and (iii) term loan facilities in an aggregate principal
amount of $53,500, consisting of a $23,500 delayed-draw tranche A facility
maturing June 2006 and a $30,000 tranche B facility maturing June 2008.
The new credit facility provides that the Company will repay (i) the tranche A
facility in quarterly installments commencing March 2002, (ii) the tranche B
facility in quarterly installments, commencing March 2002 and (iii) the
acquisition facility, in equal quarterly installments commencing three years
from the closing.
The new credit facility has several interest rate options.
The Senior Subordinated Notes have a principal amount of $170,000 and mature in
June 2009. The notes were issued at a discount, which is being accreted to the
face value using the effective interest method and is reflected as interest
expense. The notes were issued with warrants that allow the holder to purchase
117,276 of the Company's Class A Common Shares for $0.01 per share.
9
<PAGE> 10
Following is a summary of the Company's long-term debt as of June 30, 2000 and
December 31, 1999:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------- ------------
<S> <C> <C>
Revolving line of credit, weighted average interest rate of 10.8% $ 4,100 $ --
Term Loan A, weighted average interest rate of 9.3% 20,817
Term Loan B, weighted average interest rate of 9.8% 30,000
Senior Subordinated Notes, interest rate of 13.0% 170,000 --
Debt discount on Senior Subordinated Notes (12,460) --
Debentures previously held by Dayton Superior Capital Trust,
interest rate of 9.1%, due on demand 2,558 --
Old Term Loan -- 100,000
Note payable to one of the Former Stockholders, 10.5% 5,000 5,000
City of Parsons, Kansas Economic Development Loan, 7.0% 165 173
--------- ---------
Total long-term debt 220,180 105,173
Less current portion (7,590) (5,032)
--------- ---------
Long-term portion $ 212,590 $ 100,141
========= =========
</TABLE>
At June 30, 2000, all of the $50,000 Revolving Credit Facility was available, of
which $4,100 of borrowings was outstanding. The average borrowing, maximum
borrowing, and weighted average interest rate on the revolving line of credit
and its predecessor for the periods indicated were as follows:
<TABLE>
<CAPTION>
Three fiscal months Six fiscal months
ended ended
----------------------- -----------------------
June 30, July 2, June 30, July 2,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Average borrowing $12,137 $32,356 $ 8,841 $27,674
Maximum borrowing 16,420 37,140 16,420 37,140
Weighted average interest rate 8.2% 6.6% 8.6% 6.8%
</TABLE>
The new credit facility contains certain restrictive covenants which, among
other things, require that the Company maintain a minimum interest coverage
ratio and a minimum EBITDA level and not exceed a certain leverage ratio.
(6) 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 income
(loss) before extraordinary item for the three and six fiscal months ended June
30, 2000 and July 2, 1999 would
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<PAGE> 11
have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
Three fiscal months ended Six fiscal months ended
------------------------- ------------------------
June 30, July 2, June 30, July 2,
2000 1999 2000 1999
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Income (loss) before
extraordinary item As Reported $(2,972) $5,271 $(2,499) $4,916
Pro Forma (3,009) 5,191 (2,594) 4,836
</TABLE>
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
A summary of the activity of the Company's stock option plans for the six fiscal
months ended June 30, 2000 is presented in the table below:
<TABLE>
<CAPTION>
Weighted Average
Number of Exercise Price
Shares Per Share
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1999 442,283 $ 9.28
Exercised (344,353) 8.85
-------- ------
Outstanding at June 30, 2000 97,930 $10.81
======== ======
</TABLE>
(7) RETIREMENT PLANS
In 1999, the Company terminated and merged various defined benefit plans. As a
result, the Company recorded a $797 non-recurring pension plan termination gain,
$120 of which was recorded as a reduction of cost of sales and $677 of which was
recorded as a reduction of selling, general, and administrative expenses.
(8) SEGMENT REPORTING
The Company operates in four segments, each with a general manager: concrete
accessories, concrete forming systems, paving products, and masonry products.
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.
11
<PAGE> 12
Information about the income (loss) of each segment and the reconciliations to
the consolidated amounts for the three and six fiscal months ended June 30, 2000
and July 2, 1999 is as follows:
<TABLE>
<CAPTION>
Three fiscal months Six fiscal months
ended ended
------------------------ -------------------------
June 30, July 2, June 30, July 2,
2000 1999 2000 1999
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Concrete Accessories $ 42,562 $39,730 $ 77,482 $ 70,411
Concrete Forming Systems 33,600 30,665 60,087 55,541
Paving Products 12,368 11,065 19,663 17,738
Masonry Products 9,470 7,176 17,273 13,142
-------- ------- -------- --------
Net sales to external customers $ 98,000 $88,636 $174,505 $156,832
======== ======= ======== ========
Concrete Accessories $ 877 $ 970 $ 2,126 $ 2,127
Concrete Forming Systems 1,771 1,395 3,777 2,627
Paving Products 757 -- 1,416 --
Masonry Products 270 -- 310 --
-------- ------- -------- --------
Net sales to other segments $ 3,675 $ 2,365 $ 7,629 $ 4,754
======== ======= ======== ========
Concrete Accessories $ 1,045 $ 918 $ 1,781 $ 1,893
Concrete Forming Systems 2,196 1,806 3,858 3,507
Paving Products 219 181 349 363
Masonry Products 268 144 468 261
-------- ------- -------- --------
Interest expense $ 3,728 $ 3,049 $ 6,456 $ 6,024
======== ======= ======== ========
Concrete Accessories $ 7,863 $ 7,093 $ 11,990 $ 9,608
Concrete Forming Systems (11,050) 2,965 (10,641) 3,268
Paving Products 1,559 950 1,410 451
Masonry Products 530 526 348 140
Corporate (1,678) (732) (3,161) (2,130)
Intersegment Eliminations (2,046) (1,217) (3,915) (2,398)
-------- ------- -------- --------
Income (loss) before income taxes and
extraordinary item $ (4,822) $ 9,585 $ (3,969) $ 8,939
======== ======= ======== ========
Concrete Accessories $ 824 $ 826 $ 1,718 $ 1,579
Concrete Forming Systems 1,645 1,888 3,248 3,214
Paving Products 231 214 445 437
Masonry Products 378 361 729 693
Corporate 21 12 35 25
-------- ------- -------- --------
Depreciation $ 3,099 $ 3,301 $ 6,175 $ 5,948
======== ======= ======== ========
Concrete Accessories $ 353 $ 353 $ 710 $ 720
Concrete Forming Systems (80) 21 17 130
Paving Products 42 54 71 118
Masonry Products 137 108 278 215
-------- ------- -------- --------
Amortization of goodwill and intangibles $ 452 $ 536 $ 1,076 $ 1,183
======== ======= ======== ========
</TABLE>
12
<PAGE> 13
Information regarding capital expenditures by segment and the reconciliation to
the consolidated amounts for the three and six fiscal months ended June 30, 2000
and July 2, 1999 is as follows:
<TABLE>
<CAPTION>
Three fiscal months ended Six fiscal months ended
------------------------- -----------------------
June 30, July 2, June 30, July 2,
2000 1999 2000 1999
--------- --------- --------- -------
<S> <C> <C> <C> <C>
Concrete Accessories $ 921 $ 569 $ 1,545 $1,316
Concrete Forming Systems 454 303 957 688
Paving Products 265 186 733 461
Masonry Products 292 358 859 513
Corporate 71 34 116 79
------ ------ ------- ------
Property, Plant, and Equipment Additions $2,003 $1,450 $ 4,210 $3,057
====== ====== ======= ======
Concrete Accessories $ 415 $ 615 $ 1,315 $ 943
Concrete Forming Systems 5,594 2,842 8,854 8,526
Masonry Products 13 -- 13 --
------ ------ ------- ------
Rental Equipment Additions $6,022 $3,457 $10,182 $9,469
====== ====== ======= ======
</TABLE>
There has been no material change in the relative assets employed by each
segment since December 31, 1999.
(9) 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.
Symons appealed the trial court's decision to the United States Court of Appeals
for the Eighth Circuit. A three-judge panel issued its decision on July 18,
2000, affirming the district court's ruling in all respects. On August 1, 2000,
Symons filed a petition for a rehearing before the full court of appeals.
As a result of the decision of the Court of Appeals, the Company has recorded a
$15,000 pre-tax liability for the judgment and estimated post-judgment interest.
In the event Symons is unsuccessful in its petition for a rehearing, payment of
the judgment may have an adverse effect on the Company's consolidated financial
position, results of
13
<PAGE> 14
operations, or cash flows, even though the Company has available financial
resources to fund the payment.
(10) SUBSEQUENT EVENT
In July 2000, the Company acquired the stock of Conspec Marketing and
Manufacturing Co., Inc., Conspec Performance Products, Inc. and Bristol
Investments, Inc. (collectively, "Conspec") for approximately $23,500 in cash,
including approximately $1,000 in acquisition costs, which was funded through an
increase to the tranche B credit facility. The purchase price is subject to a
working capital adjustment.
The acquisition has been accounted for as a purchase, and the results of Conspec
will be included in the accompanying consolidated financial statements from the
date of acquisition. The purchase price will be allocated based on the estimated
fair values of the assets acquired and liabilities assumed. Pro forma financial
information is not required.
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
We believe we are the largest North American manufacturer and distributor of
metal accessories and forms used in concrete construction and of metal
accessories used in masonry construction. Although almost all of our products
are used in concrete or masonry construction, the function and nature of the
products differ widely. As of June 30, 2000, we have four principal operating
divisions, which are organized around the following product lines:
o Concrete Accessories;
o Concrete Forming Systems;
o Paving Products; and
o Masonry Products.
ACQUISITIONS
We have completed and integrated four acquisitions since the beginning of 1999.
These acquisitions are summarized in the following table:
<TABLE>
<CAPTION>
Purchase Price
Date Business Acquired Division (In millions)
---- ----------------- -------- --------------
<S> <C> <C> <C>
January 1999 Cempro Concrete Accessories $5.4
October 1999 Southern Construction Products Masonry Products and Concrete
Accessories 8.3
February 2000 Polytite Masonry Products and Concrete
Accessories 1.5*
July 2000 Conspec Chemicals 23.5*
</TABLE>
*Subject to working capital adjustment
15
<PAGE> 16
RESULTS OF OPERATIONS
The following table summarizes the Company's results of operations as a
percentage of net sales.
<TABLE>
<CAPTION>
THREE FISCAL MONTHS ENDED SIX FISCAL MONTHS ENDED
------------------------- -----------------------
June 30, July 2, June 30, July 2,
2000 1999 2000 1999
--------- ------- --------- --------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 60.9 63.1 62.0 63.6
----- ----- ----- -----
Gross profit 39.1 36.9 38.0 36.4
----- ----- ----- -----
Selling, general and administrative expenses 24.3 22.0 27.3 26.0
Amortization of goodwill and intangibles 0.5 0.6 0.6 0.8
----- ----- ----- -----
Total selling, general and administrative expenses 24.8 22.6 27.9 26.8
----- ----- ----- -----
Income from operations 14.3 14.3 10.1 9.6
Interest expense, net 3.9 3.5 3.8 3.9
Nonrecurring item-Lawsuit judgment 15.3 -- 8.6 --
----- ----- ----- -----
Income (loss) before income taxes and extraordinary
item (4.9) 10.8 (2.3) 5.7
Provision (benefit) for income taxes (1.9) 4.9 (0.9) 2.6
----- ----- ----- -----
Income (loss) before extraordinary item (3.0) 5.9 (1.4) 3.1
Extraordinary item, net of income tax benefit (4.9) -- (2.8) --
----- ----- ----- -----
Net income (loss) (7.9) 5.9 (4.2) 3.1
Dividends from Company-obligated mandatorily
redeemable convertible trust preferred securities,
net of income tax benefit (0.3) -- (0.3) --
----- ----- ----- -----
Net income (loss) available to common shareholders (8.2%) 5.9% (4.5%) 3.1%
===== ===== ===== =====
</TABLE>
COMPARISON OF THREE FISCAL MONTHS ENDED JUNE 30, 2000 AND JULY 2, 1999
NET SALES
Net sales increased $9.4 million, or 10.6%, to $98.0 million in the second
quarter of 2000 from $88.6 million in the second quarter of 1999. The following
table summarizes our net sales by segment:
<TABLE>
<CAPTION>
Three fiscal months ended
----------------------------------------------------
June 30, 2000 July 2, 1999
---------------------- ----------------------
(In thousands)
Net Sales % Net Sales % % Change
--------- ----- --------- ----- --------
<S> <C> <C> <C> <C> <C>
Concrete accessories $43,439 44.3% $40,700 45.9% 6.7%
Concrete forming systems 35,371 36.1 32,060 36.2 10.3
Paving products 13,125 13.4 11,065 12.5 18.6
Masonry products 9,740 9.9 7,176 8.1 35.7
Intersegment eliminations (3,675) (3.7) (2,365) (2.7) 55.4
------- ----- ------- -----
Net sales $98,000 100.0% $88,636 100.0% 10.6%
======= ===== ======= =====
</TABLE>
16
<PAGE> 17
Net sales of concrete accessories increased 6.7% to $43.4 million in the second
quarter of 2000 from $40.7 million in the second quarter of 1999, primarily due
to increases in volume and new product initiatives and, to a lesser extent, the
contribution of Southern Construction Products. Net sales of concrete forming
systems increased 10.3% to $35.4 million for the second quarter of 2000 compared
to $32.1 million in the second quarter of 1999, primarily due to increases in
volume and the expansion and introduction of new products, including
distribution rights to two European forming systems. Net sales of paving
products increased $2.1 million, or 18.6%, in the second quarter of 2000
compared to the second quarter of 1999 primarily due to an increase in volume as
a result of the Transportation Equity Act for the 21st Century, known as TEA-21.
Net sales of masonry products increased $2.6 million, or 35.7%, primarily due to
the acquisition of Southern Construction Products.
GROSS PROFIT
Gross profit for the second quarter of 2000 was $38.3 million, a 16.9% increase
from $32.7 million in the second quarter of 1999, primarily due to the increased
net sales. Gross margin was 39.1% in the second quarter of 2000, increasing from
36.9% in 1999 primarily due to higher manufacturing efficiencies in the concrete
accessories and concrete forming systems divisions.
OPERATING EXPENSES
Selling, general, and administrative expenses, including amortization of
goodwill and intangibles ("SG&A expenses"), increased $4.2 to $24.2 million in
the second quarter of 2000, from $20.0 million in the second quarter of 1999,
due to acquisitions and higher volume. Additionally, the Company recorded a $0.7
million non-recurring pension plan termination gain in the second quarter of
1999. SG&A expenses increased as a percent of net sales to 24.8% in the second
quarter of 2000 from 22.6% in the second quarter of 1999 (23.5% without the
non-recurring pension plan termination gain), primarily due to planned spending
to develop customers, markets, new products, and employees.
OTHER EXPENSES
Interest expense increased to $3.7 million in the second quarter of 2000 from
$3.0 million in the second quarter of 1999 primarily due to increased long-term
debt and higher interest rates resulting from the recapitalization.
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.
17
<PAGE> 18
Symons appealed the trial court's decision to the United States Court of Appeals
for the Eighth Circuit. A three-judge panel issued its decision on July 18,
2000, affirming the district court's ruling in all respects. On August 1, 2000,
Symons filed a petition for a rehearing before the full court of appeals. While
such petitions are infrequently granted, Symons believes that the three-judge
panel's decision conflicts with recent Supreme Court and Eighth Circuit
precedent.
As a result of the decision of the Court of Appeals, the Company has recorded a
one-time $15,000 pre-tax liability for the judgment and post-judgment interest.
In the event Symons is unsuccessful in its petition for a rehearing, payment of
the judgment may have an adverse effect on the Company's consolidated financial
position, results of operations, or cash flows, even though the Company has
available financial resources to fund the payment.
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM
Income (loss) before income taxes and extraordinary item in the second quarter
of 2000 was a loss of $4.8 million as compared to income of $9.6 million in the
second quarter of 1999 and was comprised of the following:
<TABLE>
<CAPTION>
Three fiscal months ended
------------------------------
June 30, 2000 July 2, 1999
------------- ------------
(In thousands)
<S> <C> <C>
Concrete accessories $ 7,863 $ 7,093
Concrete forming systems (11,050) 2,965
Paving products 1,559 950
Masonry products 530 526
Corporate (1,678) (732)
Intersegment eliminations (2,046) (1,217)
-------- -------
Income before income taxes $ (4,822) $ 9,585
======== =======
</TABLE>
Concrete accessories' income before income taxes of $7.9 million in the second
quarter of 2000 increased from $7.1 million in the second quarter of 1999 due to
increased net sales and manufacturing efficiencies. Concrete forming systems'
income (loss) before income taxes was ($11.1) million in the second quarter of
2000 in comparison to income of $3.0 million in the second quarter of 1999 due
to the lawsuit judgment. Without such judgment, concrete forming systems' income
before income taxes would have increased 33% to $4.0 million, due to higher net
sales and manufacturing efficiencies. Income before income taxes from paving
products increased to $1.6 million in the second quarter of 2000 from $0.9
million in the second quarter of 1999 due to the increase in net sales. Income
before income taxes from masonry products remained flat at $0.5 million despite
the higher net sales due to the higher interest expense from the acquisition of
Southern Construction Products. Corporate expenses increased to $1.7 million
from $0.7 million due to the non-recurring pension plan termination gain in
1999. Elimination of profit on intersegment sales was $2.0 million in the second
quarter of 2000 compared to $1.2 million in the second quarter of 1999.
18
<PAGE> 19
NET INCOME
The effective tax rate decreased to 38.3% in the second quarter of 2000 from
45.0% in the second quarter of 1999 primarily due to the permanent benefit of
stock option exercises. Income (loss) before extraordinary item for the second
quarter of 2000 was ($3.0) million compared to $5.3 million in the second
quarter of 1999 due to the factors described above. As described in footnote 2
to the consolidated financial statements, the Company's recapitalization
resulted in an extraordinary loss of $4.8 million in the second quarter of 2000.
COMPARISON OF SIX FISCAL MONTHS ENDED JUNE 30, 2000 AND JULY 2, 1999
NET SALES
Net sales increased $17.7 million, or 11.3%, to $174.5 million in the first half
of 2000 from $156.8 million in the first half of 1999. The following table
summarizes our net sales by segment:
<TABLE>
<CAPTION>
Six fiscal months ended
------------------------------------------------------
June 30, 2000 July 2, 1999
-------------------- ---------------------
(In thousands)
Net Sales % Net Sales % % Change
--------- ---- --------- ---- --------
<S> <C> <C> <C> <C> <C>
Concrete accessories $ 79,608 45.6% $ 72,538 46.3% 9.7%
Concrete forming systems 63,864 36.6 58,168 37.1 9.8
Paving products 21,079 12.1 17,738 11.3 18.8
Masonry products 17,583 10.1 13,142 8.4 33.8
Intersegment eliminations (7,629) (4.4) (4,754) (3.1) 60.5
-------- ----- -------- -----
Net sales $174,505 100.0% $156,832 100.0% 11.3%
======== ===== ======== =====
</TABLE>
Net sales of concrete accessories increased 9.7% to $79.6 million in the first
half of 2000 from $72.5 million in the first half of 1999, due to increases in
volume and new product initiatives and, to a lesser extent, the contribution
from Southern Construction Products. Net sales of concrete forming systems were
$63.9 million for the first half of 2000 compared to $58.2 million in the first
half of 1999 primarily due to an increase in volume and the expansion and
introduction of new products including distribution rights to two European
forming systems. Net sales of paving products increased $3.3 million, or 18.8%,
in the first half of 2000 compared to the first half of 1999 due to an increase
in volume as a result of the Transportation Equity Act for the 21st Century,
known as TEA-21. Net sales of masonry products increased $4.4 million, or 33.8%,
primarily due to the acquisition of Southern Construction Products.
GROSS PROFIT
Gross profit for the first half of 2000 was $66.2 million, a 16.1% increase
from $57.0 million in the first half of 1999, due primarily to increased net
sales. Gross margin was 38.0% in the first half of this year, increasing from
36.4% last year due to manufacturing efficiencies in the concrete accessories
and concrete forming systems segments.
19
<PAGE> 20
OPERATING EXPENSES
SG&A expenses increased $6.6 million to $48.6 million in the first half of 2000
from $42.0 million in the first half of 1999, due to the acquisitions and higher
volume. Additionally, the Company recorded a $0.7 million non-recurring pension
plan termination gain in the first half of 1999. SG&A expenses increased as a
percent of net sales to 27.9% in the first half of 2000 from 26.8% in the first
half of 1999 (27.2% without the non-recurring pension plan termination gain),
primarily due to planned spending to develop customers, markets, new products,
and employees.
OTHER EXPENSES
Interest expense increased to $6.5 million in the first half of 2000 from $6.0
million in the first half of 1999 primarily due to increased long-term debt and
higher interest rates resulting from the recapitalization.
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.
Symons appealed the trial court's decision to the United States Court of Appeals
for the Eighth Circuit. A three-judge panel issued its decision on July 18,
2000, affirming the district court's ruling in all respects. On August 1, 2000,
Symons filed a petition for a rehearing before the full court of appeals. While
such petitions are infrequently granted, Symons believes that the three-judge
panel's decision conflicts with recent Supreme Court and Eighth Circuit
precedent.
As a result of the decision of the Court of Appeals, the Company has recorded a
$15,000 pre-tax liability for the judgment and estimated post-judgment interest.
In the event Symons is unsuccessful in its petition for a rehearing, payment of
the judgment may have an adverse effect on the Company's consolidated financial
position, results of operations, or cash flows, even though the Company has
available financial resources to fund the payment.
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM
Income (loss) before income taxes and extraordinary item in the first half of
2000 was a loss of $4.0 million as compared to income of $8.9 million in the
first half of 1999 and was comprised of the following:
20
<PAGE> 21
<TABLE>
<CAPTION>
Six fiscal months ended
-----------------------------
June 30, 2000 July 2, 1999
------------- ------------
(In thousands)
<S> <C> <C>
Concrete accessories $ 11,990 $ 9,608
Concrete forming systems (10,641) 3,268
Paving products 1,410 451
Masonry products 348 140
Corporate (3,161) (2,130)
Intersegment eliminations (3,915) (2,398)
-------- -------
Income before income taxes $ (3,969) $ 8,939
======== =======
</TABLE>
Concrete accessories' income before income taxes of $12.0 million in the first
half of 2000 increased 24.8% from $9.6 million in the first half of 1999 due
primarily to the increase in net sales and manufacturing efficiencies. Concrete
forming systems' income (loss) before income taxes was ($10.6) million in the
first half of 2000 compared to $3.3 million in the first half of 1999 due to the
lawsuit judgment. Without such judgment, concrete forming systems' income before
income taxes would have increased 33.4% to $4.4 million, due to higher net sales
and manufacturing efficiencies. Income before income taxes from paving products
increased to $1.4 million in the first half of 2000 from $0.5 million in the
first half of 1999 due to the increase in net sales. Income before income taxes
from masonry products was $0.3 million in the first half of 2000 compared to
$0.1 million in the first half of 1999 due to the increase in net sales.
Corporate expenses increased to $3.2 million from $2.1 million due to the
non-recurring pension plan termination gain in 1999. Elimination of profit on
intersegment sales was $3.9 million in the first half of 2000 as compared to
$2.4 million in the first half of 1999.
NET INCOME
The effective tax rate decreased to 37.0% in the first half of 2000 from 45.0%
in the first half of 1999 primarily due to the permanent benefit of stock option
exercises. Income (loss) before extraordinary item for the first half of 2000
was ($2.5) million compared to $4.9 million in the first half of 1999 due to the
factors described above. As described in footnote 2 to the consolidated
financial statements, the Company's recapitalization resulted in an
extraordinary loss of $4.8 million in the second quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's key statistics for measuring liquidity and capital resources are
net cash provided by operating activities, capital expenditures, amounts
available under our revolving credit facility and cash gap. Cash gap is defined
as the number of days of outstanding accounts receivable, plus the number of
days of inventory on hand, less the number of days of outstanding accounts
payable.
21
<PAGE> 22
The Company's capital requirements relate primarily to capital expenditures,
debt service and the cost of acquisitions. Historically, the Company's primary
sources of financing have been cash from operations, borrowings under its
revolving line of credit and the issuance of long-term debt and equity.
Net cash used in operating activities in the first half of 2000 was $3.7 million
and was comprised of the following:
o ($7.3) million of net loss,
o $22.6 million of non-cash reductions to net income, and
o ($19.0) million of normal seasonal working capital growth.
The Company invested in the following:
o $8.5 million in net capital expenditures and
o ($0.6) million of acquisitions.
In connection with the recapitalization, the Company incurred substantial new
indebtedness and refinanced certain outstanding indebtedness. As of June 30,
2000, the Company has long-term debt of: (a) $170.0 million in principal amount
of Senior Subordinated Notes, with a net book value of $157.5 million, (b) $54.9
million outstanding of a $133.5 million new credit facility, which consists of a
$50.0 million revolving credit facility, a $30.0 million acquisition facility, a
$23.5 million term loan under the delayed-draw tranche A facility and a $30.0
million term loan under the tranche B facility, (c) $2.6 million of debentures
previously held by the Dayton Superior Capital Trust, (d) $5.0 million to one of
the former stockholders of Symons Corporation, and (e) $0.2 million to the City
of Parsons, Kansas.
At June 30, 2000, all of the $50.0 million revolving credit facility was
available, of which $4.1 million of borrowings were outstanding. None of the
$30.0 million acquisition facility had been drawn, and $20.8 million of the
delayed-draw tranche A facility had been drawn. All of the $30.0 million tranche
B facility was outstanding.
At June 30, 2000, working capital was $50.2 million, compared to $50.5 million
at December 31, 1999. The decline in working capital is primarily attributable
to the $15.0 million non-recurring lawsuit judgment, offset by normal seasonal
growth.
For the first half of 2000 the Company's average cash gap days were 66, an
improvement of 2 days from 68 days in the first half of 1999 due to the
Company's continued focus on working capital management.
The Company believes its liquidity, capital resources and cash flows from
operations are sufficient to fund planned capital expenditures, working capital
requirements and debt service in the absence of additional acquisitions.
The Company intends to fund future acquisitions with cash, securities, or a
combination of cash and securities, to the extent the Company uses cash for all
or part of any acquisitions. The Company expects to raise such cash from
operations or from borrowings under the new credit facility, or, if feasible and
attractive, issuances of long-term debt or additional Class A common shares.
22
<PAGE> 23
As previously described, the court of appeals affirmed in all respect the
decision of the trial court in the EFCO litigation. The Company has, however,
filed a petition for a rehearing en banc which is now pending before the court.
If the appellate court denies the petition for a rehearing and the Company is
required to make payment on the judgment, the Company could finance that payment
with a drawing under the new credit facility.
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.
FORWARD-LOOKING STATEMENTS
This Form 10-Q includes, and future filings by the Company on Form 10-K, Form
10-Q, and Form 8-K, and future oral and written statements by the Company and
its management may include, certain forward-looking statements, including
(without limitation) statements with respect to anticipated future operating and
financial performance, growth opportunities and growth rates, acquisition and
divestitive opportunities and other similar forecasts and statements of
expectation. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and "should," and variations of these words and
similar expressions, are intended to identify these forward-looking statements.
Forward-looking statements by the Company and its management are based on
estimates, projections, beliefs and assumptions of management and are not
guarantees of future performance. The Company disclaims any obligation to update
or revise any forward-looking statement based on the occurrence of future
events, the receipt of new information, or otherwise.
Actual future performance, outcomes and results may differ materially from those
expressed in forward-looking statements made by the Company and its management
as the result of a number of important factors. Representative examples of these
factors include (without limitation) the cyclical nature of nonresidential
building and infrastructure construction activity, which can be affected by
factors outside the Company's control such as weakness in the general economy, a
decrease in governmental spending, interest rate increases, and changes in
banking and tax laws; an unsuccessful outcome in the Company's legal proceedings
and disputes; the Company's ability to successfully identify, finance, complete
and integrate
23
<PAGE> 24
acquisitions; increases in the price of steel (the principal raw material in the
Company's products) and the Company's ability to pass along such price increases
to its customers; and the effects of weather and seasonality on the construction
industry; increasing consolidation of the Company's customers; the mix of
products the Company sells; the competitive nature of our industry; and the
amount of debt we must service. This list is not intended to be exhaustive. 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.
24
<PAGE> 25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As of June 30, 2000, the Company had financial instruments that were sensitive
to changes in interest rates. These financial instruments consist of $170.0
million of principal amount of fixed rate Senior Subordinated Notes, with a book
value of $157.5 million, a $133.5 million new credit facility, of which $54.9
million was outstanding and $7.8 million in other fixed-rate, long-term debt.
The Senior Subordinated Notes bear interest at 13.0% on the $170.0 million of
principal and mature in 2009. The estimated fair value of the notes is $162.5
million.
The new credit facility has several interest rate options which re-price on a
short-term basis. Accordingly, the fair value of the new credit facility
approximates its $54.9 million face value. The weighted average interest rate at
June 30, 2000 was 9.7%.
Other long-term debt consists of a.) a $5.0 million, 10.5% note payable due in
2004 with an estimated fair value of $5.2 million, b.) $2.6 million of
debentures previously held by the Dayton Superior Capital Trust, with a fair
value of $2.6 million and c.) a $0.2 million, 7.0% loan due in installments of
$32 thousand per year with an estimated fair value of $0.1 million.
Management does not believe there will be any significant changes in interest
rates in the near future. However, no assurances can be given that economic
conditions or interest rates will remain stable for any particular period.
In the ordinary course of its business, the Company also is exposed to price
changes in raw materials (particularly steel bar and rod and steel flat plate)
and products purchased for resale. The prices of these items can change
significantly due to changes in the markets in which the Company's suppliers
operate. The Company generally does not use financial instruments to manage its
exposure to changes in commodity prices.
25
<PAGE> 26
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. 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.
Symons appealed the trial court's decision to the United States Court of Appeals
for the Eighth Circuit. A three-judge panel issued its decision on July 18,
2000, affirming the district court's ruling in all respects. On August 1, 2000,
Symons filed a petition for a rehearing before the full court of appeals. While
such petitions are infrequently granted, Symons believes that the three-judge
panel's decision conflicts with recent Supreme Court and Eighth Circuit
precedent.
As a result of the decision of the Court of Appeals, the Company has recorded a
one time $15,000 pre-tax liability for the judgment and post-judgment interest.
In the event Symons is unsuccessful in its petition for a rehearing, payment of
the judgment may have an adverse effect on the Company's consolidated financial
position, results of operations, or cash flows, even though the Company has
available financial resources to fund the payment.
The Company and all of its directors were named as defendants in a purported
shareholder class action lawsuit which was brought in January 2000 in the Court
of Common Pleas for Montgomery County in Dayton, Ohio. This lawsuit was
dismissed by the court on May 19, 2000.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) In connection with the Company's recapitalization on June 16, 2000, the
Dayton Superior Capital Trust was dissolved and the holders of the
convertible trust preferred securities issued by the Trust received the
Company's 10% convertible subordinated debentures due September 30, 2029
in exchange for their preferred securities. In addition, under the
conversion provisions of the debentures, as a result of the
recapitalization the convertible subordinated debentures became
convertible only into the right to receive cash, and no longer may be
converted into the Company's common shares. As noted under "Liquidity and
Capital Resources" above, the Company also incurred substantial new
indebtedness in connection with the recapitalization as to all of which
the convertible subordinated debentures are subordinated.
(c) In connection with the Company's recapitalization, the Company also sold
an aggregate of 19,444 common shares to 3 of its executive officers in
transactions not registered under the Securities Act of 1933. These
shares were sold at a price of $27 per share, payable in cash, and were
not registered under the Securities Act in reliance on the exemption from
registration set forth in Section 4(2) of the Act for transactions not
involving a public offering based on the limited nature of the offering
and the sophistication of the purchasers.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of the Company was held on May 23, 2000. At the special
meeting, the shareholders voted to (i) adopt the Agreement and Plan of Merger
dated January 19, 2000 between Dayton Superior and Stone Acquisition Corp. which
provided for the recapitalization of the Company through the merger of Stone
Acquisition Corp. into the Company ("Issue 1"), and (ii) approve the proposal to
permit the proxies for the special meeting, in their discretion, to adjourn the
special meeting for the sole purpose of soliciting more votes or proxies in
favor of adoption of the Agreement and Plan of Merger. The number of votes cast
for, against or withheld and the number of broker nonvotes on Issue 1 and Issue
2 were as follows:
For Against Withheld Broker Nonvotes
--- ------- -------- ---------------
Issue 1 4,387,327 8,360 13,775 --
Issue 2 3,571,411 802,666 35,385 --
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 June 30, 2000, the
Company did not file any Current Reports on Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DAYTON SUPERIOR CORPORATION
---------------------------
DATE: August 14, 2000 BY: /s/ Alan F. McIlroy
---------------- ------------------------
Alan F. McIlroy
Chief Financial Officer
27
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INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
(27) Financial Data Schedule
27.1 Financial Data Schedule**
------------
** Filed herewith
28
