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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549
 FORM 10-K þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2004 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-11781 DAYTON SUPERIOR CORPORATION  Ohio
(State of incorporation)
    
    31-0676346
(I.R.S. Employer Identification No.)
 7777 Washington Village Dr.
Suite 130
Dayton, Ohio 45459
(Address of principal executive office) Registrants telephone number, including area code: (937) 428-6360 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act). Yes o No þ As of March 30, 2005,
there were 4,586,431 common shares outstanding, all of which were privately
held and not traded on a public market. As of June 30, 2004, the aggregate market value of common
shares held by non-affiliates was $2,979,400 based on the appraised market value of the common
shares.




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TABLE OF CONTENTS  Part IItem 1. BusinessItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPart IIItem 5. Market for Registrants Common Equity and Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management, and Related Stockholder MattersItem 13. Certain Relationships and Related TransactionsPART IVItem 14. Principal Accounting Fees and ServicesItem 15. Exhibits and Financial Statement SchedulesSIGNATURESIndex of ExhibitsExhibit 4.1.1 First Supplemental Indenture Dated 1-17-2000Exhibit 4.12.1 Amend # 1 Dated as of June 30, 2004Exhibit 10.1 Management Incentive PlanExhibit 21.1 Subsidiaries of Dayton Superior CorporationExhibit 31.1 302 Certification-CEOExhibit 31.2 302 Certification-CFOExhibit 32.1 906 Certification-CEOExhibit 32.2 906 Certification-CFO    Table of Contents  In this Annual Report on Form 10-K, unless otherwise noted, the terms Dayton Superior, we,
us and our refer to Dayton Superior Corporation and its subsidiary. 
 Part I 
 Item 1. Business. Available Information The Company files annual, quarterly, current reports, and other documents with the
Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934. The public may
read and copy any materials that the Company files with the SEC at the SECs Public Reference Room
at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an
Internet website that contains reports and information statements, and other information regarding
issuers, including the Company, that file electronically with the SEC. The public can obtain any
documents that the Company files with the SEC at http://www.sec.gov. General We believe we are the largest North American manufacturer and distributor of metal
accessories and forms used in concrete construction and a leading manufacturer of metal accessories
used in masonry construction in terms of revenues. In many of our product lines, we believe we are
the market leader, in terms of revenues, competing primarily in two segments of the construction
industry: infrastructure construction, such as highways, bridges, utilities, water and waste
treatment facilities and airport runways, and non-residential building, such as schools, stadiums,
prisons, retail sites, commercial offices, hotels and manufacturing facilities. We derive our revenue from a mix of sales of consumable products and the sale and rental of
engineered concrete forming systems. Through our network of 22 service/distribution centers, we
serve over 4,000 customers, comprised of independent distributors and a broad array of pre-cast
concrete manufacturers, general contractors, subcontractors and metal fabricators. We sell most of
our 21,000 products under well established, industry-recognized brand names, and manufacture the
vast majority of these products in-house. We believe that the breadth of our product offerings
and national distribution network allow us to service the largest customer base in the industry by
providing a one-stop alternative to our customers. We believe that none of our competitors can
match our combination of product breadth and national reach. In addition, our nationwide customer
base enables us to efficiently cross-sell our products and provides us with a platform from which
we can broadly distribute newly developed and acquired product lines. Finally, our national
customer base provides us with geographically dispersed sales, which can mitigate the effects of
regional economic downturns. Effective December 31, 2004, all of our wholly owned domestic subsidiaries (consisting of
Symons Corporation; Aztec Concrete Accessories, Inc.; Dur-O-Wal, Inc.; Trevecca Holdings, Inc.;
Dayton Superior Specialty Chemical Corp.; and Southern Construction Products, Inc.) were merged
into Dayton Superior Corporation. Dayton Superior is the surviving corporation in the merger and
now directly operates the businesses that were being operated by the domestic subsidiaries
immediately prior to the merger. Effective January 1, 2004, the Company changed its financial reporting to three segments to
monitor gross profit by sales type: product sales, rental revenue and used rental equipment sales.
These types of sales are differentiated by their source and gross margin percents of sales.
Accordingly, this segmentation provides information for decision-making and resource allocation.
Product sales represent sales of new products carried in inventories on the balance sheet. Cost of
goods sold for product sales includes material, manufacturing labor, overhead costs and freight.
Rental revenues represent the leasing of the rental equipment and are recognized ratably over the
lease term. Cost of goods sold for rental revenues includes depreciation of the rental equipment,
maintenance of the rental
equipment, and freight. Sales of used rental equipment represent sales of the rental
equipment after a 1




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period of generating rental revenue. Cost of goods sold for sales of used rental
equipment consists of the net book value of the rental equipment. Products Although almost all of our products are used in concrete or masonry construction, the
function and nature of the products differ widely. Most of our products are consumable, providing
us with a source of recurring revenue. In addition, while our products represent a relatively small
portion of a construction projects total cost, our products assist in ensuring the on-time,
quality completion of those projects. We continually attempt to increase the number of products we
offer by using engineers and product development teams to introduce new products and refine
existing products. We manufacture and sell products primarily under the Dayton/Richmond®, Aztec®, Symons®, and
BarLock® brand names, chemical products under the Dayton Superior®, Conspec®, and Edoco®, brand
names, masonry products primarily under the Dur-O-Wal® brand name and welded dowel assemblies and
other paving products primarily under the American Highway Technology® name. Product Sales Consist Of:  
    Wall-Forming Products.Wall-forming products include shaped metal
ties and accessories that are used with modular forms to hold concrete in
place when walls are poured at a construction site or are prefabricated off
site. These products, which generally are not reusable, are made of wire or
plastic or a combination of both materials.
    Bridge Deck Products.Bridge deck products are metal assemblies of varying
designs used to support the formwork used by contractors in the construction
and rehabilitation of bridges.
    Bar Supports.Bar supports are non-structural steel, plastic, or
cementitious supports used to position rebar within a horizontal slab or form
to be filled with concrete. Metal bar supports are often plastic or epoxy
coated, galvanized or equipped with plastic tips to prevent creating a
conduit for corrosion of the embedded rebar.
    Splicing Products.Splicing products are used to join two pieces of rebar
together while at a construction site without the need for extensive
preparation of the rebar ends.
    Precast and Prestressed Concrete Construction Products.Precast and
prestressed concrete construction products are metal assemblies of varying
designs used in the manufacture of precast concrete panels and prestressed
concrete beams and structural members. Precast concrete panels and
prestressed concrete beams are fabricated away from the construction site and
transported to the site. Precast concrete panels are used in the construction
of prisons, freeway sound barrier walls, external building facades and other
similar applications. Prestressed concrete beams use multiple strands of
steel cable under tension embedded in concrete beams to provide rigidity and
bearing strength, and often are used in the construction of bridges, parking
garages and other applications where long, unsupported spans are required.
    Formliner Products.Formliner products include plastic and elastomeric
products that adhere to the inside face of forms to provide shape to the
surface of the concrete.
    Chemical Products.Chemical products include a broad spectrum of chemicals
for use in concrete construction, including form release agents, bond
breakers, curing compounds, liquid hardeners, sealers, water repellents,
bonding agents, 2




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grouts and epoxies, and other chemicals used in the pouring and placement of
concrete and curing compounds used in concrete road construction.
    Masonry Products.Masonry products are wire products sold under the
Dur-O-Wal® name that improve the performance and longevity of masonry walls
by providing crack control, greater elasticity and higher strength to
withstand seismic shocks and better resistance to rain penetration.
    Welded Dowel Assemblies.Welded dowel assemblies are used to transfer
dynamic loads between two adjacent slabs of concrete roadway. Metal dowels
are part of a dowel basket design that is imbedded in two adjacent slabs to
transfer the weight of vehicles as they move over a road.
    Corrosive-Preventing Epoxy Coatings.Corrosive-preventing epoxy coatings
are used for infrastructure construction products and a wide range of
industrial and construction uses.
    Architectural Paving Products.Architectural paving products are used to
apply decorative texture and coloration to concrete surfaces while concrete
is being poured. We manufacture, sell and rent reusable concrete forming systems primarily under the
Symons® name and tilt-up construction products under the Dayton/Richmond® name. Rental Revenues and Sales of Used Rental Equipment Consist Of :  
    Concrete Forming Systems. Concrete forming systems are reusable,
engineered modular forms which hold liquid concrete in place on concrete
construction jobs while it hardens. Standard forming systems are made of
steel and plywood and are used in the creation of concrete walls and columns.
Specialty forming systems consist primarily of steel forms that are designed
to meet architects specific needs for concrete placements. Both standard and
specialty forming systems are rented and sold.
    Shoring Systems.Shoring systems, including aluminum beams and joists, are
reusable post shores and shoring frames which are used to support deck and
other raised forms while concrete is being poured.
    Tilt-Up Construction Products.Tilt-up construction products include a
complete line of inserts, reusable lifting hardware and adjustable beams used
in the tilt-up method of construction, in which the concrete floor slab is
used as part of a form for casting the walls of a building. After the cast
walls have hardened on the floor slab, a crane is used to tilt-up the
walls, which then are braced in place until they are secured to the rest of
the structure. Tilt-up construction generally is considered to be a faster
method of constructing low-rise buildings than conventional poured-in-place
concrete construction. Manufacturing We manufacture a substantial majority of the products we sell and rent in 18 facilities
throughout North America. These facilities incorporate semi-automated and automated production
lines, heavy metal presses, forging equipment, stamping equipment, robotic welding machines,
drills, punches and other heavy machinery typical for this type of manufacturing operation.
Our production volumes enable us to design and build or custom modify much of the equipment we
use to manufacture these products, using a team of experienced manufacturing engineers and tool and
die makers. 3




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By developing our own automatic high-speed manufacturing equipment, we believe we generally
have achieved significantly greater productivity, lower capital equipment costs, lower scrap rates,
higher product quality, faster changeover times, and lower inventory levels than most of our
competitors. In addition, our ability to hot-dip galvanize masonry products provides us with an
advantage over many competitors manufacturing masonry wall reinforcement products, as they lack
this internal capability. We also have a flexible manufacturing setup and can make the same
products at several locations using short and discrete manufacturing lines. We outsource some of our production requirements to lower cost foreign producers, which we
believe generate significant additional savings. Distribution We distribute our products to customers through our network of 22 service/distribution
centers located in the United States and Canada. We ship most of our products to our
service/distribution centers from our manufacturing plants. We have an on-line inventory tracking
system, which enables us to identify, reserve and ship inventory quickly from our locations in
response to customer orders. Sales and Marketing We employed approximately 285 sales and marketing personnel at December 31, 2004, of whom
approximately two-thirds were in field sales and one-third were customer service representatives.
Sales and marketing personnel are located in most of our service/distribution centers. We produce
product catalogs and promotional materials that illustrate certain construction techniques in which
our products can be used to solve typical construction problems. We promote our products through
seminars and other customer education efforts and work directly with architects and engineers to
secure the use of our products whenever possible. We consider our engineers to be an integral part of the sales and marketing effort. Our
engineers have developed proprietary software applications to conduct extensive pre-testing on both
new products and construction projects. Customers We
have over 4,000 customers, of which approximately 50% purchase our products for resale
and 50% are end users. Our customer base is geographically diverse, with no customer accounting for
more than 4% of our net sales in 2004. Our customers consist of distributors, rebar fabricators,
precast and prestressed concrete manufacturers, brick and concrete block manufacturers, general
contractors and sub-contractors. Raw Materials Our principal raw materials are steel wire rod, steel hot rolled bar, metal stampings and
flat steel, aluminum sheets and extrusions, plywood, cement and cementitious ingredients, liquid
chemicals, zinc, plastic resins and injection-molded plastic parts. We currently purchase materials
from over 800 vendors and are not dependent on any single vendor or small group of vendors for any
significant portion of our raw material purchases. Steel, in its various forms, constitutes
22.5% of our cost of sales. In 2004, we faced rapidly rising steel prices. We
responded by increasing our sales prices and intend to increase prices in response to rising steel
and other costs. Competition Our industry is highly competitive in most product categories and geographic regions. We
compete with a limited number of full-line national manufacturers of concrete accessories, concrete
forming systems and paving products, and a much larger number of regional manufacturers and
manufacturers with limited product lines. We believe competition in our industry is largely based
on, among other things, price, quality, breadth of product lines, distribution capabilities
(including quick 4




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delivery times), and customer service. Due primarily to factors such as freight
rates, quick delivery times and customer preference for local suppliers, some local or regional
manufacturers and suppliers may have a competitive advantage over us in a given region. We believe
the size, breadth, and quality of our product lines provide us with advantages of scale in both
distribution and production relative to our competitors. Trademarks and Patents We sell most products under the registered trade names Dayton Superior®,
Dayton/Richmond®, Symons®, Aztec®, BarLock®, Conspec®, Edoco®, Dur-O-Wal® and American Highway
Technology®, which we believe are widely recognized in the construction industry and, therefore,
are important to our business. Although some of our products (and components of some products) are
protected by patents, we do not believe these patents are material to our business. At December 31,
2004, we had approximately 190 trademarks and 150 patents. Employees As of December 31, 2004, we employed approximately 700 salaried and 1,000 hourly
personnel, of whom approximately 600 of the hourly personnel and 4 of the salaried personnel are
represented by labor unions. Employees at our Miamisburg, Ohio; Parsons, Kansas; Des Plaines,
Illinois; New Braunfels, Texas; Tremont, Pennsylvania; Long Beach, California; Santa Fe Springs,
California; City of Industry, California, and Aurora, Illinois facilities are covered by collective
bargaining agreements. One collective bargaining agreement will expire in 2005. We believe we have
good employee and labor relations. Seasonality Our operations are seasonal in nature, with approximately 55% of our sales historically
occurring in the second and third quarters. Working capital and borrowings under the revolving
credit facility fluctuate with sales volume, such that our peak revolving credit facility
borrowings are generally in the late second quarter or early third quarter. Backlog We typically ship most of our products, other than paving products and most specialty
forming systems, within one week and often within 24 hours after we receive the order. Other
product lines, including paving products and specialty forming systems, may be shipped up to six
months after we receive the order, depending on our customers needs. Accordingly, we do not
maintain significant backlog, and backlog as of any particular date has not been representative of
our actual sales for any succeeding period. Risks Related To Our Business Cyclicality of construction industryThe construction industry is cyclical, and a continued
significant downturn in the construction industry could further decrease our revenues and profits
and adversely affect our financial condition. Because our products primarily are used in
infrastructure construction and non-residential building construction, our sales and earnings are
strongly influenced by construction activity, which historically has been cyclical. Construction
activity can decline because of many factors we cannot control, such as:  
    weakness in the general economy;
    a decrease in government spending at the federal and state levels;
    interest rate increases; and
    changes in banking and tax laws. 5




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Substantial leverageOur substantial indebtedness could adversely affect our financial health and
prevent us from fulfilling our obligations. We have a significant amount of indebtedness and debt
service requirements. The following shows certain important credit information as of December 31,
2004: Total long-term indebtedness, including current maturities
    
    $ 377.6 millionShareholders deficit
    
    $ 55.5 million
 Our substantial indebtedness could have important consequences. For example, it could:  
    make it more difficult for us to satisfy our obligations under outstanding indebtedness;
    increase our vulnerability to general adverse economic and industry conditions;
    require us to dedicate a substantial portion of our cash flow from operations to payments on our
indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital
expenditures, and other general corporate purposes;
    limit our flexibility in planning for, or reacting to, changes in our business and the industry
in which we operate;
    place us at a disadvantage to our competitors that have less debt; and
    limit, along with other restrictive covenants in our indebtedness agreements, among other
things, our ability to borrow additional funds. In addition, failing to comply with those covenants could result in an event of default, which, if
not cured or waived, could have a material adverse effect on our business, financial condition and
results of operations. In addition, we may be able to incur additional indebtedness under the terms
of our indebtedness. If new debt is added to our current debt levels, the related risks that we,
and they, now face could increase. Net lossesOur business has experienced net losses over the past several years. We reported net
losses of approximately $20.3 million in 2002, $17.1 million in 2003 and $48.4 million in 2004. Our
results of operations will continue to be affected by events and conditions both within and beyond
our control, including competition, economic, financial, business and other conditions. Therefore,
we cannot offer assurances you that we will not continue to incur net losses in the future. Price increases and availabilityWe may not be able to pass on the cost of commodity price
increases to our customers. Steel, in its various forms, is our principal raw material,
constituting 22.5% of our cost of sales in 2004. Historically, steel prices have
fluctuated, and we faced rapidly rising steel prices in 2004. Any decrease in our volume of steel
purchases could affect our ability to secure volume purchase discounts that we have obtained in the
past. Additionally, the overall increase in energy costs, including natural gas and petroleum
products, has adversely impacted our overall operating costs in the form of higher raw material,
utilities, and freight costs. We cannot offer assurances that we will be able to pass these cost
increases on to our customers. Weather-related risksWeather causes our operating results to fluctuate and could adversely affect
the demand for our products and decrease our revenues. Our operating results tend to fluctuate
from quarter to quarter because, due to weather, the construction industry is seasonal in most of
North America, which is where almost all of our sales are made. Demand for our products generally
is higher in the spring and summer than in the winter and late fall. As a result, our first quarter
net sales typically are the lowest of the year. Our net sales and operating income in the fourth
quarter also generally are less than in the second and third quarters. In addition, severe weather
could adversely affect our business, financial condition and results of operation. Adverse weather,
such as unusually prolonged
periods of cold, rain, blizzards, hurricanes and other severe weather patterns, could delay or halt
construction activity over wide regions of the country. For example, a severe winter, such as the
2002-2003 winter, could lead to reduced construction activity and thus magnify the seasonal decline
in our 6




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revenues and earnings during the winter months. Although weather conditions have not
historically had a material long-term effect on our results of operations, sustained extreme
adverse weather conditions could have a material adverse effect on our business, financial
condition and results of operations. Chemical products competitionWe are significantly smaller than some of our construction chemical
competitors. In the sale of some construction chemicals, we must compete with a number of national
and international companies that are many times larger than we are in terms of total assets and
annual revenues. Because our resources are more limited, we may not be able to compete effectively
and profitably on a sustained basis in the markets in which those competitors are actively present. Potential exposure to environmental liabilitiesWe may be liable for costs under certain
environmental laws, even if we did not cause any environmental problems. Changes in environmental
laws or unexpected investigations could adversely affect our business. Our business and our
facilities are subject to a number of federal, state and local environmental laws and regulations,
which govern, among other things, the discharge of hazardous materials into the air and water as
well as the handling, storage and disposal of these materials. Pursuant to certain environmental
laws, a current or previous owner or operator of land may be liable for the costs of investigation
and remediation of hazardous materials at the property. These laws typically impose liability
whether or not the owner or operator knew of, or was responsible for, the presence of any hazardous
materials. Persons who arrange (as defined under these statutes) for the disposal or treatment of
hazardous materials also may be liable for the costs of investigation and remediation of these
substances at the disposal or treatment site, regardless of whether the affected site is owned or
operated by them. We believe we are in material compliance with applicable environmental laws.
However, because we own and operate a number of facilities where industrial activities have been
historically conducted and because we arrange for the disposal of hazardous materials at many
disposal sites, we may incur costs for investigation and remediation, as well as capital costs
associated with compliance with these laws. These environmental costs have not been material in the
past and are not expected to be material in the future. Nevertheless, more stringent environmental
laws as well as more vigorous enforcement policies or discovery of previously unknown conditions
requiring remediation could impose material costs and liabilities on us, which could have a
material adverse effect on our business, financial condition and results of operations. Consolidation of our customersIncreasing consolidation of our customers may negatively affect our
earnings. We believe that there is an increasing trend among our distributors to consolidate into
larger entities. As our customers increase in size and market power, they may be able to exert
pressure on us to reduce prices or create price competition by dealing more readily with our
competitors. If the consolidation of our customers does result in increased price competition, our
sales and profit margins may be adversely affected. Increased dependence on foreign operationsWe operate a manufacturing facility in Reynosa Mexico
and have increased our purchasing of raw materials and finished goods from foreign sources.
Political and economic conditions in foreign countries could adversely affect us. The success of
our operations in Mexico will depend on numerous factors, many of which will be beyond our control,
including our inexperience with operating abroad, general economic conditions, currency
fluctuations, restrictions on the repatriation of assets, compliance with foreign laws and
standards and political risks. Product mix profit marginsA change in the mix of products we sell could negatively affect our
earnings. Some of our products historically have had narrow profit margins. If the mix of products
we sell shifts to include a larger percentage of products with narrow profit margins, our earnings
may be negatively affected. Risks associated with acquisitionsWe may complete acquisitions that disrupt our business. If we
make acquisitions, we could do any of the following, which could adversely affect our business,
financial condition and results of operations:  
    incur substantial additional debt, which may reduce funds available for operations and future
opportunities and increase our vulnerability to adverse general economic and industry conditions
and competition; 7




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
    assume contingent liabilities; or
    take substantial charges to write off goodwill and other intangible assets. In addition, acquisitions can involve other risks, such as:  
    difficulty in integrating the acquired operations, products and personnel into our existing
business;
    costs which are greater than anticipated or cost savings which are less than anticipated;
    diversion of management time and attention; and
    adverse effects on existing business relationships with our suppliers and customers and the
suppliers and customers of the acquired business. CompetitionThe markets in which we sell our products are highly competitive. We compete against
some national and many regional rivals. The uniformity of products among competitors results in
substantial pressure on pricing and profit margins. As a result of these pricing pressures, we may
in the future experience reductions in the profit margins on our sales, or we may be unable to pass
any cost increases on to our customers. We cannot assure you that we will be able to maintain or
increase our current market share of our products or compete successfully in the future. Control by OdysseyWe are controlled by Odyssey Investment Partners, LLC. Odyssey and its
co-investors directly or indirectly own 92% of our outstanding common shares and, therefore, have
the power, subject to certain exceptions, to control our affairs and policies. They also control
the election of directors, the appointment of management, the entering into of mergers, sales of
substantially all of our assets and other extraordinary transactions. The directors have authority,
subject to the terms of our debt, to issue additional stock, implement stock repurchase programs,
declare dividends and make other decisions about our capital stock. The interests of Odyssey and
its affiliates could conflict with the interests of our note holders. For example, if we encounter
financial difficulties or are unable to pay our debts as they mature, the interests of the Odyssey
investors, as holders of our equity, might conflict with the interests of our note holder.
Affiliates of Odyssey may also have an interest in pursuing acquisitions, divestitures, financings
or other transactions that, in their judgment, could enhance their equity investments, even though
these transactions might involve risks to the holders of our notes. Risks associated with our workforceWe depend on our highly trained employees, and any work
stoppage or difficulty hiring similar employees would adversely affect our business. We could be
adversely affected by a shortage of skilled employees. As of December 31, 2004, approximately 35%
of our employees were unionized. We are subject to several collective bargaining agreements with
employees at our Miamisburg, Ohio; Parsons, Kansas; Des Plaines, Illinois; New Braunfels, Texas;
Tremont, Pennsylvania; Long Beach, California; Santa Fe Springs, California; City of Industry,
California, and Aurora, Illinois facilities. Although we believe that our relations with our
employees are good, we cannot offer assurances that we will be able to negotiate a satisfactory
renewal of these collective bargaining agreements or that our employee relations will remain
stable. Any shortage of labor could have a material adverse effect on our business, financial
condition and results of operations. Dependence on key personnelIf we lose our senior management, our business may be adversely
affected. The success of our business is largely dependent on our senior managers, as well as on
our ability to attract and retain other qualified personnel. We cannot assure you that we will be
able to attract and retain the personnel necessary for the development of our business. The loss of
the services of key personnel or the failure to attract additional personnel as required could have
a material adverse effect on our business, financial condition and results of operations. We do not
currently maintain key person life insurance on any of our key employees. 8




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Restrictive covenantsOur revolving credit facility and our note indentures contain various
covenants, which limit the discretion of our management in the operation of our business including,
among other things, our ability to:  
    incur additional debt;
    pay dividends or distributions on our capital stock or repurchase our capital stock;
    enter into guarantees;
    issue preferred stock of our subsidiary;
    restrict the rights of our subsidiary to make distributions to us;
    make certain investments;
    create liens to secure debt;
    enter into transactions with affiliates;
    merge or consolidate with another company;
    transfer and sell assets;
    change the terms of certain of our debt; and
    create new subsidiaries. In addition, if we fail to comply with our revolving credit facility, our note indentures, or any
other subsequent financing agreements, a default could occur. Such a default could allow the
lenders, if the agreements so provide, to accelerate the related debt as well as any other debt to
which a cross-acceleration or cross-default provision applies. In addition, the lenders could
terminate any commitments they had made to supply us with further funds. 9




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Item 2. Properties. Our
corporate headquarters is located in leased facilities in Dayton, Ohio. We believe
our facilities provide adequate manufacturing and distribution capacity for our needs. We also
believe all of the leases were entered into on market terms. Our other principal facilities as of
December 31, 2004 are located throughout North America, as follows: Size
    
    Lease ExpirationLocation
    
    Use
    
    Leased/ Owned
    
    (Sq. Ft.)
    
    DateBirmingham, Alabama
    
    Manufacturing/Distribution
    
    Leased
    
    
    287,000
    
    
    December 2021Kankakee, Illinois
    
    Manufacturing/Distribution
    
    Leased
    
    
    172,954
    
    
    December 2007Des Plaines, Illinois
    
    Manufacturing/Distribution
    
    Owned
    
    
    171,650Miamisburg, Ohio
    
    Manufacturing/Distribution
    
    Owned
    
    
    126,000Fontana, California
    
    Manufacturing/Distribution
    
    Leased
    
    
    114,000
    
    
    February 2006Reynosa, Mexico
    
    Manufacturing/Distribution
    
    Leased
    
    
    110,000
    
    
    July 2006Aurora, Illinois
    
    Manufacturing/Distribution
    
    Owned
    
    
    109,000Parsons, Kansas
    
    Manufacturing/Distribution
    
    Owned
    
    
    98,250New Braunfels, Texas
    
    Manufacturing/Distribution
    
    Owned
    
    
    89,600Tremont, Pennsylvania
    
    Manufacturing/Distribution
    
    Owned
    
    
    86,000Parker, Arizona
    
    Manufacturing/Distribution
    
    Leased
    
    
    60,000
    
    
    Month to MonthModesto, California
    
    Manufacturing/Distribution
    
    Leased
    
    
    54,100
    
    
    October 2007Atlanta, Georgia
    
    Service/Distribution
    
    Leased
    
    
    49,392
    
    
    August 2006Toronto, Ontario
    
    Manufacturing/Distribution
    
    Leased
    
    
    45,661
    
    
    February 2007Grand Prairie, Texas
    
    Service/Distribution
    
    Leased
    
    
    45,000
    
    
    June 2010Seattle, Washington
    
    Service/Distribution
    
    Leased
    
    
    40,640
    
    
    June 2006Oregon, Illinois
    
    Service/Distribution
    
    Owned
    
    
    39,000Kansas City, Kansas
    
    Manufacturing/Distribution
    
    Owned
    
    
    33,000Folcroft, Pennsylvania
    
    Service/Distribution
    
    Owned
    
    
    32,000
 
 Item 3. Legal Proceedings. During the ordinary course of our business, we are from time to time threatened with, or
may become a party to, legal actions and other proceedings. While we are currently involved in
various legal proceedings, we believe the results of these proceedings will not have a material
effect on our business, financial condition or results of operations. We believe that our potential
exposure to these legal actions is adequately covered by product and general liability insurance,
and, in some instances, by indemnification arrangements. 
 Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. 
 Part II 
 Item 5. Market for Registrants Common Equity and Related Stockholder Matters and Issuer
Purchases of Equity Securities . There is no established public trading market for our common shares. As of December 31,
2004, there were 36 holders of our common shares. 10




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##### Table of Contents



Item 6. Selected Financial Data. The following table sets forth selected historical consolidated financial information as of
and for each of the years in the five-year period ended December 31, 2004. The selected historical
financial information as of December 31, 2000 has been derived from our consolidated financial
statements, which were audited by Arthur Andersen LLP, our former independent public accountants.
The selected historical financial information as of December 31, 2001, 2002, 2003, and 2004 and for
each of the years in the five-year period ended December 31, 2004 have been derived from our
consolidated financial statements, which have been audited by Deloitte & Touche LLP. Our audited
consolidated financial statements for the three years ended December 31, 2004 are included
elsewhere herein. You should read the following table together with the Managements Discussion
and Analysis of Financial Condition and Results of Operations section below and our consolidated
financial statements and their related notes included elsewhere herein. Year Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(dollars in thousands)Statement of Operations Data:Net sales
    
    $
    418,639
    
    
    $
    379,457
    
    
    $
    400,046
    
    
    $
    417,011
    
    
    $
    388,691Cost of sales
    
    
    310,891
    
    
    
    277,678
    
    
    
    273,462
    
    
    
    281,527
    
    
    
    253,900Gross profit
    
    
    107,748
    
    
    
    101,779
    
    
    
    126,584
    
    
    
    135,484
    
    
    
    134,791Selling, general and administrative
expenses
    
    
    89,735
    
    
    
    84,543
    
    
    
    88,929
    
    
    
    93,746
    
    
    
    89,410Facility closing and severance
expenses (1)
    
    
    2,036
    
    
    
    2,294
    
    
    

    5,399
    
    
    
    7,360
    
    
    
    2,517Amortization of goodwill and
intangibles
    
    
    989
    
    
    
    944
    
    
    
    603
    
    
    
    3,912
    
    
    
    2,508Income from operations
    
    
    14,988
    
    
    
    13,998
    
    
    
    31,653
    
    
    
    30,466
    
    
    
    40,356Interest expense
    
    
    47,030
    
    
    
    40,008
    
    
    
    34,039
    
    
    
    35,074
    
    
    
    22,671Interest income
    
    
    (559
    )
    
    
    (53
    )
    
    
    (72
    )
    
    
    (50
    )
    
    
    (97
    )Lawsuit judgment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,341
    (2)Loss on early extinguishment of
long-term debt
    
    
    842
    (3)
    
    
    2,480
    (4)
    
    
    
    
    
    
    
    
    
    
    7,761
    (5)Loss (gain) on disposals of
property, plant and equipment
    
    
    (248
    )
    
    
    (636
    )
    
    
    1,115
    
    
    
    (7
    )
    
    
    130Other (income) expense
    
    
    (134
    )
    
    
    20
    
    
    
    80
    
    
    
    102
    
    
    
    163Loss before provision (benefit) for
income taxes and cumulative effect
of change in accounting principle
    
    
    (31,943
    )
    
    
    (27,821
    )
    
    
    (3,509
    )
    
    
    (4,653
    )
    
    
    (5,613
    )Provision (benefit) for income taxes
    
    
    16,427
    (6)
    
    
    (10,713
    )
    
    
    (386
    )
    
    
    (1,179
    )
    
    
    (1,478
    )Loss before cumulative effect of
change in accounting principle
    
    
    (48,370
    )
    
    
    (17,108
    )
    
    
    (3,123
    )
    
    
    (3,474
    )
    
    
    (4,135
    )Cumulative effect of change in
accounting principle, net of income
tax benefit
    
    
    
    
    
    
    
    
    
    
    (17,140
    )(7)
    
    
    
    
    
    
    Net loss
    
    
    (48,370
    )
    
    
    (17,108
    )
    
    
    (20,263
    )
    
    
    (3,474
    )
    
    
    (4,135
    )Dividends on Company-obligated
mandatorily redeemable convertible
trust preferred securities, net of
income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    583Net loss available to common
shareholders
    
    $
    (48,370
    )
    
    $
    (17,108
    )
    
    $
    (20,263
    )
    
    $
    (3,474
    )
    
    $
    (4,718
    )
 11




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##### Table of Contents



Year Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(dollars in thousands)Other Financial Data:Depreciation and amortization
    
    $
    31,018
    
    
    $
    26,878
    
    
    $
    21,453
    
    
    $
    22,202
    
    
    $
    15,121Property, plant and equipment
additions, net
    
    
    4,586
    
    
    
    6,935
    
    
    
    9,267
    
    
    
    9,755
    
    
    
    11,483Rental equipment additions, net
    
    
    (6,273
    )
    
    
    (12,152
    )
    
    
    (17,230
    )
    
    
    3,191
    
    
    
    801Balance Sheet Data (at period end):Working capital
    
    $
    95,283
    
    
    $
    71,594
    
    
    $
    65,751
    
    
    $
    56,943
    
    
    $
    60,868Goodwill and intangibles
    
    
    114,828
    
    
    
    120,117
    
    
    
    115,733
    
    
    
    136,626
    
    
    
    97,044Total assets
    
    
    394,138
    
    
    
    393,384
    
    
    
    373,971
    
    
    
    396,843
    
    
    
    335,418Long-term debt (including current
portion)
    
    
    377,644
    
    
    
    341,890
    
    
    
    299,536
    
    
    
    291,946
    
    
    
    245,925Shareholders equity (deficit)
    
    
    (55,530
    )
    
    
    (7,267
    )
    
    
    (4,241
    )
    
    
    16,721
    
    
    
    13,196
   (1)
    
    From 2000 through 2004, we approved and implemented several plans to exit manufacturing and
distribution facilities and reduce overall headcount to keep our cost structure aligned with
our net sales. We describe the facility closing and severance expenses relating to these
consolidation efforts in Managements Discussion and Analysis of Financial Condition and
Results of OperationsFacility Closing and Severance Expenses.(2)
    
    We were a defendant in a civil suit brought by EFCO Corp., a competitor of ours in one
portion of our business. In October 2000, we satisfied a judgment of $14.1 million,
post-judgment interest of $1.1 million, and defense costs of $0.1 million, by payment to EFCO
from our cash on hand and from our revolving credit facility.(3)
    
    On January 30, 2004, we established an $80.0 million senior secured revolving credit
facility, which was used to refinance our previous $50.0 million revolving credit facility.
This facility was subsequently increased to $95.0 million in July 2004. As a result of the
transaction, we incurred a loss on the early extinguishment of long-term debt of $0.8 million,
due to the expensing of deferred financing costs related to the previous revolving credit
facility.(4)
    
    On June 9, 2003, we completed an offering of $165.0 million of senior second secured notes
(the Senior Notes) in a private placement. The proceeds of the offering of the Senior Notes
were $157.0 million and were used to repay our acquisition credit facility, term loan tranche
A, term loan tranche B, and a portion of the revolving credit facility. As a result of the
transactions, we incurred a loss on the early extinguishment of long-term debt of $2.5
million, due to the expensing of deferred financing costs. 12




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##### Table of Contents



(5)
    
    During June 2000, in connection with our recapitalization, we refinanced our then-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 we recorded a loss in 2000
of $7.8 million, comprised of the following: Expense deferred financing costs on previous long-term debt
    
    $
    2.7Prepayment premium on extinguishments of long-term debt and
interest rate swap agreements
    
    
    0.5Expense issuance costs on company-obligated mandatorily redeemable
convertible trust Preferred securities
    
    
    1.7Prepayment premium on conversion of company-obligated mandatorily
redeemable convertible trust preferred securities into debentures
    
    
    2.1Financing cost for unused long-term debt commitment
    
    
    0.8$
    7.8
  (6)
    
    In the fourth quarter of 2004, we recorded a non-cash valuation allowance for our net
deferred tax assets related to net operating loss carryforwards as a result of adherence to
FAS 109, as our estimated levels of future taxable income are less than the amount needed to
realize the deferred tax asset related to the carryforwards. Future changes in these
estimates could result in a non-cash increase or decrease to net income.(7)
    

    We adopted SFAS No. 142 effective January 1, 2002. As a result of adopting SFAS No. 142, we
recorded a non-cash charge in 2002 of $17.1 million ($19.9 million of goodwill, less an income
tax benefit of $2.8 million), which is reflected as a cumulative effect of change in
accounting principle. This amount does not affect our ongoing operations. The goodwill arose
from the acquisitions of Dur-O-Wal in 1995, Southern Construction Products in 1999, and
Polytite in 2000, all of which manufacture and sell metal accessories used in masonry
construction. The masonry products market has experienced weaker markets and significant price
competition, which has had a negative impact on the product lines earnings and fair value. 13




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations. Overview Founded in 1924, we believe we are the largest North American manufacturer and
distributor of metal accessories and forms used in concrete construction and a leading manufacturer
of metal accessories used in masonry construction in terms of revenues. Although almost all of our
products are used in concrete or masonry construction, the function and nature of the products
differ widely. We have expanded our business through acquisitions. On July 29, 2003, we completed
the acquisition of substantially all of the fixed assets and rental fleet assets of Safway Formwork
Systems, L.L.C. (Safway Formwork) for $20.0 million. Safway Formwork was a subsidiary of Safway
Services, Inc., whose ultimate parent is ThyssenKrupp AG, or TK, a publicly traded company in
Germany. Effective December 31, 2004, all of Dayton Superiors wholly owned domestic subsidiaries
(consisting of Symons Corporation; Aztec Concrete Accessories, Inc.; Dur-O-Wal, Inc.; Trevecca
Holdings, Inc.; Dayton Superior Specialty Chemical Corp.; and Southern Construction Products, Inc.)
were merged into Dayton Superior Corporation. Dayton Superior Corporation is the surviving
corporation in the merger and now directly operates the businesses that were being operated by the
domestic subsidiaries immediately prior to the merger. As a result of the merger, the guarantees by the merged subsidiaries of our Senior Second
Secured Notes and the Senior Subordinated Notes and the pledge of the capital stock of certain of
the merged subsidiaries that secured the Credit Agreement and the Senior Second Secured Notes
immediately prior to the merger ceased to exist, effective December 31, 2004. As the surviving
corporation in the merger, however, Dayton Superior, which is the issuer of the Senior Second
Secured Notes, the Senior Subordinated Notes and the borrower under the Credit Agreement, succeeded
to all of the assets and liabilities of each of the merged subsidiaries that had been guarantors of
the notes and Credit Agreement. Effective January 1, 2004, the Company changed its financial reporting to three segments to
monitor gross profit by sales type: product sales, rental revenue, and used rental equipment
sales. These types of sales are differentiated by their source and gross margin percents of sales.
Accordingly, this segmentation provides information for decision-making and resource allocation.
Product sales represent sales of new products carried in inventories on the balance sheet. Cost of
goods sold for product sales include material, manufacturing labor, overhead costs, and freight.
Rental revenues represent the leasing of the rental equipment and are recognized ratably over the
lease term. Cost of goods sold for rental revenues includes depreciation of the rental equipment,
maintenance of the rental equipment, and freight. Sales of used rental equipment represent sales
of the rental equipment after a period of generating rental revenue. Cost of goods sold for sales
of used rental equipment consists of the net book value of the rental equipment. Product sales consist of:  
    Concrete accessories,which are used for connecting forms for poured-in-place
concrete walls, anchoring or bracing for walls and floors, supporting bridge framework and
positioning steel reinforcing bars, and include products which remain in place at the
convenience of the contractors.
    Masonry products,which are placed between layers of brick and concrete blocks
and covered with mortar to provide additional strength to walls.
    Paving products,which are used in the construction and rehabilitation of
concrete roads, highways and airport runways to extend the life of the pavement, and
include products which remain in place at the convenience of the contractors. Welded
dowel assemblies are a paving product used to transfer dynamic loads between two adjacent
slabs of concrete roadway. Metal 14




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##### Table of Contents



dowels are part of a dowel basket design that is imbedded in two adjacent slabs to transfer
the weight of vehicles as they move over a road.
    Chemicals,which include a broad spectrum of chemicals for use in concrete
construction, including form release agents, bond breakers, curing compounds, liquid
hardeners, sealers, water repellents, bonding agents, grouts and epoxies, and other
chemicals used in the pouring, placement, and stamping of concrete as well as curing
compounds used in concrete road construction. Rental Revenues and Sales of Used Rental Equipment consist primarily of:  
    Concrete Forming Systems. Concrete forming systems are reusable, engineered
modular forms which hold liquid concrete in place on concrete construction jobs
while it hardens. Standard forming systems are made of steel and plywood and are
used in the creation of concrete walls and columns. Specialty forming systems
consist primarily of steel forms that are designed to meet architects specific
needs for concrete placements. Both standard and specialty forming systems are
rented.
    Shoring Systems.Shoring systems, including aluminum beams and joists, post
shores and shoring frames are used to support deck and other raised forms while
concrete is being poured.
    Tilt-Up Construction Products.Tilt-up construction products include a complete
line of inserts, reusable lifting hardware and adjustable beams used in the tilt-up
method of construction, in which the concrete floor slab is used as part of a form
for casting the walls of a building. After the cast walls have hardened on the floor
slab, a crane is used to tilt-up the walls, which then are braced in place until
they are secured to the rest of the structure. Tilt-up construction generally is
considered to be a faster method of constructing low-rise buildings than
conventional poured-in-place concrete construction. Safway Formwork Acquisition On July 29, 2003, we completed the acquisition of substantially all of the fixed assets and
rental fleet assets of Safway Formwork Systems, L.L.C. (Safway) for $20.0 million. Safway was a
subsidiary of Safway Services, Inc., whose ultimate parent is ThyssenKrupp AG, or TK, a publicly
traded company in Germany. The purchase price was comprised of $13.0 million in cash and a $12.0
million non-interest bearing (other than in the case of default) senior unsecured note with an
initial present value of $7.0 million payable to the seller. The note is being accreted to the face
value at 14.5% using the effective interest method and is reflected as interest expense. The book
value of the note at December 31, 2004 was $6.3 million. The first $250,000 installment payment on
the note was paid on September 30, 2003, and an additional $750,000 installment payment was due on
December 31, 2003. The settlement of normal purchase price adjustments resulted in a $417,000
reduction in the December payment to $333,000. A subsequent purchase price adjustment of $240,000
was paid in March 2004 and the scheduled $1.0 million payment was paid in September 2004. Annual
payments of $1.0 million are due on September 30 of each year from 2005 through 2008, with a final
balloon payment of $6.0 million due on December 31, 2008. We also exercised our option to acquire additional rental equipment from Safway. The Company
issued a non-interest bearing note with an initial present value of $1.6 million and a book value
of $1.5 million as of December 31, 2004. The note is being accreted to the face value of $2.0
million at 6.0% using the effective interest method and is reflected as interest expense. Minimum
future payments on the note are $282,000 in 2005, $398,000 in 2006, $563,000 in 2007, and $464,000
in 2008. Payments may be accelerated if certain revenue targets are met. Safway sold and rented concrete forming and shoring systems, principally European style clamping
systems designed and manufactured by TKs affiliated European concrete forming and shoring
business, to a national customer base. For the period from October 1, 2002 through July 25, 2003,
Safway Formwork had revenues of $17.0 million. By acquiring the Safway rental fleet assets, which
had a gross book value at July 25, 2003 of $41.8 million, we increased our presence in the concrete
forming
and shoring systems business and expanded our product offerings by advancing our plan to continue 15




---



##### Table of Contents



augmenting our existing rental fleet with European systems. As part of the asset acquisition, we
entered into an exclusive manufacturing and distribution agreement with certain of TKs affiliates,
under which we were granted the exclusive right to manufacture, design, market, offer, sell and
distribute certain European formwork products within North America. The acquisition has been
accounted for as a purchase, and the results of Safway Formwork have been included in our
consolidated financial statements from the date of acquisition. The purchase price has been
allocated based on the fair value of the assets acquired and liabilities assumed. Facility Closing and Severance Expenses During 2000, as a result of an acquisition, we approved and began implementing a plan to
consolidate certain of our existing operations. Activity for this plan for the years ended December
31, 2002 and 2003, as there was no activity for 2004, was as follows: InvoluntaryTermination
    
    
    Lease Termination
    
    
    Relocation of
    
    
    Other Post-ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    Total(Amounts in thousands)Balance, January 1, 2002
    
    $
    
    
    
    $
    490
    
    
    $
    
    
    
    $
    177
    
    
    $
    667Facility closing and
severance expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Items charged against reserve
    
    
    
    
    
    
    (221
    )
    
    
    
    
    
    
    (84
    )
    
    
    (305
    )Balance, December 31, 2002
    
    
    
    
    
    
    269
    
    
    
    
    
    
    
    93
    
    
    
    362Facility closing and
severance expenses
    
    
    
    
    
    
    (212
    )
    
    
    
    
    
    
    
    
    
    
    (212
    )Items charged against reserve
    
    
    
    
    
    
    (57
    )
    
    
    
    
    
    
    (93
    )
    
    
    (150
    )Balance, December 31, 2003
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 During 2001, we approved and began implementing a plan to exit certain of our manufacturing
and distribution facilities and to reduce overall headcount by approximately 500 employees, in
order to keep our cost structure in alignment with net sales. Activity for this plan for the years
ended December 31, 2002, 2003, and 2004 was as follows: InvoluntaryTermination
    
    
    Lease Termination
    
    
    Relocation of
    
    
    Other Post-ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    Total(Amounts in thousands)Balance, January 1, 2002
    
    $
    931
    
    
    $
    524
    
    
    $
    
    
    
    $
    786
    
    
    $
    2,241Facility closing and
severance expenses
    
    
    
    
    
    
    
    
    
    
    108
    
    
    
    
    
    
    
    108Items charged against reserve
    
    
    (931
    )
    
    
    (314
    )
    
    
    (108
    )
    
    
    (475
    )
    
    
    (1,828
    )Balance, December 31, 2002
    
    
    
    
    
    
    210
    
    
    
    
    
    
    
    311
    
    
    
    521Facility closing and
severance expenses
    
    
    
    
    
    
    379
    
    
    
    
    
    
    
    
    
    
    
    379Items charged against reserve
    
    
    
    
    
    
    (175
    )
    
    
    
    
    
    
    (311
    )
    
    
    (486
    )Balance, December 31, 2003
    
    
    
    
    
    
    414
    
    
    
    
    
    
    
    
    
    
    
    414Facility closing and
severance expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Items charged against reserve
    
    
    
    
    
    
    (414
    )
    
    
    
    
    
    
    
    
    
    
    (414
    )Balance, December 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 16




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##### Table of Contents



During 2002, we approved and began implementing a plan to exit certain of our distribution
facilities and to reduce overall headcount by approximately 200 employees, in order to keep our
cost structure in alignment with net sales. Activity for this plan for the years ended December 31,
2002, 2003, and 2004 was as follows: InvoluntaryTermination
    
    
    Lease Termination
    
    
    Relocation of
    
    
    Other Post-ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    Total(Amounts in thousands)Facility closing and
severance expenses
    
    $
    4,441
    
    
    $
    650
    
    
    $
    
    
    
    $
    200
    
    
    $
    5,291Items charged against reserve
    
    
    (2,029
    )
    
    
    (566
    )
    
    
    
    
    
    
    (200
    )
    
    
    (2,795
    )Balance, December 31, 2002
    
    
    2,412
    
    
    
    84
    
    
    
    
    
    
    
    
    
    
    
    2,496Facility closing and
severance expenses
    
    
    202
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    191Items charged against reserve
    
    
    (2,414
    )
    
    
    (73
    )
    
    
    
    
    
    
    
    
    
    
    (2,487
    )Balance, December 31, 2003
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200Facility closing and
severance expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Items charged against reserve
    
    
    (200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200
    )Balance, December 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 During 2003, we approved and began implementing a plan to exit certain of our distribution
facilities and to reduce overall headcount by approximately 120 employees, in order to keep our
cost structure in alignment with net sales. Activity for this plan for the years ended December 31,
2003, and 2004 was as follows: InvoluntaryTermination
    
    
    Lease Termination
    
    
    Relocation of
    
    
    Other Post-ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    Total(Amounts in thousands)Facility closing and
severance expenses
    
    $
    988
    
    
    $
    27
    
    
    $
    
    
    
    $
    921
    
    
    $
    1,936Items charged against reserve
    
    
    (988
    )
    
    
    (27
    )
    
    
    
    
    
    
    (921
    )
    
    
    (1,936
    )Balance, December 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Facility closing and
severance expenses
    
    
    63
    
    
    
    1
    
    
    
    
    
    
    
    61
    
    
    
    125Items charged against reserve
    
    
    (63
    )
    
    
    (1
    )
    
    
    
    
    
    
    (61
    )
    
    
    (125
    )Balance, December 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 During 2004, we approved and began implementing a plan to exit certain of our distribution
facilities and to reduce overall headcount by approximately 75 employees, in order to keep our cost
structure in alignment with net sales. Activity for this plan for the year ended December 31, 2004
was as follows: InvoluntaryTermination
    
    
    Lease Termination
    
    
    Relocation of
    
    
    Other Post-ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    Total(Amounts in thousands)Facility closing and
severance expenses
    
    $
    611
    
    
    $
    307
    
    
    $
    595
    
    
    $
    398
    
    
    $
    1,911Items charged against reserve
    
    
    (611
    )
    
    
    (187
    )
    
    
    (595
    )
    
    
    (398
    )
    
    
    (1,791
    )Balance, December 31, 2004
    
    $
    
    
    
    $
    120
    
    
    $
    
    
    
    $
    
    
    
    $
    120
 17




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##### Table of Contents



The total expected future expense for commitments under this plan is approximately $500,000
and will be expensed in accordance with SFAS No. 146. Results of Operations The following table summarizes our results of operations as a percentage of net sales for
the periods indicated: Years ended December 31,2004
    
    
    2003
    
    
    2002Product sales
    
    
    83.1
    %
    
    
    80.1
    %
    
    
    80.0
    %Rental revenue
    
    
    10.1
    
    
    
    9.4
    
    
    
    11.1Used rental equipment sales
    
    
    6.8
    
    
    
    10.5
    
    
    
    8.9Net sales
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Product cost of sales
    
    
    76.2
    
    
    
    77.9
    
    
    
    74.0Rental cost of sales
    
    
    83.5
    
    
    
    78.6
    
    
    
    51.7Used rental equipment cost of sales
    
    
    36.6
    
    
    
    32.2
    
    
    
    38.4Cost of sales
    
    
    74.3
    
    
    
    73.2
    
    
    
    68.4Product gross profit
    
    
    23.8
    
    
    
    22.1
    
    
    
    26.0Rental gross profit
    
    
    16.5
    
    
    
    21.4
    
    
    
    48.3Used rental equipment gross profit
    
    
    63.4
    
    
    
    67.8
    
    
    
    61.6Gross profit
    
    
    25.7
    
    
    
    26.8
    
    
    
    31.6Selling, general and administrative expenses
    
    
    21.4
    
    
    
    22.3
    
    
    
    22.2Facility closing and severance expenses
    
    
    0.5
    
    
    
    0.6
    
    
    
    1.3Amortization of intangibles
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2Income from operations
    
    
    3.6
    
    
    
    3.7
    
    
    
    7.9Interest expense
    
    
    11.2
    
    
    
    10.5
    
    
    
    8.5Interest income
    
    
    (0.1
    )
    
    
    
    
    
    
    Loss on early extinguishment of long-term debt
    
    
    0.2
    
    
    
    0.7
    
    
    
    Loss (gain) on disposals of property, plant,
and equipment
    
    
    (0.1
    )
    
    
    (0.2
    )
    
    
    0.3Other expense
    
    
    
    
    
    
    
    
    
    
    Loss before provision (benefit) for income taxes
    
    
    (7.6
    )
    
    
    (7.3
    )
    
    
    (0.9
    )Provision (benefit) for income taxes
    
    
    3.9
    
    
    
    (2.8
    )
    
    
    (0.1
    )Loss before cumulative effect of change in
accounting principle
    
    
    (11.6
    )
    
    
    (4.5
    )
    
    
    (0.8
    )Cumulative effect of change in accounting
principle, net of income tax benefit
    
    
    
    
    
    
    
    
    
    
    (4.3
    )Net loss
    
    
    (11.6
    )%
    
    
    (4.5
    )%
    
    
    (5.1
    )%
 18




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##### Table of Contents



Comparison of Years Ended December 31, 2003 and 2004 Net Sales.Our 2004 net sales were $418.6 million, a 10.3% increase from $379.5 million in
2003. The following table summarizes our net sales by product type for the periods indicated: Years Ended December 31,2004
    
    
    2003(In thousands)Sales
    
    
    %
    
    
    Sales
    
    
    %
    
    
    % ChangeProduct sales
    
    $
    348,036
    
    
    
    83.1
    %
    
    $
    304,101
    
    
    
    80.1
    %
    
    
    14.5
    %Rental revenue
    
    
    42,231
    
    
    
    10.1
    
    
    
    35,633
    
    
    
    9.4
    
    
    
    18.5Used rental equipment sales
    
    
    28,372
    
    
    
    6.8
    
    
    
    39,723
    
    
    
    10.5
    
    
    
    (28.6
    )Net sales
    
    $
    418,639
    
    
    
    100.0
    %
    
    $
    379,457
    
    
    
    100.0
    %
    
    
    10.3
    %
 Product sales increased $44.0 million, or 14.5%, to $348.0 million in 2004 from $304 million in
2003. The increase in sales was due almost entirely to price increases over the last twelve months
as unit volume was virtually flat year over year. Rental revenue increased $6.6 million, or 18.5%, to $42.2 million in 2004, compared to $35.6
million in 2003. The increase was due to the acquisition of Safway, which added approximately $6.3
million. The remaining increase was due to an increase in volume in existing product lines. Used rental equipment sales decreased to $28.4 million in 2004 from $39.7 million in 2003. The
decrease was due to two large transactions in 2003 that did not recur in 2004. Gross Profit.Gross profit for 2004 was $107.8 million, a $6.0 million increase from the $101.8
million for 2003. Gross profit was 25.7% of sales in 2004, decreasing from 26.8% in 2003. Product gross profit was $82.8 million, or 23.8% of product sales, in 2004, compared to $67.2
million, or 22.1% of product sales in 2003. The increase in gross profit dollars was due to higher
sales. The increase in gross profit percent of sales was due to productivity gains, despite flat
unit volume and increases of approximately $27.5 million in steel and other raw material costs. Rental gross profit decreased by $0.6 million to $7.0 million, or 16.5% of rental revenue in 2004
from $7.6 million, or 21.4% of rental revenue in 2003. Higher depreciation expense of $5.0 million
and higher freight costs of $1.8 million, both due to the acquisition of Safway, offset the
increased rental revenue. Gross profit on used rental equipment sales was $18.0 million, or 63.4% of used rental equipment
sales, compared to $27.0 million, or 67.8% of used rental equipment sales, in 2003. The decrease in
gross profit dollars was primarily due to the decreased sales discussed previously. Gross profit
as a percentage of sales, fluctuates based on the age and type of the specific equipment sold and
remained within historical ranges. Operating Expenses.Our selling, general and administrative (SG&A) expenses increased $5.2
million to $89.7 million in 2004 from $84.5 million in 2003, entirely as a result of the
acquisition of Safway. Without Safway, SG&A expense would have declined slightly due to continued
cost controls. Facility closing and severance expenses in 2004 were approximately $2.0 million and approximately
$2.3 million in 2003. Amortization of intangibles increased $0.1 million to $1.0 million in 2004 from $0.9 million in
2003, due to the amortization of intangibles acquired with Safway. 19




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##### Table of Contents



Other Expenses.Interest expense increased to $47.0 million in 2004 from $40.0 million in 2003, due
to higher interest rates on the new Senior Secured Notes issued in June 2003 relative to the
long-term debt it replaced and higher outstanding long-term debt balances, including the note
payable to the seller of Safway, in 2004. In January 2004, we established a new revolving credit facility, which resulted in a loss on early
extinguishment of long-term debt of $0.8 million related to the expensing of deferred financing
costs on the previous revolving credit facility. The issuance of the new Senior Secured Notes in
June 2003 resulted in a loss on extinguishment of long-term debt of $2.5 million, primarily related
to expensing of deferred financing costs on the debt that was repaid with the proceeds. The gain on disposals of property, plant and equipment was $0.3 million in 2004, as compared to
$0.6 million in 2003. The 2004 amount related to real estate disposed due to being redundant with
an acquired Safway leased facility. Loss Before Provision (Benefit) for Income Taxes.The loss before income taxes in 2004 was $31.9
million, as compared to $27.8 million in 2003 due to the factors described above. Provision (Benefit) for Income Taxes.In the fourth quarter of 2004, we recorded a non-cash
valuation allowance for our net operating loss carryforwards as a result of adherence to FAS 109,
as estimated levels of future taxable income are less than the amount needed to realize the
deferred tax asset related to the carryforwards. Tax benefit from current year net operating
losses have been offset by a valuation allowance resulting in no tax benefit being recorded.
Future changes in these estimates could result in a non-cash increase or decrease to net income.
The effective tax rate in 2003 was 38.5%, which is different than the statutory rate primarily due
to state income taxes. Net Loss.The net loss for 2004 was $48.4 million, compared to a loss of $17.1 million in 2003 due
to the factors described above. Comparison of Years Ended December 31, 2002 and 2003 Net Sales.Our
2003 net sales were $379.5 million, a 5.1% decrease from $400.1 million in
2002. The following table summarizes our net sales by product type for the periods indicated: Years Ended December 31,2003
    
    
    2002(In thousands)%Sales
    
    
    %
    
    
    Sales
    
    
    %
    
    
    ChangeProduct sales
    
    $
    304,101
    
    
    
    80.1
    %
    
    $
    320,221
    
    
    
    80.0
    %
    
    
    (5.0
    )%Rental revenue
    
    
    35,633
    
    
    
    9.4
    
    
    
    44,184
    
    
    
    11.1
    
    
    
    (19.4
    )Used rental equipment sales
    
    
    39,723
    
    
    
    10.5
    
    
    
    35,641
    
    
    
    8.9
    
    
    
    11.5Net sales
    
    $
    379,457
    
    
    
    100.0
    %
    
    $
    400,046
    
    
    
    100.0
    %
    
    
    (5.1
    )%
 Product sales decreased $16.1 million, or 5.0%, to $304.1 million in 2003 from $320.2 million in
2002. This decrease was due to a decrease in unit volume, as the construction products markets
were weaker in 2003 compared to 2002. Rental revenue decreased $8.6 million, or 19.4%, to $35.6 million in 2003, compared to $44.2
million in 2002. The acquisition of Safway contributed $5.2 million of rental revenues in the five
months after acquisition. This was more than offset by lower revenues in existing product lines,
due to lower rental rates and, to a lesser extent, unit volume, both due to weaker markets. We
estimate that approximately 80% of the decrease in rental revenues in existing product lines is due
to rates. 20




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##### Table of Contents



Used rental equipment sales increased to $39.7 million in 2003 from $35.6 million in 2002. Safway
contributed $4.4 million with the remaining increase due to customers desiring to increase their
own fleet of rental equipment. Gross Profit.Gross profit for 2003 was $101.8 million, a $24.8 million decrease from the $126.6
million reported for 2002. Gross profit was 26.8% of sales in 2003, decreasing from 31.6% in 2002. Product gross profit was $67.2 million, or 22.1% of product sales, in 2003, compared to $83.3
million, or 26.0% of product sales in 2002. The decrease in percent of product sales was due to
higher costs of steel of approximately $1.8 million, insurance and health care benefits of
approximately $2.5 million, consistent with general market trends, and the negative impact of fixed
costs on lower product sales. Rental gross profit decreased by $13.7 million to $7.6 million, or 21.4% of rental revenue in 2003
from $21.3 million, or 48.3% of rental revenue in 2002. Lower rental revenues and higher
depreciation expense of $4.5 million, of which $2.9 million was due to the acquisition of Safway,
were the causes for the decline. Gross profit on used rental equipment sales was $26.9 million, or 67.8% of used rental equipment
sales, compared to $22.0 million, or 61.6% of used rental equipment sales, in 2002. The increase
in percent of used rental equipment sales was due to older equipment with lower net book value
being sold. Operating Expenses.Our SG&A expenses decreased $4.4 million to $84.5 million in 2003 from $88.9
million in 2002 as a result of the cost reduction initiatives we implemented in 2003 and 2002,
which more than offset the $3.3 million added by the acquisition of Safway. Facility closing and severance expenses in 2003 were approximately $2.3 million and approximately
$5.4 million in 2002. Amortization of intangibles increased $0.3 million to $0.9 million in 2003 from $0.6 million in
2002, due to the amortization of intangibles acquired with Safway. Other Expenses.Interest expense increased to $40.0 million in 2003 from $34.0 million in 2002, due
to higher interest rates on the Senior Secured Notes issued in June 2003 and higher outstanding
long-term debt balances, including the note payable to the seller of Safway, in 2003. The issuance of the Senior
Secured Notes in June 2003 resulted in a loss on extinguishment of
long-term debt of $2.5 million, primarily related to expensing of deferred financing costs on the
debt that was repaid with the proceeds. The gain on disposals of property, plant and equipment was $0.6 million in 2003, as compared to a
loss of $1.1 million in 2002. The 2003 amount related to real estate disposed due to being
redundant with an acquired Safway leased facility. The 2002 amount related to the write-off of
certain assets that were disposed of in conjunction with our facility closing plans. Loss Before Benefit for Income Taxes, and Cumulative Effect of Change in Accounting Principle.The
loss before income taxes and cumulative effect of change in accounting principle in 2003 was $27.8
million, as compared to $3.5 million in 2002. Loss Before Cumulative Effect of Change in Accounting Principle.The effective tax rate in 2003
was 38.5%, which is different than the statutory rate, primarily due to the state income taxes. The
net loss before cumulative effect of change in accounting principle for 2003 was $17.1 million,
compared to a loss of $3.1 million in 2002 due to the factors described above. Cumulative Effect of Change in Accounting Principle.We adopted SFAS No. 142, Goodwill and Other
Intangible Assets, effective January 1, 2002. As a result of adopting SFAS No. 142, we recorded a
non-cash charge in 2002 of $17.1 million ($19.9 million of goodwill, less an income tax benefit of
$2.8 million), which is reflected as a cumulative effect of change in accounting principle. This
amount did not 21




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##### Table of Contents



affect our ongoing operations or our cash flow. The goodwill arose from the acquisitions of
Dur-O-Wal in 1995, Southern Construction Products in 1999, and Polytite in 2000, all of which
manufactured and sold metal accessories used in masonry construction. The masonry products market
had experienced weaker markets and significant price competition, which had a negative impact on
the product lines earnings and fair value. Net Loss.The net loss for 2003 was $17.1 million, compared to a loss of $20.3 million in 2002 due
to the factors described above. Liquidity and Capital Resources Our key statistics for measuring liquidity and capital resources are net cash provided by
operating activities, capital expenditures, and amounts available under our revolving credit
facility. Our capital requirements relate primarily to capital expenditures, debt service and the cost
of acquisitions. Historically, our primary sources of financing have been cash generated from
operations, borrowings under our revolving credit facility and the issuance of long-term debt and
equity. Net cash used in operating activities for 2004 and 2003 was $28.6 million and $32.5 million,
respectively. Net loss after non-cash adjustments for 2004 improved to $12.9 million compared to
$22.4 million in 2003. This was due to the higher gross profit on product sales, partially offset
by higher SG&A and interest expense. The provision (benefit) for income taxes in both 2004 and
2003 was predominantly non-cash. Changes in assets and liabilities resulted in a use of cash of
$15.6 million in 2004 compared to $10.1 million in 2003. This increase was primarily due to an
intentional increase in inventories to take advantage of an opportunistic raw material purchase. Net cash provided by investing activities for 2004 was $1.4 million. Our investing activities
included $28.4 million of proceeds from sales of rental equipment, offset by additions to the
rental fleet of $22.1 million, and net property, plant, and equipment additions of $4.6 million. As of December 31, 2004, our long-term debt consisted of the following: Revolving credit facility, weighted average interest rate of 5.0%
    
    $
    58,800Senior Subordinated Notes, interest rate of 13.0%
    
    
    154,729Debt discount on Senior Subordinated Notes
    
    
    (7,397
    )Senior Second Secured Notes, interest rate of 10.75%
    
    
    165,000Debt discount on Senior Second Secured Notes
    
    
    (6,194
    )Senior Unsecured Note payable to seller of Safway, non-interest
bearing, accreted at 6.0% to 14.5%
    
    
    7,794Debentures previously held by Dayton Superior Capital Trust, interest
rate of 9.1%, due on demand
    
    
    1,102Capital lease obligations
    
    
    3,794City of Parsons, Kansas Economic Development Loan, interest rate of 7.0%
    
    
    16Total long-term debt
    
    
    377,644Less current maturities
    
    
    (2,455
    )Long-term portion
    
    $
    375,189
 On January 30, 2004, we established an $80.0 million senior secured revolving credit facility,
which was used to refinance our previous $50.0 million revolving credit facility. On July 2, 2004,
the Company increased the senior secured revolving credit facility to $95.0 million. The new
credit facility has no financial covenants and is subject to availability under a borrowing base
calculation. Availability of borrowings is limited to 85% of eligible accounts receivable and 60%
of eligible inventories and rental equipment, less $10.0 million. As of December 31, 2004,
borrowings of $58.8 million and $5.2 million of letters of credit were outstanding, while the
remaining $31.0 million was available for borrowing. The credit facility is secured by
substantially all assets of the Company. On June 9, 2003 we completed an offering of $165.0 million of 10.75% Senior Second Secured
Notes due 2008. The proceeds of the offering, $157.0 million, net of discounts, were used to repay
our 22




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##### Table of Contents



acquisition credit facility, term loan tranche A, term loan tranche B and a portion of the
revolving credit facility. Also in June 2003, we repurchased $15.3 million in principal amount of
our senior subordinated notes for $14.3 million with borrowings under our revolving credit
facility. The Senior Second Secured Notes are secured by substantially all assets of the Company. For
the year ended December 31, 2004, our long-term debt borrowings, all on the
revolving credit facility of $34.4 million were partially offset by $2.5 million of repayments of
other long-term debt. We incurred $2.6 million of financing costs related to the new revolving
credit facility. The guarantees by the merged subsidiaries of our Senior Second Secured Notes and the Senior
Subordinated Notes and the pledge of the capital stock of certain of the merged subsidiaries that
secured the Credit Agreement and the Senior Second Secured Notes immediately prior to the merger
ceased to exist, effective December 31, 2004. As the surviving corporation in the merger, however,
Dayton Superior, which is the issuer of the Senior Second Secured Notes, the Senior Subordinated
Notes and the borrower under the Credit Agreement, succeeded to all of the assets and liabilities
of each of the merged subsidiaries that had been guarantors of the notes and Credit Agreement. The Company may, from time to time, seek to retire its outstanding debt through cash purchases
and/or exchanges for equity securities, in open market purchases, privately negotiated transactions
or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions,
the Companys liquidity requirements, contractual restrictions and other factors. The amounts
involved may be material. At December 31, 2004, working capital was $95.3 million, an increase of $23.7 million from
$71.6 million at December 31, 2003. Cash increased $2.5 million due to the timing of receipts and
disbursements. Accounts receivable increased by $3.2 million due to net sales weighted more to
December in 2004 relative to 2003. Inventories increased $10.0 million from 2004 to 2003. Raw
materials increased $12.1 million due to an opportunistic raw material purchase and inflation on
steel- related raw materials. Finished goods decreased $2.0 million in spite of steel-related
inflation, due to a return to normal levels, as the December 31, 2003 balances were temporarily
higher to support our manufacturing rationalization plan. Prepaid expenses and other current
assets increased $3.8 million from 2003 to 2004 primarily due to a higher current portion of notes
receivable. Accrued liabilities, in total, decreased $4.7 million from 2003 to 2004. This was
primarily due to the final payment under a deferred compensation agreement assumed in an
acquisition. We intend to pursue additional acquisitions that present opportunities to realize significant
synergies, operating expense economies or overhead cost savings or to increase our market position.
We regularly engage in discussions with respect to potential acquisitions and investments. There
are no definitive agreements with respect to any material acquisitions at this time, and we cannot
assure you that we will be able to reach an agreement with respect to any future acquisition. Our
acquisition strategy may require substantial capital, and no assurance can be given that we will be
able to raise any necessary funds on terms acceptable to us or at all. We intend to fund
acquisitions with cash, securities or a combination of cash and securities. To the extent we use cash for all or part of any future acquisitions, we expect to raise the
cash from our business operations, from borrowings under our revolving credit facility or, if
feasible and attractive, by issuing long-term debt or additional common shares. If we incur
additional debt to finance acquisitions, our total interest expense will increase. On July 29, 2003, we completed the acquisition of substantially all of the fixed assets and
rental fleet assets of Safway Formwork Systems, L.L.C. for $20.0 million. Safway was a subsidiary
of Safway Services, Inc., whose ultimate parent is ThyssenKrupp AG, or TK, a publicly traded
company in Germany. The purchase price was comprised of $13.0 million in cash and a $12.0 million
non-interest bearing (other than in the case of default) senior unsecured note with an initial
present value of $7.0 million payable to the seller. The note is being accreted to the face value
at 14.5% using the effective interest method and is reflected as interest expense. The book value
of the note at December 31, 2004 was $6.3 million. The first $250,000 installment payment on the
note was paid on September 30, 2003, and an additional $750,000 installment payment was due on
December 31, 2003. The settlement of 23




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##### Table of Contents



normal purchase price adjustments resulted in a $417,000 reduction in the December payment to
$333,000. A subsequent purchase price adjustment of $240,000 was paid in March 2004 and the
scheduled $1.0 million payment was paid in September 2004. Annual payments of $1.0 million are due
on September 30 of each year from 2005 through 2008, with a final balloon payment of $6.0 million
due on December 31, 2008. The Company exercised an option to acquire additional rental equipment from Safway. The
Company issued a non-interest bearing note with an initial present value of $1.6 million and a book
value of $1.5 million as of December 31, 2004. The note is being accreted to the face value of
$2.0 million at 6.0% using the effective interest method and is reflected as interest expense.
Minimum future payments on the note are $282,000 in 2005, $398,000 in 2006, $563,000 in 2007, and
$464,000 in 2008. Payments may be accelerated if certain revenue targets are met. We believe our liquidity, capital resources and cash flows from operations are sufficient, in
the absence of additional acquisitions, to fund the capital expenditures we have planned and our
working capital and debt service requirements. Our ability to make scheduled payments of principal of, or to pay the interest on, or to
refinance, our indebtedness, or to fund planned capital expenditures will depend on our future
performance, which, to a certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control. Based on our current level
of operations and anticipated operating improvements, management believes that cash flow from
operations and available borrowings under our revolving credit facility will be adequate to meet
our future liquidity for the foreseeable future. We cannot assure you, however, that our business
will generate sufficient cash flow from operations, that operating improvements will be realized on
schedule or that future borrowings will be available to us under our revolving credit facility in
an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We
may from time to time seek to retire our outstanding debt through cash purchases and/or exchanges
for equity securities, in open market purchases, in privately negotiated transactions or otherwise.
Any such repurchases or exchanges will depend on prevailing market conditions, our liquidity
requirements, contractual restrictions and other factors. The amounts involved may be material. We
may need to refinance all or a portion of our indebtedness on or before maturity. We cannot offer
assurances that we will be able to refinance any of our indebtedness, including our revolving
credit facility, the senior subordinated notes and the senior second secured notes, on commercially
reasonable terms or at all. Commitments Certain purchase commitments contain guaranteed purchase levels with vendors. The maximum
potential future payout is reflected in the purchase obligations column and there are no guaranteed
purchase levels in excess of what the Company intends to purchase in the normal course of business. Our Management Stockholders Agreement states that, upon termination of the employment of a
management stockholder, the management stockholder has certain put rights, and the Company has
certain call rights, with respect to the stockholders common shares. See discussion of Management
Stockholders Agreement in Item 11. 24




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##### Table of Contents



Scheduled payments of long-term debt, future minimum lease payments under capital leases,
future lease payments under non-cancelable operating leases, purchase obligations, and other
long-term liabilities at December 31, 2004 were as follows: OtherLong-term
    
    
    Interest
    
    
    Capital
    
    
    Operating
    
    
    Purchase
    
    
    Long-TermYear
    
    Debt
    
    
    Payments
    
    
    Leases
    
    
    Leases
    
    
    Obligations
    
    
    Liabilities
    
    
    Total2005
    
    $
    1,379
    
    
    $
    38,873
    
    
    $
    1,498
    
    
    $
    6,156
    
    
    $
    1,466
    
    
    $
    50
    
    
    $
    49,4222006
    
    
    399
    
    
    
    38,851
    
    
    
    1,102
    
    
    
    4,905
    
    
    
    3
    
    
    
    50
    
    
    
    45,3102007
    
    
    59,395
    
    
    
    38,820
    
    
    
    880
    
    
    
    3,274
    
    
    
    3
    
    
    
    
    
    
    
    102,3722008
    
    
    171,539
    
    
    
    38,775
    
    
    
    772
    
    
    
    2,118
    
    
    
    
    
    
    
    
    
    
    
    213,2042009
    
    
    154,729
    
    
    
    10,057
    
    
    
    234
    
    
    
    1,173
    
    
    
    
    
    
    
    
    
    
    
    166,193Thereafter
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    9,578
    
    
    
    
    
    
    
    
    
    
    
    9,630$
    387,441
    
    
    $
    165,376
    
    
    $
    4,538
    
    
    $
    27,204
    
    
    $
    1,472
    
    
    $
    100
    
    
    $
    586,131
 Seasonality Our operations are seasonal in nature, with approximately 55% of our sales historically
occurring in the second and third quarters. Working capital and borrowings under the revolving
credit facility fluctuate with sales volume, such that our peak revolving credit facility
borrowings are generally in the late second quarter or early third quarter Inflation We may not be able to pass on the cost of commodity price increases to our customers. Steel,
in its various forms, is our principal raw material, constituting 22.5% of our cost
of sales in 2004. Historically, steel prices have fluctuated, and we faced rapidly rising steel
prices in 2004. Any decrease in our volume of steel purchases could affect our ability to secure
volume purchase discounts that we have obtained in the past. Additionally, the overall increase in
energy costs, including natural gas and petroleum products, has adversely impacted our overall
operating costs in the form of higher raw material, utilities, and freight costs. We cannot assure
you we will be able to pass these cost increases on to our customers. Stock Collateral Valuation  Senior Second Secured Notes Rule 3-16 of the SECs Regulation S-X requires the presentation of a subsidiarys stand-alone,
audited financial statements if the subsidiarys capital stock secures an issuers notes and the
par value, book value or market value (Applicable Value) of the stock equals or exceeds 20% of
the aggregate principal amount of the secured class of securities the (Collateral Threshold.) The
indenture governing our Senior Second Secured Notes and the security documents for the notes
provide that the collateral will never include the capital stock of any subsidiary to the extent
the Applicable Value of the stock is equal to or greater than the Collateral Threshold. As a
result, we will not be required to present separate financial statements of our subsidiary under
Rule 3-16. In addition, in the event that Rule 3-16 or Rule 3-10 of Regulation S-X is amended,
modified or interpreted by the SEC to require (or is replaced with another rule or regulation, or
any other law, rule or regulation is adopted, which would require) the filing with the SEC (or any
other governmental agency) of separate financial statements of subsidiary due to the fact that such
subsidiarys capital stock or other securities secure our Senior Second Secured Notes, then the
capital stock or other securities of such subsidiary automatically will be deemed not to be part
of the collateral for the notes but only to the extent necessary to not be subject to such
requirement. In such event, the security documents for the Senior Second Secured Notes may be
amended or modified, without the consent of any holder of notes, to the extent necessary to release
the liens of the Senior Second Secured Notes on the shares of capital stock or other securities
that are so deemed to no longer constitute part of the collateral; however, the excluded collateral
will continue to secure our first priority lien obligations such as our senior secured revolving
credit facility. As a result of the provisions in the indenture and security documents relating to
subsidiary capital stock, holders of
our Senior Second Secured Notes may at any time in the future lose all or a portion of their
security 25




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##### Table of Contents



interest in the capital stock of any of our other subsidiaries if the Applicable Value of
that stock were to become equal to or greater than the Collateral Threshold. As of December 31,
2004, 65% of the voting capital stock and 100% of the non-voting capital stock of our subsidiary
Dayton Superior Canada Ltd. constitutes collateral for the notes. We have based our determination
of whether 65% of the voting capital stock and 100% of the non-voting capital stock of our
subsidiary Dayton Superior Canada Ltd. constitutes collateral upon the book value, par value and
estimated market value of the capital as of December 31, 2004. The Applicable Value for the capital
stock is the greater of the book value and estimated market value, as the value of each
subsidiarys capital stock is nominal and therefore has not impacted our calculation of Applicable
Value. Set forth in the table below is the Applicable Value of Dayton Superior Canada Ltd. as of December
31, 2004: Subsidiary
    
    Applicable Value as of 12/31/2004Dayton Superior Canada Ltd.
    
    $6,738
 Based upon the foregoing, as of December 31, 2004, the Applicable Value of the capital stock of
Dayton Superior Canada Ltd. did not exceed the Collateral Threshold. The Applicable Value of the
common stock of Dayton Superior Canada Ltd was based upon the estimated market value. We have
calculated the estimated market value of our Dayton Superior Canada Ltd. capital stock by
determining the earnings before interest, taxes, depreciation, and amortization, or EBITDA, for the
twelve months ended December 31, 2004, adjusted to add back facility closing and severance
expenses, loss on sale of fixed assets and other expense, and multiplied this adjusted EBITDA by
5.5 times. We retain an independent appraisal firm for purposes of calculating the market value of
our common stock on a going concern basis, as required under our Management Stockholders Agreement
and in connection with determining equity-based compensation. The appraisal firm has informed us
that a range of 5 to 6 times adjusted EBITDA is reasonable for determining the fair value of the
capital stock of smaller, basic manufacturing companies. We determined that using a multiple of 5.5
times, which is the mid-point of the range described above is a reasonable and appropriate means
for determining fair value of our subsidiarys capital stock. Set forth below is the adjusted EBITDA of Dayton Superior Canada Ltd. for the year ended December
31, 2004, together with a reconciliation to the net income: Dayton SuperiorCanada Ltd.Net Income
    
    $
    1,227Provision for Income Taxes
    
    
    (62
    )Income from Operations
    
    
    1,165Depreciation Expense
    
    
    60Adjusted valuation EBITDA
    
    
    1,225Multiple
    
    
    5.5Estimated Fair Value
    
    $
    6,738
 As described above, we have used EBITDA and adjusted EBITDA of Dayton Superior Canada Ltd.
solely for purposes of determining the estimated market value of the capital stock to determine
whether that capital stock is included in the collateral. EBITDA and adjusted EBITDA are not
recognized financial measures under generally accepted accounting principles and do not purport to
be alternatives to operating income as indicators of operating performance or to cash flows from
operating activities as measures of liquidity. Additionally, EBITDA has limitations as an
analytical tool, and you should not consider it in isolation or as a substitute for analysis of our
consolidated results as reported under generally accepted accounting principles. Because not all
companies use identical calculations, the presentation of adjusted EBITDA also may not be
comparable to other similarly titled measures of other
companies. You are encouraged to evaluate the adjustments taken and the reasons we consider them
appropriate for analysis for determining estimated market value of our subsidiaries capital stock. 26




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A change in the Applicable Value of the capital stock of Dayton Superior Canada Ltd. could result
in the capital stock being previously excluded from collateral becoming part of the collateral or a
that was previously included in collateral to become excluded. The following table reflects the
amounts by which the Applicable Value of Dayton Superior Canada Ltd. as of December 31, 2004 and
the adjusted EBITDA for the twelve months ended December 31, 2004 would have to increase in order
for Dayton Superior Canada Ltd. capital stock to no longer constitute collateral: Change in Applicable
    
    Change in AdjustedSubsidiary
    
    Value
    
    EBITDADayton Superior Canada Ltd.
    
    $26,262
    
    $4,775
 Critical Accounting Policies In preparing our consolidated financial statements, we follow accounting principles generally
accepted in the United States of America. These principles require us to make certain estimates and
apply judgments that affect our financial position and results of operations. We continually review
our accounting policies and financial information disclosures. On an ongoing basis, we evaluate our
estimates, including those related to allowance for doubtful accounts, inventories, investments,
long-lived assets, income taxes, self insurance reserves, restructuring liabilities, environmental
contingencies and litigation. We base our estimates on historical experience and on various other
assumptions that we believe are reasonable under the circumstances. Actual results may differ from
these estimates under different assumptions or conditions. We believe the following critical
accounting policies affect our more significant judgments and estimates used in the preparation of
our consolidated financial statements. Inventories We value our inventories at the lower of first-in, first-out, or FIFO, cost or market and
include all costs associated with manufacturing products: materials, labor and manufacturing
overhead. We provide net realizable value reserves, which reflect our best estimate of the excess
of the cost of potential obsolete and slow moving inventory over the expected net realizable value. Rental Equipment We manufacture and purchase rental equipment for resale and for rent to others on a short-term
basis. We record rental equipment at the lower of FIFO cost or market and depreciate it over the
estimated useful life of the equipment, three to fifteen years, on a straight-line method. Rental
equipment that is sold is charged to cost of sales on a FIFO basis. Goodwill and Intangible Assets In June 2001, the FASB issued SFAS No. 141, Business Combinations and No. 142 Goodwill
and Other Intangible Assets. SFAS No. 141 revises the accounting for future business combinations
to only allow the purchase method of accounting. In addition, the two statements preclude
amortization of goodwill for periods beginning after December 15, 2001. Instead, an annual review
of the recoverability of the goodwill and intangible assets is required and is based on our
estimate of future events and could be materially different from actual cash flows. If the
carrying value of an asset is considered impaired, an impairment charge is recorded for the amount
by which the carrying value of the asset exceeds its fair value. Certain other intangible assets
continue to be amortized over their estimated useful lives Income Taxes Deferred income taxes are recorded for temporary differences between financial statement
carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities
reflect the enacted tax rates in effect for the years the differences are expected to reverse. We
evaluate the need for a
deferred tax asset valuation allowance by assessing whether it is more likely than not that we will
realize our deferred tax assets in the future and we record liabilities for uncertain tax matters
based on our 27




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assessment of the likelihood of sustaining certain tax positions. In estimating
whether deferred tax assets are realizable, we estimate levels of future taxable income by
considering historical results of operations in recent years and would, if necessary, consider the
implementation of prudent and feasible tax planning strategies to generate taxable income. Revenue Recognition Revenue is recognized from product sales and used rental equipment sales when the product is
shipped from our facilities and risk of loss and title have passed to the customer. Additionally,
revenue is recognized at the customers written request and when the customer has made a fixed
commitment to purchase goods on a fixed schedule consistent with the customers business, where
risk of ownership has passed to the buyer, the goods are set-aside in storage and the Company does
not retain any specific performance obligations and therefore the earning process is complete. For
transactions where such conditions are not satisfied, revenue is deferred until the terms of
acceptance are satisfied. Rental revenues are recognized ratably over the terms of the rental
agreements. Insurance Reserves We are self-insured for certain of our group medical, workers compensation and product and
general liability claims. We have stop loss insurance coverage at various per occurrence and per
annum levels depending on type of claim. We consult with third party administrators to estimate the
reserves required for these claims. Actual claims experience can impact these calculations and, to
the extent that subsequent claim costs vary from estimates, future earnings could be impacted and
the impact could be material. We made no material revisions to the estimates for the years ended
December 31, 2004, 2003 and 2002. Pension Liabilities Pension and other retirement benefits, including all relevant assumptions required by
accounting principles generally accepted in the United States of America, are evaluated each year.
Due to the technical nature of retirement accounting, outside actuaries are used to provide
assistance in calculating the estimated future obligations. Since there are many assumptions used
to estimate future retirement benefits, differences between actual future events and prior
estimates and assumptions could result in adjustments to pension expense and obligations. Certain
actuarial assumptions, such as the discount rate and expected long-term rate of return, have a
significant effect on the amounts reported for net periodic pension cost and the related benefit
obligations. Accounts Receivable Allowance We maintain allowances for sales discounts and allowances and for doubtful accounts for
estimated losses resulting from customer disputes and/or the inability of our customers to make
required payments. If the financial condition of our customers deteriorates, resulting in an
impairment of their ability to make payments, additional allowances may be required. Receivables
are charged to the allowance for doubtful accounts when an account is deemed to be uncollectible,
taking into consideration the financial condition of the customer and the value of any collateral.
Recoveries of receivables previously charged off as uncollectible are credited to the allowance. Other Loss Reserves We have other loss exposures, such as litigation. Establishing loss reserves for these
matters requires us to estimate and make judgments in regards to risk exposure and ultimate
liability. We establish accruals for these exposures; however, if our exposure exceeds our
estimates we could be required to record additional charges. 28




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Recently Issued Accounting Pronouncements In December 2004, the FASB issued Staff Position No. FAS 109-2, Accounting and Disclosure
Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of
2004 (FSP 109-2). FSP 109-2 provides guidance on the accounting for the effects of the Acts
repatriation of certain foreign earnings to a U.S. taxpayer, provided certain criteria are met.
FSP 109-2 was effective upon issuance. The Company does not believe this pronouncement will have a
material impact on its consolidated results of operations, financial position, and cash flows. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity. SFAS No. 150 requires certain financial
instruments that embody obligations of the issuer and have characteristics of both liabilities and
equity to be classified as liabilities. The provisions of SFAS 150 are effective for financial
instruments entered into or modified after May 31, 2003 and to all other instruments that exist as
of the beginning of the first interim financial reporting period beginning after June 15, 2003,
except for mandatory redeemable financial instruments of a nonpublic entity, this statement became
effective for periods beginning after December 15, 2003. The adoption of this pronouncement did not
have a material impact on the Companys consolidated financial position, results of operations, or
cash flows. In May 2004, the FASB staff issued FASB Staff Position SFAS 106-2, Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003
(the Act). This statement prescribes accounting for the Act and is effective for interim
periods beginning after June 15, 2004. The Company has determined that the benefits provided to
retirees under the Companys prescription drug plan are not actuarially equivalent to the benefits
provided under the Act. Therefore, the Company will not qualify for the subsidy provided by the
Act and the adoption of SFAS 106-2 did not have a material effect on the financial statements. In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43,
Chapter 4, to clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and waste material (spoilage). This statement requires those items to be
recognized as current period charges. The Company will be required to comply with the provision of
SFAS No. 151 as of the first fiscal year beginning after June 15, 2005. The Company has not
determined the impact that SFAS No. 151 will have on its financial statements. In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment. This
statement requires that the cost resulting from all share-based payment transactions are recognized
in the financial statements. That cost will be measured based on the fair value of the equity of
liability instruments issued. SFAS 123 ® is effective as of the first interim or annual
reporting period that ends after June 15, 2005. The Company is currently evaluating this
pronouncement and does not anticipate a material impact on the Companys results of operations. 29




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Forward-Looking Statements This Form 10-K includes, and future filings by us on Form 10-K, Form 10-Q, and Form 8-K, and
future oral and written statements by us and our 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 our management and us are based on estimates, projections, beliefs
and assumptions of management and are not guarantees of future performance. We disclaim 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 us, and our 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 our control such as weakness in the general economy, a decrease in governmental
spending, interest rate increases, and changes in banking and tax laws; the amount of debt we must
service; the effects of weather and the seasonality of the construction industry; our ability to
implement cost savings programs successfully and on a timely basis; and Dayton Superiors ability
to successfully integrate acquisitions on a timely basis, our ability to successfully identify,
finance, complete and integrate acquisitions; increases in the price of steel (our principal raw
material) and our ability to pass along such price increases to our customers; the effects of
weather and seasonality on the construction industry; increasing consolidation of our customers;
the mix of products we sell; the competitive nature of our industry; and the amount of debt we must
service. This list is not intended to be exhaustive, and additional information can be found under
Risks Related to Our Business in Part I of this annual report on Form 10-K. 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 our future business. 30




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk. As of December 31, 2004, we had financial instruments which were sensitive to changes in
interest rates. These financial instruments consist of:  
    $95 million revolving credit facility, $58.8 million of which was
outstanding at December 31, 2004;
    $154.7 million of Senior Subordinated Notes;
    $165.0 million of Senior Second Secured Notes;
    $7.8 million present value of Senior Unsecured Notes payable to seller of Safway
    $3.8 million in capital lease obligations
    $1.1 million in other fixed-rate, long-term debt. Our $95.0 million revolving credit facility matures on January 30, 2007. The credit facility
has no financial covenants. Availability of borrowings is limited to 85% of eligible accounts
receivable and 60% of eligible inventories and rental equipment, less $10.0 million. At December
31, 2004, the Company had outstanding letters of credit of $5.2 million and available borrowings of
$30,965. The weighted average interest rate as of December 31, 2004 was 5.0%. The credit facility
is secured by substantially all assets of the Company. Our $154.7 million of Senior Subordinated Notes 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 net book value of the notes at December 31, 2004 was $147.3
million. 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. The senior subordinated notes have an
interest rate of 13.0%. The estimated fair value of the notes was $160.8 million as of December
31, 2004. Our $165.0 million of Senior Second Secured Notes mature in June 2008. 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 proceeds of the offering of the Senior Notes were $156,895 and
were used to repay the Companys acquisition credit facility, term loan tranche A, term loan
tranche B, and a portion of the revolving credit facility which was subsequently increased by
$24,375. As a result of the transactions, the Company incurred a loss on the early extinguishment
of long-term debt of $2,550, due to the expensing of deferred financing costs. The net book value
of the notes at December 31, 2004 was $158.8 million. The Senior Second Secured Notes have an
interest rate of 10.75%. The estimated fair value of the notes was $176.6 million as of December
31, 2004. On July 29, 2003, we completed the acquisition of substantially all of the fixed assets and
rental fleet assets of Safway Formwork Systems, L.L.C. for $20.0 million. Safway was a subsidiary
of Safway Services, Inc., whose ultimate parent is ThyssenKrupp AG, or TK, a publicly traded
company in Germany. The purchase price was comprised of $13.0 million in cash and a $12.0 million
non-interest bearing (other than in the case of default) senior unsecured note with an initial
present value of $7.0 million payable to the seller. The note is being accreted to the face value
at 14.5% using the effective interest method and is reflected as interest expense. The book value
of the note at December 31, 2004 was $6.3 million. The first $250,000 installment payment on the
note was paid on September 30, 2003, and an additional $750,000 installment payment was due on
December 31, 2003. The settlement of normal purchase price adjustments resulted in a $417,000
reduction in the December payment to $333,000. A subsequent purchase price adjustment of $240,000
was paid in March 2004 and the scheduled $1.0 million payment was paid in September 2004. Annual
payments of $1.0 million 31




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##### Table of Contents



are due on September 30 of each year from 2005 through 2008, with a final balloon payment of $6.0
million due on December 31, 2008. The Company exercised an option to acquire additional rental equipment from Safway. The
Company issued a non-interest bearing note with an initial present value of $1.6 million and a book
value of $1.5 million as of December 31, 2004. The note is being accreted to the face value of
$2.0 million at 6.0% using the effective interest method and is reflected as interest expense.
Minimum future payments on the note are $282,000 in 2005, $398,000 in 2006, $563,000 in 2007, and
$464,000 in 2008. Payments may be accelerated if certain revenue targets are met. Our other long-term debt at December 31, 2004 consisted of $1.1 million of 9.1% junior
subordinated debentures previously held by the Dayton Superior Capital Trust with an estimated fair
value of $1.8 million, and a $16 thousand, 7% loan due in 2005 with an estimated fair value as of
December 31, 2004 of $16 thousand. In the ordinary course of our business, we also are exposed to price changes in raw materials
(particularly steel rod and steel bar) and products purchased for resale. The prices of these
items can change significantly due to changes in the markets in which our suppliers operate. We
generally do not, however, use financial instruments to manage our exposure to changes in commodity
prices. As of December 31, 2004 a one percentage point increase or decrease in our weighted average
interest rate applicable to our senior credit facility would increase or decrease interest expense
by approximately $0.6 million. 32




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders
Dayton Superior Corporation We have audited the accompanying consolidated balance sheets of Dayton Superior Corporation (an
Ohio Corporation) and subsidiary (the Company) as of December 31, 2004 and 2003, and the related
consolidated statements of operations, shareholders deficit, cash flows and comprehensive loss for
each of the three years in the period ended December 31, 2004. Our audits also included the
financial statement schedule listed in the Index at Item 15(a)(2). These consolidated financial
statements and financial statement schedule are the responsibility of the Companys management.
Our responsibility is to express an opinion on the financial statements and financial statement
schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of Dayton Superior Corporation and its subsidiary as of December 31, 2004
and 2003, and the results of their operations and their cash flows for each of the three years in
the period ended December 31, 2004, in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein. As discussed in Note 3 to the consolidated financial statements in 2002, the Company changed its
method of accounting for goodwill and other intangible assets to adopt Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. DELOITTE & TOUCHE LLP
Dayton, Ohio
March 25, 2005 33




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Dayton Superior Corporation And Subsidiary
Consolidated Balance Sheets
As of December 31
(Amounts in thousands, except share amounts) 2004
    
    
    2003ASSETSCurrent assets:Cash
    
    $
    4,504
    
    
    $
    1,995Accounts receivable, net of reserves for doubtful accounts and sales
returns and allowances of $5,375 and
$4,939
    
    
    68,031
    
    
    
    64,849Inventories
    
    
    59,389
    
    
    
    49,437Prepaid expenses and other current assets
    
    
    8,392
    
    
    
    4,610Prepaid income taxes
    
    
    365
    
    
    
    956Deferred income taxes
    
    
    5,465
    
    
    
    5,368Total current assets
    
    
    146,146
    
    
    
    127,215Rental equipment, net of accumulated depreciation of $38,756 and $27,794
    
    
    69,662
    
    
    
    78,042Property, plant and equipmentLand and improvements
    
    
    5,324
    
    
    
    5,457Building and improvements
    
    
    34,790
    
    
    
    30,621Machinery and equipment
    
    
    78,271
    
    
    
    77,288118,385
    
    
    
    113,366Less accumulated depreciation
    
    
    (58,927
    )
    
    
    (51,128
    )Net property, plant and equipment
    
    
    59,458
    
    
    
    62,238Goodwill
    
    
    107,643
    
    
    
    109,585Intangible assets, net of accumulated amortization
    
    
    7,185
    
    
    
    10,532Other assets
    
    
    4,044
    
    
    
    5,772Total assets
    
    $
    394,138
    
    
    $
    393,384LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Current portion of long-term debt
    
    $
    2,455
    
    
    $
    3,067Accounts payable
    
    
    21,086
    
    
    
    20,526Accrued compensation and benefits
    
    
    12,700
    
    
    
    19,704Accrued interest
    
    
    6,746
    
    
    
    6,423Accrued freight
    
    
    3,722
    
    
    
    2,081Other accrued liabilities
    
    
    4,154
    
    
    
    3,820Total current liabilities
    
    
    50,863
    
    
    
    55,621Long-term debt
    
    
    375,189
    
    
    
    338,823Deferred income taxes
    
    
    17,474
    
    
    
    Other long-term liabilities
    
    
    6,142
    
    
    
    6,207Total liabilities
    
    
    449,668
    
    
    
    400,651Commitments and contingencies (Note 9)Shareholders deficitClass A common shares; no par value; 5,000,000 shares authorized;
4,622,618 and 4,591,016 shares issued and 4,585,871 and 4,554,269
shares outstanding
    
    
    116,024
    
    
    
    115,951Loans to shareholders
    
    
    (2,767
    )
    
    
    (2,729
    )Class A treasury shares, at cost, 36,747 shares
    
    
    (1,184
    )
    
    
    (1,184
    )Other comprehensive loss
    
    
    (1,137
    )
    
    
    (1,209
    )Accumulated deficit
    
    
    (166,466
    )
    
    
    (118,096
    )Total shareholders deficit
    
    
    (55,530
    )
    
    
    (7,267
    )Total liabilities and shareholders deficit
    
    $
    394,138
    
    
    $
    393,384
 The accompanying notes to consolidated financial statements are
an integral part of these consolidated balance sheets. 34




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##### Table of Contents



Dayton Superior Corporation and Subsidiary
Consolidated Statements of Operations
Years Ended December 31
(Amounts in thousands) 2004
    
    
    2003
    
    
    2002Product sales
    
    $
    348,036
    
    
    $
    304,101
    
    
    $
    320,221Rental revenue
    
    
    42,231
    
    
    
    35,633
    
    
    
    44,184Used rental equipment sales
    
    
    28,372
    
    
    
    39,723
    
    
    
    35,641Net sales
    
    
    418,639
    
    
    
    379,457
    
    
    
    400,046Product cost of sales
    
    
    265,228
    
    
    
    236,877
    
    
    
    236,932Rental cost of sales
    
    
    35,275
    
    
    
    28,010
    
    
    
    22,855Used rental equipment cost of sales
    
    
    10,388
    
    
    
    12,791
    
    
    
    13,675Cost of sales
    
    
    310,891
    
    
    
    277,678
    
    
    
    273,462Product gross profit
    
    
    82,808
    
    
    
    67,224
    
    
    
    83,289Rental gross profit
    
    
    6,956
    
    
    
    7,623
    
    
    
    21,329Used rental equipment gross profit
    
    
    17,984
    
    
    
    26,932
    
    
    
    21,966Gross profit
    
    
    107,748
    
    
    
    101,779
    
    
    
    126,584Selling, general and administrative expenses
    
    
    89,735
    
    
    
    84,543
    
    
    
    88,929Facility closing and severance expenses
    
    
    2,036
    
    
    
    2,294
    
    
    
    5,399Amortization of intangibles
    
    
    989
    
    
    
    944
    
    
    
    603Income from operations
    
    
    14,988
    
    
    
    13,998
    
    
    
    31,653Other expensesInterest expense
    
    
    47,030
    
    
    
    40,008
    
    
    
    34,039Interest Income
    
    
    (559
    )
    
    
    (53
    )
    
    
    (72
    )Loss on early extinguishment of long-term debt
    
    
    842
    
    
    
    2,480
    
    
    
    Loss (gain) on disposals of property, plant and equipment
    
    
    (248
    )
    
    
    (636
    )
    
    
    1,115Other expense
    
    
    (134
    )
    
    
    20
    
    
    
    80Loss before benefit for income taxes, and cumulative effect of
change in accounting principle
    
    
    (31,943
    )
    
    
    (27,821
    )
    
    
    (3,509
    )Provision (benefit) for income taxes
    
    
    16,427
    
    
    
    (10,713
    )
    
    
    (386
    )Loss before cumulative effect of change in accounting principle
    
    
    (48,370
    )
    
    
    (17,108
    )
    
    
    (3,123
    )Cumulative effect of change in accounting principle, net of
income tax benefit of $2,754
    
    
    
    
    
    
    
    
    
    
    (17,140
    )Net loss
    
    $
    (48,370
    )
    
    $
    (17,108
    )
    
    $
    (20,263
    )
 The accompanying notes to consolidated financial statements are
an integral part of these consolidated statements. 35




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##### Table of Contents



Dayton Superior Corporation and Subsidiary
Consolidated Statements of Shareholders Deficit
Years Ended December 31, 2004, 2003, and 2002
(Amounts in thousands, except share amounts) Other Comprehensive Loss
    
    RetainedClass A
    
    
    
    
    
    
    Class A
    
    
    Cumulative
    
    
    
    
    
    
    EarningsCommon Shares
    
    
    Loans to
    
    
    Treasury Shares
    
    
    Foreign Currency
    
    
    Minimum
    
    
    (AccumulatedShares
    
    
    Amount
    
    
    Shareholders
    
    
    Shares
    
    
    Amount
    
    
    Translation
    
    
    Pension Liability
    
    
    Deficit)
    
    
    TotalBalances at January 1, 2002
    
    
    4,026,402
    
    
    $
    102,044
    
    
    $
    (3,030
    )
    
    
    29,288
    
    
    $
    (979
    )
    
    $
    (589
    )
    
$



    $
    (80,725
    )
    
    $
    16,721Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    




    
    (20,263
    )
    
    
    (20,263
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92
    
    




    
    
    
    
    
    92Change in minimum pension liability
(net of income tax benefit of $151)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

(1,219
)

    
    
    
    
    
    (1,219
    )Issuance of Class A common shares
    
    
    20,505
    
    
    
    481
    
    
    
    (350
    )
    
    
    
    
    
    
    
    
    
    
    
    
    




    
    
    
    
    
    131Purchase of Class A common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,459
    
    
    
    (205
    )
    
    
    
    
    




    
    
    
    
    
    (205
    )Repayments of loans to shareholders
    
    
    
    
    
    
    
    
    
    
    502
    
    
    
    
    
    
    
    
    
    
    
    
    
    




    
    
    
    
    
    502Balance at December 31, 2002
    
    
    4,046,907
    
    
    
    102,525
    
    
    
    (2,878
    )
    
    
    36,747
    
    
    
    (1,184
    )
    
    
    (497
    )
    

(1,219
)

    
    (100,988
    )
    
    
    (4,241
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    




    
    (17,108
    )
    
    
    (17,108
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    613
    
    




    
    
    
    
    
    613Change in minimum pension liability
(net of income tax benefit of $657)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

(106
)

    
    
    
    
    
    (106
    )Issuance of Class A common shares
    
    
    544,109
    
    
    
    13,059
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    




    
    
    
    
    
    13,059Repayments of loans to shareholders
    
    
    
    
    
    
    
    
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    
    
    




    
    
    
    
    
    149Additional tax benefit from 2000
recapitalization
    
    
    
    
    
    
    367
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    




    
    
    
    
    
    367Balances at December 31, 2003
    
    
    4,591,016
    
    
    
    115,951
    
    
    
    (2,729
    )
    
    
    36,747
    
    
    
    (1,184
    )
    
    
    116
    
    

(1,325
)

    
    (118,096
    )
    
    
    (7,267
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    




    
    (48,370
    )
    
    
    (48,370
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    193
    
    




    
    
    
    
    
    193Change in minimum pension liability
(net of income tax benefit of $73)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

(121
)

    
    
    
    
    
    (121
    )Issuance of Class A common shares
    
    
    31,602
    
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    




    
    
    
    
    
    73Changes in loans to shareholders, net
    
    
    
    
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    
    
    




    
    
    
    
    
    (38
    )Balances at December 31, 2004
    
    
    4,622,618
    
    
    $
    116,024
    
    
    $
    (2,767
    )
    
    
    36,747
    
    
    $
    (1,184
    )
    
    $
    309
    
    
$
(1,446
)

    $
    (166,466
    )
    
    $
    (55,530
    )
 The accompanying notes to consolidated financial statements are
an integral part of these consolidated statements. 36




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##### Table of Contents



Dayton Superior Corporation and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31
(Amounts in thousands) 2004
    
    
    2003
    
    
    2002Cash Flows From Operating Activities:Net loss
    
    $
    (48,370
    )
    
    $
    (17,108
    )
    
    $
    (20,263
    )Adjustments to reconcile net loss to net cash used in operating activities:Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    17,140Loss on the early extinguishment of long-term debt
    
    

    842
    
    
    

    2,480
    
    
    
Depreciation
    
    
    30,029
    
    
    
    25,934
    
    
    
    20,850Amortization of goodwill and intangibles
    
    
    989
    
    
    
    944
    
    
    
    603Deferred income taxes
    
    
    16,743
    
    
    
    (10,436
    )
    
    
    3,228Amortization of deferred financing costs, debt discount, and
issuance costs on Company-obligated mandatorily redeemable
convertible trust preferred securities

    
    
    5,087
    
    
    
    3,371
    
    
    
    2,335Net gain on sale of rental equipment
    
    
    (17,984
    )
    
    
    (26,932
    )
    
    
    (21,966
    )Net (gain) loss on sale of property, plant, and equipment
    
    
    (248
    )
    
    
    (636
    )
    
    
    1,115Change in assets and liabilities, net of effects of acquisition:Accounts receivable
    
    
    (3,182
    )
    
    
    (3,684
    )
    
    
    (9,537
    )Inventories
    
    
    (9,952
    )
    
    
    (1,526
    )
    
    
    (11
    )Prepaid expenses and other assets
    
    
    (1,588
    )
    
    
    2,013
    
    
    
    2,119Prepaid income taxes
    
    
    3,549
    
    
    
    3,420
    
    
    
    (2,784
    )Accounts payable
    
    
    560
    
    
    
    (5,140
    )
    
    
    (1,673
    )Accrued liabilities and other long-term liabilities
    
    
    (5,033
    )
    
    
    (5,188
    )
    
    
    (8,406
    )Net cash used in operating activities
    
    
    (28,558
    )
    
    
    (32,488
    )
    
    
    (17,250
    )Cash Flows From Investing Activities:Property, plant and equipment additions
    
    
    (5,423
    )
    
    
    (7,829
    )
    
    
    (11,277
    )Proceeds from sale of property, plant, and equipment
    
    
    837
    
    
    
    894
    
    
    
    2,010Rental equipment additions
    
    
    (22,099
    )
    
    
    (27,571
    )
    
    
    (18,411
    )Proceeds from sales of rental equipment
    
    
    28,372
    
    
    
    39,723
    
    
    
    35,641Acquisitions
    
    
    (245
    )
    
    
    (13,668
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    1,442
    
    
    
    (8,451
    )
    
    
    7,963Cash Flows From Financing Activities:Repayments of long-term debt
    
    
    (2,471
    )
    
    
    (177,873
    )
    
    
    (4,141
    )Issuance of long-term debt
    
    
    34,425
    
    
    
    206,442
    
    
    
    8,050Proceeds from sale/leaseback transaction
    
    
    
    
    
    
    
    
    
    
    2,258Issuance of common shares
    
    
    73
    
    
    
    13,059
    
    
    
    131Purchase of treasury shares
    
    
    
    
    
    
    
    
    
    
    (205
    )Changes in loans to shareholders, net
    
    
    (38
    )
    
    
    149
    
    
    
    502Financing costs incurred
    
    
    (2,557
    )
    
    
    (1,860
    )
    
    
    Net cash provided by financing activities
    
    
    29,432
    
    
    
    39,917
    
    
    
    6,595Effect of Exchange Rate Changes on Cash
    
    
    193
    
    
    
    613
    
    
    
    107Net increase (decrease) in cash
    
    
    2,509
    
    
    
    (409
    )
    
    
    (2,585
    )Cash, beginning of year
    
    
    1,995
    
    
    
    2,404
    
    
    
    4,989Cash, end of year
    
    $
    4,504
    
    
    $
    1,995
    
    
    $
    2,404Supplemental Disclosures:Cash refunded for income taxes
    
    $
    (4,341
    )
    
    $
    (3,909
    )
    
    $
    (1,149
    )Cash paid for interest
    
    
    41,061
    
    
    
    32,690
    
    
    
    31,862Purchase of equipment on capital lease
    
    
    481
    
    
    
    3,183
    
    
    
    2,758Issuance of Class A common shares and loans to shareholders
    
    
    
    
    
    
    
    
    
    
    350Issuance of long-term debt in conjunction with acquisition
    
    
    
    
    
    
    8,572
    
    
    
    
 The accompanying notes to consolidated financial statements are
an integral part of these consolidated statements. 37




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##### Table of Contents



Dayton Superior Corporation and Subsidiary
Consolidated Statements of Comprehensive Loss
Years Ended December 31
(Amounts in thousands) 2004
    
    
    2003
    
    
    2002Net loss
    
    $
    (48,370
    )
    
    $
    (17,108
    )
    
    $
    (20,263
    )Other comprehensive incomeForeign currency translation adjustment
    
    
    193
    
    
    
    613
    
    
    
    92Change in minimum pension liability
(net of income tax benefit of $73,
$657 and $151)
    
    
    (121
    )
    
    
    (106
    )
    
    
    (1,219
    )Comprehensive loss
    
    $
    (48,298
    )
    
    $
    (16,601
    )
    
    $
    (21,390
    )
 The accompanying notes to consolidated financial statements are
an integral part of these consolidated statements. 38




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##### Table of Contents



Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Dollar amounts in thousands, except share and per share amounts) (1) The Company The accompanying consolidated financial statements include the accounts of Dayton Superior
Corporation and its wholly-owned subsidiary (collectively referred to as the Company). All
intercompany transactions have been eliminated. The Company believes it is the largest North American manufacturer and distributor of metal
accessories and forms used in concrete construction and of metal accessories used in masonry
construction. The Company has a distribution network consisting of 18 manufacturing/distribution
plants and 22 service/distribution centers in the United States and Canada. The Company employs
approximately 700 salaried and 1,000 hourly personnel, of whom approximately 600 of the hourly
personnel and 4 of the salaried personnel are represented by labor unions. Employees at the
Miamisburg, Ohio; Parsons, Kansas; Des Plaines, Illinois; New Braunfels, Texas; Tremont,
Pennsylvania; Long Beach, California; Santa Fe Springs, California; City of Industry, California,
and Aurora, Illinois manufacturing/distribution plants are covered by collective bargaining
agreements. (2) Acquisitions Safway Formwork Systems, L.L.C.  On July 29, 2003 the Company completed the acquisition of substantially all of the fixed
assets and rental fleet assets of Safway Formwork Systems, L.L.C. (Safway) for $20,000. Safway is
a subsidiary of Safway Services, Inc., whose ultimate parent is ThyssenKrupp AG, or TK, a publicly
traded company in Germany. The purchase price was comprised of $13,000 in cash and a $12,000
non-interest bearing (other than in the case of default) senior unsecured note with an initial
present value of $6,965 payable to the seller. The note is being accreted to the face value at
14.5% using the effective interest method and is reflected as interest expense. The book value of
the note at December 31, 2004 was $6,334. The first $250 installment payment on the note was paid
on September 30, 2003, and an additional $750 installment payment was due on December 31, 2003. The
settlement of normal purchase price adjustments resulted in a $417 reduction in the December
payment to $333. A subsequent purchase price adjustment of $240 was paid in March 2004 and the
scheduled $1,000 payment was made in September 2004. Annual payments of $1,000 are due on
September 30 of each year from 2005 through 2008, with a final balloon payment of $6,000 due on
December 31, 2008. For purposes of calculating the net present value of the senior unsecured note, the Company has
assumed an interest rate of 14.5%. The $13,000 of cash was funded through the issuance of 541,667
common shares valued at $13,000 to the Companys majority shareholder. The common shares were
valued at $24.00 per share in an independent third party appraisal completed in December 2002. The Company exercised its option to acquire additional rental equipment from Safway. The Company
issued a non-interest bearing note with an initial present value of $1,607 and a book value of
$1,460 as of December 31, 2004. The note is being accreted to the face value of $1,987 at 6.0%
using the effective interest method and is reflected as interest expense. Minimum future payments
on the note are $282 in 2005, $398 in 2006, $563 in 2007, and $464 in 2008. Payments may be
accelerated if certain revenue targets are met. 39




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##### Table of Contents



The acquisition has been accounted for as a purchase, and the results of Safway have been
included in the Companys consolidated financial statements from the date of acquisition. The
purchase price has been allocated based on the estimated fair value of the assets acquired, as
follows: Rental equipment
    
    $
    15,837Property, plant and equipment
    
    
    798Goodwill
    
    
    2,844Intangible assets
    
    
    2,970Accrued liabilities
    
    
    (1,571
    )Purchase price, including acquisition costs of $1,085
    
    $
    20,878
 Components of the purchase price are as follows: Cash paid at closing
    
    $
    13,000Acquisition costs
    
    
    1,085Initial purchase price adjustment
    
    
    (417
    )2003 Cash portion of acquisition
    
    
    13,668Present value of seller note
    
    
    6,9652004 purchase price adjustment
    
    
    240Acquisition costs
    
    
    5Total purchase price
    
    $
    20,878
 The following pro forma information sets forth the consolidated results of operations for the
fiscal year ended December 31, as though the acquisition had been completed as of the beginning of
the period: Pro FormaTwelve fiscalmonths endedDecember 31, 2003Net Sales
    
    $
    392,052Income (loss) before provision
(benefit) for income taxes and
cumulative effect of change in
accounting principle
    
    
    (30,829
    )Income (loss) before cumulative
effect of change in accounting
principle
    
    $
    (19,093
    )
 (3) Summary of Significant Accounting Policies Inventories The Company values all inventories at the lower of first-in, first-out (FIFO) cost or
market. The Company provides net realizable value reserves which reflect the Companys best
estimate of the excess of the cost of potential obsolete and slow moving inventory over the
expected net realizable value. Following is a summary of the components of inventories as of
December 31, 2004 and 2003: December 31,
    
    
    December 31,2004
    
    
    2003Raw materials
    
    $
    21,663
    
    
    $
    9,588Work in progress
    
    
    2,588
    
    
    
    2,742Finished goods
    
    
    35,138
    
    
    
    37,107Total Inventory
    
    $
    59,389
    
    
    $
    49,437
 40




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##### Table of Contents



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 lives of the equipment, three to fifteen years, on a
straight-line method. Property, Plant and Equipment Property, plant and equipment are valued at cost and depreciated using straight-line methods
over their estimated useful lives of 10-30 years for buildings and improvements and 3-10 years for
machinery and equipment. Leasehold improvements are amortized over the lesser of the term of the lease or the estimated
useful lives of the improvements. Improvements and replacements are capitalized, while expenditures
for maintenance and repairs are charged to expense as incurred. Included in the cost of property, plant and equipment are assets obtained through capital leases,
all included in machinery and equipment. As of December 31, 2004, the cost of assets under capital
lease is $6,422, with accumulated amortization of $2,174. Amortization expense related to machinery
and equipment under capital lease was $1,270 for the period ended December 31, 2004. As of December
31, 2003, the cost of assets under capital lease is $5,941, with accumulated amortization of $904.
Amortization expense related to machinery and equipment under capital lease was $648 for the period
ended December 31, 2003. Goodwill and Intangible Assets Amortization is provided over the term of the loan (3 to 9 years) for deferred financing
costs, the term of the agreement (17 months to 5 years) for non-compete agreements, over the
estimated useful life (1-15 years) for intellectual property, customer lists, and dealer network.
Amortization of non-compete agreements, intellectual property, customer lists, and dealer network
is reflected as Amortization of intangibles in the accompanying consolidated statements of
operations. Long-lived assets and goodwill are reviewed for impairment annually or whenever events
or circumstances indicate that the carrying amount of an asset may not be recoverable from future
cash flows. Future cash flows are forecasted based on managements estimates of future events and
could be materially different from actual cash flows. If the carrying value of an asset is
considered impaired, an impairment charge is recorded for the amount by which the carrying value of
the asset exceeds its fair value. The estimated aggregate amortization expense for each of the
next five years is as follows: $684 in 2005, $491 in 2006, $119 in 2007, $119 in 2008, and $119 in
2009. Amortization of deferred financing costs is reflected as Interest expense in the
accompanying consolidated statements of operations. The estimated aggregate expense for each of the
next five years related to the amortization of deferred financing costs is as follows: $1,633 in
2005, $1,633 in 2006, $976 in 2007, $808 in 2008, and $202 in 2009. Intangible assets consist of the following at December 31: 2004
    
    
    2003Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedGross
    
    
    Amortization
    
    
    Net
    
    
    Gross
    
    
    Amortization
    
    
    NetDeferred financing costs
    
    $
    7,032
    
    
    $
    (1,779
    )
    
    $
    5,253
    
    
    $
    8,429
    
    
    $
    (3,175
    )
    
    $
    5,254Non-compete agreements
    
    
    1,760
    
    
    
    (837
    )
    
    
    923
    
    
    
    2,325
    
    
    
    (367
    )
    
    
    1,958Customer list
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,255
    
    
    
    (63
    )
    
    
    2,192Intellectual property
    
    
    1,700
    
    
    
    (764
    )
    
    
    936
    
    
    
    1,590
    
    
    
    (481
    )
    
    
    1,109Pension benefits
    
    
    73
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    Dealer Network
    
    
    33
    
    
    
    (33
    )
    
    
    
    
    
    
    33
    
    
    
    (14
    )
    
    
    19$
    10,598
    
    
    $
    (3,413
    )
    
    $
    7,185
    
    
    $
    14,632
    
    
    $
    (4,100
    )
    
    $
    10,532
 The Company adopted SFAS No. 142 effective January 1, 2002. As a result of adopting SFAS No. 142,
the Company recorded a non-cash charge in 2002 of $17,140 ($19,894 of goodwill, less an income tax
benefit of $2,754), which is reflected as a cumulative effect of change in accounting principle in
the accompanying 41




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##### Table of Contents



December 31, 2002 consolidated statement of operations. This amount does not
affect the Companys ongoing operations. The goodwill arose from the acquisitions of Dur-O-Wal in
1995, Southern Construction Products in 1999, and Polytite in 2000, all of which manufacture and
sell metal accessories used in masonry construction. The masonry products market has experienced
weaker markets and significant price competition, which has had a negative impact on the product
lines earnings and fair value. The following is a reconciliation of goodwill: Product
    
    
    Rental Revenues/Sales ofSales
    
    
    Used Rental Equipment
    
    
    TotalBalance at January 1, 2003
    
    $
    98,098
    
    
    $
    8,507
    
    
    $
    106,605Safway Acquisition
    
    
    
    
    
    
    2,537
    
    
    
    2,537Other
    
    
    443
    
    
    
    
    
    
    
    443Balance at December 31, 2003
    
    
    98,541
    
    
    
    11,044
    
    
    
    109,585Change in Purchase Price
Allocation of Safway
Acquisition
    
    
    
    
    
    
    307
    
    
    
    307Change in Purchase Price
Allocation related to
income taxes from the
acquisition of Aztec
Concrete Accessories, Inc.
in 2001
    
    
    (2,249
    )
    
    
    
    
    
    
    (2,249
    )Balance at December 31, 2004
    
    $
    96,292
    
    
    $
    11,351
    
    
    $
    107,643
 Fair Value of Financial Instruments The carrying amount of cash and accounts receivable approximate fair value because of the
relatively short maturity of these financial instruments. Fair values of debt are based on quoted
prices for financial instruments with the same remaining maturities. Income Taxes Deferred income taxes are recorded for temporary differences between financial statement
carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities
reflect the enacted tax rates in effect for the years the differences are expected to reverse. The
Company evaluates the need for a deferred tax asset valuation allowance by assessing whether it is
more likely than not that it will realize deferred tax assets in the future and it records
liabilities for uncertain tax matters based on assessment of the likelihood of sustaining certain
tax positions. In estimating whether deferred tax assets are realizable, it estimates levels of
future taxable income by considering historical results of operations in recent years and would, if
necessary, consider the implementation of prudent and feasible tax planning strategies to generate
taxable income. Environmental Remediation Liabilities The Company accounts for environmental remediation liabilities in accordance with the American
Institute of Certified Public Accountants issued Statement of Position 96-1, Environmental
Remediation Liabilities, (SOP 96-1). The Company accrues for losses associated with
environmental remediation obligations when such losses are probable and reasonably estimable.
Accruals for estimated losses from environmental remediation obligations generally are recognized
no later than completion of the remedial feasibility study. Such accruals are adjusted as further
information develops or circumstances change. Costs of future expenditures for environmental
remediation obligations are not discounted to their present value. Recoveries of environmental
remediation costs from other parties are recorded as assets when their receipt is deemed probable. 42




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##### Table of Contents



Foreign Currency Translation Adjustment The financial statements of the Companys foreign subsidiary and branches are maintained in
their functional currency (Canadian dollars) and are then translated into U.S. dollars. The balance
sheets are translated at end of year rates while revenues, expenses and cash flows are translated
at weighted average rates throughout the year. Translation adjustments, which result from changes
in exchange rates from period to period, are accumulated in a separate component of shareholders
deficit. Transactions in foreign currencies are translated into U.S. dollars at the rate in effect
on the date of the transaction. Changes in foreign exchange rates from the date of the transaction
to the date of the settlement of the asset or liability are recorded as income or expense. Revenue Recognition Revenue is recognized from product sales when the product is shipped from our facilities and
risk of loss and title have passed to the customer. Additionally, revenue is recognized at the
customers written request and when the customer has made a fixed commitment to purchase goods on a
fixed schedule consistent with the customers business, where risk of ownership has passed to the
buyer, the goods are set-aside in storage and the Company does not retain any specific performance
obligations and therefore the earning process is complete. For transactions where such conditions
are not satisfied, revenue is deferred until the terms of acceptance are satisfied. On rental
equipment sales, revenue is recognized and recorded on the date of shipment. Rental revenues are
recognized ratably over the terms of the rental agreements. Customer Rebates The Company offers rebates to certain customers, which are redeemable only if the customer
meets certain specified thresholds relating to a cumulative level of sales transactions. The
Company records such rebates as a reduction of revenue in the period the related revenues are
recognized. Accounts Receivable Reserves The Company maintains reserves for sales discounts and allowances and for doubtful accounts
for estimated losses resulting from customer disputes and/or the inability of our customers to make
required payments. If the financial condition of customers deteriorates, resulting in an impairment
of their ability to make payments, additional allowances may be required. Receivables are charged
to the allowance for doubtful accounts when an account is deemed to be uncollectible, taking into
consideration the financial condition of the customer and the value of any collateral. Recoveries
of receivables previously charged off as uncollectible are credited to the allowance. Use of Estimates The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the balance sheet date and the reported
amounts of revenues and expenses during the year. Actual results could differ from those estimates.
Examples of accounts in which estimates are used include the reserve for excess and obsolete
inventory, the allowance for doubtful accounts and sales returns and allowances, the accrual for
self-insured employee medical claims, the self-insured product and general liability accrual, the
self-insured workers compensation accrual, accruals for litigation losses, the valuation allowance
for deferred tax assets, actuarial assumptions used in determining pension benefits, and actuarial
assumptions used in determining other post-retirement benefits. New Accounting Pronouncements In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity. SFAS No. 150 requires certain financial
instruments that embody obligations of the issuer and have characteristics of both liabilities and
equity to be classified as liabilities. The provisions of SFAS 150 are effective for financial
instruments entered into or modified after May 31, 2003 and to all other instruments that exist as
of the beginning of the first interim financial reporting period beginning after June 15, 2003,
except for mandatory redeemable financial instruments of a nonpublic entity, this statement became
effective for periods 43




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##### Table of Contents



beginning after December 15, 2003. The adoption of this pronouncement did not
have a material impact on the Companys consolidated financial position, results of operations, or
cash flows. In May 2004, the FASB staff issued FASB Staff Position SFAS 106-2, Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003
(the Act). This statement prescribes accounting for the Act and is effective for interim
periods beginning after June 15, 2004. The Company has determined that the benefits provided to
retirees under the Companys prescription drug plan are not actuarially equivalent to the benefits
provided under the Act. Therefore, the Company will not qualify for the subsidy provided by the
Act and the adoption of SFAS 106-2 did not have a material effect on the financial statements. In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43,
Chapter 4, to clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and waste material (spoilage). This statement requires those items to be
recognized as current-period charges. The Company will be required to comply with the provision of
SFAS No. 151 as of the first fiscal year beginning after June 15, 2005 (January 1, 2006 for the
Company). The Company has not determined the impact that SFAS No. 151 will have on its financial
statements. In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment. This
statement requires that the cost resulting from all share-based payment transactions are recognized
in the financial statements. That cost will be measured based on the fair value of the equity of
liability instruments issued. SFAS 123 (R) is effective as of the first interim or annual
reporting period that ends after June 15, 2005, effective for the Companys second quarter of 2005.
The Company is currently evaluating this pronouncement and does not anticipate a material impact
on the Companys results of operations. In December 2004, the FASB issued Staff Position No. FAS 109-2, Accounting and Disclosure Guidance
for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004 (FSP
109-2). FSP 109-2 provides guidance on the accounting for the effects of the Acts repatriation of
certain foreign earnings to a U.S. taxpayer, provided certain criteria are met. FSP 109-2 was
effective upon issuance and the Company does not believe this pronouncement will have a material
impact on its consolidated results of operations, financial position, and cash flows. Stock Options The Company measures compensation cost for stock options issued using the intrinsic
value-based method of accounting in accordance with Accounting Principles Board Opinion (APB) No.
25. If compensation cost for the Companys stock options had been determined based on the fair
value method of SFAS No. 123, Accounting for Stock-Based Compensation, the Companys net loss
would have been increased to the pro forma amounts as follows: 2004
    
    2003
    
    2002Net loss:
    
    As Reported
    
    $
    (48,370
    )
    
    $
    (17,108
    )
    
    $
    (20,263
    )Deduct: Total
stock-based
employee
compensation
expense determined
under fair
value-based method
for all awards, net
of related tax
effect
    
    
    (247
    )
    
    
    (261
    )
    
    
    (284
    )Pro Forma
    
    $
    48,617
    
    
    $
    (17,369
    )
    
    $
    (20,547
    )
 The fair value of each option grant is estimated on the date of grant using the Black Scholes
options pricing model with the following weighted average assumptions used for grants in 2004,
2003, and 2002, respectively: 2004
    
    2003
    
    2002Risk-free interest rates
    
    2.62%-3.24%
    
    2.98%-3.26%
    
    3.70%Expected dividend yield
    
    0%
    
    0%
    
    0%Expected lives
    
    6 years
    
    6 years
    
    6 yearsExpected volatility
    
    7.04%
    
    8.44%
    
    0.00%
 44




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##### Table of Contents



Reclassifications Certain reclassifications
have been made to the 2003 and 2002 amounts to conform to their 2004
classifications. (4) Credit Arrangements Following is a summary of the Companys long-term debt as of December 31, 2004 and December
31, 2003: December 31,
    
    
    December 31,2004
    
    
    2003Revolving credit facility, weighted average interest rate of 5.0%
    
    $
    58,800
    
    
    $
    24,375Senior Subordinated Notes, interest rate of 13.0%
    
    
    154,729
    
    
    
    154,729Debt discount on Senior Subordinated Notes
    
    
    (7,397
    )
    
    
    (8,514
    )Senior Second Secured Notes, interest rate of 10.75%
    
    
    165,000
    
    
    
    165,000Debt discount on Senior Second Secured Notes
    
    
    (6,194
    )
    
    
    (7,454
    )Senior Unsecured Notes payable to seller of Safway, non-interest
bearing, accreted at 6.0% to 14.5%
    
    
    7,794
    
    
    
    7,999Debentures previously held by Dayton Superior Capital Trust,
interest rate of 9.1%, due on demand
    
    
    1,102
    
    
    
    1,110Capital lease obligations
    
    
    3,794
    
    
    
    4,590City of Parsons, Kansas Economic Development Loan, interest rate
of 7.0%
    
    
    16
    
    
    
    55Total long-term debt
    
    
    377,644
    
    
    
    341,890Less current maturities
    
    
    (2,455
    )
    
    
    (3,067
    )Long-term portion
    
    $
    375,189
    
    
    $
    338,823
 Scheduled maturities of long-term debt and future minimum lease payments under capital leases are: Long-term
    
    
    CapitalYear
    
    Debt
    
    
    Leases
    
    
    Total2005
    
    $
    1,379
    
    
    $
    1,498
    
    
    $
    2,8772006
    
    
    399
    
    
    
    1,102
    
    
    
    1,5012007
    
    
    59,395
    
    
    
    880
    
    
    
    60,2752008
    
    
    171,539
    
    
    
    772
    
    
    
    172,3112009
    
    
    154,729
    
    
    
    234
    
    
    
    154,963Thereafter
    
    
    
    
    
    
    52
    
    
    
    52Long-Term Debt and Lease Payments
    
    
    387,441
    
    
    
    4,538
    
    
    
    391,979Less: Debt Discount
    
    
    (13,591
    )
    
    
    
    
    
    
    (13,591
    )Less: Amounts Representing Interest
    
    
    
    
    
    
    (744
    )
    
    
    (744
    )$
    373,850
    
    
    $
    3,794
    
    
    $
    377,644
 On January 30, 2004, we established an $80,000 senior secured revolving credit facility, which was
used to refinance our previous $50,000 revolving credit facility. As a result of the transaction,
the company incurred a loss on the early extinguishment of long-term debt of $842, due to the
expensing of deferred financing costs related to the previous revolving credit facility. On July
2, 2004, the Company increased the senior secured revolving credit facility to $95,000. The new
credit facility, which matures on January 30, 2007, has no financial covenants and is subject to
availability under a borrowing base calculation. Availability of borrowings is limited to 85% of
eligible accounts receivable and 60% of eligible inventories and rental equipment, less $10,000.
At December 31, 2004, all $95,000 was available under the calculation and the Company had
outstanding letters of credit of $5,235 and available borrowings of $30,965. The credit facility
is secured by substantially all assets of the Company. 45




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##### Table of Contents



The average borrowings, maximum borrowings and weighted average interest rates on the revolving
credit facility for the periods indicated were as follows: For the Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2004
    
    
    2003
    
    
    2002Average borrowing
    
    $
    54,539
    
    
    $
    22,578
    
    
    $
    15,156Maximum borrowing
    
    
    72,425
    
    
    
    35,225
    
    
    
    29,275Weighted average interest rate
    
    
    4.6
    %
    
    
    5.5
    %
    
    
    6.4
    %
 On June 9, 2003, the Company completed an offering of $165,000 of senior second secured notes (the
Senior Notes) in a private placement. The notes mature in June 2008 and 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 proceeds of the offering of the Senior Notes were $156,895 and
were used to repay the Companys acquisition credit facility, term loan tranche A, term loan
tranche B, and a portion of the revolving credit facility which was subsequently increased by
$24,375. As a result of the transactions, the Company incurred a loss on the early extinguishment
of long-term debt of $2,550, due to the expensing of deferred
financing costs. The estimated fair value of the notes was $176.6
million as of December 31, 2004. The senior second
secured notes are secured by substantially all assets of the Company. As of December 31, 2004, the Senior Subordinated Notes (the Notes) have a principal amount of
$154,729 and mature in June 2009. During the second quarter of 2003, the Company repurchased a
portion of the Notes. A principal amount of $15,271, with a net book value of $14,381, was
repurchased using the revolving credit facility for $14,311, resulting in a gain on the early
extinguishment of long-term debt of $70. 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 holders to purchase 117,276 of the
Companys Common Shares for $0.01 per share. The estimated fair
value of the notes was $160.8
million as of December 31, 2004. The guarantees by the merged subsidiaries of our Senior Second Secured Notes and the Senior
Subordinated Notes and the pledge of the capital stock of certain of the merged subsidiaries that
secured the Credit Agreement and the Senior Second Secured Notes immediately prior to the merger
ceased to exist, effective December 31, 2004. As the surviving corporation in the merger, however,
Dayton Superior, which is the issuer of the Senior Second Secured Notes, the Senior Subordinated
Notes and the borrower under the Credit Agreement, succeeded to all of the assets and liabilities
of each of the merged subsidiaries that had been guarantors of the notes and Credit Agreement. Other long term debt at
December 31, 2004 consisted of $1.1 million of 9.1% junior
subordinated debentures previously held by the Dayton Superior
Capital Trust with an estimated fair value as of December 31, 2004 of
$16 thousand The wholly owned foreign subsidiary of the Company is not a guarantor of the Notes or the Senior
Notes and does not have any credit arrangements senior to the Notes or the Senior Notes. (5) Common Shares Stock Option Plan Upon consummation of our recapitalization in 2000, we adopted the 2000 Stock Option Plan of
Dayton Superior Corporation (Stock Option Plan). The Stock Option Plan permits the grant of
stock options to purchase 769,254 common shares. Options to purchase 79,400, 92,859, and 147,225,
common shares were granted during 2004, 2003, and 2002, respectively. Options that are cancelled
may be reissued. As of December 31, 2004, options to purchase 43,048
common shares were available to be granted. The Stock Option Plan constitutes the amendment and merger into one plan of four previous option
plans and governs options that remain outstanding following the recapitalization, as well as new
option grants. The terms of the option grants are ten years from the date of grant. Generally, between 10% and 25% of the options have a fixed vesting period of less than three years.
The remaining options are eligible to become exercisable in installments over one to five years
from the date of grant based on the Companys performance, but, in any case, become exercisable no
later than nine years after the grant date. 46




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##### Table of Contents



These options may be subject to accelerated vesting upon certain change in control events based on
Odysseys return on investment. Under the Stock Option Plan, the option exercise price equals the
stocks market price on date of grant. A summary of the status of the Companys stock option plans at December 31, 2004, 2003, and 2002,
and changes during the years then ended is presented in the table and narrative below: Weighted AverageNumber of
    
    
    Exercise Price PerShares
    
    
    ShareOutstanding at January 1, 2002
    
    
    541,258
    
    
    $
    24.17Granted at a weighted average fair value of $5.43
    
    
    147,225
    
    
    
    27.50Exercised
    
    
    (3,050
    )
    
    
    2.29Cancelled
    
    
    (13,749
    )
    
    
    25.21Outstanding at December 31, 2002
    
    
    671,684
    
    
    
    25.00Granted at a weighted average fair value of $4.78
    
    
    92,859
    
    
    
    25.42Cancelled
    
    
    (120,704
    )
    
    
    25.26Outstanding at December 31, 2003
    
    
    643,839
    
    
    
    25.03Granted at a weighted average fair value of $4.39
    
    
    79,400
    
    
    
    25.85Exercised
    
    
    (31,044
    )
    
    
    1.96Cancelled
    
    
    (9,217
    )
    
    
    27.39Outstanding at December 31, 2004
    
    
    682,978
    
    
    $
    26.13
 Price ranges and other information for stock options outstanding at December 31, 2004 are as
follows: Outstanding
    
    
    ExercisableWeighted
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    Remaining
    
    
    
    
    
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    
    Price
    
    
    Life
    
    
    Shares
    
    
    Price$4.00
    
    
    9,843
    
    
    $
    4.00
    
    
    0.8 years
    
    
    9,843
    
    
    $
    4.00$16.81 - $19.91
    
    
    22,164
    
    
    
    17.95
    
    

    3.6
    
    
    
    22,164
    
    
    
    17.95$24.00 - $27.50
    
    
    650,971
    
    
    
    26.74
    
    

    6.7
    
    
    
    125,824
    
    
    
    26.87682,978
    
    
    $
    26.13
    
    
    6.5 years
    
    
    157,831
    
    
    $
    24.19
 Shares exercisable were 161,050 and 188,092 as of December 31, 2003 and 2002, respectively. Treasury Shares During 2002 the Company repurchased common shares from former employees in conjunction with
the facility closing and severance plans discussed in Note 10. There were 7,459 shares repurchased
for $205. 47




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##### Table of Contents



(6) Retirement Plans Company-Sponsored Pension Plans The Companys pension plans cover virtually all hourly employees not covered by multi-employer
pension plans and provide benefits of stated amounts for each year of credited service. The Company
funds such plans at a rate that meets or exceeds the minimum amounts required by applicable
regulations. The plans assets are primarily invested in mutual funds comprised primarily of common
stocks and corporate and U.S. government obligations. The Company provides postretirement health care benefits on a contributory basis and life insurance
benefits for Symons salaried and hourly employees who retired prior to May 1, 1995. Pension
    
    
    Pension
    
    
    Symons
    
    
    SymonsBenefits
    
    
    Benefits
    
    
    Postretirement
    
    
    Postretirement2004
    
    
    2003
    
    
    Benefits 2004
    
    
    Benefits 2003Change in benefit obligationBenefit obligation at beginning of year
    
    $
    10,198
    
    
    $
    8,227
    
    
    $
    648
    
    
    $
    721Service cost
    
    
    622
    
    
    
    483
    
    
    
    
    
    
    
    Interest cost
    
    
    610
    
    
    
    563
    
    
    
    28
    
    
    
    46Amendments
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    Actuarial loss/(gain)
    
    
    485
    
    
    
    1,424
    
    
    
    (167
    )
    
    
    45Benefits paid
    
    
    (422
    )
    
    
    (499
    )
    
    
    (31
    )
    
    
    (164
    )Benefit obligation at end of year
    
    $
    11,617
    
    
    $
    10,198
    
    
    $
    478
    
    
    $
    648Change in plan assetsFair value of plan assets at beginning of year
    
    $
    7,648
    
    
    $
    6,812
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    784
    
    
    
    1,136
    
    
    
    
    
    
    
    Employee contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109Employer contribution
    
    
    998
    
    
    
    199
    
    
    
    31
    
    
    
    55Benefits paid
    
    
    (422
    )
    
    
    (499
    )
    
    
    (31
    )
    
    
    (164
    )Fair value of plan assets at end of year
    
    $
    9,008
    
    
    $
    7,648
    
    
    $
    
    
    
    $
    Funded status
    
    $
    (2,608
    )
    
    $
    (2,550
    )
    
    $
    (478
    )
    
    $
    (648
    )Unrecognized prior service cost
    
    
    73
    
    
    
    (37
    )
    
    
    144
    
    
    
    168Unrecognized net loss (gain)
    
    
    2,422
    
    
    
    2,170
    
    
    
    (150
    )
    
    
    7Net amount recognized
    
    $
    (113
    )
    
    $
    (417
    )
    
    $
    (484
    )
    
    $
    (473
    )Amounts recognized in the statement of
financial position consist of:Accrued benefit liability
    
    $
    (2,513
    )
    
    $
    (2,550
    )
    
    $
    (484
    )
    
    $
    (473
    )Intangible Asset
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    Accumulated other comprehensive income
    
    
    2,327
    
    
    
    2,133
    
    
    
    
    
    
    
    Net amount recognized
    
    $
    (113
    )
    
    $
    (417
    )
    
    $
    (484
    )
    
    $
    (473
    )Components of net periodic benefit costService cost
    
    $
    622
    
    
    $
    483
    

    
    $
    
    
    
    $
    Interest cost
    
    
    610
    
    
    
    563
    
    
    
    28
    
    
    
    46Expected return on plan assets
    
    
    (636
    )
    
    
    (536
    )
    
    
    
    
    
    
    Amortization of actuarial loss
    
    
    84
    
    
    
    55
    
    
    
    (11
    )
    
    
    Amortization of prior service cost
    
    
    14
    
    
    
    5
    
    
    
    24
    
    
    
    24Net periodic pension cost
    
    $
    694
    
    
    $
    570
    
    
    $
    41
    
    
    $
    70Additional InformationIncrease in minimum liability included
in other comprehensive income
    
    
    194
    
    
    
    763
    
    
    
    
    
    
    
    
 48




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##### Table of Contents



The weighted average assumptions used in the actuarial computation that derived the above
funded status amounts were as follows: Pension
    
    Pension
    
    Symons
    
    SymonsBenefits
    
    Benefits
    
    Postretirement
    
    Postretirement2004
    
    2003
    
    Benefits 2004
    
    Benefits 2003Discount rate
    
    5.75%
    
    6.00%
    
    6.00%
    
    6.00%Expected return on plan assets
    
    8.00%
    
    8.00%
    
    N/A
    
    N/ARate of compensation increase
    
    N/A
    
    N/A
    
    N/A
    
    N/A
 The weighted average assumptions used in the actuarial computation that derived net periodic
benefit income (expense) were as follows: Pension
    
    Pension
    
    Pension
    
    Symons
    
    Symons
    
    SymonsBenefits
    
    Benefits
    
    Benefits
    
    Postretirement
    
    Postretirement
    
    Postretirement2004
    
    2003
    
    2002
    
    Benefits 2004
    
    Benefits 2003
    
    Benefits 2002Discount rate
    
    6.00%
    
    6.75%
    
    7.25%
    
    6.00%
    
    6.75%
    
    7.5%Expected return on plan assets
    
    8.00%
    
    8.00%
    
    8.00%
    
    N/A
    
    N/A
    
    N/ARate of compensation increase
    
    N/A
    
    N/A
    
    N/A
    
    N/A
    
    N/A
    
    N/A
 One of the principal components of the net periodic pension cost calculation is the expected
long-term rate of return on assets. The required use of an expected long-term rate of return on
plan assets may result in recognized pension income that is greater or less than the actual returns
of those plan assets in any given year. Over time, however, the expected long-term returns are
designed to approximate the actual long-term returns and therefore result in a pattern of income
and expense recognition that more closely matches the pattern of the services provided by the
employees. Our defined benefit pension plans assets are invested primarily in equity and fixed
income mutual funds. We use long-term historical actual return experience and estimates of future
long-term investment return with consideration to the expected investment mix of the plans assets
to develop our expected rate of return assumption used in the net periodic pension cost
calculation. Our postretirement healthcare benefit plan is unfunded and has no plan assets. Therefore, the
expected long-term rate of return on plan assets is not a factor in accounting for this benefit
plan. As of December 31, 2004 and 2003, the pension plan had accumulated benefit obligations equal to the
projected benefit obligation of $11,617 and $10,198, respectively. Assumed health care cost trend rates: December 31,2005
    
    
    2004Health care cost trend rate assumed for next year
    
    
    13.0
    %
    
    
    8.0
    %Rate to which the cost trend rate is assumed to
decline (the ultimate trend rate)
    
    
    5.0
    %
    
    
    5.0
    %Year that the rate reaches the ultimate trend rate
    
    
    2015
    
    
    
    2010
 Assumed health care cost trend rates have a significant effect on the amounts reported for the
health care plan. A one percentage point change in assumed health care cost trend rates would have
the following effects: 1 Percentage Point
    
    
    1 PercentageIncrease
    
    
    Point DecreaseEffect on total of service and
interest cost components
    
    $
    5
    
    
    $
    (3
    )Effect on the postretirement
benefit obligation
    
    
    9
    
    
    
    (8
    )
 49




---



##### Table of Contents



Plan Assets The pension plan asset allocations at December 31, 2004 and 2003, by asset category were as
follows: Plan Assets at December 31,Asset Category
    
    2004
    
    
    2003Equity Securities
    
    
    54
    %
    
    
    55
    %Debt Securities
    
    
    33
    
    
    
    36Cash and Cash Equivalents
    
    
    8
    
    
    
    2Insurance Contract
    
    
    5
    
    
    
    7Total
    
    
    100
    %
    
    
    100
    %
 The Companys pension plan asset investment strategy is to invest in a combination of equities and
fixed income investments while maintaining a moderate risk posture. The targeted asset allocation
within the investment portfolio is 55% equities and 45% fixed income. The Company evaluates the
performance of the pension investment program in the context of a three to five-year horizon. Cash Flow Contributions: We expect to contribute $931 to the pension plan in 2005. Estimated Future Benefit Payments: The following benefit payments, which reflect expected future service, as appropriate, are expected
to be paid: Pension Benefits
    
    
    Other Benefits2005
    
    $
    372
    
    
    $
    452006
    
    
    376
    
    
    
    472007
    
    
    411
    
    
    
    482008
    
    
    454
    
    
    
    492009
    
    
    480
    
    
    
    49Years 2010-2014
    
    
    3,304
    
    
    
    204
 Multi-Employer Pension Plan Approximately 11% of the Companys employees are currently covered by collectively bargained,
multi-employer pension plans. Contributions are determined in accordance with the provisions of
negotiated union contracts and generally are based on the number of hours worked. The Company does
not have the information available to determine its share of the accumulated plan benefits or net
assets available for benefits under the multi-employer pension plans. The aggregate amount charged
to expense under these plans was $308, $321, and $347 for the years ended December 31, 2004, 2003,
and 2002, respectively. 401(k) Savings Plan Most employees are eligible to participate in Company sponsored 401(k) savings plans. Company
matching contributions vary from 0% to 50% according to terms of the individual plans and
collective bargaining agreements. The aggregate amount charged to expense under these plans was $760, $767, and $993 for
the years ended December 31, 2004, 2003, and 2002, respectively. Retirement Contribution Account The Company has a defined contribution plan for substantially all salaried employees.
Employees are not permitted to contribute to the plan. The Company suspended contributions to this
account for service rendered in 50




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##### Table of Contents



2003 and 2004. Previously, participants earned 1.5% to 6.0% of
eligible compensation, depending on the age of the employee. The amount charged to expense for the
year ended December 31, 2002 was $1,791. (7) Income Taxes The following is a summary of the components of the Companys income tax provision for the
years ended December 31, 2004, 2003, and 2002: 2004
    
    
    2003
    
    
    2002Currently payable (receivable):Federal
    
    $
    (239
    )
    
    $
    (98
    )
    
    $
    (4,000
    )State and local
    
    
    (19
    )
    
    
    154
    
    
    
    (354
    )Foreign
    
    
    (58
    )
    
    
    459
    
    
    
    603Deferred (future tax benefit)
    
    
    16,743
    
    
    
    (11,228
    )
    
    
    3,365Total provision (benefit)
    
    $
    16,427
    
    
    $
    (10,713
    )
    
    $
    (386
    )
 The effective income tax rate differs from the statutory federal income tax rate for the years
ended December 31, 2004, 2003, and 2002 for the following reasons: 2004
    
    
    2003
    
    
    2002Statutory income tax rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %State income taxes (net of federal
tax benefit), before valuation allowance
    
    
    3.7
    
    
    
    4.9
    
    
    
    (4.1
    )Nondeductible goodwill
amortization and other
permanent differences
    
    
    (0.8
    )
    
    
    (0.4
    )
    
    
    (8.6
    )Foreign income taxes
    
    
    1.4
    
    
    
    
    
    
    
    (10.3
    )Valuation allowance
    
    
    (89.7
    )
    
    
    
    
    
    
    Effective income tax rate
    
    
    (51.4
    )%
    
    
    38.5
    %
    
    
    11.0
    %
 The components of the Companys deferred taxes as of December 31, 2004 and 2003 are the result of
book/tax basis differences related to the following items: 2004
    
    
    2003Deferred tax assets:Accounts receivable reserves
    
    $
    1,998
    
    
    $
    1,123Inventory reserves
    
    
    848
    
    
    
    1,100Accrued liabilities
    
    
    2,686
    
    
    
    2,975Other long-term liabilities
    
    
    1,640
    
    
    
    3,523Net operating loss carryforwards
    
    
    28,655
    
    
    
    15,179Other
    
    
    217
    
    
    
    170Valuation allowance
    
    
    (28,655
    )
    
    
    Total
    
    $
    7,389
    
    
    $
    24,070Deferred tax liabilities:Accelerated depreciation
    
    
    (17,590
    )
    
    
    (16,248
    )Goodwill and intangible assets
    
    
    (671
    )
    
    
    (814
    )Note payable to seller of Safway
    
    
    (1,137
    )
    
    
    (1,400
    )Other
    
    
    
    
    
    
    (240
    )Total
    
    $
    (19,398
    )
    
    $
    (18,702
    )Net deferred taxes
    
    $
    (12,009
    )
    
    $
    5,368
 For federal income tax purposes, the Company has federal net operating loss carryforwards of
approximately $77,000, which expire over a six-year period beginning in 2019. The Company also has
state net operating tax loss carryforwards of approximately $79,000, which expire over a period of
five to twenty years beginning in 2005. 51




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##### Table of Contents



The Company has recorded a non-cash valuation allowance to
reduce its deferred tax asset related to these net operating loss carryforwards to zero, as
estimated levels of future taxable income are less than the amount needed to realize this asset.
If such estimates change in the future the valuation allowance would be decreased or increased,
resulting in a non-cash increase or decrease to net income. A provision has not been made for domestic or additional foreign taxes on the undistributed portion
of earnings of our foreign subsidiary as those earnings have been permanently reinvested. The
undistributed earnings of foreign subsidiaries approximate $7,800. The amount of the deferred tax
liability associated with these earnings has not been calculated, as it is impractical to
determine. (8) Segment Reporting Effective January 1, 2004, the Company changed its financial reporting to three segments to
monitor gross profit by sales type: product sales, rental revenue, and used rental equipment
sales. These types of sales are differentiated by their source and gross margin percents of sales.
Accordingly, this segmentation provides information for decision-making and resource allocation.
Product sales represent sales of new products carried in inventories on the balance sheet. Cost of
goods sold for product sales include material, manufacturing labor, overhead costs, and freight.
Rental revenues represent the leasing of the rental equipment and are recognized ratably over the
lease term. Cost of goods sold for rental revenues includes depreciation of the rental equipment,
maintenance of the rental equipment, and freight. Sales of used rental equipment represent sales
of the rental equipment after a period of generating rental revenue. Cost of goods sold for sales
of used rental equipment consists of the net book value of the rental equipment. All other
expenses, as well as assets and liabilities, are not tracked by sales type and therefore it is not
practicable to disclose this information by segment. Depreciation was reflected in determining
segment gross profit; however, it is no practicable to allocate the depreciation expense between
the rental and used rental equipment segments. Export sales and sales by non-U.S. affiliates is
not significant. Information about the income of each segment and the reconciliations to the consolidated amounts
for the years ended December 31, 2004, 2003, and 2002 is as follows: 2004
    
    
    2003
    
    
    2002Product sales
    
    $
    348,036
    
    
    $
    304,101
    
    
    $
    320,221Rental revenue
    
    
    42,231
    
    
    
    35,633
    
    
    
    44,184Used rental equipment sales
    
    
    28,372
    
    
    
    39,723
    
    
    
    35,641Net sales
    
    
    418,639
    
    
    
    379,457
    
    
    
    400,046Product cost of sales
    
    
    265,228
    
    
    
    236,877
    
    
    
    236,932Rental cost of sales
    
    
    35,275
    
    
    
    28,010
    
    
    
    22,855Used rental equipment cost of sales
    
    
    10,388
    
    
    
    12,791
    
    
    
    13,675Cost of sales
    
    
    310,891
    
    
    
    277,678
    
    
    
    273,462Product gross profit
    
    
    82,808
    
    
    
    67,224
    
    
    
    83,289Rental gross profit
    
    
    6,956
    
    
    
    7,623
    
    
    
    21,329Used rental equipment gross profit
    
    
    17,984
    
    
    
    26,932
    
    
    
    21,966Gross profit
    
    $
    107,748
    
    
    $
    101,779
    
    
    $
    126,584Depreciation Expense:Product sales (Property, plant, and equipment)
    
    $
    5,471
    
    
    $
    6,926
    
    
    $
    6,136Rental Revenue (Rental equipment)
    
    
    21,934
    
    
    
    16,924
    
    
    
    12,429Corporate
    
    
    2,624
    
    
    
    2,084
    
    
    
    2,285Total depreciation
    
    $
    30,029
    
    
    $
    25,934
    
    
    $
    20,850
 52




---



##### Table of Contents



(9) Commitments and Contingencies Operating Leases Rental expense for property, plant and equipment (principally manufacturing/distribution,
service/distribution, office facilities, forklifts, and office equipment) was $5,879, $6,301, and
$6,318, for the years ended December 31, 2004, 2003 and 2002, respectively. Lease terms range from
one to 20 years and some contain renewal options. Aggregate minimum annual rental commitments under non-cancelable operating leases are as follows: Operating Leases2005
    
    $
    6,1562006
    
    
    4,9052007
    
    
    3,2742008
    
    
    2,1182009
    
    
    1,173Thereafter
    
    
    9,578Total
    
    $
    27,204
 Several of the Companys operating leases contain predetermined fixed increases of the minimum
rental rate during the initial lease term. For these leases, the Company recognizes the related
rental expense on a straight-line basis and records the difference between the amount charged to
expense, and the rent paid as deferred rent, and begins amortizing such deferred rent upon the
possession of the leased location. Litigation From time to time, the Company is involved in various legal proceedings arising out of the
ordinary course of business. None of the matters in which the Company is currently involved, either
individually, or in the aggregate, is expected to have a material adverse effect on the Companys
consolidated financial position, results of operations, or cash flows. Self-Insurance The Company is self-insured for certain of its group medical, workers compensation and
product and general liability claims. The Company consults with third party administrators to
estimate the reserves required for these claims. No material revisions were made to the estimates
for the years ended December 31, 2004, 2003 and 2002. The Company has reserved $4,699 and $5,116 as
of December 31, 2004 and 2003, respectively. The Company has stop loss insurance coverage at
various per occurrence and per annum levels depending on the type of claim. The stop loss amounts
are as follows: Per occurrence and
    
    
    
    Aggregate per annumInsurance Type
    
    
    Per annum levels
    
    
    
    levelsGroup Medical
    
    
    $

150
    
    
    
    
    N/AWorkers Compensation
    
    
    Up to 350
    
    
    Up to $ 5,300Product and General Liability
    
    
    Up to 500
    
    
    Up to 4,000
 Severance Obligations The Company has employment agreements with certain of its executive management with annual
base compensation ranging in value from $180 to $375. The agreements generally provide for salary
continuation in the event of termination without cause for periods of one to three years. The
agreements also contain certain non-competition clauses. As of December 31, 2004, the remaining
aggregate commitment under these severance agreements if all individuals were terminated without
cause was approximately $2,140. In March 2005, employment of one executive was terminated. The
salary continuation for this executive is $750, which will be paid through the Companys normal
payroll cycle through March 2007. An expense for such salary continuation, 53




---



##### Table of Contents



plus the related
employer payroll taxes and health care benefits the executive is entitled to, will be recorded in
the first quarter of 2005. (10) Facility Closing and Severance Expenses During 2000, as a result of the acquisition of Conspec, we approved and began
implementing a plan to consolidate certain of our existing operations. Activity for this plan for
the years ended December 31, 2002, 2003, and 2004 was as follows: OtherInvoluntary
    
    
    Lease
    
    
    Relocation
    
    
    Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    Total(Amounts in thousands)Balance, January 1, 2002
    
    $
    
    
    
    $
    490
    
    
    $
    
    
    
    $
    177
    
    
    $
    667Facility closing and
severance expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Items charged against reserve
    
    
    
    
    
    
    (221
    )
    
    
    
    
    
    
    (84
    )
    
    
    (305
    )Balance, December 31, 2002
    
    
    
    
    
    
    269
    
    
    
    
    
    
    
    93
    
    
    
    362Facility closing and
severance expenses
    
    
    
    
    
    
    (212
    )
    
    
    
    
    
    
    
    
    
    
    (212
    )Items charged against reserve
    
    
    
    
    
    
    (57
    )
    
    
    
    
    
    
    (93
    )
    
    
    (150
    )Balance, December 31, 2003
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 During 2001, we approved and began implementing a plan to exit certain of our manufacturing
and distribution facilities and to reduce overall headcount by approximately 500, in order to keep
our cost structure in alignment with net sales. Activity for this plan for the years ended December
31, 2002, 2003, and 2004 was as follows: OtherInvoluntary
    
    
    Lease
    
    
    Relocation
    
    
    Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    Total(Amounts in thousands)Balance, January 1, 2002
    
    $
    931
    
    
    $
    524
    
    
    $
    
    
    
    $
    786
    
    
    $
    2,241Facility closing and
severance expenses
    
    
    
    
    
    
    
    
    
    
    108
    
    
    
    
    
    
    
    108Items charged against reserve
    
    
    (931
    )
    
    
    (314
    )
    
    
    (108
    )
    
    
    (475
    )
    
    
    (1,828
    )Balance, December 31, 2002
    
    
    
    
    
    
    210
    
    
    
    
    
    
    
    311
    
    
    
    521Facility closing and
severance expenses
    
    
    
    
    
    
    379
    
    
    
    
    
    
    
    
    
    
    
    379Items charged against reserve
    
    
    
    
    
    
    (175
    )
    
    
    
    
    
    
    (311
    )
    
    
    (486
    )Balance, December 31, 2003
    
    
    
    
    
    
    414
    
    
    
    
    
    
    
    
    
    
    
    414Facility closing and
severance expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Items charged against reserve
    
    
    
    
    
    
    (414
    )
    
    
    
    
    
    
    
    
    
    
    (414
    )Balance, December 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 54




---



##### Table of Contents



During 2002, we approved and began implementing a plan to exit certain of our distribution
facilities and to reduce overall headcount by approximately 200, in order to keep our cost
structure in alignment with net sales. Activity for this plan for the years ended December 31,
2002, 2003, and 2004 was as follows: OtherInvoluntary
    
    
    Lease
    
    
    Relocation
    
    
    Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    Total(Amounts in thousands)Facility closing and
severance expenses
    
    $
    4,441
    
    
    $
    650
    
    
    $
    
    
    
    $
    200
    
    
    $
    5,291Items charged against reserve
    
    
    (2,029
    )
    
    
    (566
    )
    
    
    
    
    
    
    (200
    )
    
    
    (2,795
    )Balance, December 31, 2002
    
    
    2,412
    
    
    
    84
    
    
    
    
    
    
    
    
    
    
    
    2,496Facility closing and
severance expenses
    
    
    202
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    191Items charged against reserve
    
    
    (2,414
    )
    
    
    (73
    )
    
    
    
    
    
    
    
    
    
    
    (2,487
    )Balance, December 31, 2003
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200Facility closing and
severance expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Items charged against reserve
    
    
    (200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200
    )Balance, December 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 During 2003, we approved and began implementing a plan to exit certain of our distribution
facilities and to reduce overall headcount by approximately 120, in order to keep our cost
structure in alignment with net sales. Activity for this plan for the years ended December 31,
2003, and 2004 was as follows: OtherInvoluntary
    
    
    Lease
    
    
    Relocation
    
    
    Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    Total(Amounts in thousands)Facility closing and
severance expenses
    
    $
    988
    
    
    $
    27
    
    
    $
    
    
    
    $
    921
    
    
    $
    1,936Items charged against reserve
    
    
    (988
    )
    
    
    (27
    )
    
    
    
    
    
    
    (921
    )
    
    
    (1,936
    )Balance, December 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Facility closing and
severance expenses
    
    
    63
    
    
    
    1
    
    
    
    
    
    
    
    61
    
    
    
    125Items charged against reserve
    
    
    (63
    )
    
    
    (1
    )
    
    
    
    
    
    
    (61
    )
    
    
    (125
    )Balance, December 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 During 2004, we approved and began implementing a plan to exit certain of our distribution
facilities and to reduce overall headcount by approximately 75, in order to keep our cost structure
in alignment with net sales. Activity for this plan for the year ended December 31, 2004 was as
follows: OtherInvoluntary
    
    
    Lease
    
    
    Relocation
    
    
    Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    Total(Amounts in thousands)Facility closing and
severance expenses
    
    $
    611
    
    
    $
    307
    
    
    $
    595
    
    
    $
    398
    
    
    $
    1,911Items charged against reserve
    
    
    (611
    )
    
    
    (187
    )
    
    
    (595
    )
    
    
    (398
    )
    
    
    (1,791
    )Balance, December 31, 2004
    
    $
    
    
    
    $
    120
    
    
    $
    
    
    
    $
    
    
    
    $
    120
 55




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##### Table of Contents



The total expected future expense for commitments under this plan is approximately $500 and will be
expensed in accordance with SFAS No. 146. (11) Related Party Transactions For the years ended December 31, 2004, 2003, and 2002, the Company reimbursed Odyssey
Investment Partners, LLC, the majority shareholder, for travel, lodging, and meals of $86, $315,
and $228, respectively. (12) Quarterly Financial Information (Unaudited) 2004First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    FullQuarterly Operating Data
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    YearNet sales
    
    $
    89,117
    
    
    $
    115,206
    
    
    $
    114,548
    
    
    $
    99,768
    
    
    $
    418,639Gross profit
    
    
    20,607
    
    
    
    31,449
    
    
    
    32,059
    
    
    
    23,633
    
    
    
    107,748Net loss
    
    
    (15,868
    )
    
    
    (2,681
    )
    
    
    (1,843
    )
    
    
    (27,978
    )
    
    
    (48,370
    )
 2003First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    FullQuarterly Operating Data
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    YearNet sales
    
    $
    72,306
    
    
    $
    105,864
    
    
    $
    101,288
    
    
    $
    100,000
    
    
    $
    379,457Gross profit
    
    
    20,834
    
    
    
    30,619
    
    
    
    23,638
    
    
    
    26,688
    
    
    
    101,779Net loss
    
    
    (5,390
    )
    
    
    (460
    )
    
    
    (6,393
    )
    
    
    (4,865
    )
    
    
    (17,108
    )
 (13) Subsequent Event On March 8, 2005, Dayton Superior Corporations Board of Directors appointed John A.
Ciccarelli as President and Chief Executive Officer of the company on an interim basis, to replace
Mr. Stephen R. Morrey as President, Chief Executive Officer, and Director of the company who was
terminated on March 7, 2005. 56




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##### Table of Contents



DAYTON SUPERIOR CORPORATION AND SUBSIDIARIES
Schedule IIValuation and Qualifying Accounts
Years Ended December 31, 2004, 2003 and 2002
(Amounts in thousands) Additions
    
    
    DeductionsChargesCharged
    
    
    
    
    
    
    for WhichBalance at
    
    
    to Costs
    
    
    
    
    
    
    Reserves
    
    
    Balance atBeginning of
    
    
    and
    
    
    
    
    
    
    Were
    
    
    End ofYear
    
    
    Expenses
    
    
    Other
    
    
    Created
    
    
    YearReserves for Doubtful Accounts and
Sales Returns and AllowancesFor the year ended December 31, 2004
    
    $
    4,939
    
    
    $
    3,796
    
    
    $
    
    
    
    $
    (3,360
    )
    
    $
    5,375For the year ended December 31, 2003
    
    
    4,861
    
    
    
    6,521
    
    
    
    

    
    
    
    (6,443
    )
    
    
    4,939For the year ended December 31, 2002
    
    
    7,423
    
    
    
    1,848
    
    
    
    
    
    
    
    (4,410
    )
    
    
    4,861Valuation AllowanceFor the year ended December 31, 2004
    
    $
    
    
    
    $
    28,655
    
    
    $
    
    
    
    $
    
    
    
    $
    28,655
 57




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. Not applicable. 
 Item 9A. Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange
Commissions rules and forms and that such information is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow for timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognizes that any controls
and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and management is required to apply
its judgment in evaluating the cost-benefit relationship of possible controls and
procedures. As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and
with the participation of our management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report. Based on the
foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective at the reasonable assurance level. There has been no change in our internal controls over financial reporting during the most
recent quarter that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting. The Company is currently undergoing a comprehensive effort to comply with Section 404 of the
Sarbanes-Oxley Act of 2002, which is required as of December 31, 2006. This effort includes
documenting, evaluating the design and testing the effectiveness of our internal controls.
During this process, we expect to make improvements in the design of and operation of our
internal controls including further formalization of policies and procedures and improving
segregation of duties. Although we believe that our efforts will enable us to provide the
required management report on internal controls and our independent auditors to provide the
required attestation as of fiscal year end 2006, we can give no assurance that these efforts
will be successfully completed in a timely manner. 
 Item 9B. Other Information Not applicable. 58




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##### Table of Contents



PART III 
 Item 10. Directors and Executive Officers of the Registrant. Directors and Executive Officers The following table sets forth the name, age and position of our executive officers and
directors as of December 31, 2004. Name
    
    Age
    
    PositionJohn A. Ciccarelli
    
    
    65
    
    
    Chairman of the Board of DirectorsStephen R. Morrey
    
    
    50
    
    
    President, Chief Executive Officer and DirectorPeter J. Astrauskas
    
    
    54
    
    
    Vice President, EngineeringRaymond E. Bartholomae
    
    
    58
    
    
    Vice President, Sales and MarketingDennis P. Haggerty
    
    
    53
    
    
    Vice President, Supply Chain ManagementSteven C. Huston
    
    
    50
    
    
    Vice President, General Counsel and SecretaryMark K. Kaler
    
    
    47
    
    
    Vice President, Strategic PlanningEdward J. Puisis
    
    
    44
    
    
    Vice President and Chief Financial OfficerThomas W. Roehrig
    
    
    39
    
    
    Vice President of Corporate AccountingStephen Berger
    
    
    65
    
    
    DirectorWilliam F. Hopkins
    
    
    41
    
    
    DirectorDouglas W. Rotatori
    
    
    44
    
    
    Director
 John A. Ciccarellihas been interim President and Chief Executive Officer since March 2005,
Director since 1994 and Chairman of our Board of Directors since 2000. Mr. Ciccarelli was
President and Chief Executive Officer from 1989 until 2002. Stephen R. Morreywas President, Chief Executive Officer and a Director from July 2002
through March 2005. From June 2001 to July 2002, Mr. Morrey was President of Alcoa
Automotive Castings. From 1999 to June 2001, he was Vice President of Operations for the
Occupant Safety Systems Division of TRW. Peter J. Astrauskashas been Vice President, Engineering since September 2003. From 2001 to
2003, he was Vice President, Engineering for Alcoa Automotive. From 1994 to 2001, he was
the Director, Global Manufacturing Engineering for TRW Safety Systems. Raymond E. Bartholomaehas been Vice President, Sales and Marketing since August 2003. He
has been employed by Symons Corporation since January 1970 and had been Vice President and
General Manager, Symons, from February 1998 to August 2003. Dennis P. Haggertyhas been Vice President, Supply Chain Management since October 2002. From
October 2001 to October 2002, he was Director of Business Development/Quality for Alcoa
Automotive Castings. From February 2000 to October 2001, he was Executive Vice President for
Ventra Plastics. Steven C. Hustonhas been Vice President, General Counsel and Secretary since January 2003.
From January 2002 to January 2003, he was Deputy General Counsel and Assistant Secretary.
Mr. Huston was in private practice from February 2001 through December 2001, and prior to
that, served as CounselNorth America for Wm. Wrigley Jr. Company from March 1997 to
February 2001. Mark K. Kalerhas been Vice President, Strategic Planning since August 2003. He served as
Vice President and General Manager, Construction Products Group division from October 2002
to August 2003. From April 1996 to October 2002, Mr. Kaler was Vice President and General
Manager, American Highway Technology division. Edward J. Puisishas been Vice President and Chief Financial Officer since August 2003. From
March 1998 to August 2003 Mr. Puisis was General Manager of Finance and Administration and
Chief Financial Officer of Gallatin Steel Company, a partnership owned by Dafasco and Gerdau
Ameristeel. 59




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##### Table of Contents



Thomas W. Roehrighas been Vice President of Corporate Accounting since February 2003 and
was Treasurer from August 2003 to December 2003. From April 1998 to February 2003, Mr.
Roehrig served as Corporate Controller. Stephen Bergerhas been chairman of Odyssey Investment Partners, LLC since 1997. Mr. Berger
also served as a director of Transdigm, Inc., a supplier of highly engineered commercial and
military aircraft parts from 1998 to July 2003. William F. Hopkinshas been a member and Managing Principal of Odyssey Investment Partners,
LLC since 1997. Mr. Hopkins also served as a director of Transdigm, Inc. from 1998 to July
2003, a supplier of highly engineered commercial and military aircraft parts. Douglas W. Rotatorihas been a principal of Odyssey Investment Partners, LLC since 1998. We have five directors. Each director is elected to serve until the next annual meeting of
shareholders or until a successor is elected. Our executive officers are elected by the
directors to serve at the pleasure of the directors. There are no family relationships
between any of our directors or executive officers. Except for Mr. Ciccarelli
(who was compensated for serving as a non-executive Chairman prior to
becoming our interim President and Chief Executive Officer), our
directors, all of whom are employed by Odyssey, or us do not receive any compensation for
their service as directors. The Audit Committeeof our Board of Directors consists of Messrs. Berger, Hopkins, and
Rotatori, none of who is considered independent under the rules of the national securities
exchanges. The Board of Directors has determined that Mr. Rotatori is an Audit Committee
financial expert, as defined in the rules of the Securities and Exchange Commission. We have adopted a Code of Ethicsthat specifically applies to our senior financial officers,
including our President and Chief Executive Officer, Chief Financial Officer, Vice President
of Corporate Accounting, and Treasurer. Our Code of Ethics was previously filed on Form
10-K as Exhibit 14. 60




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##### Table of Contents



Item 11. Executive Compensation The following table summarizes the 2004, 2003, and 2002 compensation for our chief
executive officer and each of the other four most highly compensated executive officers who
were serving as executive officers at December 31, 2004 or who had served as an executive
officer during 2004. Long-TermCompensationAnnual Compensation
    
    
    Awards
    
    
    PayoutsOther Annual
    
    
    Shares
    
    
    Long-TermName and Principal
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Compensation
    
    
    Underlying
    
    
    Incentive
    
    
    All OtherPosition
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    Options (#)(1)
    
    
    Payouts ($)
    
    
    Compensation($)(2)Stephen R. Morrey
    
    
    2004
    
    
    $
    375,000
    
    
    
    
    
    
    $
    3,413
    
    
    
    
    
    
    $
    
    
    
    $
    4,100President and Chief
    
    
    2003
    
    
    
    375,000
    
    
    
    135,000
    
    
    
    195,709
    (3)
    
    
    
    
    
    
    
    
    
    
    4,000Executive Officer
    
    
    2002
    
    
    
    173,077
    
    
    
    235,000
    
    
    
    77,102
    (3)
    
    
    100,000
    
    
    
    
    
    
    
    Raymond E. Bartholomae
    
    
    2004
    
    
    $
    260,000
    
    
    
    165,000
    
    
    $
    
    
    
    
    10,000
    
    
    $
    
    
    
    $
    4,100Vice President,
    
    
    2003
    
    
    
    243,942
    
    
    
    140,000
    
    
    
    
    
    
    
    12,000
    
    
    
    
    
    
    
    4,000Sales and Marketing
    
    
    2002
    
    
    
    210,000
    
    
    
    120,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,000Edward J. Puisis
    
    
    2004
    
    
    $
    250,000
    
    
    
    200,000
    
    
    $
    114,366
    (4)
    
    
    
    
    
    $
    
    
    
    $
    1,923Vice President and
    
    
    2003
    
    
    
    96,154
    
    
    
    325,000
    (5)
    
    
    
    
    
    
    55,000
    
    
    
    
    
    
    
    Chief Financial
OfficerMark K. Kaler
    
    
    2004
    
    
    $
    227,000
    
    
    
    100,000
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    4,100Vice President,
    
    
    2003
    
    
    
    227,000
    
    
    
    70,000
    
    
    
    
    
    
    
    12,000
    
    
    
    
    
    
    
    4,000Strategic Planning
    
    
    2002
    
    
    
    184,077
    
    
    
    110,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,000Dennis Haggerty
    
    
    2004
    
    
    $
    225,000
    
    
    
    110,000
    
    
    $
    44,227
    (6)
    
    
    
    
    
    $
    
    
    
    $
    3,587Vice President,
    
    
    2003
    
    
    
    225,000
    
    
    
    100,000
    
    
    
    43,122
    (6)
    
    
    
    
    
    
    
    
    
    
    3,500Supply Chain
    
    
    2002
    
    
    
    55,385
    
    
    
    32,653
    
    
    
    
    
    
    
    35,000
    
    
    
    
    
    
    
    Management
   (1)
    
    Options to purchase common shares were granted under our stock option plans at an
exercise price of $27.50 per share, except for Mr. Puisis options, and Mr. Bartholomaes
2004 options, which have an exercise price of $24.00 per share. The options become
exercisable based on a combination of service and performance factors.(2)
    
    Consists of: Matching 401(k) Contributions
    
    
    Contributions to 401(k) Savings Plan2004
    
    
    2003
    
    
    2002
    
    
    2004
    
    
    2003
    
    
    2002Mr. Morrey
    
    $
    4,100
    
    
    $
    4,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Mr. Bartholomae
    
    
    4,100
    
    
    
    4,000
    
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    12,000Mr. Puisis
    
    
    1,923
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Kaler
    
    
    4,100
    
    
    
    4,000
    
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    9,000Mr. Haggerty
    
    
    3,587
    
    
    
    3,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   (3)
    
    The amounts included in this column which represent more than 25% of the total
perquisites and personal benefits received by Mr. Morrey were relocation expense paid by us
of $70,402 in 2002 and $176,119 in 2003.(4)
    
    The amounts included in this column which represent more than 25% of the total
perquisites and personal benefits received by Mr. Puisis were relocation expenses paid by us
of $52,584. 61




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##### Table of Contents



(5)
    
    The bonus amount for Mr. Puisis reflects a signing bonus of $175,000 he received upon
his employment with Dayton Superior and a $150,000 bonus under the Companys annual bonus
plan.(6)
    
    The amounts included in this column which represent more than 25% of the total
perquisites and personal benefits received by Mr. Haggerty were temporary living and mileage
expenses paid by the Company of $18,150 in 2003 and $29,322 in 2004 and a car allowance of $13,800
in 2003, and 2004. Employment Agreements We have entered into employment agreements with each of Messrs. Bartholomae and Puisis.
Generally, each employment agreement provides:  
    Each executive officer is an employee at will.
    Each executive officer is entitled to participate in our
executive annual bonus plan and in our various other employee benefit plans and
arrangements which are applicable to senior officers.
    If an executive officer is terminated without cause during the
term of his employment agreement, he will be entitled to receive a pro rata
share of his bonus for the year of termination, to continue to receive his
annual base salary for a period of 12 to 36 months and to continue coverage
under our medical and dental programs for from one to three years on the same
basis as he was entitled to participate prior to his termination.
    Each executive officer is prohibited from competing with us
during the term of his employment under the employment agreement and, under
certain conditions, from one to three years following termination of his
employment or expiration of the term of his employment agreement. Mr. Puisis employment agreement also provides the following:  
    His annual base salary is $250,000, which may be increased by our
Board of Directors at its discretion.
    The term of his employment is two years, beginning August 11,
2003. His employment agreement will be automatically extended for additional
one-year periods unless either of us notifies the other not later than 120 days
before the end of a term.
    He received in 2003 a one-time signing bonus of $175,000 and
reimbursement for expenses he incurred in connection with his move to the
Dayton, Ohio area.
    He receives an annual car allowance, payment of the annual
membership fee in a country, alumni or social club of his choice (up to a
specified maximum amount) as well as payment of the initiation fee in that
country, alumni or social club (up to a specified amount). We also entered into an employment agreement with Mr. Steven R. Morrey, which was modified
by a letter agreement we entered into with him in connection with the termination of his
employment as our President and Chief Executive Officer and a director, effective March 7,
2005. Under these two agreements together:  
    We paid him, in connection with the termination of his employment,
$100,000 in lieu of certain salary, bonus and other amounts that otherwise might
have been payable to him under his employment agreement, and he was required to
apply the after-tax proceeds of this payment to the partial repayment of certain
loans we made to him in July 2002 when he was hired by us.
    He will continue to receive his annual base salary of $375,000 and
coverage under our medical and dental programs until March 7, 2007.
    He is prohibited from competing with us until March 7, 2007. 62




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##### Table of Contents



Management Stockholders Agreement We along with Odyssey and our employee stockholders, including the officers named
in the Summary Compensation Table (the Management Stockholders), are partners to a
Management Stockholders Agreement (the Management Stockholders Agreement) which governs
our common shares, options to purchase our common shares and shares acquired upon exercise
of options. The Management Stockholders Agreement provides that except for certain transfers to
family members and family trusts, no Management Stockholder may transfer common stock
except in accordance with the Management Stockholders Agreement. The Management Stockholders Agreement also provides that, upon termination of the
employment of a Management Stockholder, the Management Stockholder has certain put rights
and we have certain call rights regarding his or her common stock. If the provisions of any law, the terms of credit and financing arrangements or our
financial circumstances would prevent us from making a repurchase of shares pursuant to the
Management Stockholders Agreement, we will not make the purchase until all such
prohibitions lapse, and will then also pay the Management Stockholder a specified rate of
interest on the repurchase price. The Management Stockholders Agreement further provides that in the event of certain
transfers of common shares by Odyssey, the Management Stockholders may participate in such
transfers and/or Odyssey may require the Management Stockholders to transfer their shares
in such transactions, in each case on a pro rata basis. Certain Management Stockholders are entitled to participate on a pro rata basis with,
and on the same terms as, Odyssey in any future offering of common shares. 63




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##### Table of Contents



Fiscal 2004 Stock Option Grants The stock options granted in 2004 to Mr. Bartholomae are shown in the following
table. The table also shows the hypothetical gains that would exist for the options at the
end of their ten year terms, assuming compound rates of stock appreciation of 5% and 10%,
respectively. The actual future value of the options will depend on the market or appraised
value of the common shares. Option Grants in Last Fiscal YearPotential Realizable Valueat Assumed Annual Ratesof Stock Price AppreciationIndividual Grants
    
    
    for Option TermNumber ofShares
    
    
    % of TotalUnderlying
    
    
    Options
    
    
    ExerciseOptions
    
    
    Granted to Employees
    
    
    Price
    
    
    ExpirationName
    
    Granted (#)
    
    
    in 2004
    
    
    ($/Sh)
    
    
    Date
    
    
    5%($)
    
    
    10%($)Raymond E.Bartholomae
    
    
    10,000
    (1)
    
    
    12.6%
    
    
    $
    24.00
    
    
    
    8/11/13
    
    
    $
    150,935
    
    
    $
    382,498
   (1)
    
    Options were granted under the 2000 Stock Option Plan with an exercise price
that represents the fair market value of a Common Share on the date the options were granted.
These options vest as follows: 5% vest immediately at time of grant, 5% vest at the second
anniversary of the grant and the remaining 90% are eligible to become exercisable in
installments over one to five years from the date of grant based on the Companys
performance, but, in any case, become exercisable not later than nine years after the grant
date. All unvested options will become fully exercisable upon a change in control (as
defined in the 2000 Stock Option Plan), if Odyssey receives at least a targeted return on its
investment. Fiscal Year-End Option Values The number and value of options exercised and the number and value of all unexercised
options held by each of the executive officers named in the Summary Compensation Table at
December 31, 2004 are shown in the following table. Shares
    
    
    
    Number of Shares
    
    
    Value of Unexercised In-Acquired on
    
    
    
    Underlying Unexercised
    
    
    the-Money Options atName
    
    Exercise (#)
    
    Value Realized ($)
    
    Options at 12/31/04 (#)
    
    
    12/31/04($)(1)Exercisable/Unexercisable
    
    
    Exercisable/UnexercisableStephen R. Morrey
    
    
    
    
    
    
    25,000/75,000
    
    
    $
    0/$0Dennis Haggerty
    
    
    
    
    
    
    3,500/31,500
    
    
    
    0/0Raymond E. Bartholomae
    
    
    
    
    
    
    12,452/59,441
    
    
    
    14,847/0Mark K. Kaler
    
    8,696
    
    $177,833
    
    
    11,479/48,017
    
    
    
    55,050/0Edward J. Puisis
    
    
    
    
    
    
    4,582/50,418
    
    
    
    0/0
   (1)
    
    Represents the excess of $22.35, the fair market value as of December 31, 2004, based on
an independent appraisal, over the aggregate option exercise price. 64




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management, and Related Stockholder Matters. The following table sets forth information with respect to the beneficial ownership of
our common shares as of December 31, 2004 by:  
    each person known by us to beneficially own more than 5% of our common shares;
    directors;
    executive officers listed in the compensation table; and
    directors and executive officers as a group. We have determined beneficial ownership as reported below in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as amended. Beneficial ownership generally
includes sole or shared voting or investment power with respect to the shares and includes
the number of common shares subject to all outstanding options. The percentages of our
outstanding common shares are based on 4,585,871 shares outstanding, except for certain
parties who hold options that are exercisable into common shares within 60 days. The
percentages for those parties who hold options that are exercisable within 60 days are based
on the sum of 4,554,269 shares outstanding plus the number of common shares subject to
options exercisable within 60 days held by them and no other person, as indicated in the
notes following the table. The number of common shares beneficially owned has been
determined by assuming the exercise of options exercisable into common shares within 60
days. Unless otherwise indicated, voting and investment power are exercised solely by each
individual and/or a member of his
household. Number of CommonShares Beneficially
    
    
    % of CommonName of Beneficial Owner:
    
    Owned
    
    
    SharesOdyssey (1)
    
    
    4,208,317
    
    
    91.8Raymond E. Bartholomae (2)
    
    
    34,129
    
    
    *Stephen Berger (3)
    
    
    4,208,317
    
    
    92.4John A. Ciccarelli (4)
    
    
    76,312
    
    
    1.7Dennis P. Haggerty (5)
    
    
    5,500
    
    
    *William F. Hopkins (3)
    
    
    4,208,317
    
    
    92.4Mark K. Kaler (6)
    
    
    48,686
    
    
    1.1Edward J. Puisis (7)
    
    
    10,767
    
    
    *Stephen R. Morrey (8)
    
    
    39,546
    
    
    *Douglas Rotatori (3)
    
    
    4,208,317
    
    
    92.4Executive
officers and directors as a group (12 persons) (9)
    
    
    4,431,172
    
    
    94.5
   *
    
    Signifies less than 1%.(1)
    
    Consists of 4,208,317 common shares owned in the aggregate by Odyssey Investment
Partners Fund, LP (the Fund), certain of its affiliates and certain co-investors
(together with the Fund, Odyssey). Odyssey Capital Partners, LLC is the general partner
of the Fund. Odyssey Investment Partners, LLC is the manager of the Fund. The principal
business address for Odyssey is 280 Park Avenue, West Tower, 38th Floor, New York, New York.(2)
    
    Includes 13,052 common shares issuable upon exercise of options exercisable within 60
days.(3)
    
    Consists of 4,208,317 common shares owned in the aggregate by Odyssey. Messrs. Berger
and Hopkins are managing members of the Odyssey Capital Partners, LLC and Odyssey Investment
Partners, LLC and, therefore, may each be deemed to share voting and investment power with
respect to the shares deemed to be beneficially owned by Odyssey. Mr. Rotatori is a member
of Odyssey Investment Partners, LLC. Each of Messrs. Berger, Hopkins and Rotatori disclaim
beneficial ownership of these shares. 65




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##### Table of Contents



(4)
    
    Includes 37,051 common shares issuable upon exercise of options exercisable within 60
days.(5)
    
    Includes 3,500 common shares issuable upon exercise of options exercisable within 60
days.(6)
    
    Includes 12,079 common shares issuable upon exercise of options exercisable within 60
days.(7)
    
    Includes 9,167 common shares issuable upon exercise of options exercisable within 60
days.(8)
    
    Includes 25,000 common shares issuable upon exercise of options exercisable within 60
days.(9)
    
    As described in note 3, Messrs. Berger and Hopkins may each be deemed to share voting
and investment power with respect to the shares beneficially owned by Odyssey and Messrs.
Berger, Hopkins and Rotatori disclaim beneficial ownership of the shares beneficially owned
by Odyssey. Excluding the shares deemed to be owned by Odyssey, all executive officers and
directors as a group beneficially own 222,855 common shares. Equity Compensation Plan Information Number of securitiesremaining available forNumber of securities to
    
    
    
    Weighted-average
    
    
    
    
    future issuance underbe issued upon exercise
    
    
    
    exercise price of
    
    
    
    
    equity compensation plansof outstanding options,
    
    
    
    outstanding options,
    
    
    
    
    (excluding securitieswarrants and rights
    
    
    
    warrants and rights
    
    
    
    
    reflected in column (a))Plan Category
    
    
    
    (a)
    
    
    
    (b)
    
    
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    
    682,978
    
    
    
    $
    24.19
    
    
    
    
    43,048Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    682,978
    
    
    
    $
    24.19
    
    
    
    
    43,048
 
 Item 13. Certain Relationships and Related Transactions. Employment and Rollover Agreements In connection with the 2000 recapitalization, we entered into employment and other
rollover agreements with John A. Ciccarelli,
Raymond E. Bartholomae and Mark K. Kaler.
Generally, the rollover agreements required each executive officer to retain
common shares and, in most cases, stock options, with a specified aggregate value following
the recapitalization. In some cases, the executive officer agreed to exercise stock options
in order to obtain some of the common shares, which he agreed to retain following the
recapitalization. These agreements provided that if the executive officer exercised stock
options in order to obtain some of the common shares he is required to retain and he so
requested, we made a non-interest bearing, recourse loan to him in an amount equal to the
exercise price of the options plus the estimated federal and state income tax liability he
incurred in connection with the exercise. If the executive officer purchased some of the
common shares he is required to retain and he so requested, we made a 6.39% interest
deferred recourse loan to him. These loans are secured by a pledge of the shares issued. 66




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As of December 31, 2004, the amounts outstanding were $74,267 for Mr. Ciccarelli, $400,913
for Mr. Morrey, $585,969 for Mr. Bartholomae, and $291,069 for Mr. Kaler. These amounts
were also the largest amounts outstanding for these loans during the period January 1, 2004
through December 31, 2004. Odyssey Financial Services During 2004, we reimbursed Odyssey for approximately $86,000 of out-of-pocket expenses
for travel, lodging and meals. Management Stockholders Agreement We, along with Odyssey and our employee stockholders, including our executive officers,
are parties to a Management Stockholders Agreement, which is described in more detail under
Item 11 above. 67




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PART IV 
 Item 14. Principal Accounting Fees and Services The services performed by Deloitte & Touche LLP in 2004 and 2003 were pre-approved by
our Audit Committee. Our Audit Committee requires any requests for audit, audit-related,
tax, or any other services to be submitted to the Audit Committee for specific pre-approval
and cannot commence until such approval has been granted. Normally, pre-approval is
provided at regularly scheduled meetings. However, the authority to grant specific
pre-approval between meetings, as necessary, has been delegated to the Chairman of the
Audit Committee. The Chairman must update the Audit Committee at the next regularly
scheduled meeting of any services that were granted specific pre-approval. In addition,
although not required by the rules and regulations of the SEC, the Audit Committee
requests a range of fees associated with each proposed service. Providing a range of fees
for a service permits appropriate oversight and control of the independent auditor
relationship, while permitting us to receive immediate assistance from the independent
auditor when time is of the essence. We retained Deloitte & Touche LLP to audit our consolidated financial statements for the
years ended 2004 and 2003. To minimize relationships that could appear to impair the
objectivity of Deloitte & Touche, our audit committee has restricted the non-audit services
that Deloitte & Touche may provide to us primarily to audit services and tax services. In
considering the nature of the services provided by the independent auditor, the Audit
Committee determined that such services are compatible with the provision of independent
audit services. The Audit Committee discussed these services with the independent auditor
and our management to determine that they are permitted under the rules and regulations
concerning auditor independence promulgated by the SEC to implement the Sarbanes-Oxley Act
of 2002. The aggregate fees billed for professional services by Deloitte & Touche LLP, our
independent accountants, in 2004 and 2003 for these various services were: Type of Fees
    
    2004
    
    
    2003Audit fees (1)
    
    $
    460.4
    
    
    $
    645.9Audit-related fees
    
    
    22.3
    
    
    
    197.8Tax fees
    
    
    465.0
    
    
    
    855.2Total fees
    
    $
    947.7
    
    
    $
    1,698.9
   (1)
    
    Audit fees for 2003 include $345.7 of costs related to the 2000, 2001, and 2002
restatements as disclosed in our Form 10-K/A for the year ended December 31, 2002. In the above table, in accordance with new SEC definitions and rules, audit fees are
fees we paid Deloitte & Touche for professional services for the audit of our consolidated
financial statements included in Form 10-K and review of financial statements included in
Form 10-Qs, or for comfort letters, statutory and regulatory audits, consents and other
services related to SEC matters; audit-related fees are fees billed by Deloitte & Touche
for assurance and related services that are reasonably related to the performance of the
audit or review of our financial statements, due diligence associated with
mergers/acquisitions, financial accounting and reporting consultations, and information
systems reviews; tax fees are fees for tax compliance, tax advice, and tax planning. Tax
compliance services are services rendered based upon facts already in existence or
transactions that have already occurred to document, compute, and obtain government
approval for amounts to be included in tax filings. Tax planning and advice are services
rendered with respect to proposed transactions or that alter a transaction to obtain a
particular tax result. 68




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##### Table of Contents



Item 15. Exhibits and Financial Statement Schedules (a)(1) Financial Statements The following consolidated financial statements
of the Company and subsidiaries are incorporated by reference as part of this Report under
Item 8. Independent Auditors Report. Consolidated Balance Sheets as of December 31, 2004 and 2003. Consolidated Statements of Operations for the years ended December 31, 2004, 2003, and 2002. Consolidated Statements of Shareholders Equity for the years ended December 31, 2004, 2003,
and 2002. Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003, and 2002. Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31,
2004, 2003, and 2002. Notes to Consolidated Financial Statements. (a)(2) Financial Statement Schedules Schedule II  Valuation and Qualifying Accounts (at Item 8 of this Report) All other schedules are omitted because they are not applicable, or not required, or because
the required information is included in the consolidated financial statements or notes
thereto. (a)(3) Exhibits. See Index to Exhibits following the signature pages to this
Report for a list of exhibits. 69




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, Dayton Superior Corporation has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. DAYTON SUPERIOR CORPORATIONMarch 31, 2005By
    
    /s/John A. CiccarelliJohn A. CiccarelliChairman of the Board of Directors,President,Chief Executive Officer
 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been
signed below by the following persons on behalf of Dayton Superior Corporation and in the
capacities and on the dates indicated. NAME
    
    TITLE
    
    DATE/s/John A. Ciccarelli

John A. Ciccarelli
    
    Chairman of the Board of Directors, President, Chief
Executive Officer
    
    March 31, 2005/s/Edward J. Puisis

Edward J. Puisis
    
    Vice President and Chief Financial Officer (Principal
Financial Officer)
    
    March 31, 2005/s/Thomas W. Roehrig

Thomas W. Roehrig
    
    Vice President of Corporate Accounting
(Principal Accounting Officer)
    
    March 30, 2005/s/ Stephen Berger

Stephen Berger
    
    Director
    
    March 31, 2005/s/William F. Hopkins

William F. Hopkins
    
    Director
    
    March 30, 2005/s/Douglas Rotatori

Douglas Rotatori
    
    Director
    
    March 31, 2005
 70




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Index of Exhibits Exhibit No.
    
    
    
    
    
    Description(2)
    
    Acquisition Agreements2.1
    
    
    Asset Purchase Agreement, dated as of June 30, 2003,
by and among the Company and Symons Corporation, and
Safway Formworks Systems L.L.C. and Safway Services,
Inc. [Incorporated by reference to Exhibit 2.1 to the
Companys Form 8-K filed on August 13, 2003]
    
    2.1.1
    
    
    Amendment One, dated as of July 15, 2003, to the
Asset Purchase Agreement among the Company and Symons
Corporation, and Safway Formworks Systems L.L.C. and
Safway Services, Inc. [Incorporated by reference to
Exhibit 2.2 to the Companys Form 8-K filed on August
13, 2003]
    
    2.1.2
    
    
    Amendment Two, dated as of July 29, 2003, to the
Asset Purchase Agreement among the Company and Symons
Corporation, and Safway Formworks Systems L.L.C. and
Safway Services, Inc. [Incorporated by reference to
Exhibit 2.3 to the Companys Form 8-K filed on August
13, 2003]
    
    (3)
    
    Articles of Incorporation and By-Laws3.1
    
    
    Amended Articles of Incorporation of the Company
[Incorporated by reference to Exhibit 3.1 to the
Companys Registration Statement on Form S-4 (Reg.
No. 333-41392)]
    
    3.2
    
    
    Code of Regulations of the Company (as amended)
[Incorporated by reference to Exhibit 3.3 to the
Companys Registration Statement on Form S-4 (Reg.
No. 333-41392)]
    
    (4)
    
    Instruments defining the Rights of Security Holders, Including Indentures4.1
    
    
    Form of Junior Convertible Subordinated Indenture
between Dayton Superior Corporation and Firstar Bank,
N.A., as Indenture Trustee [Incorporated by reference
to Exhibit 4.2.3 to the Companys Registration
Statement on Form S-3 (Reg. 333-84613)]
    
    4.1.1
    
    
    First Supplemental Indenture dated January 17, 2000,
between Dayton Superior Corporation and Firstar Bank,
N.A., as Trustee
    
    **4.1.2
    
    
    Form of Junior Convertible Subordinated Debenture
[Incorporated by reference to Exhibit 4.2.3 to the
Companys Registration Statement on Form S-3 (Reg.
333-84613)]
    
    
 71




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##### Table of Contents



Exhibit No.
    
    
    
    
    
    Description4.2
    
    
    Indenture dated June 16, 2000 among the Company, the
Guarantors named therein, as guarantors, and United
States Trust Company of New York, as trustee,
relating to $170,000,000 in aggregate principal
amount of 13% Senior Subordinated Notes due 2009 and
registered 13% Senior Subordinated Notes due 2009
[Incorporated by reference to Exhibit 4.1 to the
Companys Registration Statement on Form S-4 (Reg.
333-41392)]
    
    4.2.1
    
    
    First Supplemental Indenture dated as of August 3,
2000. [Incorporated by reference to Exhibit 4.5.1 to
the Companys Annual Report on Form 10-K for the year
ended December 31, 2001]
    
    4.2.2
    
    
    Second Supplemental Indenture dated as of January 4,
2001. [Incorporated by reference to Exhibit 4.5.2 to
the Companys Annual Report on Form 10-K for the year
ended December 31, 2001]
    
    4.2.3
    
    
    Third Supplemental Indenture dated as of June 19,
2001. [Incorporated by reference to Exhibit 4.5.3 to
the Companys Annual Report on Form 10-K for the year
ended December 31, 2001]
    
    4.2.4
    
    
    Fourth Supplemental Indenture dated as of September
30, 2003. [Incorporated by reference to Exhibit 4.2.4
to the Companys Annual Report on Form 10-K for the
year ended December 31, 2003]
    
    4.3
    
    
    Specimen Certificate of 13% Senior Subordinated Notes
due 2009 [Incorporated by reference to Exhibit 4.2 to
the Companys Registration Statement on Form S-4
(Reg. 333-41392)]
    
    4.4
    
    
    Specimen Certificate of the registered 13% Senior
Subordinated Notes due 2009 [Incorporated by
reference to Exhibit 4.3 to the Companys
Registration Statement on Form S-4 (Reg. 333-41392)]
    
    4.5
    
    
    Warrant Agreement dated as of June 16, 2000 between
the Company and United States Trust Company of New
York, as Warrant Agent [Incorporated by reference to
Exhibit 4.5 to the Companys Annual Report on Form
10-K for the year ended December 31, 2003]
    
    4.6
    
    
    Warrant Shares Registration Rights Agreement dated as
of June 16, 2000 among the Company and the Initial
Purchasers [Incorporated by reference to Exhibit 4.6
to the Companys Annual Report on Form 10-K for the
year ended December 31, 2003]
    
    4.7
    
    
    Tag-Along Sales Agreement dated as of June 16, 2000
among the Company, Odyssey Investment Partners Fund,
LP and the Initial Purchasers [Incorporated by
reference to Exhibit 4.7 to the Companys Annual
Report on Form 10-K for the year ended December 31,
2003]
    
    4.8
    
    
    Senior Second Secured Notes Indenture with respect to
the 10 3/4% Senior Second Secured Notes due 2008,
among the Company, the Guarantors named therein and
The Bank of New York, as Trustee, dated June 9, 2003
[Incorporated by reference to Exhibit 4.1 to the
Companys Registration Statement on Form S-4 (Reg.
333-107071)]
    
    4.9
    
    
    Form of 10 3/4% Senior Second Secured Note due 2008
(included in Exhibit 4.5)
    
    
 72




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Exhibit No.
    
    
    
    
    
    Description4.10
    
    
    Second Amended and Restated Security Agreement, among
the Company, certain former subsidiaries of the
Company and The Bank of New York, as Collateral Agent
and as Trustee, dated January 30, 2004 [Incorporated
by reference to Exhibit 4.10 to the Companys
Registration Statement on Form S-4 (Reg. 333-107071)]
    
    4.11
    
    
    Second Amended and Restated Pledge Agreement, among
the Company, Trevecca Holdings, Inc. and The Bank of
New York, as Collateral Agent and as Trustee, dated
January 30, 2004 [Incorporated by reference to
Exhibit 4.11 to the Companys Registration Statement
on Form S-4 (Reg. 333-107071)]
    
    4.12
    
    
    Credit Agreement among the Company, the other persons
designated as Credit Parties, General Electric
Capital Corporation, as Agent, L/C Issuer and a
Lender, the other Lenders and GECC Capital Markets
Group, Inc., as Lead Arranger, dated January 30, 2004
[Incorporated by reference to Exhibit 4.7 to the
Companys Registration Statement on Form S-4 (Reg.
333-107071)]
    
    4.12.1
    
    
    Amendment One dated as of June 30, 2004 among the
Company, General Electric Capital Corporation, and
GMAC Commercial Finance LLC
    
    **4.12.2
    
    
    Amendment Two dated as of February 23, 2005 among the
Company, General Electric Capital Corporation, and
GMAC Commercial Finance LLC [Incorporated by
reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K dated February 25, 2005]
    
    4.13
    
    
    Security Agreement among the Company, certain former
subsidiaries of the Company and General Electric
Capital Corporation, as Agent, dated January 30, 2004
[Incorporated by reference to Exhibit 4.8 to the
Companys Registration Statement on Form S-4 (Reg.
333-107071)]
    
    4.14
    
    
    Pledge Agreement among the Company, Trevecca
Holdings, Inc. and General Electric Capital
Corporation, as Agent, dated January 30, 2004
[Incorporated by reference to Exhibit 4.9 to the
Companys Registration Statement on Form S-4 (Reg.
333-107071)]
    
    Certain instruments defining the rights of holders of
long-term debt of the Company have not been filed
because the total amount does not exceed 10% of the
total assets of the Company and its subsidiary on a
consolidated basis. A copy of each such instrument
will be furnished to the Commission upon request.(10)
    
    Material Contracts10.1
    
    
    Management Incentive Plan
    
    * **10.2
    
    
    Employment Agreement dated effective June 12, 2002 by and between Dayton
Superior Corporation and Stephen R. Morrey [Incorporated by reference to
Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarter
ended June 28, 2002]
    
    *10.2.1
    
    
    Secured Promissory Note dated July 22, 2002 between Dayton Superior
Corporation and Stephen R. Morrey. [Incorporated by reference to Exhibit 10.3
to the Companys Quarterly Report on Form 10-Q for the quarter ended September
27, 2002]
    
    *
 73




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##### Table of Contents



Exhibit No.
    
    
    
    
    
    Description10.2.2
    
    
    Secured Promissory Note dated July 22, 2002 between Dayton Superior
Corporation and Stephen R. Morrey. [Incorporated by reference to Exhibit 10.4
to the Companys Quarterly Report on Form 10-Q for the quarter ended September
27, 2002]
    
    *10.2.3
    
    
    Repayment and Stock Pledge Agreement dated as of July 22, 2002 between Dayton
Superior Corporation and Stephen R. Morrey. [Incorporated by reference to
Exhibit 10.5 to the Companys Quarterly Report on Form 10-Q for the quarter
ended September 27, 2002]
    
    *10.2.4
    
    
    Letter Agreement dated as of March 14, 2005 between the Dayton Superior
Corporation and Stephen R. Morrey [Incorporated by reference to Exhibit 99.1
to the Companys Current Report on Form 8-K dated March 14, 2005]
    
    10.3
    
    
    Employment Agreement between the Company and Edward J. Puisis [Incorporated by
reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q dated
November 10, 2003]
    
    *10.4
    
    
    Letter Agreement dated August 13, 2003 between Raymond Bartholomae and the
Company [Incorporated by reference to Exhibit 10.3 to the Companys Quarterly
Report on Form 10-Q dated November 10, 2003]
    
    *10.5
    
    
    Management Stockholders Agreement dated June 16, 2000 by and among the
Company, Odyssey Investment Partners Fund, LP and the Management Stockholders
named therein [Incorporated by reference to Exhibit 10.25 to the Companys
Registration Statement on Form S-4 (Reg. 333-41392)]
    
    *10.6
    
    
    Dayton Superior Corporation 2000 Stock Option Plan [Incorporated by reference
to Exhibit 10.13 to the Companys Annual Report on Form 10-K for the year
ended December 31, 2001]
    
    *10.6.1
    
    
    First Amendment to 2000 Stock Option Plan of Dayton Superior Corporation
[Incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report
on Form 10-Q for the quarter ended March 30, 2001]
    
    *10.6.2
    
    
    Second Amendment to 2000 Stock Option Plan of Dayton Superior Corporation
dated July 15, 2002 [Incorporated by reference to Exhibit 10.13.2 to the
Companys Annual Report on Form 10-K for the year ended December 31, 2002]
    
    *10.6.3
    
    
    Third Amendment to 2000 Stock Option Plan of Dayton Superior Corporation dated
October 23, 2002 [Incorporated by reference to Exhibit 10.13.3 to the
Companys Annual Report on Form 10-K for the year ended December 31, 2002]
    
    *10.6.4
    
    
    Fourth Amendment to 2000 Stock Option Plan of Dayton Superior Corporation
dated February 10, 2004. [Incorporated by reference to Exhibit 10.10.4 to the
Companys Annual Report on Form 10-K for the year ended December 31, 2003]
    
    *
 74




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Exhibit No.
    
    
    
    
    
    Description10.6.5
    
    
    Form of Amended and Restated Stock Option Agreement entered into between
Dayton Superior Corporation and certain of its executive officers
[Incorporated by reference to Exhibit 21.1 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2002]
    
    *10.6.6
    
    
    Form of First Amended to Stock Option Agreement dated as of July 1, 2003
[Incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report
on Form 10-Q for the quarter ended July 2, 2003]
    
    *(14)
    
    Code of Ethics14
    
    
    Code of Ethics for Senior
Financial Officers
[Incorporated by reference
to Exhibit 14 to the
Companys Annual Report on
Form 10-K for the year ended
December 31, 2003]
    
    (21)
    
    Subsidiaries of the Registrant21.1
    
    
    Subsidiaries of the Company
    
    **(31)
    
    Rule 13a-14(a)/15d-14(a) Certifications31.1
    
    
    Rule 13a-14(a)/15d-14(a)
Certification of President
and Chief Executive Officer
    
    **31.2
    
    
    Rule 13a-14(a)/15d-14(a)
Certification of Vice
President and Chief
Financial Officer
    
    **(32)
    
    Section 1350 Certifications32.1
    
    
    Sarbanes-Oxley Section 1350
Certification of President
and Chief Executive Officer
    
    **32.2
    
    
    Sarbanes-Oxley Section 1350
Certification of Vice
President and Chief
Financial Officer
    
    **
   *
    
    Compensatory plan, contract or arrangement in which one or more directors or named executive
officers participate.**
    
    Filed herewith
    
    Previously filed 75