##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTER ENDED 
March 28, 2008
    
    COMMISSION FILE NUMBER
1-11781
 DAYTON SUPERIOR CORPORATION
   DELAWARE
    
    31-0676346(State or other jurisdiction of 
Incorporation or organization)
    
    (I.R.S. Employer
Identification No.)7777 Washington Village Dr., Suite 130
Dayton, Ohio
    
    45459(Address of principal 
executive offices)
    
    (Zip Code)
 937-428-6360
 
  þ o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company.
See the definitions of large
accelerated filer, accelerated filer and smaller
 reporting company in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer
o
    
    Accelerated filer
þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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TABLE OF CONTENTS  Part I.  Financial InformationItem 1  Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II.  Other InformationItem 1A. Risk FactorsItem 6. ExhibitsSIGNATURESINDEX OF EXHIBITSEX-31.1.1EX-31.1.2EX-32.1EX-32.2    Table of Contents  
 Part I.  Financial Information
 
 Item 1  Financial Statements
 
 March 28,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,081
    
    
    $
    3,381Accounts receivable, net of allowances for doubtful accounts and
sales returns and allowances of $4,044 and $4,447
    
    
    64,121
    
    
    
    68,593Inventories
    
    
    78,905
    
    
    
    66,740Prepaid expenses and other current assets
    
    
    7,168
    
    
    
    5,718Prepaid income taxes
    
    
    716
    
    
    
    740Total current assets
    
    
    151,991
    
    
    
    145,172Rental equipment, net of accumulated depreciation of $69,822 and $67,276
    
    
    66,381
    
    
    
    67,640Property, plant and equipment, net of accumulated depreciation of
$55,584 and $58,542
    
    
    55,771
    
    
    
    56,812Goodwill
    
    
    43,643
    
    
    
    43,643Other assets
    
    
    6,633
    
    
    
    3,986Total assets
    
    $
    324,419
    
    
    $
    317,253LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Current maturities of long-term debt
    
    $
    102,849
    
    
    $
    8,990Revolving credit facility
    
    
    102,500
    
    
    
    Accounts payable
    
    
    36,255
    
    
    
    39,204Accrued compensation and benefits
    
    
    12,134
    
    
    
    15,456Accrued interest
    
    
    6,713
    
    
    
    6,193Accrued freight
    
    
    3,712
    
    
    
    4,065Other accrued liabilities
    
    
    6,169
    
    
    
    9,219Total current liabilities
    
    
    270,332
    
    
    
    83,127Other long-term debt, net of current portion
    
    
    152,318
    
    
    
    315,607Other long-term liabilities
    
    
    8,919
    
    
    
    8,162Total liabilities
    
    
    431,569
    
    
    
    406,896Stockholders deficit:Common stock, $0.01 par value, 100,000,000 shares authorized,
19,066,212 shares issued and outstanding, 502,984 unvested
    
    
    191
    
    
    
    191Additional paid-in capital
    
    
    207,484
    
    
    
    207,181Loans to stockholders
    
    
    (1,093
    )
    
    
    (1,085
    )Accumulated other comprehensive loss
    
    
    (757
    )
    
    
    (618
    )Accumulated deficit
    
    
    (312,975
    )
    
    
    (295,312
    )Total stockholders deficit
    
    
    (107,150
    )
    
    
    (89,643
    )Total liabilities and stockholders deficit
    
    $
    324,419
    
    
    $
    317,253
 
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##### Table of Contents



Three Fiscal Months EndedMarch 28,
    
    
    March 30,2008
    
    
    2007Product sales
    
    $
    77,303
    
    
    $
    80,176Rental revenue
    
    
    13,580
    
    
    
    14,573Used rental equipment sales
    
    
    4,496
    
    
    
    4,273Net sales
    
    
    95,379
    
    
    
    99,022Product cost of sales
    
    
    58,237
    
    
    
    60,432Rental cost of sales
    
    
    8,537
    
    
    
    8,093Used rental equipment cost of sales
    
    
    550
    
    
    
    1,126Cost of sales
    
    
    67,324
    
    
    
    69,651Product gross profit
    
    
    19,066
    
    
    
    19,744Rental gross profit
    
    
    5,043
    
    
    
    6,480Used rental equipment gross profit
    
    
    3,946
    
    
    
    3,147Gross profit
    
    
    28,055
    
    
    
    29,371Selling, general and administrative expenses
    
    
    26,835
    
    
    
    25,858Facility closing and severance expenses
    
    
    702
    
    
    
    368(Gain) loss on disposals of property,
plant, and equipment
    
    
    (531
    )
    
    
    83Income from operations
    
    
    1,049
    
    
    
    3,062Other expensesInterest expense
    
    
    12,506
    
    
    
    11,185Interest income
    
    
    (112
    )
    
    
    (135
    )Loss on extinguishment of long-term debt
    
    
    6,224
    
    
    
    Other expense
    
    
    30
    
    
    
    112Loss before provision for income taxes
    
    
    (17,599
    )
    
    
    (8,100
    )Provision for income taxes
    
    
    64
    
    
    
    59Net loss
    
    $
    (17,663
    )
    
    $
    (8,159
    )Basic net loss per common share
    
    $
    (0.95
    )
    
    $
    (0.45
    )Average number of shares of common stock
outstanding
    
    
    18,563
    
    
    
    18,209Diluted net loss per common share
    
    $
    (0.95
    )
    
    $
    (0.45
    )Average number of shares of common stock
and equivalents outstanding
    
    
    18,563
    
    
    
    18,209
 
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Three Fiscal Months EndedMarch 30,2007 (AsMarch 30,
    
    
    restated  see2008
    
    
    Note 8)Cash Flows From Operating Activities:Net loss
    
    $
    (17,663
    )
    
    $
    (8,159
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    6,593
    
    
    
    5,847Amortization of intangibles
    
    
    36
    
    
    
    46Loss on extinguishment of long-term debt
    
    
    6,224
    
    
    
    Stock compensation expense
    
    
    304
    
    
    
    659Amortization of deferred financing costs and debt discount
    
    
    2,005
    
    
    
    1,504Amortization of deferred gain on sale-leaseback transactions
    
    
    (407
    )
    
    
    (403
    )Gain on sales of rental equipment
    
    
    (3,946
    )
    
    
    (3,147
    )(Gain) loss on sales of property, plant and equipment
    
    
    (399
    )
    
    
    215Changes in assets and liabilities:Accounts receivable
    
    
    3,172
    
    
    
    1,064Inventories
    
    
    (12,181
    )
    
    
    (12,068
    )Prepaid expenses and other assets
    
    
    (1,800
    )
    
    
    (2,050
    )Accounts payable
    
    
    (734
    )
    
    
    (3,070
    )Accrued liabilities and other long-term liabilities
    
    
    (5,034
    )
    
    
    (5,697
    )Net cash used in operating activities
    
    
    (23,830
    )
    
    
    (25,259
    )Cash Flows From Investing Activities:Property, plant and equipment additions
    
    
    (4,184
    )
    
    
    (5,036
    )Proceeds from sales of property, plant and equipment
    
    
    1,120
    
    
    
    5Rental equipment additions
    
    
    (4,207
    )
    
    
    (9,028
    )Proceeds from sales of used rental equipment
    
    
    6,421
    
    
    
    4,718Net cash used in investing activities
    
    
    (850
    )
    
    
    (9,341
    )Cash Flows From Financing Activities:Borrowings under revolving credit facilities
    
    
    134,641
    
    
    
    10,475Repayments of revolving credit facilities
    
    
    (32,141
    )
    
    
    (3,525
    )Issuance of long-term debt
    
    
    94,250
    
    
    
    Repayments of long-term debt
    
    
    (166,079
    )
    
    
    (207
    )Financing costs paid
    
    
    (3,560
    )
    
    
    (594
    )Prepayment premium on redemption of long-term debt
    
    
    (4,641
    )
    
    
    Changes in loans to stockholders
    
    
    (8
    )
    
    
    831Issuance of shares of common stock
    
    
    
    
    
    
    731Net cash provided by financing activities
    
    
    22,462
    
    
    
    7,711Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    (82
    )
    
    
    76Net decrease in cash and cash equivalents
    
    
    (2,300
    )
    
    
    (26,813
    )Cash and cash equivalents, beginning of period
    
    
    3,381
    
    
    
    26,813Cash, end of period
    
    $
    1,081
    
    
    $
    Supplemental Disclosures:Cash paid for income taxes
    
    $
    95
    
    
    $
    93Cash paid for interest
    
    
    10,223
    
    
    
    9,300Financing cost additions in accounts payable
    
    
    670
    
    
    
    Sales of used rental equipment in accounts receivable and notes receivable
    
    
    10,527
    
    
    
    10,838Property, plant and equipment and rental equipment additions in accounts
payable
    
    
    895
    
    
    
    2,223
 
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Three Fiscal Months EndedMarch 28, 2008
    
    
    March 30, 2007Net loss
    
    $
    (17,663
    )
    
    $
    (8,159
    )Other comprehensive gain (loss):Foreign currency translation
adjustment
    
    
    (139
    )
    
    
    76Comprehensive loss
    
    $
    (17,802
    )
    
    $
    (8,083
    )
 
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##### Table of Contents



Dayton Superior Corporation and Subsidiary
Notes to Condensed Consolidated Financial Statements
($ in thousands, except per share amounts)
(Unaudited)
 (1) Consolidated Financial Statements
   (2) Accounting Policies
  (a)
    
    Fiscal Quarter  The Companys fiscal year end is December 31. The Companys
fiscal quarters are defined as the 13-week periods ending on a Friday near the end of
March, June and September.(b)
    
    Inventories  The Company values all inventories at the lower of first-in,
first-out (FIFO) cost or market. The Company provides a net realizable value reserve,
which reflects 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 March 28, 2008 and December
31, 2007:
 March 28, 2008
    
    December 31, 2007Raw materials
    
    $
    19,463
    
    
    $
    13,534Work in progress
    
    
    7,143
    
    
    
    3,518Finished goods
    
    
    56,366
    
    
    
    53,358Total inventories
    
    
    82,972
    
    
    
    70,410Net realizable value reserve
    
    
    (4,067
    )
    
    
    (3,670
    )Net inventories
    
    $
    78,905
    
    
    $
    66,740
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(c)
    
    Loss Per Share of Common Stock  Basic net loss per share of common stock is
computed by dividing net loss by the weighted average number of vested shares of common
stock outstanding during the period. Diluted net loss per share is computed by dividing net
loss by the weighted average number of shares of common stock and common stock equivalents
outstanding, if dilutive, during each period. The Companys common stock equivalents
consist of unvested shares and unexercised warrants and stock options. Their effect is
calculated using the treasury stock method. For the three months ended March 28, 2008 and
March 30, 2007, common stock equivalents of 734,529 and 1,015,166 respectively, were not
included as their effect would have been anti-dilutive.(d)
    
    New Accounting Pronouncements  In September 2006, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No.
157, Fair Value Measurements. This Statement clarifies the definition of fair value,
establishes a framework for measuring fair value, and expands the disclosures on fair value
measurements. Two FASB Staff Positions (FSP) on SFAS No. 157 were subsequently issued. In
February 2008, FSP No. 157-1 excluded SFAS No. 13, Accounting for Leases, and other
accounting pronouncements that address fair value measurements for purposes of lease
classification or measurement under SFAS No. 13, from the scope of SFAS No. 157. This FSP is effective upon
initial adoption of SFAS No. 157. In February 2008, FSP No. 157-2 delayed the effective
date of this SFAS No. 157 for non-financial assets and non-financial liabilities that are
recognized or disclosed at fair value in the consolidated financial statements on a nonrecurring basis.
This FSP is effective for fiscal years beginning after
November 15, 2008. However, these scope exceptions do not apply to assets acquired and liaiblities assumed in a
business combination that are required to be measured at fair value
under SFAS No. 141, Business Combinations or SFAS No. 141R, Business Combinations. As a result, the Company has partially adopted SFAS No. 157 in accordance with FSP
No. 157-2 as it relates to nonrecurring non-financial assets and non-financial liabilities. At the time of the partial adoption of
SFAS No. 157, however, there were no financial assets or liabilities measured at fair value on a recurring basis and no non-financial
assets or liabilities measured at fair value on a nonrecurring basis.The fair value framework requires the categorization of assets and liabilities into three
levels based upon the inputs used to price the assets or liabilities. Level 1 provides the
most reliable measure of fair value, whereas Level 3 generally requires significant
management judgment. The three levels are defined as follows:
 
 
 
 In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities  Including an amendment of FASB Statement No. 115. This Statement
provides entities with an option to report selected financial assets and liabilities at fair
value and establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for similar types
of assets and liabilities. The Company complied with SFAS No. 159 as of January 1, 2008.
SFAS No. 159 did not have an impact on the Companys consolidated financial statements, as
the Company did not elect to report selected financial assets and liabilities at fair value.In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations. SFAS
No. 141(R) changes the accounting for business combinations, including the measurement of
acquirer shares issued in consideration for a business combination, the recognition of
contingent consideration, the accounting for preacquisition gain and loss contingencies, the
recognition of capitalized in-process research and development, the accounting for
acquisition-related restructuring cost accruals, the treatment of acquisition related
transaction costs and the recognition of changes in the acquirers income tax valuation
allowance. SFAS No. 141(R) applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning
on
 7




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or after December 15, 2008, except for certain tax adjustments for prior business
combinations. Accordingly, we will adopt this statement on January 1, 2009.
 In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51. SFAS No. 160 changes the accounting for
noncontrolling (minority) interests in consolidated financial statements including the
requirements to classify noncontrolling interests as a component of consolidated
stockholders equity, and the elimination of minority interest accounting in results of
operations with earnings attributable to noncontrolling interests reported as part of
consolidated earnings. Additionally, SFAS No. 160 revises the accounting for both increases
and decreases in a parents controlling ownership interest. SFAS No. 160 is effective for
fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company
does not expect the adoption of SFAS No. 160 to have a material impact on its consolidated
financial statements.In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activitiesan amendment of FASB Statement No. 133.SFAS No. 161 requires enhanced
disclosures about an entitys derivative and hedging activities and thereby improves the
transparency of financial reporting. This Statement is effective for consolidated financial statements
issued for fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. This Statement encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. The Company currently does not have any
instruments or activities to which this Statement would apply, but is expected to enter an
interest rate swap agreement during the second quarter of 2008. The Company is evaluating
the effect that SFAS No. 161 will have on its consolidated financial statements.In April, 2008, the FASB issued FSP 142-3, Determination of the Useful Lives of Intangible
Assets. This FSP amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized intangible asset
under SFAS No. 142, Goodwill and Other Intangible Assets. The intent of this FSP is to
improve the consistency between the useful life of a recognized intangible asset under SFAS
No. 142 and the period of expected cash flows used to measure the fair value of the asset.
This FSP shall be effective for consolidated financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early adoption is
prohibited. Due to the recentness of the pronouncement, the Company has not yet evaluated
the impact of FSP 142-3 on its consolidated financial statements.
 (3) Credit Arrangements
  Sources:Issuance of $100,000 term loan, net of discount
    
    $
    94,250Initial draw on new revolving credit facility
    
    
    88,666$
    182,916Uses:Repayment of Senior Second Secured Notes
    
    $
    165,000Prepayment premium on Senior Second Secured Notes
    
    
    4,641Accrued interest
    
    
    9,836Financing costs paid at closing
    
    
    3,439$
    182,916
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Prepayment premium on Senior Second Secured Notes
    
    $
    4,641Unamortized debt discount on Senior Second Secured Notes
    
    
    1,063Unamortized financing costs on Senior Second Secured Notes
    
    
    243Unamortized financing costs on previous revolving credit facility
    
    
    277Loss on extinguishment of long-term debt
    
    $
    6,224
   Three fiscal months endedMarch 28, 2008
    
    March 30, 2007Revolving Credit Facility:Average borrowings
    
    $
    38,175
    
    
    $
    1,444Maximum borrowing
    
    
    104,741
    
    
    
    10,175Weighted average interest rate
    
    
    7.6
    %
    
    
    58.1
    %
   March 28,
    
    
    December 31,2008
    
    
    2007Senior Subordinated Notes, interest rate of 13.0%
    
    $
    154,729
    
    
    $
    154,729Debt discount on Senior Subordinated Notes
    
    
    (2,582
    )
    
    
    (3,045
    )Term loan, interest rate of 7.1%
    
    
    100,000
    
    
    
    Debt discount on term loan
    
    
    (5,391
    )
    
    
    Senior Second Secured Notes, interest rate of 10.75%
    
    
    
    
    
    
    165,000Debt discount on Senior Second Secured Notes
    
    
    
    
    
    
    (1,393
    )Senior notes payable to seller in 2003 acquisition,
non-interest bearing, accreted at 6.0% (secured) to
14.5% (unsecured)
    
    
    6,316
    
    
    
    6,907Debentures previously held by Dayton Superior
Capital Trust, interest rate of 9.1%, due on demand
    
    
    1,035
    
    
    
    1,035Capital lease obligations
    
    
    1,060
    
    
    
    1,364Total long-term debt
    
    
    255,167
    
    
    
    324,597Less current maturities
    
    
    (102,849
    )
    
    
    (8,990
    )Long-term portion
    
    $
    152,318
    
    
    $
    315,607
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(4) Stock Option Plans
  Granted and outstanding
    
    
    868,542Granted and exercised
    
    
    122,998Available for granting
    
    
    675,664Total
    
    
    1,667,204
  10




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##### Table of Contents



Risk-free interest rates
    
    
    2.60
    %Expected dividend yield
    
    
    0.00
    %Expected life
    
    5.0 yearsExpected volatility
    
    
    81.46
    %
    Weighted
    
    
    Unvested
    
    
    Weighted
    
    
    AggregateNumber of
    
    
    Average Exercise
    
    
    Number of
    
    
    Average Grant-
    
    
    IntrinsicShares
    
    
    Price Per Share
    
    
    Shares
    
    
    Date Value
    
    
    ValueOutstanding at
December 31, 2007
    
    
    743,762
    
    
    $
    11.74
    
    
    
    483,249
    
    
    $
    2.96
    
    
    $
    Granted
    
    
    145,000
    
    
    
    3.19
    
    
    
    145,000
    
    
    
    2.11
    
    
    
    Expired
    
    
    (14,754
    )
    
    
    7.76
    
    
    
    
    
    
    
    Forfeited
    
    
    (5,466
    )
    
    
    12.46
    
    
    
    (5,466
    )
    
    
    3.53Outstanding at
March 28, 2008
    
    
    868,542
    
    
    $
    10.38
    
    
    
    622,783
    
    
    $
    2.75
    
    
    $
    
     11




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##### Table of Contents



(5) Retirement Plans
    Pension
    
    
    Pension
    
    
    Postretirement
    
    
    PostretirementBenefits 2008
    
    
    Benefits 2007
    
    
    Benefits 2008
    
    
    Benefits 2007Service cost
    
    $
    114
    
    
    $
    172
    
    
    $
    
    
    
    $
    Interest cost
    
    
    216
    
    
    
    205
    
    
    
    7
    
    
    
    7Expected return on plan assets
    
    
    (270
    )
    
    
    (243
    )
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    2
    
    
    
    2
    
    
    
    6
    
    
    
    6Amortization of net loss
    
    
    24
    
    
    
    19
    
    
    
    (2
    )
    
    
    (2
    )Net periodic benefit cost
    
    $
    86
    
    
    $
    155
    
    
    $
    11
    
    
    $
    11
  (6) Segment Reporting
       Three Fiscal Months EndedMarch 28, 2008
    
    
    March 30, 2007Product sales
    
    $
    77,303
    
    
    $
    80,176Rental revenue
    
    
    13,580
    
    
    
    14,573Used rental equipment sales
    
    
    4,496
    
    
    
    4,273Net sales
    
    
    95,379
    
    
    
    99,022
 12




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Three Fiscal Months EndedMarch 28, 2008
    
    
    March 30, 2007Product cost of sales
    
    
    58,237
    
    
    
    60,432Rental cost of sales
    
    
    8,537
    
    
    
    8,093Used rental equipment cost of sales
    
    
    550
    
    
    
    1,126Cost of sales
    
    
    67,324
    
    
    
    69,651Product gross profit
    
    
    19,066
    
    
    
    19,744Rental gross profit
    
    
    5,043
    
    
    
    6,480Used rental equipment gross profit
    
    
    3,946
    
    
    
    3,147Gross profit
    
    $
    28,055
    
    
    $
    29,371Depreciation Expense:Product sales (property, plant, and
equipment)
    
    $
    1,501
    
    
    $
    1,284Rental Revenue (rental equipment)
    
    
    4,246
    
    
    
    3,984Corporate
    
    
    846
    
    
    
    579Total depreciation
    
    $
    6,593
    
    
    $
    5,847
 (7) Provision for Income Taxes
   Balance at January 1, 2008
    
    $
    987Reductions in tax positions taken during a prior period
    
    
    (722
    )Reductions in tax positions from expiration of statute
    
    
    (2
    )Foreign currency translation
    
    
    (2
    )Balance at March 28, 2008
    
    $
    261
  13




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##### Table of Contents



(8) Restatement of Previously Issued Financial Statements
 Statement of Cash
Flows
 For the Three Fiscal Months Ended March 30, 2007As PreviouslyReported
    
    Adjustments
    
    As RestatedChanges in assets and liabilities  Accounts receivable
    
    $
    2,476
    
    
    $
    (1,412
    )
    
    $
    1,064Changes in assets and liabilities  Prepaid expenses
and other assets
    
    
    (3,017
    )
    
    
    967
    
    
    
    (2,050
    )Net cash provided by (used in) operating activities
    
    
    (24,814
    )
    
    
    (445
    )
    
    
    (25,259
    )Proceeds from sales of rental equipment
    
    
    4,273
    
    
    
    445
    
    
    
    4,718Net cash provided by (used in) investing activities
    
    
    (9,786
    )
    
    
    445
    
    
    
    (9,341
    )Supplemental Disclosures  Sale of used rental
equipment in accounts and notes receivable
    
    
    
    
    
    
    10,838
    
    
    
    10,838
 14




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Certain
amounts in condensed consolidated statements of cash flows in the
following discussion related to 2007 include the effects of a
restatement. See Note 8 - Restated of Previously Issued Financial
Statements contained in the Notes to Condensed Consolidated Financial
Statements in Item 8 for a more detailed discussion of the
restatement. The following discussion should be read in conjunction with our consolidated financial statements
and the related notes included elsewhere in this document. This discussion contains forward-looking
statements that involve risks and uncertainties. See Risk Factors included in our Annual Report
on Form 10-K for the year ended December 31, 2007 for a discussion of important factors that could
cause actual results to differ materially from those described or implied by the forward-looking
statements contained in this discussion. Please refer to Forward-Looking Statements included
elsewhere in this document.
 Overview
  
    
    infrastructure projects, such as highways, bridges, airports, power plants and water
management projects;
    
    institutional projects, such as schools, stadiums, hospitals and government buildings;
and
    
    commercial projects, such as retail stores, offices, and recreational, distribution and
manufacturing facilities.
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##### Table of Contents



Results of Operations
  Three fiscal months endedMarch 28, 2008
    
    March 30, 2007Product sales
    
    
    81.1
    %
    
    
    81.0
    %Rental revenue
    
    
    14.2
    
    
    
    14.7Used rental equipment sales
    
    
    4.7
    
    
    
    4.3Net sales
    
    
    100.0
    
    
    
    100.0Product cost of sales
    
    
    75.3
    
    
    
    75.4Rental cost of sales
    
    
    62.9
    
    
    
    55.5Used rental equipment cost of sales
    
    
    12.2
    
    
    
    26.4Cost of sales
    
    
    70.6
    
    
    
    70.3Product gross profit
    
    
    24.7
    
    
    
    24.6Rental gross profit
    
    
    37.1
    
    
    
    44.5Used rental equipment gross profit
    
    
    87.8
    
    
    
    73.6Gross profit
    
    
    29.4
    
    
    
    29.7Selling, general and administrative expenses
    
    
    28.1
    
    
    
    26.1Facility closing and severance expenses
    
    
    0.7
    
    
    
    0.4(Gain) loss on disposals of property,
plant, and equipment
    
    
    (0.5
    )
    
    
    0.1Income from operations
    
    
    1.1
    
    
    
    3.1Interest expense
    
    
    13.1
    
    
    
    11.3Interest income
    
    
    (0.1
    )
    
    
    (0.1
    )Loss on extinguishment of long-term debt
    
    
    6.5
    
    
    
    Other expense (income)
    
    
    
    
    
    
    0.1Loss before provision for income taxes
    
    
    (18.4
    )
    
    
    (8.2
    )Provision for income taxes
    
    
    0.1
    
    
    
    Net loss
    
    
    (18.5
    %)
    
    
    (8.2
    %)
 Comparison of Three Fiscal Months Ended March 28, 2008 and March 30, 2007
 Net Sales
  Three fiscal months endedMarch 28, 2008
    
    
    March 30, 2007(In thousands)Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %
    
    
    % ChangeProduct sales
    
    $
    77,303
    
    
    
    81.1
    %
    
    $
    80,176
    
    
    
    81.0
    %
    
    
    (3.6
    %)Rental revenue
    
    
    13,580
    
    
    
    14.2
    
    
    
    14,573
    
    
    
    14.7
    
    
    
    (6.8
    )Used rental equipment sales
    
    
    4,496
    
    
    
    4.7
    
    
    
    4,273
    
    
    
    4.3
    
    
    
    5.2Net sales
    
    $
    95,379
    
    
    
    100.0
    %
    
    $
    99,022
    
    
    
    100.0
    %
    
    
    (3.7
    %)
  16




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Gross Profit
     Operating Expenses
  Other Expenses
   17




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##### Table of Contents



($ in millions)Prepayment premium on Senior Second Secured Notes
    
    $
    4.6Unamortized discount on Senior Second Secured Notes
    
    
    1.1Unamortized financing costs on Senior Second Secured Notes
    
    
    0.2Unamortized financing costs on previous revolving credit facility
    
    
    0.3Loss on extinguishment of long-term debt
    
    $
    6.2
 Loss Before Income Taxes
  Provision for Income Taxes
  Net Loss
  Liquidity and Capital Resources
   Three Fiscal Months EndedMarch 28,
    
    
    March 30,($ in thousands)
    
    2008
    
    
    2007Additions to rental equipment
    
    $
    4,207
    
    
    $
    9,028Additions to property, plant and equipment
    
    
    4,184
    
    
    
    5,036Proceeds from sales of used rental equipment
    
    
    (6,421
    )
    
    
    (4,718
    )Proceeds from sales of property, plant and equipment
    
    
    (1,120
    )
    
    
    (5
    )Net additions to rental equipment and property, plant, and equipment
    
    $
    850
    
    
    $
    9,341
  18




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##### Table of Contents



Three Fiscal Months Ended($ in millions)
    
    March 28, 2008
    
    
    March 30, 2007Net loss
    
    $
    (17.7
    )
    
    $
    (8.2
    )Non-cash adjustments
    
    
    10.4
    
    
    
    4.8Net loss after non-cash adjustments
    
    
    (7.3
    )
    
    
    (3.4
    )Changes in assets and liabilities
    
    
    (16.5
    )
    
    
    (21.9
    )Net cash used in operating activities
    
    $
    (23.8
    )
    
    $
    (25.3
    )
      19




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##### Table of Contents



($ in thousands)Senior Subordinated Notes, interest rate of 13.0%
    
    $
    154,729Debt discount on Senior Subordinated Notes
    
    
    (2,582
    )Term loan, interest rate of 7.1%
    
    
    100,000Debt discount on term loan
    
    
    (5,391
    )Senior notes payable to seller of Safway, non-interest bearing,
accreted at 6.0% (secured) to 14.5% (unsecured)
    
    
    6,316Debentures previously held by Dayton Superior Capital Trust,
interest rate of 9.1%, due on demand
    
    
    1,035Capital lease obligations
    
    
    1,060Total long-term debt
    
    
    255,167Less current maturities
    
    
    (102,849
    )Long-term portion
    
    $
    152,318
    
    
    $102.5 million increase in the revolving credit facility,
    
    $93.9 million increase in the current portion of long-term debt due to the term loan
initially maturing in March 2009,
    
    $4.5 million decrease in accounts receivable due to the lower net sales in the first
quarter of 2008 relative to the fourth quarter of 2007, and
    
    $0.7 million of other net items, offset by
    
    $12.2 million increase in inventories due to material cost inflation and higher
quantities in anticipation of seasonally higher second quarter sales,
    
    $6.2 million decrease in accrued liabilities due to the payment of customer rebates
and incentives, and
    
    $2.9 million decrease in accounts payable due to the timing of vendor payments.
  20




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##### Table of Contents



Commitments
  Seasonality
  Inflation
  Critical Accounting Policies
  Forward-Looking Statements
   21




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##### Table of Contents




    
    the cyclical nature of nonresidential building and infrastructure construction
activity, which can be affected by factors outside our control such as the general
economy, governmental expenditures, 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;
    
    our ability to successfully integrate acquisitions on a timely basis;
    
    the mix of product sales, rental revenues, and sales of used rental equipment;
    
    cost increases in raw materials and operating costs; and
    
    favorable market response to sales price increases.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
     
 Item 4. Controls and Procedures.
  22




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Changes in Internal Control over Financial Reporting
  Remediation Activities
  23




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##### Table of Contents



Part II.  Other Information
 
 Item 1A. Risk Factors
  Our substantial level of indebtedness could adversely affect our business, financial condition or
results of operations and adversely affect the price of our common stock.
 
    
    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 of principal and interest on our indebtedness, thereby reducing the availability
of our cash flow for operations and other general 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.
 Increased costs of raw materials and energy resources may result in increased operating expenses
and adversely affect our results of operations and cash flow.
 
 Item 6. Exhibits
  24




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##### Table of Contents



SIGNATURES
  DAYTON SUPERIOR CORPORATIONDATE:  May 7, 2008
    BY:
/s/ Edward J. PuisisEdward J. PuisisExecutive Vice President and
Chief Financial Officer 25




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##### Table of Contents



INDEX OF EXHIBITS
 Description
 Exhibit No.
    
    Description(10)
    
    Material Contracts10.1
    
    
    Form of Incentive Stock Option
Agreement entered into between the
Company and certain of its
employees dated March 26, 2008
[Incorporated by reference to
Exhibit 10.1 to the Companys
Current Report on Form 8-K dated
April 1, 2008]
    
     *(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 26