##### 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 
September 29, 2006
    
    COMMISSION FILE NUMBER
1-11781
 DAYTON
SUPERIOR CORPORATION
  OHIO
    
    31-0676346(State or other jurisdiction of 
Incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 7777 Washington Village Dr., Suite 130Dayton, Ohio
    
    45459(Address of principal
    
    (Zip Code)executive offices)
 937-428-6360
  (Former name, former address, and former fiscal year,
 þ o
  o o þ
 o þ




---



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 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 6. ExhibitsSIGNATURESINDEX TO EXHIBITSEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  
 Part I.  Financial Information
 
 Item 1  Financial Statements
 
 September 29,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash
    
    $
    313
    
    
    $
    Accounts receivable, net of allowances for doubtful accounts and
sales returns and allowances of $6,013 and $5,435
    
    
    81,498
    
    
    
    62,326Inventories
    
    
    65,823
    
    
    
    57,372Prepaid expenses and other current assets
    
    
    5,593
    
    
    
    5,134Prepaid income taxes
    
    
    430
    
    
    
    546Total current assets
    
    
    153,657
    
    
    
    125,378Rental equipment, net of accumulated depreciation of $65,198 and $56,591
    
    
    65,820
    
    
    
    68,400Property, plant and equipment
    
    
    102,597
    
    
    
    96,491Less accumulated depreciation
    
    
    (61,753
    )
    
    
    (58,327
    )Net property, plant and equipment
    
    
    40,844
    
    
    
    38,164Goodwill
    
    
    43,643
    
    
    
    43,643Intangible assets, net of accumulated amortization
    
    
    3,586
    
    
    
    5,025Other assets
    
    
    880
    
    
    
    910Total assets
    
    $
    308,430
    
    
    $
    281,520LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Current maturities of long-term debt
    
    $
    3,775
    
    
    $
    2,864Current portion of deferred gain on sale-leaseback
    
    
    1,635
    
    
    
    3,530Accounts payable
    
    
    27,617
    
    
    
    27,267Accrued compensation and benefits
    
    
    14,115
    
    
    
    12,266Accrued interest
    
    
    7,315
    
    
    
    6,589Accrued freight
    
    
    5,347
    
    
    
    4,031Other accrued liabilities
    
    
    5,885
    
    
    
    5,247Total current liabilities
    
    
    65,689
    
    
    
    61,794Revolving credit facility
    
    
    79,250
    
    
    
    48,700Other long-term debt, net of current portion
    
    
    319,255
    
    
    
    317,690Deferred income taxes
    
    
    11,406
    
    
    
    11,406Deferred gain on sale-leaseback, net of current portion
    
    
    4,476
    
    
    
    5,199Other long-term liabilities
    
    
    6,517
    
    
    
    8,068Total liabilities
    
    
    486,593
    
    
    
    452,857Class A common shares subject to put 693,724 (464,157 unvested)
and 233,617 shares, net of related loans to shareholders of $1,917 and
$805
    
    
    1,754
    
    
    
    Shareholders deficit:Class A common shares; no par value; 6,000,000 shares authorized,
5,091,335 and 4,627,178 shares issued, 4,397,611 and 4,393,561
not subject to put
    
    
    113,030
    
    
    
    115,248Loans to shareholders
    
    
    (345
    )
    
    
    (1,643
    )Class A treasury shares, at cost, 51,293 shares
    
    
    (1,509
    )
    
    
    (1,509
    )Accumulated other comprehensive loss
    
    
    (1,094
    )
    
    
    (1,357
    )Accumulated deficit
    
    
    (289,999
    )
    
    
    (282,076
    )Total shareholders deficit
    
    
    (179,917
    )
    
    
    (171,337
    )Total liabilities and shareholders deficit
    
    $
    308,430
    
    
    $
    281,520
 
 2




---



##### Table of Contents



Three Fiscal Months Ended
    
    
    Nine Fiscal Months EndedSeptember
    
    
    September
    
    
    September
    
    
    September29, 2006
    
    
    30, 2005
    
    
    29, 2006
    
    
    30,2005Product sales
    
    $
    107,852
    
    
    $
    96,557
    
    
    $
    300,535
    
    
    $
    269,643Rental revenue
    
    
    16,275
    
    
    
    13,816
    
    
    
    44,428
    
    
    
    35,961Used rental equipment sales
    
    
    7,514
    
    
    
    3,698
    
    
    
    18,224
    
    
    
    11,953Net sales
    
    
    131,641
    
    
    
    114,071
    
    
    
    363,187
    
    
    
    317,557Product cost of sales
    
    
    80,589
    
    
    
    75,018
    
    
    
    226,992
    
    
    
    208,030Rental cost of sales
    
    
    9,600
    
    
    
    9,594
    
    
    
    26,330
    
    
    
    27,389Used rental equipment cost of sales
    
    
    2,243
    
    
    
    1,270
    
    
    
    5,435
    
    
    
    4,188Cost of sales
    
    
    92,432
    
    
    
    85,882
    
    
    
    258,757
    
    
    
    239,607Product gross profit
    
    
    27,263
    
    
    
    21,539
    
    
    
    73,543
    
    
    
    61,613Rental gross profit
    
    
    6,675
    
    
    
    4,222
    
    
    
    18,098
    
    
    
    8,572Used rental equipment gross profit
    
    
    5,271
    
    
    
    2,428
    
    
    
    12,789
    
    
    
    7,765Gross profit
    
    
    39,209
    
    
    
    28,189
    
    
    
    104,430
    
    
    
    77,950Selling, general and
administrative expenses
    
    
    26,592
    
    
    
    22,736
    
    
    
    75,163
    
    
    
    68,993Facility closing and severance
expenses
    
    
    96
    
    
    
    211
    
    
    
    373
    
    
    
    542Gain on disposals of property,
plant, and equipment
    
    
    (439
    )
    
    
    (543
    )
    
    
    (1,775
    )
    
    
    (1,629
    )Amortization of intangibles
    
    
    158
    
    
    
    180
    
    
    
    485
    
    
    
    486Income from operations
    
    
    12,802
    
    
    
    5,605
    
    
    
    30,184
    
    
    
    9,558Other expense (income):Interest expense
    
    
    12,743
    
    
    
    12,207
    
    
    
    37,364
    
    
    
    36,563Interest income
    
    
    203
    
    
    
    (24
    )
    
    
    176
    
    
    
    (146
    )Other expense (income)
    
    
    (46
    )
    
    
    79
    
    
    
    108
    
    
    
    84Loss before provision
for income taxes
    
    
    (98
    )
    
    
    (6,657
    )
    
    
    (7,464
    )
    
    
    (26,943
    )Provision for income taxes
    
    
    244
    
    
    
    
    
    
    
    459
    
    
    
    Net loss
    
    $
    (342
    )
    
    $
    (6,657
    )
    
    $
    (7,923
    )
    
    $
    (26,943
    )Basic net
loss per common
share
    
    $
    (0.07
    )
    
    $
    (1.46
    )
    
    $
    (1.73
    )
    
    $
    (5.89
    )Average number of common shares
outstanding
    
    
    4,576
    
    
    
    4,572
    
    
    
    4,576
    
    
    
    4,576Diluted net
loss per
common share
    
    $
    (0.07
    )
    
    $
    (1.46
    )
    
    $
    (1.73
    )
    
    $
    (5.89
    )Average number of common shares
and equivalents outstanding
    
    
    4,576
    
    
    
    4,572
    
    
    
    4,576
    
    
    
    4,576
 
 3




---



##### Table of Contents



Nine Fiscal Months EndedSeptember 29,
    
    
    September 30,2006
    
    
    2005Cash Flows From Operating Activities:Net loss
    
    $
    (7,923
    )
    
    $
    (26,943
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    18,974
    
    
    
    22,750Amortization of intangibles
    
    
    485
    
    
    
    486Stock option expense
    
    
    653
    
    
    
    Deferred income taxes
    
    
    
    
    
    
    (448
    )Amortization of deferred financing costs and debt discount
    
    
    4,280
    
    
    
    3,942Amortization of deferred gain on sale-leaseback transactions
    
    
    (2,618
    )
    
    
    (1,483
    )Gain on sales of rental equipment
    
    
    (12,789
    )
    
    
    (7,765
    )(Gain) loss on sales of property, plant and equipment
    
    
    32
    
    
    
    (456
    )Changes in assets and liabilities:Accounts receivable
    
    
    (19,172
    )
    
    
    (5,157
    )Inventories
    
    
    (8,451
    )
    
    
    (5,046
    )Prepaid expenses and other assets
    
    
    (867
    )
    
    
    6,437Prepaid income taxes
    
    
    116
    
    
    
    (62
    )Accounts payable
    
    
    257
    
    
    
    (83
    )Accrued liabilities and other long-term liabilities
    
    
    2,978
    
    
    
    1,456Net cash used in operating activities
    
    
    (24,045
    )
    
    
    (12,372
    )Cash Flows From Investing Activities:Property, plant and equipment additions
    
    
    (7,282
    )
    
    
    (4,187
    )Proceeds from sales of property, plant and equipment
    
    
    21
    
    
    
    1,287Rental equipment additions
    
    
    (15,988
    )
    
    
    (20,814
    )Proceeds from sales of rental equipment
    
    
    18,224
    
    
    
    11,953Net cash used in investing activities
    
    
    (5,025
    )
    
    
    (11,761
    )Cash Flows From Financing Activities:Borrowings under revolving credit facility
    
    
    113,175
    
    
    
    108,125Repayments of revolving credit facility
    
    
    (82,625
    )
    
    
    (97,200
    )Repayments of other long-term debt
    
    
    (1,616
    )
    
    
    (1,979
    )Proceeds from sale-leaseback transaction
    
    
    
    
    
    
    11,636Financing costs incurred
    
    
    
    
    
    
    (3
    )Change in loans to shareholders
    
    
    186
    
    
    
    10Issuance of common shares subject to put option
    
    
    
    
    
    
    13Net cash provided by financing activities
    
    
    29,120
    
    
    
    20,602Effect of Exchange Rate Changes on Cash
    
    
    263
    
    
    
    379Net increase (decrease) in cash
    
    
    313
    
    
    
    (3,152
    )Cash, beginning of period
    
    
    
    
    
    
    4,504Cash, end of period
    
    $
    313
    
    
    $
    1,352Supplemental Disclosures:Cash paid for income taxes
    
    $
    208
    
    
    $
    435Cash paid for interest
    
    
    32,358
    
    
    
    31,051Rental equipment acquired under capital lease
    
    
    1,200
    
    
    
    Property, plant and equipment and rental equipment additions in accounts
payable
    
    
    1,630
    
    
    
    1,471Repayment of loans to shareholders through surrender of common shares
    
    
    
    
    
    
    325Reclassification of common shares due to repayment of shareholder loans
through redemption of common shares
    
    
    
    
    
    
    75Reclassification of common shares due to change in redemption value of common
shares subject to put, net of shareholder loans
    
    
    1,754
    
    
    
    
  4




---



##### Table of Contents



Three Fiscal Months Ended
    
    
    Nine Fiscal Months EndedSeptember 29,
    
    
    September 30,
    
    
    September 29,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net loss
    
    $
    (342
    )
    
    $
    (6,657
    )
    
    $
    (7,923
    )
    
    $
    (26,943
    )Other comprehensive loss:Foreign currency
translation
adjustment
    
    
    (7
    )
    
    
    577
    
    
    
    263
    
    
    
    379Comprehensive loss
    
    $
    (349
    )
    
    $
    (6,080
    )
    
    $
    (7,660
    )
    
    $
    (26,564
    )
 
 5




---



##### Table of Contents



Dayton Superior Corporation and Subsidiary
Notes to Consolidated Financial Statements
(Amounts in thousands, except share and per share amounts)
(Unaudited)
 (1)
    
    Consolidated Financial StatementsThe interim consolidated financial statements included herein have been prepared by Dayton
Superior Corporation (the Company) and include, in the opinion of management, all adjustments
necessary to state fairly the information set forth therein. Any such adjustments were of a
normal recurring nature. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally accepted in the
United States of America have been omitted, although the Company believes that the disclosures
are adequate to make the information presented not misleading. It is suggested that these
unaudited consolidated financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the Companys annual financial statements
for the year ended December 31, 2005. The interim results may not be indicative of future
periods.(2)
    
    Accounting PoliciesThe interim consolidated financial statements have been prepared in accordance with the
accounting policies described in the notes to the Companys consolidated financial statements
for the year ended December 31, 2005. While management believes that the procedures followed in
the preparation of interim financial information are reasonable, the accuracy of some estimated
amounts is dependent upon facts that will exist or calculations that will be made at year end.
Examples of such estimates include changes in the deferred tax accounts and management bonuses,
among others. Any adjustments pursuant to such estimates during the fiscal quarter were of a
normal recurring nature.
 (a)
    
    Fiscal Quarter  The Companys fiscal year end is December 31. The Companys
fiscal quarters are defined as the 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 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 September 29, 2006 and
December 31, 2005:
 September 29, 2006
    
    December 31, 2005Raw materials
    
    $
    17,188
    
    
    $
    13,248Work in progress
    
    
    2,566
    
    
    
    2,813Finished goods
    
    
    46,069
    
    
    
    41,311Total Inventory
    
    $
    65,823
    
    
    $
    57,372
 (c)
    
    Rental Equipment  Rental equipment is purchased and 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. Effective
January 1, 2006, the Company changed its estimate of depreciable lives on certain families
of rental equipment from three years to fifteen years on a prospective basis. The families
changed were acquired as part of an acquisition in 2003 and the Company used an estimated
useful life of three years based primarily on the risk of realizable value and uncertain
resale value of this equipment when sold as used rental equipment. Subsequent data shows
demand for the equipment is strong and that resale values of the equipment are consistent
with other rental families. The physical utilization of the rental equipment lasts
approximately 15 years. The impact of this
 6




---



##### Table of Contents



change in estimate reduced rental cost of sales by approximately $750 and $2,250 for the
three and nine fiscal months ended September 29, 2006.
 (d)
    
    Goodwill  In the second quarter of 2006, the Company completed its
quantification of the fair value of goodwill as of December 31, 2005. No adjustment to the
estimated impairment loss recorded during the year ended December 31, 2005 was required to
be recognized. No events have occurred that would indicate that the carrying value may
exceed fair value. The Company will perform its annual assessment in the fourth quarter of
2006.(e)
    
    New Accounting Pronouncements  In June, 2006, the Financial
Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, which prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position taken
or expected to be taken in a tax return. This Interpretation also provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods,
disclosure, and transition. The Company will be required to comply with Interpretation No.
48 as of the first annual period that begins after December 15, 2006. The Company has not
determined the impact that Interpretation No. 48 will have on its consolidated financial
statements.In September, 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This Statement
defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements. This Statement
applies under other accounting pronouncements that require or permit fair value
measurements. This Statement does not require any new fair value measurements. The Company
will be required to comply with Statement No. 157 as of the first annual period that begins
after November 15, 2007. The Company has not determined the impact that Statement No. 157
will have on its consolidated financial statements.In September, 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106,
and 132(R). This Statement requires an employer to recognize the overfunded or underfunded
status of a defined benefit postretirement plan as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income of a business entity. This Statement also
requires an employer to measure the funded status of a plan as of the date of its year-end
statement of financial position, with limited exceptions. The Company will be required to
recognize the funded status of its defined benefit postretirement plan and to provide the
required disclosures as of the first annual period that ends after June 15, 2007. The
Company will be required to measure plan assets and benefit obligations as of the date of
the Companys fiscal year-end statement of financial position as of the first annual period
that ends after December 15, 2008. The Company has not determined the impact that Statement
No. 158 will have on its consolidated financial statements.In September, 2006, the SEC issued Staff Accounting Bulletin 108 (SAB 108). The
interpretations in this Staff Accounting Bulletin express the staffs views regarding the
process of quantifying financial statement misstatements. The staff is aware of diversity in
practice. For example, certain registrants do not consider the effects of prior year errors
on current year financial statements, thereby allowing improper assets or liabilities to
remain unadjusted. While these errors may not be material if considered only in relation to
the balance sheet, correcting the errors could be material to the current year income
statement. Certain registrants have proposed to the staff that allowing these errors to
remain on the balance sheet as assets or liabilities in perpetuity is an appropriate
application of generally accepted accounting principles. The staff believes that approach is
not in the best interest of the users of financial statements. The interpretations in this
Staff Accounting Bulletin are being issued to address diversity in practice in quantifying
financial statement misstatements and the potential under current practice for the build up
of improper amounts on the balance sheet. The Company has not determined the impact that SAB
108 will have on its consolidated financial statements.
 7




---



##### Table of Contents



(3) Credit Arrangements
   Three fiscal months ended
    
    Nine fiscal months endedSeptember 29,
    
    September 30,
    
    September 29,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Revolving Credit Facility:Average borrowings
    
    $
    76,140
    
    
    $
    66,774
    
    
    $
    70,033
    
    
    $
    65,841Peak borrowing
    
    
    81,700
    
    
    
    71,900
    
    
    
    81,700
    
    
    
    77,500Weighted average
interest rate
    
    
    8.2
    %
    
    
    6.4
    %
    
    
    7.9
    %
    
    
    6.0
    %
  September 29,
    
    
    December 31,2006
    
    
    2005Senior Subordinated Notes, interest rate of 13.0%
    
    $
    154,729
    
    
    $
    154,729Debt discount on Senior Subordinated Notes
    
    
    (5,101
    )
    
    
    (6,114
    )Senior Second Secured Notes, interest rate of 10.75%
    
    
    165,000
    
    
    
    165,000Debt discount on Senior Second Secured Notes
    
    
    (3,604
    )
    
    
    (4,776
    )Senior unsecured notes payable to seller of Safway,
non-interest bearing, accreted at 6.0% to 14.5%
    
    
    8,068
    
    
    
    7,534Debentures previously held by Dayton Superior
Capital Trust, interest rate of 9.1%, due on demand
    
    
    1,063
    
    
    
    1,068Capital lease obligations
    
    
    2,875
    
    
    
    2,930Payable to vendor on extended terms, non-interest
bearing, accreted at 6.0%
    
    
    
    
    
    
    183Total long-term debt
    
    
    323,030
    
    
    
    320,554Less current maturities
    
    
    (3,775
    )
    
    
    (2,864
    )Long-term portion
    
    $
    319,255
    
    
    $
    317,690
   8




---



##### Table of Contents



(4) Stock-Based Compensation Plans
    Accounting for Stock-Based Compensation
 For the three fiscal
    
    
    For the nine fiscalmonths ended
    
    
    months endedSeptember 30,
    
    
    September 30,2005
    
    
    2005Net loss
    
    As Reported
    
    $
    (6,657
    )
    
    $
    (26,943
    )Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effect
    
    
    (72
    )
    
    
    (216
    )Pro Forma
    
    $
    (6,729
    )
    
    $
    (27,159
    )
 9




---



##### Table of Contents



Weighted
    
    
    
    
    
    
    WeightedTotal Number
    
    
    Average
    
    
    Unvested
    
    
    Average
    
    
    Aggregateof
    
    
    Exercise Price
    
    
    Number of
    
    
    Grant-Date
    
    
    IntrinsicShares
    
    
    Per Share
    
    
    Shares
    
    
    Fair Value
    
    
    ValueOutstanding at
December 31, 2005
    
    
    402,063
    
    
    $
    25.92
    
    
    
    310,018
    
    
    $
    6.34
    
    
    $
    Granted at a fair
value of $13.77
    
    
    37,054
    
    
    
    27.00
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    (5,792
    )
    
    
    26.61
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (36,502
    )
    
    
    27.46
    
    
    
    (36,502
    )
    
    
    4.82
    
    
    
    Outstanding at
September 29, 2006
    
    
    396,823
    
    
    $
    25.87
    
    
    
    273,516
    
    
    $
    6.55
    
    
    $
    188
   Risk-free interest rates
    
    
    4.80
    %Expected dividend yield
    
    
    0.00
    %Expected life
    
    1 yearExpected volatility
    
    
    158.75
    %
     Weighted
    
    
    
    
    
    
    WeightedTotal Number
    
    
    Average
    
    
    Unvested
    
    
    Averageof
    
    
    Exercise Price
    
    
    Number of
    
    
    Grant-DateShares
    
    
    Per Share
    
    
    Shares
    
    
    Fair ValueOutstanding at December 31, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Granted
    
    
    464,157
    
    
    
    
    
    
    
    464,157
    
    
    
    1.50Outstanding at September 29, 2006
    
    
    464,157
    
    
    $
    
    
    
    
    464,157
    
    
    $
    1.50
 10




---



##### Table of Contents



Currently Redeemable
    
    
    Not Redeemable
    
    
    TotalNumbers of vested shares subject to put
    
    
    21,818
    
    
    
    39,261
    
    
    
    2,000
    
    
    
    166,488
    
    
    
    229,567Redemption value per share
    
    $
    6.71
    
    
    $
    10.19
    
    
    $
    1.50
    
    
    $
    18.75Gross value of shares subject to put
    
    
    146
    
    
    
    400
    
    
    
    3
    
    
    
    3,122
    
    
    $
    3,671Loans to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,917
    )Net value of shares subject to put
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,754
  Currently Redeemable
    
    
    Not Redeemable
    
    
    TotalNumbers of vested shares subject to put
    
    
    21,818
    
    
    
    39,261
    
    
    
    172,538
    
    
    
    233,617Redemption value per share
    
    $
    6.71
    
    
    $
    10.19
    
    
    $
    1.50Gross value of shares subject to put
    
    
    146
    
    
    
    400
    
    
    
    259
    
    
    $
    805Loans to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,107
    )Net value of shares subject to put
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (1,302
    )
  (5) Retirement Plans
    Pension BenefitsFor the three
    
    
    For the three
    
    
    For the nine
    
    
    For the ninefiscal months
    
    
    fiscal months
    
    
    fiscal months
    
    
    fiscal monthsended
    
    
    ended
    
    
    ended
    
    
    endedSeptember
    
    
    September
    
    
    September 29,
    
    
    September 3029, 2006
    
    
    30, 2005
    
    
    2006
    
    
    2005Service cost
    
    $
    175
    
    
    $
    173
    
    
    $
    526
    
    
    $
    519Interest cost
    
    
    188
    
    
    
    164
    
    
    
    563
    
    
    
    491Expected return on plan assets
    
    
    (207
    )
    
    
    (186
    )
    
    
    (621
    )
    
    
    (555
    )Amortization of prior service cost
    
    
    3
    
    
    
    4
    
    
    
    10
    
    
    
    11Amortization of net loss
    
    
    33
    
    
    
    23
    
    
    
    99
    
    
    
    68Net periodic benefit cost
    
    $
    192
    
    
    $
    178
    
    
    $
    577
    
    
    $
    534
 11




---



##### Table of Contents



Symons Postretirement BenefitsFor the three
    
    
    For the three
    
    
    For the nine
    
    
    For the ninefiscal months
    
    
    fiscal months
    
    
    fiscal months
    
    
    fiscal monthsended
    
    
    ended
    
    
    ended
    
    
    endedSeptember
    
    
    September
    
    
    September 29,
    
    
    September 30,29, 2006
    
    
    30, 2005
    
    
    2006
    
    
    2005Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    7
    
    
    
    7
    
    
    
    21
    
    
    
    20Expected return on plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    6
    
    
    
    6
    
    
    
    18
    
    
    
    18Amortization of net gain
    
    
    (3
    )
    
    
    (3
    )
    
    
    (8
    )
    
    
    (8
    )Net periodic benefit cost
    
    $
    10
    
    
    $
    10
    
    
    $
    31
    
    
    $
    30
  (6) Segment Reporting
       Three Fiscal Months Ended
    
    
    Nine Fiscal Months EndedSeptember 29,
    
    
    September 30,
    
    
    September 29,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Product sales
    
    $
    107,852
    
    
    $
    96,557
    
    
    $
    300,535
    
    
    $
    269,643Rental revenue
    
    
    16,275
    
    
    
    13,816
    
    
    
    44,428
    
    
    
    35,961Used rental equipment sales
    
    
    7,514
    
    
    
    3,698
    
    
    
    18,224
    
    
    
    11,953Net sales
    
    
    131,641
    
    
    
    114,071
    
    
    
    363,187
    
    
    
    317,557Product cost of sales
    
    
    80,589
    
    
    
    75,018
    
    
    
    226,992
    
    
    
    208,030Rental cost of sales
    
    
    9,600
    
    
    
    9,594
    
    
    
    26,330
    
    
    
    27,389Used rental equipment cost of sales
    
    
    2,243
    
    
    
    1,270
    
    
    
    5,435
    
    
    
    4,188Cost of sales
    
    
    92,432
    
    
    
    85,882
    
    
    
    258,757
    
    
    
    239,607Product gross profit
    
    
    27,263
    
    
    
    21,539
    
    
    
    73,543
    
    
    
    61,613Rental gross profit
    
    
    6,675
    
    
    
    4,222
    
    
    
    18,098
    
    
    
    8,572Used rental equipment gross profit
    
    
    5,271
    
    
    
    2,428
    
    
    
    12,789
    
    
    
    7,765Gross profit
    
    $
    39,209
    
    
    $
    28,189
    
    
    $
    104,430
    
    
    $
    77,950
 12




---



##### Table of Contents



Three Fiscal Months Ended
    
    
    Nine Fiscal Months EndedSeptember 29,
    
    
    September 30,
    
    
    September 29,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Depreciation Expense:Product sales (property, plant,
and equipment)
    
    $
    1,239
    
    
    $
    1,466
    
    
    $
    3,784
    
    
    $
    4,383Rental revenue (rental equipment)
    
    
    5,534
    
    
    
    5,668
    
    
    
    14,227
    
    
    
    16,329Corporate
    
    
    314
    
    
    
    626
    
    
    
    963
    
    
    
    2,038Total depreciation
    
    $
    7,087
    
    
    $
    7,760
    
    
    $
    18,974
    
    
    $
    22,750
 (7) Facility Closing and Severance Expenses
  Involuntary
    
    
    Lease
    
    
    Relocation
    
    
    Other Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    TotalBalance, January 1, 2005
    
    $
    
    
    
    $
    120
    
    
    $
    
    
    
    $
    
    
    
    $
    120Facility closing and severance expenses
    
    
    105
    
    
    
    264
    
    
    
    5
    
    
    
    157
    
    
    
    531Items charged against reserve
    
    
    (105
    )
    
    
    (339
    )
    
    
    (5
    )
    
    
    (157
    )
    
    
    (606
    )Balance, December 31, 2005
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    45Facility closing and severance expenses
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    40
    
    
    
    118Items charged against reserve
    
    
    
    
    
    
    (123
    )
    
    
    
    
    
    
    (40
    )
    
    
    (163
    )Balance, September 29, 2006
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  Involuntary
    
    
    Lease
    
    
    Relocation
    
    
    Other Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    TotalFacility closing and severance expenses
    
    $
    642
    
    
    $
    
    
    
    $
    539
    
    
    $
    
    
    
    $
    1,181Items charged against reserve
    
    
    (225
    )
    
    
    
    
    
    
    (101
    )
    
    
    
    
    
    
    (326
    )Balance, December 31, 2005
    
    
    417
    
    
    
    
    
    
    
    438
    
    
    
    
    
    
    
    855Facility closing and severance expenses
    
    
    
    
    
    
    171
    
    
    
    (203
    )
    
    
    38
    
    
    
    6Items charged against reserve
    
    
    (362
    )
    
    
    (171
    )
    
    
    (235
    )
    
    
    (38
    )
    
    
    (806
    )Balance, September 29, 2006
    
    $
    55
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    55
  Involuntary
    
    
    Lease
    
    
    Relocation
    
    
    Other Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    TotalFacility closing and severance expenses
    
    $
    249
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    249Items charged against reserve
    
    
    (246
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (246
    )Balance, September 29, 2006
    
    $
    3
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3
   13




---



##### Table of Contents



(8) Provision for Income Taxes
  (9) Earnings (Loss) Per Common Share
  14




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 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.
  Facility Closing and Severance Expenses
  Involuntary
    
    
    Lease
    
    
    Relocation
    
    
    Other Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    Total(Amounts in thousands)Balance, January 1, 2005
    
    $
    
    
    
    $
    120
    
    
    $
    
    
    
    $
    
    
    
    $
    120Facility closing and severance expenses
    
    
    105
    
    
    
    264
    
    
    
    5
    
    
    
    157
    
    
    
    531Items charged against reserve
    
    
    (105
    )
    
    
    (339
    )
    
    
    (5
    )
    
    
    (157
    )
    
    
    (606
    )Balance, December 31, 2005
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    45Facility closing and severance expenses
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    40
    
    
    
    118Items charged against reserve
    
    
    
    
    
    
    (123
    )
    
    
    
    
    
    
    (40
    )
    
    
    (163
    )Balance, September 29, 2006
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  Involuntary
    
    
    Lease
    
    
    Relocation
    
    
    Other Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    Total(Amounts in thousands)Facility closing and severance expenses
    
    $
    642
    
    
    $
    
    
    
    $
    539
    
    
    $
    
    
    
    $
    1,181Items charged against reserve
    
    
    (225
    )
    
    
    
    
    
    
    (101
    )
    
    
    
    
    
    
    (326
    )Balance, December 31, 2005
    
    
    417
    
    
    
    
    
    
    
    438
    
    
    
    
    
    
    
    855Facility closing and severance expenses
    
    
    
    
    
    
    171
    
    
    
    (203
    )
    
    
    38
    
    
    
    6Items charged against reserve
    
    
    (362
    )
    
    
    (171
    )
    
    
    (235
    )
    
    
    (38
    )
    
    
    (806
    )Balance, September 29, 2006
    
    $
    55
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    55
 15




---



##### Table of Contents



Involuntary
    
    
    Lease
    
    
    Relocation
    
    
    Other Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    Total(Amounts in thousands)Facility closing and severance expenses
    
    $
    249
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    249Items charged against reserve
    
    
    (246
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (246
    )Balance, September 29, 2006
    
    $
    3
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3
   Results of Operations
   16




---



##### Table of Contents



Three fiscal months Ended
    
    Nine fiscal months endedSeptember 29,
    
    September 30,
    
    September 29,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Product sales
    
    
    81.9
    %
    
    
    84.7
    %
    
    
    82.8
    %
    
    
    84.9
    %Rental revenue
    
    
    12.4
    
    
    
    12.1
    
    
    
    12.2
    
    
    
    11.3Used rental equipment sales
    
    
    5.7
    
    
    
    3.2
    
    
    
    5.0
    
    
    
    3.8Net sales
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Product cost of sales
    
    
    74.7
    
    
    
    77.7
    
    
    
    75.5
    
    
    
    77.2Rental cost of sales
    
    
    59.0
    
    
    
    69.4
    
    
    
    59.3
    
    
    
    76.2Used rental equipment cost of sales
    
    
    29.9
    
    
    
    34.3
    
    
    
    29.8
    
    
    
    35.0Cost of sales
    
    
    70.2
    
    
    
    75.3
    
    
    
    71.2
    
    
    
    75.5Product gross profit
    
    
    25.3
    
    
    
    22.3
    
    
    
    24.5
    
    
    
    22.8Rental gross profit
    
    
    41.0
    
    
    
    30.6
    
    
    
    40.7
    
    
    
    23.8Used rental equipment gross profit
    
    
    70.1
    
    
    
    65.7
    
    
    
    70.2
    
    
    
    66.0Gross profit
    
    
    29.8
    
    
    
    24.7
    
    
    
    28.8
    
    
    
    24.5Selling, general and
administrative expenses
    
    
    20.2
    
    
    
    19.9
    
    
    
    20.7
    
    
    
    21.7Facility closing and severance
expenses
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.2Gain on disposals of property,
plant, and equipment
    
    
    (0.4
    )
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    (0.5
    )Amortization of intangibles
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.1Income from operations
    
    
    9.8
    
    
    
    4.9
    
    
    
    8.3
    
    
    
    3.0Interest expense
    
    
    9.7
    
    
    
    10.7
    
    
    
    10.3
    
    
    
    11.5Interest income
    
    
    0.2
    
    
    
    
    
    
    
    0.1
    
    
    
    Other expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) before provision for
income taxes
    
    
    (0.1
    )
    
    
    (5.8
    )
    
    
    (2.1
    )
    
    
    (8.5
    )Provision for income taxes
    
    
    0.2
    
    
    
    
    
    
    
    0.1
    
    
    
    Net income (loss)
    
    
    (0.3
    )%
    
    
    (5.8
    )%
    
    
    (2.2
    )%
    
    
    (8.5
    )%
 Comparison of Three Fiscal Months Ended September 29, 2006 and September 30, 2005
 Net Sales
  Three fiscal months endedSeptember 29, 2006
    
    
    September 30, 2005(In thousands)Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %
    
    
    % ChangeProduct sales
    
    $
    107,852
    
    
    
    81.9
    %
    
    $
    96,557
    
    
    
    84.7
    %
    
    
    11.7
    %Rental revenue
    
    
    16,275
    
    
    
    12.4
    
    
    
    13,816
    
    
    
    12.1
    
    
    
    17.8Used rental equipment sales
    
    
    7,514
    
    
    
    5.7
    
    
    
    3,698
    
    
    
    3.2
    
    
    
    103.2Net sales
    
    $
    131,641
    
    
    
    100.0
    %
    
    $
    114,071
    
    
    
    100.0
    %
    
    
    15.4
    %
  17




---



##### Table of Contents



Gross Profit
     Operating Expenses
   Other Expenses
  18




---



##### Table of Contents



Loss Before Income Taxes
  Provision for Income Taxes
  Net Loss
  Comparison of Nine Fiscal Months Ended September 29, 2006 and September 30, 2005
 Net Sales
  Nine fiscal months endedSeptember 29, 2006
    
    
    September 30, 2005(In thousands)Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %
    
    
    % ChangeProduct sales
    
    $
    300,535
    
    
    
    82.8
    %
    
    $
    269,643
    
    
    
    84.9
    %
    
    
    11.5
    %Rental revenue
    
    
    44,428
    
    
    
    12.2
    
    
    
    35,961
    
    
    
    11.3
    
    
    
    23.5Used rental equipment sales
    
    
    18,224
    
    
    
    5.0
    
    
    
    11,953
    
    
    
    3.8
    
    
    
    52.5Net sales
    
    $
    363,187
    
    
    
    100.0
    %
    
    $
    317,557
    
    
    
    100.0
    %
    
    
    14.4
    %
    19




---



##### Table of Contents



Gross Profit
     Operating Expenses
   Other Expenses
  Loss Before Income Taxes
  Provision for Income Taxes
  20




---



##### Table of Contents



Net Loss
  Liquidity and Capital Resources
   Nine fiscal months endedSeptember 29,
    
    
    September 30,2006
    
    
    2005(in thousands)Rental equipment additions
    
    $
    15,988
    
    
    $
    20,814PP&E additions
    
    
    7,282
    
    
    
    4,187Proceeds from sales of used rental equipment
    
    
    (18,224
    )
    
    
    (11,953
    )Proceeds from sales of PP&E
    
    
    (21
    )
    
    
    (1,287
    )Net rental equipment and PP&E additions
    
    $
    5,025
    
    
    $
    11,761
   Nine fiscal months endedSeptember 29,
    
    
    September 30,2006
    
    
    2005(in millions)Net loss
    
    $
    (7.9
    )
    
    $
    (26.9
    )Adjustments to reconcile net loss to net cash used in operating activities
    
    
    9.0
    
    
    
    17.0Subtotal
    
    
    1.1
    
    
    
    (9.9
    )Changes in assets and liabilities
    
    
    (25.1
    )
    
    
    (2.5
    )Net cash used in operating activities
    
    $
    (24.0
    )
    
    $
    (12.4
    )
  21




---



##### Table of Contents



September 29,2006Senior Subordinated Notes, interest rate of 13.0%
    
    $
    154,729Debt discount on Senior Subordinated Notes
    
    
    (5,101
    )Senior Second Secured Notes, interest rate of 10.75%
    
    
    165,000Debt discount on Senior Second Secured Notes
    
    
    (3,604
    )Senior unsecured notes payable to former owner of business
acquired, non-interest bearing, accreted at 6.0% to 14.5%
    
    
    8,068Debentures previously held by Dayton Superior Capital Trust,
interest rate of 9.1%, due on demand
    
    
    1,063Capital lease obligations
    
    
    2,875Total long-term debt
    
    
    323,030Less current maturities
    
    
    (3,775
    )Long-term portion
    
    $
    319,255
   
    
    $19.2 million increase in accounts receivable due to the seasonally higher
net sales in September relative to December,
    
    $8.4 million increase in inventories due to a larger than normal raw
material purchase in advance of an October cost increase and the anticipated seasonal
higher sales in the fourth quarter relative to the first quarter,
    
    $1.3 million of changes in other items, offset by
    
    $4.5 million increase in accrued liabilities due to higher expenses needed
to support the higher sales volumes.
  22




---



##### Table of Contents



Commitments
  Seasonality
  Inflation
  Stock Collateral Valuation  Senior Second Secured Notes
  23




---



##### Table of Contents



DaytonSuperiorCanada Ltd.Net Income
    
    $
    1,114Provision for Income Taxes
    
    
    649Income from Operations
    
    
    1,763Depreciation Expense
    
    
    64Adjusted valuation EBITDA
    
    
    1,827Multiple
    
    
    5.5Estimated Fair Value
    
    $
    10,049
   24




---



##### Table of Contents



Change in Applicable
    
    Change in AdjustedSubsidiary
    
    Value
    
    Valuation EBITDADayton Superior Canada Ltd.
    
    $
    22,951
    
    
    $
    4,173
 Critical Accounting Policies
  Accounting
for Uncertainty in Income Taxes
 Fair Value Measurements
 Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106, and 132(R)
  25




---



##### Table of Contents



Forward-Looking Statements
   -
    
    depressed or fluctuating market conditions for our products and services;-
    
    operating restrictions imposed by our existing debt;-
    
    increased raw material costs and operating expenses;-
    
    our ability to comply with environmental regulations and to
absorb environmental investigation, remediation and compliance costs;-
    
    the loss of certain key customers;-
    
    the loss of key personnel;-
    
    exposure to the local business risks of our Mexican operations and foreign sourcing partners;-
    
    conflicts of interest with our major shareholder;-
    
    our ability to increase manufacturing efficiency, leverage
our purchasing power and broaden our distribution network;-
    
    our ability to successfully identify, complete and integrate acquisitions;-
    
    our ability to develop new products;-
    
    the competitive nature of our industry in general, as well as our specific market areas;-
    
    changes in prevailing interest rates and the availability of
and terms of financing to fund the anticipated growth of our business;-
    
    labor disturbances; and-
    
    the other factors described in this prospectus under Risk Factors.
  26




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
    
    $95.0 million revolving credit facility, $79.2 million of which was outstanding at September 29, 2006;
    
    $165.0 million of Senior Second Secured Notes with a net book value of $160.4 million;
    
    $154.7 million of Senior Subordinated Notes with a net book value of $149.6 million;
    
    $8.1 million of Notes payable to the seller of Safway;
    
    $2.9 million in capital lease obligations;
    
    $1.1 million in other fixed-rate, long-term debt.
       
 Item 4. Controls and Procedures.
  27




---



##### Table of Contents



Part II.  Other Information
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 6. Exhibits
  28




---



##### Table of Contents



SIGNATURES
  DAYTON SUPERIOR CORPORATIONDATE: November 10, 2006
    
    
    
    BY: /s/ Edward J. PuisisEdward J. PuisisExecutive Vice President and
Chief Financial Officer
 29




---



##### Table of Contents



INDEX TO EXHIBITS
  (31)
    
    Rule 13a-14(a)/15d-14(a) Certifications
 31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief
Financial Officer
 (32)
    
    Section 1350 Certifications
 32.1
    
    Section 1350 Certification of President and Chief Executive Officer32.2
    
    Section 1350 Certification of Executive Vice President and Chief Financial
Officer
 30