##### 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 30, 2005
    
    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
executive offices)
    
    (Zip Code)
 937-428-6360
  
  þ o
 o þ
 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 6. ExhibitsSIGNATURESINDEX TO EXHIBITSEX-31.1 Rule 13A-14(A)/15D-14(A) Certification of CEOEX-31.2 Rule 13A-14(A)/15D-14(A) Certification of CFOEX-32.1 Section 1350 Certification of President & CEOEX-32.2 Section 1350 Certification of Vice President & CFO    Table of Contents  
 Part I.  Financial Information
 
 Item 1  Financial Statements
 
 September 30,
    
    
    December 31,2005
    
    
    2004ASSETSCurrent assets:Cash
    
    $
    1,352
    
    
    $
    4,504Accounts receivable, net of allowances for doubtful accounts and
sales returns and allowances of $4,506
and $5,379
    
    
    73,188
    
    
    
    68,031Inventories
    
    
    64,435
    
    
    
    59,389Prepaid expenses and other current assets
    
    
    3,636
    
    
    
    8,392Prepaid income taxes
    
    
    426
    
    
    
    365Deferred income taxes
    
    
    5,467
    
    
    
    5,465Total current assets
    
    
    148,504
    
    
    
    146,146Rental equipment, net of accumulated depreciation of $48,991 and $38,756
    
    
    69,959
    
    
    
    69,662Property, plant and equipment
    
    
    112,228
    
    
    
    118,385Less accumulated depreciation
    
    
    (60,799
    )
    
    
    (58,927
    )Net property, plant and equipment
    
    
    51,429
    
    
    
    59,458Goodwill
    
    
    107,643
    
    
    
    107,643Intangible assets, net of accumulated amortization
    
    
    5,569
    
    
    
    7,185Other assets
    
    
    2,259
    
    
    
    4,044Total assets
    
    $
    385,363
    
    
    $
    394,138LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Current maturities of long-term debt
    
    $
    2,403
    
    
    $
    2,455Accounts payable
    
    
    21,003
    
    
    
    21,086Accrued compensation and benefits
    
    
    10,748
    
    
    
    12,700Accrued interest
    
    
    8,316
    
    
    
    6,746Accrued freight
    
    
    4,340
    
    
    
    3,722Current portion of deferred gain on sale-leaseback
    
    
    3,336
    
    
    
    Other accrued liabilities
    
    
    5,222
    
    
    
    4,154Total current liabilities
    
    
    55,368
    
    
    
    50,863Revolving credit facility
    
    
    69,725
    
    
    
    58,800Other long-term debt, net of current portion
    
    
    317,148
    
    
    
    316,389Deferred gain on sale-leaseback, net of current portion
    
    
    1,796
    
    
    
    Deferred tax liability
    
    
    17,025
    
    
    
    17,473Other long-term liabilities
    
    
    6,371
    
    
    
    6,143Total liabilities
    
    
    467,433
    
    
    
    449,668Shareholders deficit:Common shares
    
    
    116,037
    
    
    
    116,024Loans to shareholders
    
    
    (2,432
    )
    
    
    (2,767
    )Treasury shares, at cost, 51,293 and 36,747 shares
    
    
    (1,509
    )
    
    
    (1,184
    )Cumulative other comprehensive loss
    
    
    (758
    )
    
    
    (1,137
    )Accumulated deficit
    
    
    (193,408
    )
    
    
    (166,466
    )Total shareholders deficit
    
    
    (82,070
    )
    
    
    (55,530
    )Total liabilities and shareholders deficit
    
    $
    385,363
    
    
    $
    394,138
 
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Three Fiscal Months Ended
    
    
    Nine Fiscal Months EndedSeptember 30,
    
    
    October 1,
    
    
    September 30,
    
    
    October 1,2005
    
    
    2004
    
    
    2005
    
    
    2004Product sales
    
    $
    96,557
    
    
    $
    96,640
    
    
    $
    269,643
    
    
    $
    273,101Rental revenue
    
    
    13,816
    
    
    
    11,449
    
    
    
    35,961
    
    
    
    30,792Used rental equipment sales
    
    
    3,698
    
    
    
    6,459
    
    
    
    11,953
    
    
    
    14,978Net sales
    
    
    114,071
    
    
    
    114,548
    
    
    
    317,557
    
    
    
    318,871Product cost of sales
    
    
    75,018
    
    
    
    71,442
    
    
    
    208,030
    
    
    
    204,948Rental cost of sales
    
    
    9,594
    
    
    
    8,304
    
    
    
    27,389
    
    
    
    23,852Used rental equipment cost of sales
    
    
    1,270
    
    
    
    2,743
    
    
    
    4,188
    
    
    
    5,956Cost of sales
    
    
    85,882
    
    
    
    82,489
    
    
    
    239,607
    
    
    
    234,756Product gross profit
    
    
    21,539
    
    
    
    25,198
    
    
    
    61,613
    
    
    
    68,153Rental gross profit
    
    
    4,222
    
    
    
    3,145
    
    
    
    8,572
    
    
    
    6,940Used rental equipment gross profit
    
    
    2,428
    
    
    
    3,716
    
    
    
    7,765
    
    
    
    9,022Gross profit
    
    
    28,189
    
    
    
    32,059
    
    
    
    77,950
    
    
    
    84,115Selling, general and administrative
expenses
    
    
    22,736
    
    
    
    21,757
    
    
    
    68,993
    
    
    
    66,294Facility closing and severance expenses
    
    
    211
    
    
    
    429
    
    
    
    542
    
    
    
    1,393(Gain) loss on disposals of property,
plant, and equipment
    
    
    (543
    )
    
    
    (464
    )
    
    
    (1,629
    )
    
    
    (386
    )Amortization of intangible assets
    
    
    180
    
    
    
    302
    
    
    
    486
    
    
    
    857Income from operations
    
    
    5,605
    
    
    
    10,035
    
    
    
    9,558
    
    
    
    15,957Other expensesInterest income
    
    
    (24
    )
    
    
    (14
    )
    
    
    (146
    )
    
    
    (42
    )Interest expense
    
    
    12,207
    
    
    
    11,937
    
    
    
    36,563
    
    
    
    35,549Loss on early extinguishment of
long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    842Other expense (income)
    
    
    79
    
    
    
    (45
    )
    
    
    84
    
    
    
    Loss before benefit for income taxes
    
    
    (6,657
    )
    
    
    (1,843
    )
    
    
    (26,943
    )
    
    
    (20,392
    )Benefit for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (6,657
    )
    
    $
    (1,843
    )
    
    $
    (26,943
    )
    
    $
    (20,392
    )
 
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Nine Fiscal Months EndedSeptember 30,
    
    
    October 1,2005
    
    
    2004Cash Flows From Operating Activities:Net loss
    
    $
    (26,943
    )
    
    $
    (20,392
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    22,750
    
    
    
    20,369Amortization of intangible assets
    
    
    486
    
    
    
    857Loss on early extinguishment of long-term debt
    
    
    
    
    
    
    842Deferred income taxes
    
    
    (448
    )
    
    
    (103
    )Amortization of deferred financing costs and debt discount
    
    
    3,942
    
    
    
    3,914Amortization of deferred gain from sale-leaseback
    
    
    (1,483
    )
    
    
    Gain on sales of rental equipment
    
    
    (7,765
    )
    
    
    (9,022
    )(Gain) loss on sales of property, plant and equipment
    
    
    (456
    )
    
    
    (386
    )Changes in assets and liabilities:Accounts receivable
    
    
    (5,157
    )
    
    
    (12,832
    )Inventories
    
    
    (5,046
    )
    
    
    (13,979
    )Accounts payable
    
    
    (83
    )
    
    
    3,024Accrued liabilities and other long-term liabilities
    
    
    1,456
    
    
    
    (259
    )Prepaid expenses and other assets
    
    
    6,375
    
    
    
    (5,913
    )Net cash used in operating activities
    
    
    (12,372
    )
    
    
    (33,880
    )Cash Flows From Investing Activities:Property, plant and equipment additions
    
    
    (4,187
    )
    
    
    (3,819
    )Proceeds from sales of property, plant and equipment
    
    
    1,287
    
    
    
    689Rental equipment additions
    
    
    (20,814
    )
    
    
    (16,671
    )Proceeds from sales of rental equipment
    
    
    11,953
    
    
    
    14,978Acquisition
    
    
    
    
    
    
    (245
    )Net cash used in investing activities
    
    
    (11,761
    )
    
    
    (5,068
    )Cash Flows From Financing Activities:Repayments of long-term debt including the revolving credit facility
    
    
    (99,179
    )
    
    
    (80,314
    )Borrowings under revolving credit facility
    
    
    108,125
    
    
    
    119,804Financing costs incurred
    
    
    (3
    )
    
    
    (2,554
    )Proceeds from sale-leaseback
    
    
    11,636
    
    
    
    Purchase of treasury shares
    
    
    (325
    )
    
    
    Changes in loans to shareholders
    
    
    335
    
    
    
    (27
    )Issuance of common shares
    
    
    13
    
    
    
    73Net cash provided by financing activities
    
    
    20,602
    
    
    
    36,982Effect of Exchange Rate Changes on Cash
    
    
    379
    
    
    
    (29
    )Net decrease in cash
    
    
    (3,152
    )
    
    
    (1,995
    )Cash, beginning of period
    
    
    4,504
    
    
    
    1,995Cash, end of period
    
    $
    1,352
    
    
    $
    Supplemental Disclosures:Cash paid for income taxes
    
    $
    435
    
    
    $
    573Cash paid for interest
    
    
    31,051
    
    
    
    30,578Purchases of equipment on capital leases
    
    
    
    
    
    
    389
 
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Three Fiscal Months Ended
    
    
    Nine Fiscal Months EndedSeptember 30,
    
    
    
    
    
    
    September 30,2005
    
    
    October 1, 2004
    
    
    2005
    
    
    October 1, 2004Net loss
    
    $
    (6,657
    )
    
    $
    (1,843
    )
    
    $
    (26,943
    )
    
    $
    (20,392
    )Other comprehensive income:Foreign currency
translation
adjustment
    
    
    577
    
    
    
    201
    
    
    
    379
    
    
    
    (29
    )Comprehensive loss
    
    $
    (6,080
    )
    
    $
    (1,642
    )
    
    $
    (26,564
    )
    
    $
    (20,421
    )
 
 5




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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 the
Company, without audit, and include, in the opinion of management, all adjustments necessary to
state fairly the information set forth therein. Any such adjustments were of a normal recurring
nature. Certain information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the United States have
been omitted, although the Company believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these unaudited consolidated
financial statements be read in conjunction with the audited consolidated financial statements
and the notes thereto included in the Companys annual financial statements for the year ended
December 31, 2004. 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, 2004. 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 30, 2005 and
December 31, 2004:
 September 30, 2005
    
    
    December 31, 2004Raw materials
    
    $
    15,153
    
    
    $
    21,663Work in progress
    
    
    3,287
    
    
    
    2,588Finished goods
    
    
    45,995
    
    
    
    35,138Total Inventory
    
    $
    64,435
    
    
    $
    59,389
 (c)
    
    New Accounting Pronouncements 
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
 6




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instruments issued. SFAS 123 (R) is effective as of the beginning of the first fiscal year
beginning 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.In June 2005, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 154, Accounting Changes and Error Corrections. The
statement applies to all voluntary changes in accounting principle, and changes the
requirement for accounting for and reporting a change in accounting principle. This
statement is a replacement for Accounting Principles Board Opinion No. 20, Accounting
Changes and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial
Statements. This statement is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005. Early adoption is permitted for
accounting changes and corrections of errors made in fiscal years beginning after May 31,
2005. The company does not anticipate a material impact on the results of operations from
the adoption of this pronouncement.(d)
    
    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 and net loss per share would have
been increased to the pro forma amounts as follows:
 Three fiscal months ended
    
    
    Nine fiscal months endedSeptember
    
    
    October 1,
    
    
    September 30,
    
    
    October 1,30, 2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss)
    
    As Reported
    
    $
    (6,657
    )
    
    $
    (1,843
    )
    
    $
    (26,943
    )
    
    $
    (20,392
    )Deduct: Total
stock-based
employee
compensation
expense determined
under fair
value-based method
for all awards, net
of related tax
effect
    
    
    (72
    )
    
    
    (61
    )
    
    
    (216
    )
    
    
    (186
    )Pro Forma
    
    $
    (6,729
    )
    
    $
    (1,904
    )
    
    $
    (27,159
    )
    
    $
    (20,578
    )
 (e)
    
    Reclassifications  Certain reclassifications have been made to the 2004
amounts to conform to their 2005 classifications.
 (3)
    
    Credit Arrangements
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Three fiscal months ended
    
    
    Nine fiscal months endedSeptember
    
    
    October 1,
    
    
    September
    
    
    October 1,30, 2005
    
    
    2004
    
    
    30, 2005
    
    
    2004Revolving Credit Facility:Average borrowings
    
    $
    66,774
    
    
    $
    63,198
    
    
    $
    65,841
    
    
    $
    51,763Maximum borrowing
    
    
    71,900
    
    
    
    71,900
    
    
    
    77,500
    
    
    
    71,900Weighted average interest rate
    
    
    6.4
    %
    
    
    4.4
    %
    
    
    6.0
    %
    
    
    4.4
    %
  September 30,
    
    
    December 31,2005
    
    
    2004Senior Second Secured Notes, interest rate of 10.75%
    
    $
    165,000
    
    
    $
    165,000Debt discount on Senior Second Secured Notes
    
    
    (5,164
    )
    
    
    (6,194
    )Senior Subordinated Notes, interest rate of 13.0%
    
    
    154,729
    
    
    
    154,729Debt discount on Senior Subordinated Notes
    
    
    (6,459
    )
    
    
    (7,397
    )Notes payable to seller of Safway, non-interest
bearing, accreted at 6.0% to 14.5%
    
    
    7,351
    
    
    
    7,794Debentures previously held by Dayton Superior Capital
Trust, interest rate of 9.1%, due on demand
    
    
    1,068
    
    
    
    1,102Capital lease obligations
    
    
    3,026
    
    
    
    3,794City of Parsons, Kansas Economic Development Loan,
interest rate of 7.0%
    
    
    
    
    
    
    16Total long-term debt
    
    
    319,551
    
    
    
    318,844Less current maturities
    
    
    (2,403
    )
    
    
    (2,455
    )Long-term portion
    
    $
    317,148
    
    
    $
    316,389
   (4)
    
    Stock Option Plans
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Weighted AverageNumber of
    
    
    Exercise Price PerShares
    
    
    ShareOutstanding at December 31, 2004
    
    
    682,978
    
    
    $
    26.13Cancelled / expired
    
    
    (100,000
    )
    
    
    27.50Outstanding at September 30, 2005
    
    
    582,978
    
    
    $
    24.27
 (5)
    
    Retirement Plans
    Symons
    
    
    SymonsPension
    
    
    Pension
    
    
    Postretirement
    
    
    PostretirementBenefits 2005
    
    
    Benefits 2004
    
    
    Benefits 2005
    
    
    Benefits 2004Service cost
    
    $
    519
    
    
    $
    448
    
    
    $
    0
    
    
    $
    0Interest cost
    
    
    491
    
    
    
    447
    
    
    
    20
    
    
    
    27Expected return on plan assets
    
    
    (555
    )
    
    
    (449
    )
    
    
    0
    
    
    
    0Amortization of prior service cost
    
    
    11
    
    
    
    4
    
    
    
    18
    
    
    
    18Amortization of net loss
    
    
    68
    
    
    
    58
    
    
    
    (8
    )
    
    
    0Net periodic benefit cost
    
    $
    534
    
    
    $
    508
    
    
    $
    30
    
    
    $
    45
  9




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(6)
    
    Segment Reporting
       Three Fiscal Months Ended
    
    
    Nine Fiscal Months EndedSeptember 30,
    
    
    
    
    
    
    September 30,
    
    
    October 1,2005
    
    
    October 1, 2004
    
    
    2005
    
    
    2004Product sales
    
    $
    96,557
    
    
    $
    96,640
    
    
    $
    269,643
    
    
    $
    273,101Rental revenue
    
    
    13,816
    
    
    
    11,449
    
    
    
    35,961
    
    
    
    30,792Used rental equipment sales
    
    
    3,698
    
    
    
    6,459
    
    
    
    11,953
    
    
    
    14,978Net sales
    
    
    114,071
    
    
    
    114,548
    
    
    
    317,557
    
    
    
    318,871Product cost of sales
    
    
    75,018
    
    
    
    71,442
    
    
    
    208,030
    
    
    
    204,948Rental cost of sales
    
    
    9,594
    
    
    
    8,304
    
    
    
    27,389
    
    
    
    23,852Used rental equipment cost of sales
    
    
    1,270
    
    
    
    2,743
    
    
    
    4,188
    
    
    
    5,956Cost of sales
    
    
    85,882
    
    
    
    82,489
    
    
    
    239,607
    
    
    
    234,756Product gross profit
    
    
    21,539
    
    
    
    25,198
    
    
    
    61,613
    
    
    
    68,153Rental gross profit
    
    
    4,222
    
    
    
    3,145
    
    
    
    8,572
    
    
    
    6,940Used rental equipment gross profit
    
    
    2,428
    
    
    
    3,716
    
    
    
    7,765
    
    
    
    9,022Gross profit
    
    $
    28,189
    
    
    $
    32,059
    
    
    $
    77,950
    
    
    $
    84,115Depreciation Expense:Product sales (property, plant,
and equipment)
    
    $
    1,466
    
    
    $
    1,343
    
    
    $
    4,383
    
    
    $
    4,276Rental Revenue (rental equipment)
    
    
    5,668
    
    
    
    4,746
    
    
    
    16,329
    
    
    
    14,146Corporate
    
    
    626
    
    
    
    790
    
    
    
    2,038
    
    
    
    1,947Total depreciation
    
    $
    7,760
    
    
    $
    6,879
    
    
    $
    22,750
    
    
    $
    20,369
 10




---



##### Table of Contents



(7)
    
    Facility Closing and Severance Expenses
  Involuntary
    
    
    Lease
    
    
    Relocation
    
    
    Other Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    TotalBalance, January 1, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Facility closing and severance expenses
    
    
    63
    
    
    
    1
    
    
    
    
    
    
    
    61
    
    
    
    125Items charged against reserve
    
    
    (63
    )
    
    
    (1
    )
    
    
    
    
    
    
    (61
    )
    
    
    (125
    )Balance, December 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
   Involuntary
    
    
    Lease
    
    
    Relocation
    
    
    Other Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    TotalBalance, January 1, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    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
    
    
    
    
    
    
    
    
    
    
    
    120Facility closing and severance expenses
    
    
    82
    
    
    
    154
    
    
    
    4
    
    
    
    134
    
    
    
    374Items charged against reserve
    
    
    (82
    )
    
    
    (208
    )
    
    
    (4
    )
    
    
    (134
    )
    
    
    (428
    )Balance, September 30, 2005
    
    $
    
    
    
    $
    66
    
    
    $
    
    
    
    $
    
    
    
    $
    66
   Involuntary
    
    
    Lease
    
    
    Relocation
    
    
    Other Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    TotalBalance, January 1, 2005
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Facility closing and severance expenses
    
    
    168
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    168Items charged against reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, September 30, 2005
    
    $
    168
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    168
  11




---



##### Table of Contents



(8)
    
    Benefit for Income Taxes
  (9)
    
    Sale-Leaseback Transaction
  (10)
    
    Subsequent Event
  -
    
    The terms are 10 years (Kansas City, Kansas), 11 years (Aurora, Illinois), 12 years
(Miamisburg, Ohio) and 13 years (Parsons, Kansas), respectively. Each Lease also permits the
Company to renew the Lease for up to two five-year renewal terms.
 -
    
    The rent the Company pays under the Leases increases annually during the initial term. The
annual rent payable during the initial year of each Lease and during the last year of the
initial term of each the Leases is as follows: Kansas City, Kansas ($226; $270); Aurora,
Illinois ($364; $444); Miamisburg, Ohio ($431; $535); and Parsons, Kansas ($240; $304). In
addition, the Company is responsible for all property taxes, operating expenses (including
maintenance expenses) and insurance on the leased property. The annual rent the Company will
pay during the renewal terms will be the higher of the rent in the last year of the initial
term or the fair market rent, determined as provided in the Lease.
  12




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
     
    
    Product sales consist primarily 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 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.
 
 13




---



##### Table of Contents




    
    Rental equipment consists primarily of:
 
    
    Forming Systems,which are reusable engineered modular forms; 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 and related accessories are sold as
used rental equipment and rented.
    
    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.
 Facility Closing and Severance Expenses
  In
000sInvoluntary
    
    
    Lease
    
    
    Relocation
    
    
    Other Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    TotalBalance, January 1, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Facility closing and severance expenses
    
    
    63
    
    
    
    1
    
    
    
    
    
    
    
    61
    
    
    
    125Items charged against reserve
    
    
    (63
    )
    
    
    (1
    )
    
    
    
    
    
    
    (61
    )
    
    
    (125
    )Balance, December 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
   In
000sInvoluntary
    
    
    Lease
    
    
    Relocation
    
    
    Other Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    TotalBalance, January 1, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    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
    
    
    
    
    
    
    
    
    
    
    
    120Facility closing and severance expenses
    
    
    82
    
    
    
    154
    
    
    
    4
    
    
    
    134
    
    
    
    374Items charged against reserve
    
    
    (82
    )
    
    
    (208
    )
    
    
    (4
    )
    
    
    (134
    )
    
    
    (428
    )Balance, September 30, 2005
    
    $
    
    
    
    $
    66
    
    
    $
    
    
    
    $
    
    
    
    $
    66
  14




---



##### Table of Contents



In
000sInvoluntary
    
    
    Lease
    
    
    Relocation
    
    
    Other Post-Termination
    
    
    Termination
    
    
    of
    
    
    ClosingBenefits
    
    
    Costs
    
    
    Operations
    
    
    Costs
    
    
    TotalBalance, January 1, 2005
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Facility closing and severance expenses
    
    
    168
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    168Items charged against reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, September 30, 2005
    
    $
    168
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    168
  Results of Operations
  Three Fiscal Months Ended
    
    
    NIne Fiscal Months EndedSeptember 30,
    
    
    October 1,
    
    
    September 30,
    
    
    October 1,2005
    
    
    2004
    
    
    2005
    
    
    2004Product sales
    
    
    84.7
    %
    
    
    84.4
    %
    
    
    84.9
    %
    
    
    85.6
    %Rental revenue
    
    
    12.1
    
    
    
    10.0
    
    
    
    11.3
    
    
    
    9.7Used rental equipment sales
    
    
    3.2
    
    
    
    5.6
    
    
    
    3.8
    
    
    
    4.7Net sales
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Product cost of sales
    
    
    77.7
    
    
    
    73.9
    
    
    
    77.2
    
    
    
    75.0Rental cost of sales
    
    
    69.4
    
    
    
    72.5
    
    
    
    76.2
    
    
    
    77.5Used rental equipment cost of sales
    
    
    34.3
    
    
    
    42.5
    
    
    
    35.0
    
    
    
    39.8Cost of sales
    
    
    75.3
    
    
    
    72.0
    
    
    
    75.5
    
    
    
    73.6Product gross profit
    
    
    22.3
    
    
    
    26.1
    
    
    
    22.8
    
    
    
    25.0Rental gross profit
    
    
    30.6
    
    
    
    27.5
    
    
    
    23.8
    
    
    
    22.5Used rental equipment gross profit
    
    
    65.7
    
    
    
    57.5
    
    
    
    65.0
    
    
    
    60.2Gross profit
    
    
    24.7
    
    
    
    28.0
    
    
    
    24.5
    
    
    
    26.4Selling, general and administrative expenses
    
    
    19.9
    
    
    
    19.0
    
    
    
    21.7
    
    
    
    20.8Facility closing and severance expenses
    
    
    0.2
    
    
    
    0.3
    
    
    
    0.2
    
    
    
    0.4(Gain) loss on disposals of property, plant,
and equipment
    
    
    (0.5
    )
    
    
    (0.4
    )
    
    
    (0.5
    )
    
    
    (0.1
    )Amortization of intangible assets
    
    
    0.2
    
    
    
    0.3
    
    
    
    0.1
    
    
    
    0.3Income from operations
    
    
    4.9
    
    
    
    8.8
    
    
    
    3.0
    
    
    
    5.0Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    10.7
    
    
    
    10.4
    
    
    
    11.5
    
    
    
    11.1Loss on early extinguishment of long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3Other expense (income)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss before benefit for income taxes
    
    
    (5.8
    )
    
    
    (1.6
    )
    
    
    (8.5
    )
    
    
    (6.4
    )Benefit for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (5.8
    %)
    
    
    (1.6
    %)
    
    
    (8.5
    %)
    
    
    (6.4
    %)
 15




---



##### Table of Contents



Comparison of Three Fiscal Months Ended September 30, 2005 and October 1, 2004
 Net Sales
  Three fiscal months endedSeptember 30, 2005
    
    
    October 1, 2004(In thousands)Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %
    
    
    % ChangeProduct sales
    
    $
    96,557
    
    
    
    84.7
    %
    
    $
    96,640
    
    
    
    84.4
    %
    
    
    (0.1
    )%Rental revenue
    
    
    13,816
    
    
    
    12.1
    
    
    
    11,449
    
    
    
    10.0
    
    
    
    20.7Used rental equipment sales
    
    
    3,698
    
    
    
    3.2
    
    
    
    6,459
    
    
    
    5.6
    
    
    
    (42.7
    )Net sales
    
    $
    114,071
    
    
    
    100.0
    %
    
    $
    114,548
    
    
    
    100.0
    %
    
    
    0.4
    %
    Gross Profit
    16




---



##### Table of Contents



Operating Expenses
   Other Expenses
  Loss Before Income Taxes
  Benefit for Income Taxes
  Net Loss
  17




---



##### Table of Contents



Comparison of Nine Fiscal Months Ended September 30, 2005 and October 1, 2004
 Net Sales
  Nine fiscal months endedSeptember 30, 2005
    
    
    October 1, 2004(In thousands)Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %
    
    
    % ChangeProduct sales
    
    $
    269,643
    
    
    
    84.9
    %
    
    $
    273,101
    
    
    
    85.6
    %
    
    
    (1.3
    )%Rental revenue
    
    
    35,961
    
    
    
    11.3
    
    
    
    30,792
    
    
    
    9.7
    
    
    
    16.8Used rental equipment sales
    
    
    11,953
    
    
    
    3.8
    
    
    
    14,978
    
    
    
    4.7
    
    
    
    (20.2
    )Net sales
    
    $
    317,557
    
    
    
    100.0
    %
    
    $
    318,871
    
    
    
    100.0
    %
    
    
    (0.4
    )%
    Gross Profit
    18




---



##### Table of Contents



Operating Expenses
    Other Expenses
  Loss Before Income Taxes
  Benefit for Income Taxes
  Net Loss
  Liquidity and Capital Resources
   19




---



##### Table of Contents



2005
    
    
    2004(in millions)Net loss
    
    $
    (26.9
    )
    
    $
    (20.4
    )Non-cash adjustments
    
    
    17.0
    
    
    
    16.5Net loss after non-cash adjustments
    
    
    (9.9
    )
    
    
    (3.9
    )Changes in assets and liabilities
    
    
    (2.5
    )
    
    
    (30.0
    )Net cash used in operating activities
    
    $
    (12.4
    )
    
    $
    (33.9
    )
  §
    
    A higher net loss in the first nine months of 2005 of $(26.9) million compared to a
$(20.4) million net loss in the first nine months of 2004.§
    
    No loss on the early extinguishment of long-term debt in 2005, while there was a loss
of $0.8 million in the first nine months of 2004.§
    
    Gains on the sale of property, plant and equipment and on the sale-leaseback of $1.9
million in the first nine months of 2005 compared with gains of $0.4 million in the first
nine months of 2004.§
    
    Changes in other items of $0.4 million.
  §
    
    Higher depreciation and amortization of intangible assets of $23.2 million in the first
nine months of 2005 compared to $21.2 million in the first nine months of 2004.§
    
    Lower gain on sale of rental equipment of $(7.8) million in the first nine months of
2005 compared to $(9.0) million in the first nine months of 2004.
  §
    
    A lower use of cash in accounts receivable, which was a $(5.2) million use of cash in
the first nine months of 2005 as compared to a $(12.8) million use of cash in the first
nine months of 2004. This decrease was primarily due to better collections in 2005.§
    
    A lower use of cash in inventory of $(5.0) million in the first nine months of 2005 as
compared to an $(14.0) million use of cash in the first nine months of 2004. The 2005
decline in cash used was due to a less dramatic rise in inventory quantities as a result
of having more inventory on-hand at year-end and greater cost increases in the first nine
months of 2004.§
    
    Cash provided by prepaid expense and other assets increasing to a $6.4 million source
of cash in the first nine months of 2005, compared to a $(5.9) million use of cash in the
first nine months of 2004. This source of cash in 2005 was primarily due to payments on
notes receivable from customers, while the use in 2004 was due to prepayments for steel.§
    
    Cash provided by accrued liabilities was $1.5 million in the first nine months of 2005,
compared to a $(0.3) million use in the first nine months of 2004. This increase was due
to higher accrued interest in 2005 and higher payments for facility closing, severance and
rebates in 2004
   20




---



##### Table of Contents



September 30,2005(in $000s)Senior Second Secured Notes, interest rate of 10.75%
    
    $
    165,000Debt discount on Senior Second Secured Notes
    
    
    (5,164
    )Senior Subordinated Notes, interest rate of 13.0%
    
    
    154,729Debt discount on Senior Subordinated Notes
    
    
    (6,459
    )Notes payable to seller of Safway, non-interest
bearing, accreted at 6.0% to 14.5%
    
    
    7,351Debentures previously held by Dayton Superior
Capital Trust, interest rate of 9.1%, due on demand
    
    
    1,068Capital lease obligations
    
    
    3,026Total long-term debt
    
    
    319,551Less current maturities
    
    
    (2,403
    )Long-term portion
    
    $
    317,148
    
    
    $3.1 million decrease in cash due to the timing of cash receipts and
disbursements at December and September,
    
    $4.8 million decrease in prepaid expenses and other current assets due to
collections on notes receivable,
    
    $3.3 million increase in deferred gain on the sale of the Des Plaines facility,
    
    $1.2 million of changes in other items,
 21




---



##### Table of Contents




    
    $5.2 million increase in accounts receivable due to the normal seasonal
increase in net sales from December to September; and
    
    $5.0 million increase in inventories due to lower than anticipated sales in
the third quarter and to higher raw material costs.
     Commitments
   Seasonality
  22




---



##### Table of Contents



Inflation
  Stock Collateral Valuation  Senior Second Secured Notes
   23




---



##### Table of Contents



DaytonSuperiorCanada Ltd.Net Income
    
    $
    1,537Provision for Income Taxes
    
    
    105Income from Operations
    
    
    1,642Depreciation Expense
    
    
    62Adjusted valuation EBITDA
    
    
    1,704Multiple
    
    
    5.5Estimated Fair Value
    
    $
    9,372
   Change in Applicable
    
    Change in AdjustedSubsidiary
    
    Value
    
    Valuation EBITDADayton Superior Canada Ltd.
    
    $
    23,628
    
    
    $
    4,296
 Critical Accounting Policies
  24




---



##### Table of Contents



Forward-Looking Statements
   25




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
    
    $95.0 million revolving credit facility, $69.7 million of which was outstanding at September 30, 2005;
    
    $165.0 million of Senior Second Secured Notes, with a net book value of $159.8 million;
    
    $154.7 million of Senior Subordinated Notes, with a net book value of $148.3 million;
    
    $10.5 million of non-interest bearing notes payable to the seller of Safway
with a net book value of $7.3 million;
    
    $3.0 million in capital lease obligations;
    
    $1.1 million in other fixed-rate, long-term debt.
        26




---



##### Table of Contents



Item 4. Controls and Procedures.
    27




---



##### Table of Contents



Part II.  Other Information
 
 Item 6. Exhibits
  28




---



##### Table of Contents



SIGNATURES
  DAYTON SUPERIOR CORPORATIONDATE: November 14, 2005
    
    
    
    BY: /s/ Edward J. PuisisEdward J. PuisisVice President and Chief Financial Officer
 29




---



##### Table of Contents



INDEX TO EXHIBITS
 Exhibit No.
    
    Description(31)
    
    Rule 13a-14(a)/15d-14(a) Certifications31.1 Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer31.2 Rule 13a-14(a)/15d-14(a) Certification of Vice President and Chief Financial Officer(32)
    
    Section 1350 Certifications32.1 Section 1350 Certification of President and Chief Executive Officer32.2 Section 1350 Certification of Vice President and Chief Financial Officer
 30